In preparation for BYI's 2Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary
GOLDMAN SACHS LODGING, GAMING, RESTAURANT & LEISURE CONFERENCE (JUNE 5)
- "In the Gaming Equipment sector, if you counted up all the gaming devices in North America today, about 13% of them would be Bally gaming devices. And yet, we've been shipping anywhere from 16% to 22% of the quarterly shipments over the past couple, three years. New openings, recent new openings would have somewhere around 19% to 21% of their devices be Bally gaming devices and the recent procurement from the Atlantic Lottery gave 25% of the gaming devices to Bally."
- "Premium games are earning anywhere from maybe $30 to $65 a day. The wide-area progressives tend earn around $80 to $110 or $120 a day profitability, so this is the highly profitable segment."
- "We just released Grease in March, and it's doing very well in the marketplace better than our expectations. We've seen very little cannibalization"
- "Michael Jackson is in beta test performing very well mechanically, and we think it's going to perform well when we launch it here in the next week."
- "Our guesstimate is that it would be reasonable to get in the neighborhood of 750 each of these two games [Michael Jackson/Grease] placed over the first six to nine months from launch; and we would expect very low cannibalization of our existing WAP games because we have so few WAP games. So at $0.03 earnings for every 100 you place, you can see the powerful impact on earnings as Bally grows in this highly profitable space in gaming."
- "We expect our mobile gaming initiative to be breakeven within the next 12 months and the iGaming to cost us a couple cents a share for the next 12 to 18 months overall."
- "We've done a handful of tuck-in technology acquisitions over the last four or five years. We expect to continue to do that."
- "We're very comfortable at a 2x leverage ratio, reasonably comfortable at 3x, and only get nervous up at the 4x level."
- "Our international revenues are only about 19% of total, where some of our mid-size competitors maybe in the 30%-plus range. So it's a good long-term opportunity for Bally."
- "Confidence in the consumer is not great, but it seems to be okay. At least it gives them a capital spend
environment that is somewhat more predictable than they had a couple of years ago. We have felt some modest increase in capital spend each of the last couple of years; this year being one and 2011 being one."
- "The good news on systems is we have very good visibility there because, between Canada and Sun, we have a pretty good backlog of deliverables for the next two or three years. But we also have a great sales pipeline that feels like people are serious about spending on iVIEW DM now."
- Dividends vs. Buyback: "Our view has been that we think at this point share buyback - because of the visibility we have and acquisitions are better use of capital. But we haven't ruled it out that we could change that over the next couple of years."
- [Canada VLTs] "We were awarded a little over 1,500 games with about 6,000 game replacements. So, they will be for-sale units. We would expect to start selling those units in the second quarter of our fiscal 2013, probably take about three to five quarters to fill that order out."
- "Within the class three machines in Canada, there's probably a good 60,000 to 65,000, we routinely replace those games. We're about a 20% player in class three there, but VLT is definitely a new initiative for us."
YOUTUBE FROM 1Q CONFERENCE CALL (APRIL 26)
- FY 2012 EPS: $2.37-$2.45
- Product Sale guidance/outlook:
- In 4Q "we expect to recognize units shipped to the two Ohio properties, with about a 21% ship share."
- "Based on anticipated mix for our fourth quarter, which we expect will include multiple Ohio properties, we anticipate our Game Sales gross margin will decline slightly over the third quarter. However, we still expect our Game Equipment margins will approach 48% to 49% within the next few quarters, due to continued reductions in material costs on each of the Pro Series cabinets."
- "We've continued to drive costs out of the Pro Series cabinets themselves. We have a path to drive cost out of a number of different components over the next really 6 to 9 months at this point that give us visibility into that 48%, 49% margin. So I think given ASPs, where they've been right around $17,000, $17,073 this quarter, we get to that 48%,49% margin just through cost cuts from here on out."
- Systems outlook & commentary:
- "We currently anticipated that fourth quarter Systems margin will return to the higher end of our historical range of 70% to 75% based on mix. With respect to our effective income tax rate for the quarter, it was 37.2%, slightly higher than fiscal 2011, but still within our expected range for fiscal 2012."
- "I expect that trend to pick up speed as we go along and every quarter, we'll probably be installing more DM than we had previously done. But I also expect software and services and maintenance and all of that to also continue to expand reasonably well."
- Gaming operations commentary & outlook:
- "We expect faster growth certainly in the WAP than we do the core premium games and some of the premium growth is coming at a little lower win as we expand internationally."
- "We still have approximately $57 million remaining under our board authorized share repurchase plan and would expect to increase this amount in the coming months if necessary."
- New market commentary:
- "We expect Italy to be an important market for us in the long-term; however, the delays thus far have led certain customers to seek alternative products partially for certain VLTs previously committed to Bally."
- "We've had good discussions with customers there, have signed several contracts and feel our products are well positioned for the market, which should result in us winning a fair share. We expect to begin initial VLT shipments in Illinois during the second half of calendar 2012, with the mix of sale versus lease to be determined by the contract terms, which are in various stages of negotiations now."
- "We expect the Canadian installs to start reflecting in the revenue towards the end of this calendar year, towards the end of calendar year 2012."
- "Our R&D and SG&A to grow at a somewhat lower percent of revenues, although we continue to invest aggressively in R&D."