01/15/13 10:41 AM EST

SLOT CHANNEL CHECKS MOSTLY POSITIVE

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:

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

Cartoon of the Day: Low IQ