Now that IGT’s and MGAM’s disappointing quarters have taken a chunk out of BYI’s stock, perhaps we can dip a toe into the water? 



In less than two weeks, BYI has sold off 9%.  The stock was already down about 5% and then tumbled another 4% post IGT’s print.  We have BYI eking out a beat of $0.79 for F4Q and issuing FY2013 guidance that is in-line with consensus estimates, albeit with a large range.  There are many deltas for next year and we outline them in the Guidance section below.  Canada and Illinois look like they are moving ahead faster than many may be anticipating and that could be a focus on the conference call.




We expect BYI to report $253MM of revenue and $0.79 of earnings next Thursday after close.  We’re projecting $99MM of gaming equipment revenue at a 45.4% gross margin.

  • 5,400 units
    • 1,200 international unit sales
    • 4,200 NA unit sales
      • 1500 new unit sales, the majority of which were shipped to Ohio.  Major shipments this quarter should include:
        • 21% share in Toledo and Cleveland (850-900 units)
        • Scotia Downs
        • PNK Baton Rouge
      • 2,700 replacement units flat YoY
  • ASP of $16.7k down QoQ and flat YoY.  We expect pricing to be negatively impacted by discounts on large shipments to new openings (Ohio/ PNK Baton Rouge)
  • Margins on new game sales should decrease slightly sequentially as the June quarter will include a lot of Ohio units which are discounted.
  • $8MM of parts and other revenue

We’re projecting $60MM of systems revenue at a 74% margin

  • BYI guided to margins at the high end of their 70-75% range due to mix in the 4Q
  • Larger new openings include:
    • Sands Cotai Central
    • CZR’s Cleveland Casino
    • There should be some recognition of Canada in the Q

We expect gaming operations revenue of $94MM at a 72.5% margin

  • Should see growth in the WAP footprint with the release of Michael Jackson game late in the quarter and additional Grease placements.
  • June has always been a better quarter seasonally for BYI, vs. the March quarter, for gaming operations revenue

Other stuff:

  • SG&A:  $67MM
  • R&D:  $26MM
  • D&A:  $6MM
  • Net interest expense:  $3MM
  • Tax rate:  36.5%



We think that BYI will offer a wide range of guidance for next year but recent developments in Canada and IL have made us more confident about the outlook for next year.  We still maintain that the biggest risk to owning BYI into the print is what they will guide to.  Based on some of the numbers that we’ve run we can come up with numbers ranging from $3.05-3.25 for FY2013.


What are the big delta points for next year?

  • We understand that the provinces of Manitoba and Saskatchewan have recently awarded the RFP for 10,000-11,000 new units.  We are fairly confident that BYI got an allocation of those units.  There will be some uncertainty in terms of how fast those units start shipping and it’s likely that some of the units will fall into BYI’s FY14.
  • IL:  So far only 88 locations have been approved but we know that BYI already has some orders and believe that there should be an acceleration in license approvals over the next few months since IL will start enforcing the ban on grey machines.  Violators will be charged with a felony offense.  We assume that BYI should be able to ship at least 800 units to IL in FY13; there could be upside to that number.
  • Atlantic Lottery units should start shipping in September
  • Some of the Ohio tracks opening in 2H13 could have shipments in BYI’s F4Q13
  • Timing of systems revenue recognition
  • ASPs may be lower since IL VLT’s are going to be priced in the mid $12k range and Canadian units are also priced at a discount
  • Uncertainty around the US replacement cycle and international shipments

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more