Julia Boguslawski - Executive Vice President, Investor Relations and Chief Marketing Officer David Lopez - Chief Executive Officer Kimo Akiona - Chief Financial Officer.

Brad Boyer - Stifel Chad Beynon - Macquarie Barry Jonas - Bank of America David Katz - Jefferies LLC.

Good day and welcome to the AGS First Quarter 2018 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 first quarter 2018 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 first quarter 2018 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 Q1 2018 performance, in addition to our financial outlook. This conference call includes forward-looking statements.

Any statement that refers to expectations, projections or other characterizations of future events including financial projections or future current 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 to 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..

Thank you, Julia. Hello, everyone and welcome to AGS’s Q1 earnings call, our second call since going public at the end of January of this year. For those using the slide deck, please turn to Slide 3.

I’ll start by providing a brief overview of our first quarter operational highlights along with an update of our progress executing against our various growth initiatives. After a financial overview from Kimo, I will close out the call with an update of our annual guidance metrics.

We are pleased to announce that we achieved many records for the company in the first quarter including revenue, adjusted EBITDA, recurring revenue, sales revenues, average sales price and table unit to name more than a few. Coming off a record breaking fourth quarter, I was extremely proud of the team for delivering such amazing results.

Slide 3 shows that Q1 revenue of approximately $64.9 million was up 36% year-over-year and adjusted EBITDA grew to approximately $34.5 million, up 39% over last year although we achieved record sales revenue in the first quarter, I am pleased to report that we also achieved record recurring revenue of $49.6 million which grew 23% year-over-year and 10% sequentially.

These double digit gains and revenue and EBITDA were primarily driven by the continued performance of our Orion Portrait cabinet which has become a proven staple in the casino floor.

Additionally, first quarter performance was underscored by strong ICON perform placements and the inclusion of the Rocket Gaming and In Bet assets from our strategic acquisitions in the second half of 2017. With that, I will now provide an update on our segment performance for the quarter. Turning to our EGM segment on Slide 5.

We ended Q1 with a total recurring EGM base of 24,033 units up 13% year-over-year. In addition to the inclusion of the Rocket EGMs, recurring unit growth was bolstered by the 4 wins opening in Q1 where AGS received approximately 14% of the floor. Additionally, we benefited from a couple of expansions in Oklahoma.

We continue to execute on our yield optimization strategy upgrading 1650 of our legacy machines on a trailing 12 month basis with our latest high-performing products. This mission serves to grow our recurring revenue and protect our base as well as support our loyal long-term customers by providing them with our newer, more profitable products.

As of Q1, approximately $5.6 million of our recurring revenue came from our optimization efforts over the past two years. We sold 838 EGMs for a total of $15.2 million in sales revenue for the quarter up 107% over the prior year period. Approximately 60% of sold units were the Orion Portrait cabinet.

Like last quarter, sales were driven by placements across the entire country with nearly 60 different operators, 16% of orders went into Nevada followed by California, Florida and Arizona to name a handful of the 21 states where we sold EGMs in Q1.

Quarterly EGM performance was headlined by Orion Portrait which continued to expand into new properties as well as current markets and properties that add more units to their existing Orion footprint. As the first quarter, demonstrated, Orion Portrait has plenty of runway ahead in 2018 and beyond.

As of Q1, we have more than 2830 Orion Portraits installed with roughly 44% sold, 48% on lease and 8% on trial. Our trial conversion rate on Orion is over 99% and our removal rate of course is under 1% demonstrating the staying power of the cabinet due to its stunning hardware and industry-leading game performance.

River Dragons and Fu Nan Fu Nu are two of our top performers on Orion and additionally our Xtreme Jackpot titles have been building momentum. We have launched 8 new titles for Orion this year including the new [indiscernible] which is showing strong initial performance right out of the gate and we plan to release oven more games throughout the year.

The result of the Q1 Eilers Fantini slot survey shown on Slide 6 highlighted AGS’ casino owned game performance, maintaining its industry leading 1.7x house average position. Leading not only the big four but all suppliers, this quarter marks the sixth consecutive quarter that we have held this position.

However, this game performance grew to approximately 2.4x house average taking a second spot after [indiscernible].

It’s always hard to predict exactly how we think we will fair in any given quarter on these surveys, but I can tell you that we remain committed to releasing high-performance content which should help us maintain a strong position in both of these categories. Moving on to our table segment on Slide 7.

In the first quarter, we achieved record revenue of $1.7 million up 164% year-over-year due to strong placements of Buster Blackjack, Bonus Spin and the inclusion of the In Bet assets. As I mentioned last quarter, we are now EBITDA positive in our table segment and we saw 205% EBITDA growth over the prior year period.

Units climbed to new highs with more than 2,630 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 first quarter in addition to launch of Jackpot blackjack our new side bet we acquired as part of the In Bet assets. In the quarter alone, we placed more than 160 blackjack side bets which speaks to the depth and the popularity of our side bet offerings.

With 44 new placements, we installed a record number of bonus spins in the quarter bringing the total to 170 units. Our premium games continuing to grow with a total install base of nearly 140 units up 97% year-over-year driven by strong Dai Bacc, Chase the Flush and Criss Cross Poker placements.

In the interactive segment on Slide 8, we reported $1.9 million in revenue in the quarter which was nearly all recurring and which was down 9% year-over-year. However, this was our first full quarter of being EBITDA positive in the interactive segment with EBITDA growth of 108% year-over-year.

The main drivers of our EBITDA games interactive were expansions in our B2B business and moderate stability in our B2C business due to the optimize marketing spend. In Q1, average revenue per daily active user or ARPDAU decreased to $0.51 primarily driven from higher daily active users related to a shift in marketing spend to lower cost channels.

We continue to focus on improving our ARPDAU through our VIP player initiatives and player engagement strategies as well as launching premium AGS land-based content across all platforms.

New online slot games launched in the quarter include Lime Storm [ph], Long Arm Jackpots [ph] and Tiger! Tiger! In addition, we recently won an RP with a large operator in the Northeast to provide our B2B white label casino solution and we are nearing the final stages of contract execution.

We continue to meet with our land-based customer who are looking for social casino solutions and we have a few larger more meaningful agreements in the works that we believe will materialize throughout the year. With that, I will now hand it over to Kimo for discussions of our financial results..

Thanks David and good afternoon, everyone. As David noted earlier, our results for the quarter were impressive yet again and Slide 14 in the appendix provides a comprehensive operational summary.

For the first quarter 2018, total revenues were up 36% to $64.9 million of which $61.3 million were from EGMs, $1.7 million from table products and $1.9 million from interactive.

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

Revenue for the first quarter also included approximately $4.1 million of EGM recurring revenue from our recent Rocket Gaming asset acquisition that was completed in December. Total adjusted EBITDA for the first quarter 2018 increased by $9.6 million or 39% to $34.5 million a company record.

The increase was primarily from our EGM segment which grew $9.1 million on increased revenues. Table products and interactive also increased by approximately $0.4 million and $0.1 million respectively on increased revenue in the table product segment and optimized user acquisition spend for interactive.

Total adjusted EBITDA margin for the first quarter 2018 was 53%, a slight increase over 52% in the prior year period, positively impacting adjusted EBITDA margin in the quarter were two items, first the better than expected operating results from the Rocket Gaming asset acquisition due to the timing of certain expenses which we anticipate to be recognized in the balance of the year.

On a go-forward basis, we expect margins from the Rocket Gaming machines to be more in line with our existing gaming operations business. Second, we recorded a positive adjustment of just under $1 million in the quarter related to prior state and local tax positions that have rolled off.

Turning to our EGM segment, gaming operations revenue increased 22% in the first quarter to a record $46 million. The year-over-year increase primarily reflects a larger domestic install base that grew by over 2500 units or 18%.

Approximately, 1500 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.

Also in the first quarter, we saw the install base grow in Indiana and Oklahoma by nearly 500 units from new casino openings and expansions notably the 4 wins property in Indiana where we installed nearly 250 units in the quarter.

Domestic RPD for the first quarter also increased by 3% to 2672 compared to the first quarter of 2017 driven primarily by our optimization initiative as well as the rollout of our newer premium Orion Portrait cabinet.

Our international install base also grew by over 300 units or 4% year-over-year contributing to the growth in revenue with our international RPD remaining relatively stable at $8.27. Sequentially, the international install base decreased by 247 units as certain leases reached the end of their contractual terms.

These units are still in the field but are no longer recognized in our install base. Revenue from EGM equipment sales grew approximately $7.9 million or 107% to $15.2 million another company record. We sold 838 units at an average sales price of 17,758 compared to 453 units sold in the first quarter of last year at an average sales price of 15,695.

Unit sales were led by our premium Orion Portrait cabinet as well as the continued success of our ICON cabinet. Both cabinets have contributed to our ongoing success at penetrating the Class 3 market in which many customers prefer to buy rather than lease EGMs.

The increase in average sales price was driven by the pricing of our premium Orion Portrait cabinet. Gross margin for gaming operations increased to 82.9% in the first quarter compared to 82.3% in the prior year period primarily due to the increase in RPD.

The equipment sales gross margin also increased to 51.4% to 47.5% due to the proportionally high amount of our premium Orion Portrait cabinet sales in the quarter. Now turning to table products.

Revenues increased by over $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 based increased by 940 units to 2631 at the end of the quarter driven by the acquisition of approximately 500 In Bet units as well as organic growth primarily in side bets most notably Buster Blackjack as well as our Bonus Spin progressive.

For the second quarter in a row, the table product segment contributed positive adjusted EBITDA for nearly $0.2 million which was an increase of nearly $0.4 million year-over-year. For interactive, revenues decreased $0.2 million to $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 positive EBITDA for the quarter which is also a first for this segment. During the quarter and as a result of our initial public offering, we recognized several significant transactions.

Most notably, the IPO impacted our equity structure and the number of common shares outstanding as you will see in our recently filed Form10-Q. Also in connection with the IPO, we recorded an initial charge of $8 million of non-cash stock-based compensation expense.

Going forward, we expect to recognize approximately $0.3 million of non-cash stock-based compensation expense each quarter based on current awards outstanding. SG&A and R&D expense adjusted to exclude the initial charge of $8 million of non-cash stock based compensation expense would have been $10.5 million and $7 million respectively.

Moving on to our capital structure update on Slide 9, total net debt which is the principal amount of total debt less cash and cash equivalents was $487.7 million as of March 31, 2018.

As a result of the IPO, the exercise in full of the underwriters allotment option and the settlement of our HoldCo PIK notes during the quarter, our net debt decreased by $161 million which also significantly improved our net leverage to 4.2 times at March 31, 2018 from 6.1 times at December 31, 2017.

Capital expenditures were approximately $15 million for the first quarter of 2018 which comprised of $10.1 million for a growth machine CapEx, $3.1 million for intangible CapEx, $1.1 million for corporate CapEx and $0.7 million for maintenance CapEx.

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

With that, I will now turn the call back over to David for closing remarks..

Thank you, Kimo. As evidenced by the first quarter, 2018 is already off to a great start and we feel very good about our growth prospects across all of our business segments for the balance of the year. On our Q4 call, I outlined our high level growth drivers for 2018 and beyond and we have included that again in the deck on Slide 10.

I won’t be on it as much detail as I did on last call, but I will highlight the most important updates. One of the most significant opportunities for AGS that continues to be a big part of the growth story is further penetration of the Orion Portrait cabinet.

Looking at our performance this past quarter, and it is apparent that Orion Portrait shows no signs of slowing down. We believe, we are only in the second inning with this product as we are now starting to reap even more benefits from its reputation and proven performance.

Additionally, both Orion and ICON continue to drive our yield optimization story building our recurring revenues by serving as profit enhancing upgrades to some of our legacy units in the field.

Slide 11 shows that we continue to grow our footprint in North America with these two key products and as of Q1, we have about 2.3% in market share up from 1.8% in Q1 of last year. That is a considerable game for AGS resulting in over 4500 new units in the domestic marketplace.

There is a significant opportunity and increased penetration in Nevada, California, Canada, Mississippi, Louisiana, Maryland to name more than few. Based on the most recent data from the Eilers Fantini report which highlighted our most recent ship share at approximately 6%, we believe that we are on a very achievable path of 5% market share.

New market entry for EGMs and tables is our second initiative and in Q1 we received our Ohio license which was a significant milestone for the company. Both the EGM and table teams have been busy visiting key contacts in that market and we believe, we will be shipping Orions and ICONS into several properties in the coming months.

More jurisdictions coming online in 2018 are outlined in Slide 10 and as we witnessed with Ohio, we believe that there is pent-up demand in all these markets given that there is much more familiarity with the AGS story and products at this point.

The third initiative centers on our new products and I’m pleased to provide an update on Orion Slant, which has been on trial in several location since March. We are evaluating performance on these initial 36 units and so far, we have been very satisfied with the feedback.

The games on average are doing about two times house average and the best to come in terms of game launches that we have planned for this cabinet. Customers have been happy with the performance and we are on track to commence our official rollout this month. And finally, we mentioned international expansion as a key rudder for growth.

We mentioned last call, our initial Alora video bingo had touched ground in the Philippines. We expect that these units will go live within the quarter and based on performance, we should be in a position to make a bigger push into the market within the second half of the year.

If you turn to Slide 12, you will see that given our progress executing against these growth initiatives on Slide 10 and 11 in the first quarter and due to our strong momentum right out of the gate, we are revising guidance upwards.

We believe that we are in position to both tighten our range and raise our adjusted EBITDA guidance in 2018 to $126 million to $131 million. That list the bottom end by $2 million and raises the top end by $1 million. Based on our greater visibility that we now have for Orion Portrait throughout the year, we feel confident with this revised range.

We maintain our CapEx range of $55 million to $60 million and believe based on our growth opportunities, we will be on the higher end of this range.

From our first three months results and our commentary today, it should be clear that fiscal 2018 is off to a great start and we have the appropriate strategies, products and people to ensure long-term meaningful growth.

Last thing, before we move to Q&A, I want to thank all of our shareholders for their continued support and confidence in AGS as well as the entire AGS team now more than 600 strong. We are proud of the fact that our one of a kind unique corporate culture is a huge competitive advantage for us and it just keeps getting better every day.

With that, we will move to the Q&A portion of the call..

We will now begin the question and answer session [Operator Instruction] The first question comes from Brad Boyer with Stifel.

Thanks for taking my questions, guys. First one out of the box here. I assume a lot of people are thinking this at this point, but you beat the quarter here by about $4 million if I compare where EBITDA came in relative to consensus, yet, you are taking the midpoint of the EBITDA guidance range up a little less than that.

Just curious, if there is anything to that other than just some conservatism around the revised guidance and just kind of how you think that?.

Thanks Brad. So we are early in the year, still, it’s May. It’s early May. Clearly, first quarter was amazing, bullish for the rest of the year, but again, we are being prudent on the guidance.

I think, we will be patient here and we will talk again at the end of Q2 but definitely confident in the year as you can see, we moved – we took a couple off the slot guidance and raised the top end by $1 million. So we feel really good about it. But again just little bit of prudence and I think it’s wise for us to just talk to you at the end of Q2.

But obviously, we are confident in the year..

Sounds good and then my second question is just a bigger picture question around Class 2 gaming.

It seems like based on your comments around some expansions in Oklahoma, some operators comments recently about expansions in California that as the mechanical play of the Class 2 units improves and the content that you guys and your competitors are rolling out there in the Class 2 side improves that the travel operators are looking to add Class 2 units whether that’s the expensive Class 3 whether that’s just a pure expansion of the floor.

Just curious if you are seeing that on your end from a demand perspective and if that’s providing any lift on the Class 2 side of the business..

Yes, so that’s some good recon there. So we have been talking about this probably for a couple of years now and we don’t have a crystal ball but we thought we saw some of this coming and now it is – some of it is coming to fruition.

I think, directionally, we are seeing a number of tribes that are going this way and I am speaking specifically about California, where they are willing to either expand and add Class 2 or maybe make the transition from Class 3 to Class 2 on a piece.

Therefore and they are going to dabble and they are going to test on that but I think what’s been clear to them and I can’t speak for them all clearly but I think, what is clear then is if you look at Class 2 machines 10 years ago, we just turn back time, go back to 2008 compared to now, this is not event.

The quality of play on a 2018 machine versus 2008 is amazing.

Now you go back even further to win some of the things, these compacts were negotiated that was a completely different machine, one that none of us would want to play these days but now not only do the games look the same, do they sort of feel the same, the play quality is amazing, the graphics are great.

A lot of, as I would like to say, a lot of CEOs from these vendors probably call tell the difference if you sat them down for their own games and said, tell me the difference between a Class 2 and Class 3 game and I think customers are voting with their money and it’s the same thing.

We do see that there is efforts out there and we channeled our team in a big way to get out there and be a part of it and I think, we are getting in many cases, when we say fair share floor, our ship share is 6% but in many of these cases, we are getting 10%, 15% and 20% of those floors when they expand or they make the switch to Class 2..

That’s pretty perspective there. I appreciate that and then just on my last question here. Just around M&A, since Cadillac Jack in 2014, you guys have kind of just been nipping around the edges so to speak whether that’s acquiring table game product, acquiring Class 2 routes that sort of stuff.

Just curious how you are thinking about M&A today and if there is anything out there that piece your interest and then how you prioritize it, I assume, you are just pursuing whatever kind of presents the highest return to you and your shareholders but just curious your current thoughts around M&A and that’s all for me. Thanks.

So we are very confident in all of our divisions. We talked in the past about where we might focus if we were to make some investments that maybe – it might be around interactive just to beef it up a little bit. Tables, we have been active in the space.

We sort of, we do a lot of tuck-ins but in the table game space just about everything is a tough game, something that we can just grab and run with it and it fits right in our infrastructure really well. In the slot division, we are very confident in our team.

We are confident in our ability to improve, we talk about in the prepared remarks, talk about the culture and how we think it affects our ability to improve. So we want to stay focused in the slot division. If something comes up, once again, we will evaluate it. You saw, we did that at the end of last year with Rocket. But we are going to be smart.

We are going to be prudent. We are going to really focus on the returns and is it a distraction to the current success of the business and does it fit our culture. So there is a bunch of sort of building blocks when we do our M&A. We are always active. We are always looking. We are always thinking, but I think, that probably sums it up, Brad..

Perfect, thanks a lot guys..

The next question comes from Chad Beynon with Macquarie. Please go ahead..

Hi good afternoon, thanks for taking my question. Another quarter with nice product performance sounds like mainly from the Orion. And you kind of mentioned, how diversified your placements were just in terms of the number of operators.

Outside of 4 wins in the quarter, could you kind of help us think about if you are able to break down some doors with some new operators and if the results from Orion continue to kind of build around the edges with maybe some players, who weren’t using the product and their property? Thank you..

So, I think that, you know, when you look at our installs for the quarter, I will sort of answer and I think, Julia, might add some detail here as well.

But if you look at the way we are ruling out and sort of how we effect the white space and how we get into new jurisdictions, it’s a good mix between getting where properties for the first time with Orion, get going to an existing property that’s already has Orion cabinets and sort of going for that second or even third order at this point.

So I think, you are talking about specifically about 4 wins, which was a big win for us. Things went very well there.

But generally speaking, when you look at the quarter, great deal of our units that are placed are going into new properties that we haven’t been into before with the Orion or probably in there with ICON and I think, again if you go back to some of what we say in the prepared remarks, the beauty of where we are at right now as opposed to four – for eight years ago, is that people who don’t know who AGS was and neither were sure where our address was or where our home office was or any of the above unless they were in Oklahoma, Florida or let’s say Alabama.

Now as we get approved in new jurisdiction like a Pennsylvania, like in Ohio or Ontario, they have been maybe two or three times prior to that approval, they know exactly who we are. They know exactly the product that they have been really pinning for and they were able to get that into the casino..

Chad, so just to give a little bit more color on some of the specific operators and some of the good success stories we have in the quarter, you mentioned the 60 different operators across sort of 21 different states and we’ve got a few things we like to highlight. One is Norwegian, we placed about 70 units there and that was a great story.

We started with a trial bank at just one ship and that went really, really well and so now they have expanded based on that trial and we are sort of just kind of getting started there. Another great example this quarter is MGM. MGM purchased their first unit in our company’s history. This is a great relationship.

We think there is a lot of long-term opportunity there. Pechanga and a number of different tribal customers reopt with us basically based on the strong performance of Orion. So lot of what you have seen this quarter is that, we had a lot of different operators maybe they just had four Orion, now they are moving that to 12 to 16 to 20.

They are really expanding their floor based on performance. We made placements with Caesars, Langeries [ph], Win Win [ph] Ontario, Pen, just a lot of great – as David said new customer relationships or situations where now we proven ourselves and we are able to get more of the floor..

I am more excited honestly, Chad about revise than I am about the first install because it really speaks like when someone takes the product, it doesn’t matter really what product it is whether it is you know our product or any consumer product.

When you go for the revise, it means that you really like the product and that clearly in this case that the products are playing well and again that the actual players are voting with their money for AGS products..

Great, thanks. And then my follow-up just kind of going back to guidance, you mentioned the Philippines launch and there is a number of different – number of your different segments I think are punching above their weight at this point.

Did anything with respect to the Philippines launch, I guess come in ahead or behind expectations and is everything still kind of in the same place in terms of how you are thinking about this short term, medium term and long term, just the overall value of that business, thank you..

Thanks Chand. So on the Philippines front, I think there is two ways that I will sort of answer the question from a unit and a revenue and EBITDA.

We talk about sort of normally when we are going to enter a market and when we are going to get our first units on ground and maybe when our – we will see our quote, unquote first revenue and we may be a smidge behind and when I say, behind, 30 days something like that in the realm of 30 days behind there, from a true revenue where EBITDA perspective, we are probably right on track still because we take a very conservative approach on that end.

Again, when we talk about expansions, international, acquisitions whatever it may be, we have a very strong core business. We don’t need to depend on that stuff to grow the company. The very organic white space growth that we have in North America and even what we are doing in Mexico is very good for us, so we don’t heavily depend on that.

So we are probably, just a hair behind on national unit install from a revenue perspective, we are right on track and nothing in that market is sort of swayed at either way at this point.

What I can say is that once we get the unit send and we really monitor how they perform and I expect them to perform well, we will probably have some additional excitement because we are very confident in the Cabinet.

We are confident in the games that we designed for that jurisdiction and we actually see that that market that we are attacking is pretty hot..

Okay, thanks David. Nice quarter and best of luck..

The next question comes from Barry Jonas with Bank of America. Please go ahead..

Hi guys, just a few questions. First, 6% ship share and another very solid quarter. Maybe just curious how you are thinking about what levels of ship share and maybe the cadence we should expect to see in future quarters on that road to a 5% market share..

Boy again, crystal ball or here a little bit, so hard to say.

I expect this year, we will be in our range of ship share and I think that when they calculate this and when you sort of look at it across, you get this from the Eilers report, how you calculate it, it’s interesting because when you look at any given market, we might be carrying the cover off them all in a particular market.

I know, I have said this before on calls that maybe we are shipping at 15% or 18% in our particular market in any given time, so it’s really how that ebbs and flows.

We can end up in a quarter or couple of consecutive quarters where we blast that 6% and we are just knocking the cover off the block and then there might be another quarter where it just sort of backing that 5% to 6% range.

So from my perspective, I would say, let’s expect it to sort of stay around that range with a little bit of positive turbulence not necessarily going the other way, but a little bit of positive turbulence when all things are lined up maybe the stars are lined a few jurisdictions in any given quarter and I think that just comes down to timing.

We expect it to be around what has been maybe plus a percent here or there but rather consistent we are confident obviously with the performance that we are seeing..

Great. And then next question, maybe you could just comment what your government relation folks are saying about Brazil? Any updates there..

So our government relations folks are basically the team here. So we are obviously all over this. We got a team on the ground in Brazil. I think, there is something, this is always the case in Brazil. Everyone sounds like a broken record when they answer this question.

It’s like, there is some stuff that could break here in the next sort of I guess, I am going to calculate in my head about 45 days that could be altering the path of an approval in Brazil but it really does look like it’s going to be something in the later year for their approval to come through.

Again, I will sort of answer this one, I always do in any jurisdiction, follow the need for the money. I think that there is a need for the tax dollars. I believe, there is a will, I believe there is a way, meaning that there is going to be a method to get the approval.

I don’t think that much stands in the way, I think that there it was maybe on the part of those trying to get it approved late last year. There is couple of hiccups in the way that they approached it. But I still expect it to happen this year. It would be fantastic obviously leading into 2019.

Again, when you look at our 2018, we don’t really have anything in there from our budgetary perspective. We are ready for it. We are ready for it if it happens but it would be all offside if it would happen in 2018 and obviously if it happens in 2019, that’s fantastic..

Great. And then last one just a question about free cash flow, maybe you could help sort of identify some of the one-timers not a recurring stuff, so we can kind of think about a normalized number for the quarter..

I think Kimo will give probably the best answer..

So if you focus in, I think, Barry, on a operating cash, I think if you look at the statement for the quarter, couple of things to note in there that are anomaly, so when we settled our HoldCo PIK notes in the quarter, you can see there is a large amount up in operating cash related to the PIK interest that’s settled.

If you look down at accounts receivable and inventory, so working capital couple of timing related things going on there. I think, AR with some of the ramp in sales, I think, that was a little bit of a dream this quarter but obviously we fully expect to collect that probably in the subsequent quarter. Inventory, we had a little bit of a ramp there.

That’s timing related. As we get ready launch Slant and then also just build to support, I think the ramp in sales that you can see, there is another short term drain there in the quarter. So if you normalize those out, I think, we would have been at a level that was obviously better than last year. Last year, operating cash was about $7 million.

We would have been a couple of million above that if you normalize those items out. If you look on the CapEx side, I think, the guidance that we put out was 55 to 60. We commented that we expect to be on the high side. So for the quarter, you will see, we used about $15 million.

So I think if you use that run rate, it will get you to about the 60 level that we put out. So I think, if you use those data points, you can sort of circle around how free cash flow will start to look for the rest of the year.

Again, barring Brazil or anything large and different happening in there [indiscernible] in our projections and not in our numbers but yes that would different if that were to change..

Great, thank you so much..

[Operator Instruction] The next question comes from David Katz with Jefferies LLC. Please go ahead..

Hi, afternoon, congrats on a great quarter. We covered a lot of topics and I just wanted to, I think the merits and the opportunities in the slot business are very, very clear. So I wanted to ask about the table game business, which has turned positive.

And I know, you made some comments about it, but if you could paint us a vision for how big that could become on a longer-term basis and what the sort of spending and pieces are around that. So we could envision our – how large a leg of the stool does that become, please..

Yes, I think that the table game business at this point, I think, we’re really beginning to hit our stride. To give you sort of a roadmap or a vision of say, how big can this get? When I think about that business, I always go back to my history of being in the business before and saying, how much did that business generate.

The company I worked for many, many years ago. And I think that, it’s fair to say that we can get a nice piece of the pie, right that there is room for two or three players in that table game space, we believe that we are one of the major players.

I think, that when you look at bonus spend or you look at stacks and we are looking at numbers historically here in Q1 right now. But really as we look out at the year, we see a lot of nice positive momentum in that space for us. So I see some very positive things happening in 2018, but we know what the shuffle business did many years ago.

Can we get a big slice of the pie, yes, a considerable slice of the pie? I think, the challenge in the space is that it doesn’t happen like a rocket ship. It just is going to be slow and steady. And it’s going to be consistent and I think that yes, we wanted it to be a $10 million EBITDA contributor in the near future, we would love to see that.

Do I think it can grow to be $15 million and $20 million a EBITDA, of course I can. We have some wild card in that space right now. We got all the hardware that I just mentioned between stacks and bonus spend and we have a shuffler that we are releasing.

There is a lot of like optionality in that space without giving you specific numbers about where we think the business is going to go because we haven’t given that guidance yet. I think, you can look at the size of the businesses that exist out there and what it could mean to us should we see success with these products.

I know that I am sort of dancing around specific number but because we haven’t given a lot of guidance there, we sort of stay away from real specifics..

Thank you. And just one more if I may.

With respect to stock comp, and I apologize if you have covered this already but what we saw in the quarter is that an appropriate run rate that we might use going forward?.

No, I tell you no and again then Kimo can explain because I think there is a catch-up in that..

So in my prepared remarks, we mentioned that, so we took a total charge of about $8.2 million in the quarter, of that call it about $8 million or $7.9 million of that was an initial charge sort of a catch-up accounting wise related to previously not recognized expense, so on a go-forward basis, about 0.3 million, so 300,000 a quarter is what you should expect and that’s based on awards that we have outstanding.

So 300,000 a quarter is how you should model it going forward or think about it going forward..

Thanks for repeating. Thanks very much..

Thanks, David..

Thank you..

This concludes our question and answer session as well as AGS’ first quarter 2018 earnings call. Thank you for attending today’s session. You may now disconnect..