BYI beats and raises 



"Our recent innovations have resulted in four consecutive quarters of year-over-year revenue and earnings-per-share growth. Numerous of our investments of recent years are now producing good results.”


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




  • Believe that they eclipsed 20% ship share in the quarter and 20% of Revel's floor
  • Completing their largest iVIEW DM installation at Mohegan Sun
  • Will help one of their customers as they plan the world’s largest slot tournament using their flexible tournament application and iVIEW DM across over 1,000 devices 
  • 531 opening and expansion units rest were replacement units
  • Estimate that NA replacements were up 5% in the quarter YoY industry wide
  • Pro Curve sales exceeded their expectations, which led to higher than expected ASPs and lower margins.  They do not expect similar ASP growth going forward.
  • Continue to expect slight margin improvement in product sales for the rest of the year.  Expect to approach 48-49% margins in the coming quarters.
  • WAP revenue growth in the quarter and Resorts World results exceeded their expectations
  • Higher tax rate was due to a shift in business mix in international jurisdictions
  • The reduction of 25bps of interest rate will save them $1MM per year
  • Leverage below 2x also removes the limit on share buybacks
  • Expect further delays in Italy but there is very little in their FY12 guidance. Close to receiving approval for their systems products for one of their concessionaires but future approvals for other concessionaires could face more delays due to new regulatory requirements that have come up recently. 
  • Gaming operations continues to be a bright spot for BYI
    • Upcoming WAP releases of Grease (Q3) and Michael Jackons (Q4) are on track
  • Seeing good results in Alpha 2 game sales: 2,734 units were sold in NA.  Ship share in new openings continued to increased. 2,197 were replacements.
  • Have had product approval delays in Australia which caused slower rollout in that market than expected.  On the bright side, their operating system got its approval in New South Wales this quarter. 
  • Welcomed Peermont in SA and Valley Forge, PA to their systems family
  • Completed 12 major go lives in the quarter, including first go live in New Zealand
  • This calendar year will be very exciting year for systems - most of the installations will include iVIEW DM
    • Have more than 1600 DM's installed at Mohegan
    • New East coast site is getting ready to open with DM
    • Southern Nevada site going live with DM
  • Seeing positive customer spending momentum across all of their segments
  • Seeking key acquisitions that can benefit from their management expertise 



  • Detail on margin improvement on Pro Curve and new boxes.  Can they really get to high 40's margins?
    • To get to the 48-49% margins, they need more volume and decrease in raw materials
    • Also depends on where they are in the product cycle.  24 months after launch, they reduced the raw materials cost of their Pro Series by 15%.
  • They do have more ROI data on their enterprise bonus applications now that they have had it running at casinos for a while, and it's helping them demonstrate ROI to new customers.
  • New openings in the Q
    • Part of Kansas Speedway
    • Other Kansas property
    • Miami Jai-ALai
    • Shipped portion of Sands Cotai Central units
  • Backlog for Michael Jackson and Grease? Will these be incremental? 
    • The interest so far is very strong - they will not disclose numbers though
    • Pre-launch interest is as high as they have ever seen
    • 700-800 games in 6 months is a very successful run rate typically
    • Given their very small WAP footprint, they don't expect that the cannabalization rate will be very high
  • Just have over 1,000 WAPs
    • IGT has 12k+ and WMS has 3-4k
    • AC Coin, Konami are also in this space
    • So BYI is a very smaller player in this space so there is room to grow
  • Their premium footprint has also been increasing
  • Expect to recognize go live revenues for Sun International and Canada starting this summer and running for several years - so that's not in their FY12' forecast
  • ASP's from the past 2 quarters are more indicative of future ASP's
  • Timeline from IL and Italy?
    • IL - start recognizing revenue in early FY13
    • Italy - start revenue recognition in FY12 but the costs will be higher then revenues as they are carrying a lot of inventory
  • There is not a big difference in domestic vs. international ASPs although more pro curves are sold in NA than international
  • Think that Italy will be slower and a little less profitable to them than they originally thought given all the delays
  • What percentage of game operations is variable vs. fixed? 
    • They are higher weighted towards fixed fees vs. variable since they have a much smaller WAP footprint
    • Saw less seasonal impact in the quarter than usual
    • About 55% fixed, rest variable.  Expect more variable with Grease and Michael Jackson coming online
  • I've never felt better about the business than now - Dick Hadrill
  • Excited about their interactive strategy



  • Repurchased 330k shares in 2Q for $10MM and paid down $19MM of debt
  • Leverage below 2.0x resulted in a 25bps drop in BYI's LIBOR spread on its bank debt
  • Product sales:
    • New units: 3,636
      • International: 25% of total 
    • ASP: $17,201
      • ASP's increased "primarily as a result of product mix, including a heavier sales mix towards Pro Curve during the quarter, and an increase in ASP from international sales."
    • "Gross margin decreased... primarily due to higher costs for the initial production runs of several models of the Pro Series line of cabinets, which were released in late fiscal 2011, and a heavier sales mix towards Pro Curve during the quarter"
  •  Game Ops:
    • Increased due to growth in premium and WAP install base and placements at Resorts World NY
  • Systems increase "due to increases in software and services and maintenance revenues"
    • $18MM of maintenance revenue
    • "Gross margin...primarily as a result of the change in mix of products sold and an increase in maintenance revenues. Specifically, hardware sales were 33 percent of systems revenues, and software and service sales were 33 percent, as compared to 40 percent for hardware and 26 percent for software and services in the same period last year."
  • "SG&A increased... primarily due to increases in payroll, regulatory, and other infrastructure expenses to support key new markets and an increase in bad debt resulting from a general increase in accounts receivable associated with increasing revenues and heavier weighting to international markets. Bad debt as a percentage of revenue remains at approximately 1%."\
  • "R&D increased $1 million primarily due to an increase in payroll."
  • 2012 EPS: $2.25 to $2.45 (raising the bottom end of the range by 5 cents)

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