BYI 4Q REPORT CARD

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

 

 

OVERALL

  • SLIGHTLY BETTER:  Although EPS was in-line, the BYI release was more positive than expected, particularly after the WMS and IGT debacles.  BYI placed more new participation games than expected.  Buying back as much stock as the did was also a plus.

 

F4Q EPS:

  • IN-LINE:  Reported FQ4 of $0.78 and FY 2012 EPS of $2.45 (although better than the whisper)
  • PREVIOUSLY:  FY 2012 EPS: $2.37-$2.45 ($0.72-$0.80 in F4Q)

 

R&D AND SG&A GUIDANCE:

  • IN-LINE:  F4Q R&D was 10% of revenues (vs 11% of revenues YoY), while SG&A was 26% of revenues, (vs 28% of revenues YoY). A relief after the cost inflation seen at IGT & WMS
  • PREVIOUSLY:  "Our R&D and SG&A to grow at a somewhat lower percent of revenues, although we continue to invest aggressively in R&D."

BUYBACK

  • BETTER:  purchased $73 million (1.6 million shares) of common stock in F4Q and purchased an additional $33 million (745k shares) of stock post June 30.  The company has ~$58MM available under its board-authorized share repurchase plan.
  • PREVIOUSLY:  "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."

 

GAME SALES

 

CANADIAN VLTS

  • SAME:  BYI reiterated shipping their Atlantic lottery units in F2Q13
  • PREVIOUSLY:  "We were awarded a little over 1,500 games…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."

GAME SALES MARGINS

  • SAME:  F4Q game equipment margins was in-line QoQ.  Guidance commentary on game equipment margins reaching 48-49% within the next 2-3 quarters remain unchanged.
  • PREVIOUSLY:  "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."

ILLINOIS

  • SAME:  BYI expects to begin shipments to the Illinois VLT market in FQ2 2013, pending final approval of locations
  • PREVIOUSLY:  "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."

 

SYSTEMS

 

SYSTEMS MARGIN IN 4Q12

  • SAME:  F4Q systems margins came in at 74%
  • PREVIOUSLY:  "We currently anticipate that fourth quarter Systems margin will return to the higher end of our historical range of 70% to 75% based on mix.”

 

GAMING OPERATIONS

 

GREASE/MICHAEL JACKSON PERFORMANCE

  • SAME:  Strong performance by both Grease and Michael Jackson.  BYI continues to believe they will do well.  Cannibalization remains low due to low WAP exposure and unique product offering. 
  • PREVIOUSLY: "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."

GREASE & MJ PLACEMENTS

  • BETTER:   WAP increased base increased by 500 units (+31% QoQ and +72% YoY) including Grease & MJ placements; this exceeded mgmt expectations.  BYI continues to think that 750 placements for each of these games is acheivable.  They have a couple of follow on games and changes to extend the life of the games.
  • PREVIOUSLY: "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."

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