BYI F4Q12 PREVIEW

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.

 

 

FQ4 DETAIL


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%

 

GUIDANCE 


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

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