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Takeaway: Remain positive on IGT and BYI

Good feedback on IGT and BYI. Remain comfortable with estimates.

  • Our channel checks returned positive feedback on BYI & IGT
  • We remain comfortable with December quarter EPS estimates of an in-line $0.24 for IGT and beat for BYI at $0.80, respectively.
  • WMS appears to be struggling still
  • We believe that replacements (excluding Canada refreshes) trended up about 5% YoY in the December quater and the full year should shake out between 54-55k units, flat with 2011.  December is usually a better quarter for replacements than September.
  • 4Q will have a big drop in new openings and expansion units.  However, IL should generate a big sequential ramp which will compensate for a large portion of the overall drop. 
  • New openings and expansions that we believe shipped in the December 2012 Q include:
    • Cherokee Fort Gibson (OK) expansion:  220 slots
    • Ohiya Casino expansion (NE):  ~200 slots
    • Skydancer Hotel & Casino expansion (ND):  ~200 slots
    • Greektown expansion/refresh (MI):  185 slots
    • Ft. Randall Casino expansion (SD):  125 slots
    • Kansas Star casino expansion (KS):  430 slots
    • Magnolia Bluffs (MS):  600 slots
  • We estimate that there were approximately 2,000 VLTs shipped to IL in 4Q12 bringing the total to just over 2,800 installed at year end
  • Based on our channel checks, we think that international shipments will continue to be sluggish
  • Small & private supplier update:
    • AC Coin shut down at the beginning of January
    • Aruze is “killing it” and seeing some benefit from AC Coins getting yanked from the field. We have them achieving 2% market share in NA (without participating in Canada replacements in the December Q)
    • We continue to hear good things about Ainsworth
    • Konami had a rough quarter, shipping under 2,000 units which represents over a 35% YoY decline
    • Speilo share should be in the mid-teens, given their out-sized share of Canada replacements. Even without Canada though, they are a supplier we are keeping an eye on for share gains
  • IGT proxy fight is the talk of the town. While we get the sense that brain drain that we’ve previously written about is a thing of the past, we still believe that most employees are not Patti Hart fans