• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Missed due to international shipments and the black box that is systems. We'll have more commentary in an upcoming post. 



"Delays in certain decisions and the unfavorable timing of some go-lives related to our systems resulted in lower than normal quarterly systems revenues; however, we continue to see strong growth opportunities in systems. We are well positioned to capitalize on our innovation in new products and our investments in new jurisdictions in 2011."

- Richard M. Haddrill, the Company's Chief Executive Officer


  • "During  fiscal 2011 We have already purchased 826,000 shares of common stock for $27 million, $22 million of which was in our first quarter"
  • Sold 2,823 gaming devices at an ASP of $15,685
    • Units missed expectations "driven by fewer new openings and expansions during the period and a continued sluggish North America replacement cycle."
    • International shipments were 823 or 29% of total
    • ASP increased primarily due to mix
    • "Gross margin increased to 49 percent from 48 percent last year, primarily due to improved manufacturing efficiencies and improved material costs related to production of our ALPHA Elite(R) cabinets, including our popular V32 cabinet, and lower royalty expense."
  • Gaming operations was the sole bright spot in this earnings release with revenues of $79MM. Driven by better premium placements. Cash Spin had over 1,200 units installed.
  • Systems missed big due to timing of go-lives. Margins were good at 73% though due to a high mix of products sold and maintenance revenues which reached $15.9MM
  • FY2011 Business Update:
    • Lowered EPS guidance to $2.05 -$2.30 (took down high end by 10 cents)
    • Assumes no Illinois sales due to delays
    • "The Company continues to expect that its Diluted EPS from continuing operations in the second half of fiscal 2011 will exceed the first half."
    • This guidance considers a continued challenging North American replacement market, as well as the assumption that the Company will begin to see meaningful revenue from the Italy VLT market in the second half of fiscal 2011, although the timing in this market is subject to change due to potential delays resulting from regulatory and other unforeseen issues.
    • "Reiterated fiscal 2011 guidance for systems revenues of $220 million to $235 million, but updated the systems maintenance revenues component to $63 million to $65 million."


  • Expect that 2H earnings will be at least 60% of total EPS for FY2011
  • Game sales:
    • ASP's benefited from sales of certain custom games
    • 2,000 to NA: 1,763 were replacement sales
    • 230 units were shipped to Maryland but were on participation so they weren't included in the game sale units
  • Gaming operations:
    • Driven by the continued placement of premium gaming like Cash Spin and Digital Tower Series
    • Haven't released Cash Spin internationally yet
  • Systems:
    • Systems revenue will be back half weighted in 2011
    • Seeing increased interest in iView DM due to their new applications
    • Customers have been taking longer to make purchasing decisions
  • Leverage ratio continues to remain way under 1x
  • Expect increased ship share starting in calendar 2011
  • Games in Maryland are earnings 150% of floor average - New Alpha Pro-Series. With iDeck, think that their games will do even better.
  • Have received approval for iDeck and have recently started shipping Pro-Series cabinets with iDeck installed
  • Expect placing games in Italy in 1H calendar 2011
  • Also expect to start selling into New South Wales early in calendar 2011
  • Given the delays in IL, they are now not expecting to ship any games to that market in FY2011
  • Don't expect to see any meaningful pick up for replacement spending in calendar 2010 but are cautiously optimistic that spending will increase in calendar 2011
  • Systems is focused on the development of systems applications that will enhance customer revenues
    • USpin Bonus
    • Bally Command Center
  • Expect to see a real benefit to game sales as they launch Alpha 2 games on their new cabinet this month


  • What percentage of their systems guidance is in signed orders?
    • Had expected a weak systems quarter in Q1. Risk is that 2-5MM can slip from Q to Q.. which is what happened this quarter - one order got delayed.
    • Second quarter will be better than first but not as good as 3rd & 4th quarter
  • Patent suit by WMS?
    • They were surprised by this since the product was first released 2 years ago
    • Feel like there is no financial risk to them 
  • Unit sales / Maryland?
    • If MD units were for sale vs. participation, they would have earned 2 more cents
  • Can't quantify the IRS benefit yet - but it's not included in guidance
  • Cabinets are Pro Series - 20% of the cabinets shipped in the quarter.  There were no Alpha 2 titles ready, but the Alpha 2 processor is available
  • More cautious on Alabama, more optimistic on Acqueduct
  • Did they ship games to Cosmo?
    • Shipped just under 50% of their units; rest will ship this quarter
  • International sales?
    • No new openings in Asia
    • Mexico wasn't as active as it was in the past
  • Gross margins impact of Alpha 2 rollout going forward?
    • 20% of domestic were new pro-series cabinet - did have some impact
    • Doesn't see margins going more than 50-100bps below current levels
  • Acqueduct isn't included in their FY2011 scenario - can open as early as April and as late as June. Even if it opens in April, the revenue contribution won't be material since it's participation
  • Internet gaming, how does BYI think about it?
    • View it as an extension of their systems business
    • An opportunity for them to license content and enhance customer's marketing capabilities to customers online
  • Canadian RFP process?
    • Expect a decision on the systems RFP within the next 60-120 days
  • Why did rental and daily fee games decrease?
    • Some rental games came out but premium games increased
    • Some of the rental games were converted to purchase games (V32's)
  • The go-live that slipped will be in the December quarter- that was the difference in the expected earnings but still below where analysts were
  • The more recent positive vibes from customers are on games mostly but should carry over into systems... just a modest pickup though in mood
  • Gross margin decline for game operations - typically 70-74% range - just depends on jackpots related to WAP games