Good day, ladies and gentlemen, and welcome to the Q3, 2016 Golden Entertainment Earnings Conference Call. At this time, all participants are in a listen only mode. [Operator Instructions] As a reminder, this call is being recorded. I would like to introduce your host for today's conference, Howard Stutz, Vice President of Corporate Communications. Sir, you may begin.

Thank you very much Brittney, and good afternoon. By now, everyone should have access to our third quarter, 2016 Earnings Release, which can be found on the company website at www.goldenent.com under the investor section. Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward looking statements within the meaning of the federal securities laws. These forward looking statements, which are usually identified by the use of the words such as will, expect, believe, anticipate, should or other similar phrases are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our corporate working statements and therefore, you should exercise caution in interpreting and relying on them. We refer all of you to the risk factors in our recent SEC filings, including our most recent form 10-K as updated by our subsequent quarterly reports on form 10-Q for a more detailed discussion of the risk that could impact our future operating results and financial condition and other forward looking statements. During today's call, we will discuss non-GAAP financial measures, which management uses and believes are useful in evaluating the company's operating performance. Financial results before August 2015 did not include the results of Sartini Gaming. Sartini Gaming was merged with a subsidiary of the company on July 31st, 2015 and its financial results were included beginning in August 2015. Because of the merger, management believes it is helpful to provide comparisons on an unaudited combined basis where the results of the company are combined with the pre-merger results of Sartini Gaming for the relevant period. We have provided that information in the press release issued earlier today. The combined presentation does not conform with GAAP or the SEC's rules for pro forma presentations. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our third quarter 2016 earnings release. Also on the call today, we have Blake Sartini, who serves as Chairman of the Board, President and Chief Executive Officer of the company, and Matt Flandermeyer, who serves as Executive Vice President and Chief Financial Officer of the company. Management will provide prepared remarks, after which, we will open the call to questions. With that, I'll turn the call over to Blake Sartini.

Thank you, Howard. And good afternoon. We appreciate everyone joining us and welcome you to our third quarter call. During the quarter, we marked a one year anniversary of our merger. The last 12 months have been a period of transition and growth for Golden Entertainment and as a result, we have made tremendous strides in executing on our strategic plan to build shareholder value. During that time, our business units have experienced significant organic growth and we continue to see economic strength in all three jurisdictions in which we operate. Now, turning to our operating performance, the third quarter represents another period of strong economic results for Golden Entertainment. Combined company net revenues of $104.2 million represents an increase of 21 percent over the combined results of the company from a year ago. Adjusted EBITDA, a $12.6 million increased 26.5 percent, compared to the combined results from a year ago. Matt will provide additional financial details following my remarks. During the quarter, we reported our first full quarter of results from our Montana distributed gaming operations. We introduced our newest tavern brand to the Las Vegas market, SG Bar, which also was our milestone 50th wholly owned branded tavern in Southern Nevada. We saw good returns from both our Rocky Gap Resort in Maryland and our Pahrump Nevada Casino portfolio. In both locations, we have completed work on capital improvement projects that were underway during the quarter to ensure those businesses remain leaders in their respective markets. I'll now discuss some highlights from each of our business segments. First, our distributed gaming segment, we continue to see positive trends from both our wholly owned branded taverns as well as our third party accounts. Our Nevada third party distributing gaming unit posted strong results. Same store, third party revenues, excluding…

Thanks, Blake. Before getting into the results, let me remind you that the financial results from the third quarter last year did not include the full results of Sartini Gaming. Sartini Gaming was merged with a subsidiary of the company on July 31st, 2015 and its financial results were included beginning in August of 2015, just 61 days during that quarter. Because of the merger, we believe it is helpful to provide comparisons on a unaudited combined basis, where we include the results of the company with the pre-merger results of Sartini Gaming for the relative periods. We have provided that information in the press release issued earlier today. Turning to the quarter, as Blake mentioned, net revenues for the three months ended September 30th, 2016 were $104.2 million dollars, an increase of 21 percent compared to the combined results for the prior year quarter. Adjusted EBITDA for the current quarter was $12.6 million, compared to $9.9 million of combined adjusted EBITDA in the prior year, a 26.5 percent increase. Drilling into our segments, distributed gaming net revenues during the quarter were $78.3 million, an increase of 28 percent compared to the combined amount for the same period last year. Distributed gaming adjusted EBITDA was $10.5 million, versus a combined $8.4 million for the prior year period, an increase of 25 percent. Same store grocery store revenues continue to be a challenge, but overall the segment is meeting expectations. As Blake said, third quarter marked the company's first full quarter of financial results from the two distributed gaming operators we acquired in Montana earlier this year. During the quarter, our overall distributed gaming segment included $15.1 million from our Montana operations. Currently, we have 18 percent market share of Montana's approximately 16,000 gaming devices and roughly 15 percent of the…

Thank you. [Operator Instructions] And our first question comes from Patrick Schultz from SunTrust. Your line is open.

Wonder if you'd give a little bit more color or perhaps break out a little bit more in detail the results of your Nevada routes versus your Montana routes?

Detail on what form, Patrick?

You know, what sort of growth - what sort of margins you were seeing for those two, as well as revenue growth rates? What has been the trajectory there?

Patrick, this is Matt, thanks for the question, we appreciate - we haven't broken that out in the past, mainly for competitive reasons. We did give some guidance that in Montana, our margins tend to be a couple of points higher.

We - yes, to expound on that a little bit, Patrick, give you a little more insight, we do run a higher margin in Montana given that splits are a little bit more favorable to the operator up there. Although it's a price competitive market, we still - it is still a market that is fundamentally better from that standpoint than the Nevada market, which is much more mature. In terms of growth, we are - give or take this year, distributed gaming, as a whole, is fluid. It's not like a static casino floor, where you operate 1,000 or 1,500 gaming devices each month of the year and it's pretty predictable in terms of numbers of devices. It's a fragmented ownership so sometimes, there are business closures, which result in - you know, in decreased machine counts and so on. But overall, this year in Nevada, we are seeing significant continued organic growth opportunities. Year to date, give or take, I don't only do this exact number, but we've added about 400 devices on the Nevada distributed gaming route. Our organic growth pipeline is accelerating. Beginning October of this year, we're seeing significant potential numbers of devices coming on through new contracts, and we anticipate that growth rate to be pretty solid. I mentioned in my prepared remarks the temporary closures that occurred during the quarter, and a lot of that is the bulk of this fragmented ownership and fluidity in the market, where we may have devices in a location, and under that ownership, they close for economic or other reasons, we're going to pick those machines back up - I mentioned between now and the end of Q1, and so that void will be filled. But our trajectory, once that's taken into account, is positive. And in Montana, we are experiencing similar organic growth with our operating team and our approach to the market up there, and we believe there are existing or potential acquisition opportunities as well. Is that does that help?

Yes, it does. It kind of leads right into my next question, which was going to be on the inorganic growth opportunities. You’ve just briefly mentioned that, you know, talk about your thoughts on, what you may or may not be looking at, what you can - what you can tell us?

I’m sorry, in regards to?

That was a slot route in various...

In regards to specific acquisition?

Yeah, just your thoughts on, acquisitions of routes going forward, anything changed recently, any progress in that regard?

Obviously, without going into too much detail, we are, I think we are in a position to continue to see a pipeline of potential opportunities, not only in Montana, but maybe some in Nevada, although, as the largest, they would be on a smaller scale, but us being the largest operator, there are, some big disparity between us and kind of the fragmented group below us. But also, you know, other jurisdictions in which we’re active now, as a public company, including Illinois and Pennsylvania, which is considering this type of BLT distributed gaming model. We are active in those markets as well.

And our next question comes from Jim Devlin with Henley and Company. Your line is open.

Hey, guys, how are you? I had a couple of questions, you alluded to the rollout, I guess, of the Interblock StarBar. There’s been some write ups in the local papers there about it, just kind of get a feel for it, the game offers – I don’t know how your platform is setup, it’s like 16 games in one cabinet? Is that correct?

Our current -- our current IGT Game King setup is -- offers anywhere between, I’m going to say 8 to 15 type games, depending on when -- where we put the machines into the market. So there are -- there are opportunities for multiple game activity on those boxes. Interblock, I’m not sure - I'm not sure how many we offer, but it’s in that same realm, call it 8 to 10 various games, but what’s -- and again, it's in a trial mode here, but again, the uniqueness to it are these table game opportunities that these new Interblock machines provide, primarily craps, multi hand black jack and roulette, that are appealing to the tavern customers, as we're seeing with these with the -- with the trial that was just recently completed.

Okay, and as far as the metrics, StarBar versus, like an older Game King, do you guys have any kind of numbers that you can share? Or are you -- are you excited about the metrics versus the older game -- the older IGT Game Kings?

I think we’re cautious about the metrics at the moment. It’s a little bit too soon to tell, given the short timeframe of the trial. What we are seeing, to give you a little insight, is the – is the StarBar games – Interblock games are holding a little less, but we’re seeing a significant higher average bet. And so, we’re encouraged on that front, and we are also encouraged that these games tend to be pulling a millennial crowd, which tends to like to interact with these – with these live games on these bar top devices.

Okay. And right now, it's a trial, would you roll it out, you know, further or is it off - the article said I guess that it had it, recently come off a field trial? That, you know, as you get better numbers, and you, more comfort ability, if you like what you see, would you roll it out further than the number of locations you have right now?

Definitely. The trial is over. We have the ability to roll them out in greater numbers. We are, we are going back and looking at reworking the software a little bit post the trial, because we're learned a lot. Between us and Interblock, we're working together on what we're providing through the game, but we do anticipate rolling them out in greater numbers. And a little more color, it's been decades, literally since there was a new bar product that was being offered in a bar top device in this particular market, or for that matter, in any market. And we're excited about the opportunity to present a new product that is being well received, I mentioned the average bet, in particular, is being well received, but we need a little more work on the software before we start to roll them out in greater numbers.

Okay, and you have some exclusive period with the content there for a period of time?

We do.

Do you know how long?

It is - it is not in stone at the moment, but we do have an exclusive period.

Okay. All right, and then the restaurant same store sales were up 8 percent?

Correct.

Is that what you said?

That's correct.

I mean I was just looking at Restaurant News on Twitter, you know, the outlook for the restaurant industry in general, I mean you guys have some really high same store sales increases. So congratulations. So, you're doing something right obviously. Would you take that restaurant concept, is the restaurant concepts that you've worked on in Nevada transferable or do you have any plans to transfer like an SG Bar or something like that into Montana?

That's a great question. And it's a pretty clairvoyant question. The short answer is yes. You know, the model here revolves around not only food and beverage, but the gaming component in Nevada, which is unique and allows for us, I think, with your gaming expertise to produce outsized returns on these taverns. We do however believe, and we experimenting with our new brewery, with our new SG Bar and frankly our new PT's Gold prototype, experimenting with more retail oriented product that could standalone in markets, either without gaming or certainly to be in markets in Montana, in particular with some restrictions to brand and be consistent with what we offer here. Illinois for example, right now does not offer the ability for owner of a restaurant or cafe establishment to be the owner of the devices on the route. So that law is a bit challenging for us, in that regard. But other states and the states you've mentioned are certainly opportunities for us to continue to rollout this product. And again, just to reiterate, there's a potential maybe in states that don't offer gaming currently. This is a standalone product that may work.

So, you know, getting back to the challenges that other restaurant operators have had, I mean there's many articles, you know, looking for serial bankruptcies, basically, within the restaurant complex, do you see one off opportunities in Nevada? Or is that something, would you buy somebody else's box? I know you did that with the old Andre Agassi property. Is that something that you would look at?

Sure. We do that - we do that quite regularly. And your example - SGU is the latest one, we just opened in September, but yes, the answer is yes. And we've been very successful closing, rebranding, and opening under our umbrella, showing very positive returns.

And then as far as the construction, the convention center, obviously hopefully the Raiders come to Vegas, and then there's - you know, several billion dollars of new strip resorts that are kind of pipelined and stuff like that, you know, any body's guess, but like I think it's like anywhere from 12,000 to 20,000 construction workers, supposedly going to start camping out there in the Las Vegas Valley. Do you guys have a marketing program to reach out to each of these job sites? Or how do you get at those folks?

We have done some specific marketing to job sites through our - through our - primarily our tavern operations, but our brand now, is so widespread throughout the Valley, and pretty much exists, not in every neighborhood, but in most neighborhoods around town. And the one - the one I think, relevant factor around driving business through this additional - these additional jobs provided through construction or just development in general on the strip, is I think we have probably the most well known happy hour promotion in the city, in terms of where people go for that type of experience when they're done working, so the - clearly in years past, construction jobs in general are a direct tie to revenue in our restaurants and taverns. And we would anticipate the same thing to occur.

And then one last question and again, great quarter, I appreciate the time, as far as a - you know, the stock's come off a little bit lately, I guess tonight checked in under $11, gaming in general's kind of been under siege, I guess with the rest of the market in the last 30 days, but do you guys have any hooks in your loan covenants that would preclude the company from the ability, at opportune times to buy back stock? Do you have a stock buyback program? Of do you have any bond covenants that would prevent the company from being able to buy back stock if you deemed it was the right opportunity out of free cash flow?

Yes, we - this is Matt, thanks for the question. We currently don't have any plans to buy back stock at this point in time. And I believe there is some limitations in our loan document, but I'd have to double check and get back to you.

Yes, I think the broad - you know, if you look at the broad specter, it has - it has been - it has been affected. We don't know if it's the election or what it may be, but our numbers speak for themselves. And you know, we're seeing - we're seeing, going forward, at least right now, we're seeing - we're seeing positive economic trends that we will continue to benefit from.

And our next question comes from John DeCree with Union Gaming. Your line is open.

Just wanted to - just build on the last question, you touched on the stock buyback program, and just wondering when I think about the balance sheet, it looks like in my model, comfortably below 3X, net debt, obviously buyback's not on the radar and growth is the first priority, but you know, with free cash flow and absent growth opportunities, would dividends, obviously the one earlier this year was a special dividend in nature, but is that a consideration that you guys might have certainly something that might be able to help the stock, if not a buyback, given where the float is.

John, it’s not something we're considering at the moment. And we'd only get in front of ourselves here, but the stocks – I think is – the market in general is a temporary emotion. Again, the fundamentals that we’re seeing are disconnected with that. We believe that we have – that the excess funds that we have rather, through the credit facility or free cash are most beneficial put to work for growth. And we’re focused on that right now. And, I can’t – we keep doing what we’re doing, the stock’s going to perform. At this point in time, there – we’re – I think it's too early for us to start thinking about dividends. I will tell you if the stock continues to be disconnected, in our opinion, I think we will begin to put together a buyback program. That’s – there’s no question about that. Obviously, we have to check in with our credit facility and our guys holding that credit, but we certainly would be buying that stock.

Fair enough. Very good, Blake. And on that note with growth opportunities and the balance sheet, slightly different direction on the question, where do you guys feel comfortable with the balance sheet and leverage? Seems like 3X is kind of the place you guys been kind of living comfortably in for a while. But as opportunities present themselves, where do you feel comfortable, bringing the balance sheet to for the right opportunity?

Yeah, that’s always a sticky question. I’m sure you get different answers from different CEOs different companies, but, we’re very comfortable living where we’re living, in terms of the current ratio. But there is no question that I think, given the right opportunity we would flex over what would be the current headline that, current kind of ratio that we’re looking at, we would flex to accomplish or accommodate a transaction, but my anticipation, given our history would be that flex would be temporary prior to any efficiencies or improvements. And we would look – we would look for a go forward number to be less than the headline. I’m being a little vague, but I think the answer is we would flex up to do a deal.

Got it. Got it, I appreciate the color and then, just one question more fundamental operationally, just kind of for some insight. When we think about the ramp of the new taverns that you guys have opened this year, could you give us any color on how to think about that ramp? Is it kind of a spike in the first couple of months and then kind of pulls back before stabilizing? Or maybe with the new ramps this year, any color as to how to think about how those new openings will kind of ramp up the rest of this year, and next year what to expect?

Yes, that’s a – that’s a good question. Traditionally, we have seen we’ve given ourselves from a budgetary standpoint, about a six month ramp up to get to kind of full speed or on plane with these developments. I will tell you that recently, and particular the latest new offering, as well as, I think, the two prior, we spiked a lot faster than that, out of the – out of the gate. So, we’re still – we’re still, from a budget standpoint, talk internally about a six month 0 to 60 ramp up. But it’s been pretty positive here on the last couple of openings.

Awesome. Thanks for the color, and congratulations on the first year of the combined company. Thanks a lot, guys.

Our next question comes from Howard Rosencrans from Performing Capital. Your line is open.

Yes hi, guys. Great quarter. I, you gave out a couple of metrics that I just want to get clarity on, you said Vegas was 3.7 percent in the third-party taverns?

[Howard], this is Blake, it was 3.7 percent in our distributed gaming third party same store segment state wide. So it was - it was not taverns. Taverns same store was 8 percent, year over year. Our distributed third party non-grocery store was 3.7 percent increase year over year.

Okay, noted. And the taverns, that was specific to Vegas?

That was, well we have, the majority of them are here. We have two I think, in Reno -- so for the most part, yes, that would be Clark County.

Okay. Okay. Very good. That's, so it's pretty much consistent with the, with the past two quarters that were about 9 or 10, okay everything sounds great. You've given us a lot of valuable color. Thank you very much.

Again, if you have a question, please press the star then the one key on your touchtone telephone. Our next question comes from Nicole Raz from Las Vegas Review. Your line is open.

Hi, thanks. You mentioned some statistics about millennials, but what portion of millennials are currently, making up your, you know, you said their visitations are up 14 percent, for example, but from what?

The, from our, from our database. We - currently, within our overall database, approximately 37 percent, just under 40 percent of that database, both in our food and beverage and gaming operations and the taverns, approximately 37 or 38 percent of that database represents the age group which would fall into the millennial category. So, the increase is off of the baseline that we've been experiencing on a, you know, on a trailing 12 run rate basically.

Okay, great. And I missed the thing about - I guess you have a trial period of some type of bar top video game gambling machine, that specifically, is that correct, specifically to attract and retain and maintain and recruit new millennials?

I wouldn't say specifically for millennials, but the games that are offered within that new - that new device, meaning specifically table games that include craps, multi hand black jack and roulette naturally appeal to that demographic. But it is a broad, it is has a broad appeal to this point, but certainly those games in particular, appeal to a younger demographic.

Thanks. And you also said that your company, you believe is leading the way, in terms of appealing to that demographic, but what makes you say that, you know, looking at your competition? Like what makes you ahead?

Well, I'm specifically referring to the tavern business. The, what would be the gaming tavern or traditional tavern business in the State of Nevada, and we are basing that off of the amount of - the percentage of the millennials that are in our active database, and believe that that number represents a higher number than our competitors.

That's just a belief though, right? You haven't actually seen their numbers?

There's no other published information. But we know we're the leader in terms of numbers. We're the largest traditional tavern operator. And so, by deduction, we believe that approximately 40% of our customers are millennial that we would be the most attractive to that database.

And our next question comes from Roy Barry. Your line is open.

I'm a - an individual investor, and I get my information from Yahoo, and during the quarter, by reading your website, you come up with this new sophisticated tavern and a new type of slot machine, it appears, but you never put out any information on Yahoo, and my question is why don't you start putting more information through to investors on Yahoo?

We have tried to optimize that search engine's picking up of our stories, but unfortunately, it's a process that we don't control.

I guess the next question is I noticed that your earnings, that you had a blip due to some - I guess it's a - we won't call it a blip, it's just a unscheduled rise due to some - something on the merger dividend, which I couldn't figure out, and my guess - my question is are you completely done with merger accounting and comparisons and things like that? And will you - are you on a straight operating only basis going forward?

Yes, we should be past the mergers starting in the fourth quarter. The comparisons will be clean. But from a year to date perspective, we'll have to have things from the combined results on year over year.

You mentioned expansion in Maryland, is there any thought to expanding - and this requires a contract, with saying a sublet with a hotel company with lots of money like Marriott or Hilton or somebody like that?

Roy, at this point, we're not. We're - we are - we're seeing great results from operating our own hotel at that facility. And any expansion that we are currently anticipating would be to build and own it ourselves, where we think - where we think we'd get greater economics as a result.

But they have a marketing sophistication that you don't have, so maybe it's something you should consider. And I don't know…

No, I would say look, we're going to consider all options that benefit that property. Right now, we're running solid occupancy with very solid rates. Certainly, we don't have the reservation database that some of these national flags do, but we would certainly - we'll certainly look at whatever benefits the property the most.

Our last question comes from Greg Nelson [ph]. Your line is open.

Hi, Blake, I was wondering if I could ask you a question about - all about the story of the company, as far as brokerage coverage and getting our story out. But seeing the volume is always so low all the time, it just seems to be that there’s no anybody coming out with their table, their hand on the table saying you know, this is a buy, this is a buy, this is a buy, and I was just wondering what we’re looking at as far as brokerage coverage above the stock?

Yes, Greg that’s a great question. In the last year since we’ve – since we’ve – since the merger last August, we now have two analysts that are covering the stock, both of I think - both of which asked questions today. One is SunTrust Bank, the other is Union Gaming. I will tell you that it is a focus of mine and Matt, our CFO, to continue to expose this story to the analysts. We suffer a little bit from the size of the company currently, although I don’t think any longer, that’s an excuse. I do think – I do think it's – I do think it's – we deserve more coverage than we’re getting, but that’s up to us to go out and continue to tell that story. So, we are – I am actively pursuing constantly the – exposing this story to other analysts and other coverage.

Right. Right. It just seems to me that, stock was at $14, now we’re like at $10 something, it just seems like you’re so much broader so much of a better company than this and better than it being $14, it will be $17 or $18 rather than versus $10.

Yeah, look no one’s more frustrated than I am, but I think I mentioned earlier, we’re not seeing – we’re seeing a disconnection between our results and what’s happening. I can’t control that, but I think your point is well taken, that the more exposure we get, I think the more story – the more the story will be out there. But we – we are continuing to produce value – shareholder value. At some point, it's going to be recognized. If not, to an earlier caller’s point, we will institute a plan of buyback.

At this time, I would like to turn the call back over to Blake Sartini for closing remarks.

Thank you. And thank you all for joining us today. We look forward to updating everyone on our continued progress when we report our fourth quarter and the earning results next March. Thank you for joining us today.

Ladies and gentlemen, this does conclude today’s program. You may all disconnect. Everyone have a great day.