BYI YOUTUBE

In preparation for BYI's FQ2 2012 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.

BALLY TECHNOLOGIES AND WMS INDUSTRIES SETTLE PATENT LITIGATION (01/30/2012)

  • As part of the agreement, Bally will obtain a license to the WMS and Aruze Transmissive Reels® gaming technology portfolio under confidential terms.

BMO CAPITAL MARKETS DIGITAL ENTERTAINMENT CONFERENCE (11/10/2011)

  • [Michael Jackson & Grease] “Those are both going to be wide-area progressive games. We actually have seen our wide-area progressive footprint decline over the past couple of years seem to stabilize at about 1000 units. We do have an expectation that both Michael and Grease could see similar-size install base once they get to maturity.  In terms of earnings the reality is since they are coming out later in the summer our fiscal year ending June 30, we probably won't see a lot of immediate revenue impact towards the tail end but that's just in time for the season for gaming, as you know, really starts ramping up around July 4 and goes through Labor Day. So we're hoping that at the height of the gaming season we'll have those titles out there.”
  • “In term of impact for us, we earn 6.25% of the net win per day, so at Yonkers that equates to about $18 a day and at Aqueduct, double that right now.”
  • “It looks like we're going to cap off this year in terms of replacement sales, somewhere in the 50,000 units; actually with IGT reporting earlier this week, WMS reporting and us reporting, it actually looks like as an industry we saw a tick up in the September quarter with replacements. So maybe the December quarter caps off a pretty decent year with about a 10% increase in replacement sales. If you apply the same metric to next year, maybe replacements are 50,000 units to 55,000 units.”
  • “I don't really see much of a technology driver for a replacement cycle right now. I think just natural replacements due to wear and tear are happening. What's more exciting for us in the upcoming calendar year is the fact that you do have more new properties coming on; Ohio has four properties, you have Revel opening, you have a couple of properties in Louisiana, Kansas. So there's been a lot of opportunity that will probably double the total sales into new openings and expansions from – call it roughly 7,500 to 10,000 this past calendar year that we're in, to call it roughly 20,000 next year.”
  • “We have seen operators spending more capital. Some of it actually going to rooms and the instance of Caesars finishing their tower in Las Vegas, some of it going to other entertainment venues. Caesars adding a Ferris wheel here in Las Vegas. So the good news is number one, they seem better capitalized. Our customers are not so much focused on debt covenants and making those. So we think naturally some additional capital will be available. And the finally, competition is lot of these newer jurisdictions like, I mentioned Ohio and Kansas come on line as well as some properties in Louisiana, we think that that will drive some regional refresh just because of some of those floors are fairly aged.”
  • “We've really ramped up our international infrastructure over the past five years going from about 5% of our revenue to 20% today. That was initially focused on South America, Latin America, Mexico as well, and then Europe. In the last year or two, we've put additional focus into Australia, so we do see a lot of growth opportunity in Australia just from our entrance into the market. We think there is a natural replacement cycle there that runs between 6,000 and 10,000 units. So if we were to be a 10% ship share that would increase our international sales by 25% a year to an additional 1,000 units."

YOUTUBE FROM FQ1 2012 CONFERENCE CALL

  • “Due to the size, nature and complexity of several of the larger contracts, we expect revenues during the initial months to be more weighted towards services than hardware sales and software licensee.”
  • “We signed major contracts with British Columbia and Sun International, both of which will contribute meaningfully to fiscal year '13 and beyond [some of it included in FY2012 guidance]. And the acquisition of market leading mobile applications company MacroView and the establishment of Bally Interactive ensures that we have a great foundation for the long-term.”
  • “Our systems' margin does vary based on the mix whether its software or hardware, we did mention that we had a record quarter for signing up high dues, but, which is a hardware with slightly lower margin than our software, but those will be rolled out over the next six or 12 months. So, we did have a high mix of software. We still believe a good range of margins for systems in sort of that 70% to 75% or 76%. We continue to develop more software products, but we are seeing a nice sort of breaking of the pipeline in the iVIEW DM arena, which can also mitigate that.”
  • “iVIEW DM has a slightly higher margin than iVIEW, but still slightly lower than our software margins, so look for iVIEW DM margins in the 50% to 65% range, whereas our software margins are sort of 80% to 95% range.”
  • “The Grease should be out in the customers in the April timeframe and Michael Jackson in the June timeframe and these are subject to sort of a month variability or so either way.”
  • “Our core products that we've had whether it's Cash Spin or Betty Boop and Money Vault are also doing well, and we've been expanding the WAP with them. So, we are expecting gaming operations to continue to grow year-over-year.”
  • “One of the early renditions of the Pro Series we've been able to shave about 12% off the cost over the next couple of quarters. We don't see at this point a huge change in gross margins, maybe 100 to 200 basis points, longer term over the next three to five quarters I think we do get back up to that higher 48, 49 tier.”
  • [Systems margin] “Our goal is to get back into the 50%, low 50% range, especially as we get more of the new cabinets out and can sell the conversion kits. Neil, I think was talking about over the next five quarters. Clearly, the Pro Series cabinet is more expensive. The iDeCK is expensive. But it does allow us to still maintain good dollar margins, and we do see in the near term getting to the 48%, 49%, but if we're out here 18 to 24 months, Steve, we would expect to be back at 50%-plus.”
  • “We would expect it to trend down over the next two or three quarters, but we had slightly less, maybe 200 basis points less royalty themes this quarter than last quarter.”
  • “There's a very modest, very small contribution from Italy expected in fiscal '12.”
  • “In terms of ship share, we've seen the past couple of quarters, we've had an incremental increases in our ship share. So, with our content as it stands now we would expect to see some upward ticking ship share over the rest of the year. With respect to replacements, we continue to remain fairly cautious on replacements. There really hasn't been any catalysts out in the market that we've seen that have driven up an increase in replacements. The one thing I would point out is new openings and expansions, we think they were somewhere in the neighborhood of 10,000, we closed out this calendar year with about 10,000, next calendar year that doubles, and so some of that will fall in our second half of the fiscal year.”
  • [Any additional stock buyback activity?] “We may assume about $30 million, or $40 million right now as long as we're above 2 turns levered, we're capped at $64 million for the rest of this year once we get below 2 turns, we can get back to an unlimited state.”
  • “Our new openings share has pretty much tracked our replacement ship shares. So, it's been trending upward over the last year or so.”
  • “It will be several years before we generate revenue from Massachusetts, whereas Ohio should start generating some revenue in fiscal '12 for us, Illinois probably not in fiscal '12, but fiscal '13.”