Michael D. Rumbolz - President and CEO Randy L. Taylor - CFO and EVP Dean A. Ehrlich - EVP and Gaming Business Leader Mark LaBay - SVP, Strategic Development and IR.

John Davis - Stifel Nicolaus George Sutton - Craig-Hallum David Hargreaves - Stifel Nicolaus Howard Rosencrans - VA.

Good day and welcome to the Everi Holdings Incorporated Third Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Mark LaBay, Senior Vice President, Strategic Development and Investor Relations. Please go ahead, sir..

Thank you, Shannon, and welcome to the call. Joining me today are President and Chief Executive Officer, Mike Rumbolz; Executive Vice President and Chief Financial Officer, Randy Taylor; and Games Business Leader, Dean Ehrlich.

Before we begin, I'd like to remind everyone that the Safe Harbor disclaimer in our public documents covers this call and our webcast.

Some of the comments to be made during this call contain forward-looking statements and assumptions that are subject to risks and uncertainties, including, but not limited to, those contained in our SEC filings, all of which are posted within the Investor Relations section of our corporate Web site.

These events could cause actual results to differ materially from those described in our forward-looking statements and they should not be considered an indication of future performance. We do not intend and assume no obligation to update any forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements which speak of only today. In addition, this call may refer to certain non-GAAP measures, such as adjusted EBITDA and adjusted EBITDA margin.

We reference these non-GAAP measures because management uses them, in part, to manage the business and to enhance investor understanding of the underlying trends in our business and to provide better comparability between periods in different years.

We also make certain compensation decisions based, in part, on our operating performance as measured by adjusted EBITDA. And our credit facility requires us to comply with a consolidated secured leverage ratio that includes performance metrics substantially similar to adjusted EBITDA.

For a full reconciliation of these non-GAAP measures to GAAP results, please see our earnings press release and related 8-K, both of which have been filed with the SEC and are available on our corporate Web site within the section captioned Investors.

Finally, this call is being webcast which may also be accessed within the Investor Relations section of our corporate Web site and a replay of the call will be archived. With that I'm pleased to introduce our President and Chief Executive Officer, Mike Rumbolz..

Thanks, Mark, and good afternoon everyone and thank you for joining us. This afternoon, we reported another solid quarter with 2017 third quarter revenue of 247.3 million and adjusted EBITDA of 53.2 million. This represents year-over-year revenue growth of 11% and adjusted EBITDA growth of 3%.

Based on our continued momentum, the strength of our operating results through the first nine months of 2017 and our expectation for continued growth, we expect to report full year adjusted EBITDA at the high end of our guidance range of 209 million to 212 million.

We continue to benefit from the investments and the process changes that we are making in both our Games and Payments technology development. These investments, combined with our laser focus on customer service, are helping us to regain traction in our installed base footprint and to improve its yield.

We are also driving consistent growth in quarterly unit sales and ship share and we are reinforcing our position as the dominant provider of gaming industry payments solutions.

Now despite the progress we’ve made over the last 18 months, we believe that we are still only in the early stages of achieving the wide scale success which Everi is on a trajectory to reach. We’ve established a very solid foundation for growth and believe that we are positioned to consistently grow our financial results going forward.

Now with that sentiment serving as the overarching theme of my remarks this afternoon, I want to take a few moments to highlight some of the distinct successes that we’ve had to-date and some of our forward expectations within the context of our experience at the recent Global Gaming Expo.

It’s truly an understatement to say that G2E 2017 was our best showing ever for both our Payments and Games segments. I went into G2E very optimistic but our customers are always the real judge and jury. I left there with the feeling that across the board we not only accomplished our goals, we exceeded many of them.

So let me start this discussion with some of the key highlights from our Payments offerings at the show. At G2E, it’s easy for attendees to get sensory overload from all the lights and the sounds that are coming from the newest slot machines, including our own.

However, it was clear that our Payments products and our demonstrations to customers easily cut through that noise to capture those customers’ attention. We have continued to innovate in our Payments products because even though we already have a dominant industry position, we expect to not just maintain our technology leadership but to extend it.

Through the first nine months of 2017, our Payments segment adjusted EBITDA is up nearly 20% or 11.8 million compared to the first nine months of 2016. This growth includes same-store revenue growth which by the way is outpacing the rate of gross gaming revenue growth and also from the benefit of new customer wins.

In fact, we have secured the Payments business for a significant majority of the new casino openings occurring since the beginning of 2016. We are also achieving growth through net positive competitive takeouts as well as the expansion of our ATM services into Canada for the first time beginning in 2017.

Our same-store growth, our new casino cash access wins and our competitive takeouts are the result of our ability to offer industry-leading solutions that are more fully integrated throughout our customers’ operations.

Our Payments products help our customers improve their operations by reducing cash and cash handling costs and they help drive more cash through the casino floor by making the players’ experience faster and easier. At G2E, we demonstrated the next level of payments solution innovation, including the following.

Our Cash Club Wallet that maximizes patron’s financial transactions by fully integrating the existing payment solutions that exist across the gaming floor. Our eWallet solution allows players to store funds, access from multiple payment methods and easily move those funds in and out of the casino as well as manage their spending limits.

Now that will support not only our responsible gaming initiatives, but also that of our customers. Our recycler exchange and cage exchange products remove the need for cash handling from casino staff which allows for improved and immediate accuracy and verification of currency.

This allows the casino staff to focus more of their time on customer service and other cashiering and cage functions. It also helps improve operational efficiencies by reducing overall cash handling labor and training costs.

And we also demonstrated at G2E that we are well positioned to lead the industry if there is a move to mobile or cashless gaming in the future.

While we currently expect gaming to remain largely a cash-based business over at least the next several years, there is increasing conversation around cashless gaming and our customers’ exploration of mobile and cashless gaming solutions at casinos.

Before this initiative becomes the accepted standard, however, there will need to be an acceptance phase from both our casino customers as well as their patrons and as well as the gaming regulators.

Now we’ve advanced our solutions, including our Cash Club Wallet to ensure our position as the partner of choice who will best support our customers in these efforts. We recently went live with our first Cash Club Wallet customer and we’re excited for this product’s long-term potential.

We also continued to lead the industry in the availability of compliance solutions. Since this is a growing area of importance for our customers, we worked through the latter half of 2015 and throughout 2016 to make certain that our customers fully understood the advantages of our solutions.

Now this has allowed us to gain significant momentum with our compliance solution sales. Year-to-date, every compliance revenue is up 34% compared to the first nine months of 2016. This provides further evidence that our focus on innovation is translating to growing results.

And we don’t expect to maintain the same rate of revenue growth from our Payments segment in the fourth quarter that we’ve achieved so far this year. However, we do expect to continue to grow as we further separate ourselves from our competitors. Let me turn now to the Games segment.

In our Games segment, we had another solid quarter of execution in Q3 and as I highlighted with Payments, our technology investments are helping grow the business today or better positioning Everi to accelerate growth going forward.

Our success over the last 18 months is notable and it includes growing unit sales as we benefit from favorable customer reaction to our core HDX cabinet, our classic mechanical reel cabinet as well as our new game content across all platforms. We now expect unit sales to increase around 20% this year, which is up from our earlier expectations.

We debuted new innovative games for the core HDX cabinet at G2E this year with unique new features that we believe further diversifies our for sale offerings for this cabinet.

As a result of both the lessons learned from the success of our core HDX cabinet and by listening to our customers’ feedback, we made the decision to introduce a new for sale cabinet at G2E, the E43. The E43 cabinet directly addresses our customers’ request for a single screen base cabinet in a for sale solution.

The E43 was introduced to G2E with five game themes to very favorable customer response and we expect that it will be commercially available beginning in the fourth quarter. We also have a full roadmap of games being developed for the E43 with plans to introduce multiple new titles each quarter.

Now our ability to continue innovating in Class II is a significant driver of the 12% year-over-year growth in our Class II installed base. Our Class II innovation was also a significant factor in our ability to secure a long-term placement agreement for 4,300 units representing rather nearly a third of our total installed base.

Looking ahead, our Class II expertise has also helped us secure one of the largest percentages of floor share at the new Four Winds Casino Resort in South Bend, Indiana which is scheduled to open early next year. In total, we will have approximately 400 Class II units at this 1,800-unit property.

We’ve also continued to make significant strides with growing the size of our installed base and improving our daily win per unit. In the third quarter, our installed base increased 273 games on a quarterly sequential basis, our largest increase in 13 quarters.

And the 1% year-over-year decline in daily win per unit was the smallest decline recorded in seven quarters. Now while we were down for the quarter, we actually recorded our first quarterly sequential increase in our daily win per unit since the first quarter of 2016.

Our conclusion from all of these indicators is that we are clearly moving in the right direction. We’re moving past the impact related to third-party Class III game removals and we believe the fourth quarter will demonstrate even more growth in the installed base.

Our trajectory continues on a positive trend and we expect to end the year with a higher installed base than at the end of 2016. Additionally, we expect daily win per unit will approximate the daily win per unit in the prior year fourth quarter.

A significant contributing factor to the momentum that we’re seeing in our gaming operations segment is from our premium games. Our installed base of higher yielding premium games is up over 30% year-over-year and 15% on a quarterly sequential basis.

A large part of this growth is due to the recent introduction of our Class II Jackpot Lockdown wide-area progressive, which includes two licensed titles on our Empire MPX cabinet; Penn & Teller and Casablanca.

Of our almost 300 Class II wide-area progressive games, over 25% of them are either Penn & Teller or Casablanca-themed games and we continue to add more each day. Both of these titles were also recently introduced as Class III local-area progressive games with major strategic account partners.

Between the games already in the field and our future placement backlog, we have commitments for over 70 of these games as Class III placements with just our two initial casino launch partners.

Now while it’s still relatively early, both the Class II wide-area progressive and our Class III local area progressive games are performing very well in their early installations.

G2E was an opportunity for us to showcase the output of two key parts of our strategic focus; making great products with new hardware form factors and original content and listening to and being flexible with our customers to ensure that we can adequately meet their needs.

These two points have been keystones in driving our development efforts and have become an important foundation for how we think about future extensions of our entire product portfolio and how we perpetuate our culture of originality.

At the show, we introduced eight new licensed games and several new hardware innovations to very solid customer feedback. I’m not going to mention all of them here but I do want to note a few that were truly standouts at the show.

In the classic mechanical reel gaming market where we believe we have a market leading product whose performance excels already, we’ve added a new 3-reel mechanical game with a Willie Nelson branded theme. We expect that this product will resonate well with our players in core markets, particularly in Oklahoma and Texas.

We also debut the Empire 5527 cabinet. This new cabinet builds on the success of the Empire MPX cabinet and features a 55-inch high monitor mounted on top of another 27-inch widescreen. The E5527 will debut with another new branded theme, The Brady Bunch.

Now there was a great deal of appreciation from our customers that were visiting in the booth for how well we combined the appeal of this iconic brand with the unique capabilities of the E5527 to deliver a game that we expect is going to have a lot of player appeal.

We also introduced Empire Arena which we featured at the show with Shark Week as a brand and it was a highlight with our attendees as well.

Empire Arena combines the E5527 with the next generation of our Nitro media system to create a very unique product that can seamlessly integrate the action across an entire bank of games and around a circular bank of games. Finally, attendees were also captivated by our Renegade 3600 sign package.

It offers a very unique bonus experience through the combination of three 43-inch convex curved monitors and individually controlled LED lighting around each game monitor to create exciting action and very unique and very large secondary bonus events.

Each of these products is a result of our focus not just on investing in innovation but investing in innovation with a purpose. We were not trying to win headlines at G2E for new and unique innovations that are never going to make it to the market.

Instead, we wanted to innovate around solutions that help our customers further engage with their players and add excitement to their casino floors.

We’ve been successful executing on our strategic plan over the last six quarters and I fully expect these efforts to position Everi to grow our ship share from today’s mid-single digits to double-digit levels over the next several years.

We expect this growth to occur without any material change in the average selling price of our cabinets and while we continue to grow our installed base to reach our long-term stated goal of 17,000 units.

The common theme from those who visited us at G2E was that the investments we had made in games innovation and development over the last several years is clearly evident in the quality and the diversity of the gaming solutions that we are now delivering.

Okay, so before turning the call over to Randy, I would like to briefly comment on the announcement that we made today related to our capital structure.

As a result of the tremendous progress that we’ve made through the early part of 2017, we were able to leverage the then favorable credit markets to refinance our previous term loan and our former senior secured notes. With that refinancing transaction, we expected to reduce our annual cash interest expense by approximately $8 million.

Now since then we have continued to make steady additional progress. We believe that current credit market conditions remain favorable for actions that can further reduce our interest expense and improve our free cash flow.

As a result, we intend to pursue repricing of our term loan and we’re actively evaluating opportunities to refinance our senior unsecured notes. Our focus is to accelerate free cash flow generation. Success with any repricing or refinancing plans would go a long way towards helping that cause.

We view debt reduction as the top priority for our allocation of free cash flow. Achieving this goal will allow us to further reduce interest expense and to continue the cycle of accelerating free cash flow generation.

Today, Everi is well positioned to make additional progress in the fourth quarter and to grow our financial results into 2018, and I continue to remain optimistic about what the future is holding for our company. And with that, let me turn the call over to Randy..

Thank you, Mike, and good afternoon, everyone. For the third quarter of 2017, total revenues were 247.3 million comprised of 55.4 million in Games segment revenues and 191.9 million in Payments segment revenues.

Payments revenue increased approximately 16% year-over-year and Games revenue was essentially in line with the year-ago period even though the timing of the National TournEvent of Champions was not comparable this year.

Last year, the entirety of the event occurred in the third quarter but in the current year, this event occurred at the beginning of the fourth quarter. This will cause approximately 2 million of comparable revenues in the third quarter of 2016 to shift to the fourth quarter of 2017.

Adjusted EBITDA for the third quarter of 2017 increased 1.6 million or 3% to 53.2 million. Adjusted EBITDA for the Games segment was 29.4 million compared to 29.2 million a year ago and adjusted EBITDA for the Payments segment was 23.8 million compared to 22.4 million last year.

In our Games segment, gaming operations revenue decreased 2.3 million year-over-year to 39.1 million, a decline primarily due to the timing of our TournEvent of Champions event.

There was also a 72-unit year-over-year decline in the total installed base at September 30 to 13,215 units and a modestly lower daily win per unit of $27.13 compared to $27.53 in the third quarter of 2016 that impacted gaming operations revenue.

Turning to daily win per unit, the $0.40 year-over-year decline is the smallest decline in this metric in seven quarters and is in line with the expectation we provided on our second quarter call. Daily win per unit is benefitting from increases in our higher yielding premium footprint which rose 30% or 545 units year-over-year.

We also continue to grow our non-Oklahoma installed base with these units rising by 482 units year-over-year. These increases, along with the improvement we are beginning to see in yields for our non-premium games, will continue to positive impact our daily win per unit.

We expect our daily win per unit in the fourth quarter to approximate the amount reported in the prior year quarter. On a quarterly sequential basis, the installed base was up 273 units benefitting from growth in our installed base of premium games which increased 15% or 299 units.

We expect this will be an ongoing area of growth in terms of installations and daily win per unit going forward. Revenues from electronic game sales rose 1.5 million or 10% to 16.3 million for the 2017 third quarter. We sold 817 units at an ASP of $17,251 compared to 783 units sold in the third quarter of last year at an ASP of $17,258.

The year-over-year increase is notable as you may recall that last year’s third quarter benefitted from the sale of 200 units to the Alberta Gaming & Liquor Commission, our largest ever single quarter shipment to a customer. Our core HDX cabinet comprised approximately 55% of unit sales in the quarter and our ASP has remained above the 17,000 mark.

Adjusted EBITDA margin for the Games segment was 53% in the third quarter of 2017 as compared to 52% in the third quarter of 2016. For our Payments segment, the third quarter represented the sixth consecutive quarter which both revenue and adjusted EBITDA grew.

The 16% year-over-year increase in revenue to 191.9 million includes double-digit growth from our cash advance and ATM revenues, nearly 8% growth in check services revenue and another strong quarter for compliance revenues. Cash advance and ATM revenue benefitted from new casino openings and several new agreements as a result of competitive takeouts.

This quarter also marked the 12th consecutive quarter of same-store growth in both transactions and dollars processed. ATM revenue experienced further growth from surcharge increases initiated by several large corporate casino customers and the expansion of ATM services into Canada.

Adjusted EBITDA margin for the Payments segment was 12.4% in the 2017 third quarter compared to 13.5% from the third quarter of 2016, primarily driven by a higher mix of lower margin ATM revenues and an increase in selling, general and administrative expenses.

Compliance revenue had another quarter of revenue growth and through the first nine months of the year, compliance revenue is up 34% compared to the first nine months in 2016.

Equipment sales and service revenue related to our fully integrated kiosks were down as last year we benefitted from the sale of approximately 40 kiosks with a new commercial casino in Maryland. Moving to the balance sheet and reflecting the refinancing completed in May, long-term debt was 1.17 billion.

We had no amounts outstanding under our revolving credit facility as of September 30, 2017. The weighted average interest rate on our outstanding debt obligations was approximately 7%. During the quarter, we paid approximately 2.1 million in required quarterly repayments on our term loan.

As of September 30, 2017, the outstanding balance of ATM cash utilized by us from our Wells Fargo’s cash solutions agreement was approximately 226.6 million. Our consolidated secured leverage ratio at September 30 was 3.6x adjusted EBITDA compared to a maximum senior leverage of 5x.

Mike noted earlier that we are pursuing a repricing of our 820 million first lien term loan that is scheduled to mature in 2024. The earliest we are reprice the term loan to avoid the soft call premium will be November 10. So if we are successful with these efforts, we would expect this to be a very near-term event.

Our first lien term loan currently carries an interest rate of LIBOR plus 450 basis points with a 1% LIBOR floor.

With where we are in the process, I’m not currently in a position to speculate on the ultimate reduction of LIBOR spread that we might ultimately achieve but I would note that every 25 basis points reduction in the interest rate spread that we obtained would equate to approximately 2 million in lower annual cash interest costs and would be additive to the approximately 8 million in cash interest savings that we originally projected following the initial refinancing of our former term loan and senior secured notes in May.

We are also evaluating the opportunity to refinance our 350 million of 10% senior unsecured notes due 2022 prior to their January 15, 2018 early redemption date.

We believe the debt markets are currently favorable and with the continued operating success that we are achieving, we believe this provides a quality opportunity to reprice the term loan and possibly refinance our senior unsecured notes.

We expect the debt markets to receive these potential transactions favorably and could result in meaningful reductions in our weighted average cost of interest. Our goal is to continue to reduce annual cash interest expense and in the case of the senior unsecured notes to also extend their maturities past that of the existing term loan.

While there is no certainty that either of these transactions will be successfully completed, if we are able to complete either of these or both we believe we will be better positioned to allocate our growing free cash flow to reduce leverage in future periods. Capital expenditures in the third quarter were approximately 36.4 million.

Games segment capital expenditures were approximately 32.4 million, of which approximately 15.1 million was associated with replacement units for our installed base, new expansion units into our installed base and trial units not yet converted to either an installed base unit or a sold unit.

There were also 10.1 million in placement fees paid in the third quarter of 2017. Payments segment CapEx was 4.1 million for the quarter. For the first nine months of 2017, CapEx was 83.2 million with Games capital expenditures of 75.2 million inclusive of 13.1 million in placement fees and Payments CapEx of 8 million.

As noted in Mike’s earlier remarks, while our outlook for 2017 adjusted EBITDA has not changed from a range of 209 million to 212 million, we now expect to be at the high end of this range for the full year. Let me provide a few key updates on our expectations and certain metrics.

Based upon our 2,721 units sold through the first nine months of 2017 and our current visibility for the fourth quarter, we now expect full year unit sales will grow approximately 20% over the 2,954 reported in 2016. This compares to our previous expectations for an increase of 12% to 15%.

The fourth quarter does have a challenging comp to last year as last year’s 920 units sold benefitted from the sale of approximately 90 units to new casino openings in New York.

We do not expect to see a comparable level of new unit sales from new casino openings in the current year fourth quarter, but we do expect to see some benefit from positive momentum generated at G2E.

For gaming operations, we expect that our installed base will grow sequentially and we expect the installed base at year end will exceed the 2016 year-end installed base of 13,264 units.

Having largely overcome the challenging prior year comparison in daily win per unit during the third quarter, we expect daily win per unit in the fourth quarter will be comparable to the prior year fourth quarter as we continue to benefit from the new placement of premium games as well as placement of games in markets outside of Oklahoma to typically have higher yields.

As I noted earlier, approximately 2 million of TournEvent of Champions revenue will be reported in the fourth quarter of 2017 compared to the third quarter of 2016. We have had a fairly conservative view of the growth in Payments revenue and adjusted EBITDA for the last several calls.

While we will continue to maintain that conservative viewpoint, we do need to increase our outlook slightly to match the trends that we have been experiencing.

Because of the additional revenue generated from the Canadian ATM portfolio we acquired and the steady performance of our same-store locations across our Payments products, we expect the Payments segment revenue will grow in the low-double digits and adjusted EBITDA will grow in the mid-single digits on a year-over-year basis in the fourth quarter.

As new openings and competitive takeouts begin to lap their initial installations, we expect accelerated quarterly revenue growth that we have seen through the first nine months of 2017 will begin to slow in the fourth quarter.

Our expectations for full year interest expense is approximately 95 million to 96 million, which includes interest on Vault Cash of 4 million to 5 million and approximately 6 million in non-cash amortization of capitalized interest costs.

As we cannot be certain of the timing at which we will close nor our ability to close either the proposed repricing of the term loan and the potential refinancing of the senior unsecured notes, this new range does not reflect any potential interest savings nor any potential loss on the early extinguishment of debt that could occur as a result of these transactions.

We expect our full year capital expenditures to exceed the 105 million which was the top end of our range. This includes approximately 13.1 million in placement fees and the cost of approximately 400 units that will be placed on revenue share arrangement at a new tribal facility in South Bend, Indiana earlier next year.

CapEx related to the refreshment or replacement of units in the installed base is expected to be between 52 million and 54 million in 2017. With that, I will now turn the call back over to the operator for questions..

Yes, sir. Thank you. [Operator Instructions]. The first question comes from John Davis with Stifel..

Good afternoon, guys. Maybe just first quickly on the Payments business. I think revenue was quite a bit better than we expected. EBITDA was still a little bit better but also the margin was a little bit lower. Maybe just talk about the dynamics between the higher revenue and the lower margin.

Mike, maybe you had mentioned that there were some ATM fee increases on the strip maybe part of it, but any more detail you can give there will be appreciated?.

A couple of items, John. Again, the growth was more at ATM than in cash access. So again, that’s going to be a lower margin. The business in Canada is just new for us, so we continue to work through that business. And so I would say it’s a little bit on the lower margin as well.

And then I think finally we talked a little bit about some SG&A in the quarter as we have ramped up the revenue side and are performing well, there’s probably a little bit more of an incentive expense in there, overall. But I think for the full year, the margin’s going to be pretty close to what it was at '16.

It’s just kind of quarterly impact it seems a little bit lower than we would expect..

Okay. That’s helpful. Can you size the refinance revenue? I think Mike gave us that’s growing 34%.

Just roughly, is it 15% of Payments revenue, just any type of ballpark to see how big that business is today?.

Yes, I’d like to say we’ve never done that. I would say, look, it’s not – I guess in percentages wise I’m thinking it’s less than really 5% of our overall revenue of Payments, because again with the revenue from your ATM and cash advance, so again it’s still relatively small on a revenue side but very still nice on a EBITDA improvement..

Okay.

Then last thing for me capital structure wise, is there any thought to either upsizing the bank loan, maybe doing a Term B loan or do you plan to kind of keep the $820 million bank loan with the unsecured notes, so you’re happy with that structure? Is there a potential to basically change that a little bit more favorably towards bank loans, any comments there might be helpful?.

Yes, I’m not going to comment much on it, John. We’re in that process. But I would say I think in general we like where we ended up this year with the new term loan and where the covenants sat. So look, anything’s possible but I don’t think we’re looking dramatically at changing the mix just at this point in time. But it’s always possible..

Okay. And then, let me sneak one more here. The win per day I guess you guys were expected to be comp in 2018.

I just want to make sure that was consistent with your commentary earlier on a full year basis?.

Yes, our expectation is that’s going to be equal to the fourth quarter. So love to see it a little higher than that, but I think right now we’re down like I say $0.40 in this quarter and we’ve been seeing the improvement. So our expectation is it will be in line with fourth quarter..

Perfect. Thanks, guys..

Thanks, John..

[Operator Instructions]. We next move to George Sutton with Craig-Hallum..

Thank you. Guys, great results particularly up against a tough comp. And I noticed you did not use the excuses you could have relative to hurricanes and the tragedy in Las Vegas.

Can you give us any impacts from those specific items?.

Yes, I would say, look, George, the one hurricane hit Houston obviously very devastating but we haven’t seen – we’ve seen some impact into Oklahoma and some into Louisiana. But it’s not anything that I would say is material enough for us to report on. Clearly the one in Florida, very hurtful to some of the casinos we have in Florida.

But there’s nothing here that – again, I’m trying to stay away from adding certain things back when things of these type happen all the time, we don’t think it had a real material impact on either one of our businesses in the third quarter. So it was just not something I wanted to highlight. I could have, but I didn’t want to..

I appreciate that. You mentioned a couple of times on the Payments side competitive takeouts and obviously there are very few large players that you don’t have. I’m assuming when you’re talking competitive takeouts, those have been relatively small in this past quarter. There are some larger ones in front of you.

Is that a reasonable assumption?.

No, I would say there were some that we did in '16 that are helping the '17 growth. I think what we’re more pushing towards, George, is that we did pick up – we got a couple other ones that could happen this year.

So it could be somebody that was either shared floor or they were up and we took them over and so that’s really part of the takeout that I’m talking about from '17 over '16. And those can continue to occur as there’s – new contracts come up.

But I think it’s really more things that came up in '16 that we won or early '17 that we won that are really comparably helping our revenue increase..

Got you. Last for me, Mike, you mentioned you’re in the early stages of the trajectory on the gaming side given that we’re in the middle of World Series. I wondered if you could put it in the context of innings..

Actually, George, I thought about that and decided not to only because of that game going so late last night, I wasn’t sure everybody would be awake. But we’re probably in the third or fourth inning at this point. We’ve got a ways to go to win the game.

But I have got every confidence that right now we’re out in the playing field and we’re hitting the ball and the question is, can we start smacking some homeruns. .

Well, it sounds like four wins it was, so congratulations..

Yes, thanks..

Appreciate it, George..

Thanks, guys..

The next question comes from David Hargreaves with Stifel Nicolaus..

Hi, David..

Hi. I was wondering if you could talk a little bit about your outlook for replacements in the coming year..

On the installed base or --?.

Just overall sector-wide kind of high level?.

Well, why don’t we let Dean take that for you?.

I think it’s going to be flat to a little bit more positive. The messaging out there from our customers’ side has been they’re definitely comfortable that they’re going to get what they got this current year with maybe a slight amount of upside. But I’d put it at a very small percentage increase, if at all.

I would model it probably running as flat to maybe not even 5% more year-over-year. That’s just my take on it..

Now when you say that, I wonder if that’s sort of budgeting in the comments from our friends at Caesars who were saying they’re talking about replacing it 130% of baseline?.

I would tell you that for every Caesars, there’s other strategic accounts that will go less aggressive. So when you blend it all out or just across the board.

Throughout the years you always play with the ebbs and flows in terms of some major customers or jurisdictions or things that occur that go a little bit more aggressive while others that weren’t heavy the prior year not going as aggressive. So when you kind of blend it out, that’s the thought process..

David, I would say look, we’re not through our budget process yet. These really pulling together with the sales staff what they can do with some of this new product we got out there. So I still think we’re a little early to tell you what we think.

I don’t know if you’re looking at installed base, you’re looking at game sales, you’re looking at – you’re asking a lot of wide questions and I’m not ready at this point in time to tell you that we’ve really kind of pulled something together for '18. But we think there’s going to be growth in both games and payments.

We think it would be higher in games. But until we really kind of pull everything together and finish up the budget, I don’t want to – we’re not ready yet to determine where that’s going to fall..

And I would definitely be cautious on being too cavalier that the floodgates were opening and purchasing that you think are going to come are way above and beyond the prior year actually occur. I think that’s a tough position to take and I’m not comfortable taking that position..

You got to dream sometimes, right?.

Yes, but we’re likely to do that on the operator’s call..

Look, what we put in budgets and what we talk about are two different things. If you don’t think we’re not going to have some aggressive budgets, that’s a different story. But we’re going to temper it and see how things go next year..

What about potential for any new jurisdictions? It’s been a while since we’ve seen anything get approved?.

Don’t see much of – you’ve seen Pennsylvania through their legislature draft some expansion language, but I wouldn’t anticipate any new U.S. jurisdictions or Canadian jurisdictions at this point..

Yes, from our standpoint really in North America there’s no jurisdiction that we can’t operate in or sell to. So we’re pretty much there..

All right, thank you..

Thanks, David..

Next question comes from Howard Rosencrans with VA..

Hi, guys. Congratulations. It looked like a very good quarter..

Hi, Howard..

Could you guys give us a sense – first of all just on the compliance stuff, I know you just said it was less than 5% of revenue, so it probably isn’t that significant to the mix.

Is that sort of one-time ask or should you still have a pretty strong continuing stream of that business?.

It’s primarily actually recurring. There are one-time to get up there, but clearly there’s professional services as well as a subscription model, Howard. So it should be a recurring revenue source for us..

Okay. And more important than that, I wanted to ask about the win per day. You just made a comment that I only caught a piece of something in line with Q4.

But if you could give us a little more perspective now you’re beginning to ship the – let’s say the higher premium units, the Casablanca, The Brady Bunch, Penn & Teller, games you’ve never really played in the higher end license and I’m just wondering what you guys are thinking of the momentum is like for those games? You made a comment earlier also about your share going from low-single digits to double digits.

I guess that was in terms of sales but I’m more concerned about what you’re thinking about in terms of your installed base on your lease units? Thank you..

Yes. Howard, I’m going to have Dean speak to some of the new form factors and some of the new licensed games that we have out there.

But what I was trying to convey in my remarks was that we are finally and quarters sequentially starting to move the other direction instead to continuing to have quarter-after-quarter comparisons for the prior year where our win per unit per day continues to go down.

And so as we see that, that’s really in my view and the way I’m looking at it is sort of a leveling of our win per unit per day and now it’s our obligation to not just grow the installed – footprint in our installed base not only grow that, but also grow the win per unit per day.

And part of that solution, you’re correct, is getting more of our better licensed branded products out there. But we have been saying all along and it’s starting to prove itself out, but the whole point is to produce and develop better games, games that people want to play that we can either have for sale or we can put into our leased footprint.

And that’s part of where Penn & Teller and Casablanca come in, in a wide-area progressive format but also its part of why the E43 is going to be a for sale cabinet but also going to our format. But I’ll let Dean speak to how part of our strategies around how we’re going to increase that..

Mike, as you said, it’s obviously making better product and leveraging all our different technologies, our form factors. And if you take a look at our licensed portfolio now and ratchet it up, we have about 20 different licenses to third parties that we only see maybe a little more than a half dozen going out.

So between all of that, it puts us in a great situation to grow our footprint and get a better win per day overall..

Right. And so what we said, Howard, real is that we expect the win per unit per day to start going the other direction. We expect the installed base to continue to grow and become larger.

And then with respect to win per unit per day, I think the exact comment was that we anticipate our fourth quarter this year win per unit per day will be right around the fourth quarter of last year win per unit per day throughout our installed base and our installed base will grow. Over time, we expect the installed base to grow to 17,000.

And then with respect to sales, we did say that we expect to go from mid-single digits into at least double digits with our ship share for sales..

If we could just take that step one further in terms of that $17,000 number, do you expect a substantial portion of that? Could it be 1,000 units, 2,000 units? So we’re 13 now, so you got an incremental 4,000 units.

Do you believe that a 1,000 or 1,500 will be sort of your super premium – The Brady Brunch and the like, or where do you see the really premium end of your line coming in as a function of that incremental 4,000?.

I think it’s going to be much higher than that. If we’re going to get to that goal – and keep in mind that’s a stated long-term goal, right? That’s multiple years out.

But at the end of the day that’s the way that we’re going to there is by taking a premium product line and getting it out to our customer base as aggressively and appropriately as possible..

And currently we’re over 2,000 premium games in our installed base or about 2,348 of those 13,000, Howard..

Yes, I was just referring to this sort of really high end stuff because I think you gave out a number on the last conference call. I think you indicated that you have 200 – I think you had 140-ish at the end of the second quarter and 200-ish again of these really higher end games.

Is that about right?.

We have just under about 300 of the wide-area progressive – our local-area progressive. That’s what I think you’re referring to..

Premium games include more than just that, Howard. In premium games, we’re around 2,300 throughout the footprint and that’s growing as well..

Yes, okay. I was just really referring to those – the WAP or the --.

Local-area progressive..

Or the stuff that you really get a super premium on, do you envision that that will be a big part of the incremental 4,000? And I’ll let it go there. I apologize for going on..

It’s going to depend. Clearly, as we develop games and we – in particular our licensed and branded games, the whole concept behind development of those games is to develop them so they can on either wide-area progressive in Class II or wide-area in Class III or local area in Class II or III do extremely well and command premium pricing.

So yes, our intention is to in fact have that become a bigger part of our overall installed base. And how well we do that I think is going to be – I personally view that as being something that we’re going to focus on and do extremely well with.

And you can look at quite frankly our history and come to your own conclusions to how quickly and how well we’ve done with that..

Thank you. I hope the 17,000 is not too far out. Thank you..

Fair enough. Thanks, Howard..

Thanks, Howard..

Your next question comes from Jay Kunin [ph] with Stifel..

Hi, guys.

Just wanted to ask if there’s anything to report about the New York contract? Where does that stand?.

There really isn’t anything to report at this point.

And Dean, do you want to --?.

We’re in negotiations. Obviously, it’s coming to an expiration. So we should hear something pretty soon about that..

And I think we’d say look, at this point in time it’s very hard for them to change. We would expect we’re going to get some type of extension. We just don’t know what, how long. And so – I wish we could tell you something but it’s just how the New York government works into that area.

So Dean and his – the people working for him have been doing this nonstop. Wish we had answers but we just really don’t at this point..

Okay. Thank you..

Thank you..

Ladies and gentlemen, there are no further questions in queue. I’d like to turn the conference back over to management for closing remarks..

Randy, why don’t you close the call..

Just want to thank everybody for joining us on the call today and we look forward to discussing further progress in the fourth quarter and for the full year '17. Again, thanks for joining us..

Thanks, everyone..

Thank you. Ladies and gentlemen, that does conclude today’s conference. We thank you for your participation. You may now disconnect..