BYI F2Q 2010 CONF CALL
- Game sales reflected continued sluggish replacement sales
- The second quarter is seasonally the weakest quarter of the year. Frigid weather in Dec also negatively impacted results - by $1MM
- Last's year's SG&A included a $3MM insurance proceeds offset and this quarter included $3MM of G2E spend
- Expect effective tax rate of 34-36% due to higher income in lower tax jurisdictions
- Repurchased 114k shares in the 3Q2010 quarter
- Estimate that they retained game ship share in the low 20's
- North America - 2,253 were replacement sales
- They are pleased with their low 20's % shipshare
- Anticipate releasing their new alpha platform in the 3Q
- Game sale margin reflect's cost initiatives
- Majority of game sales in NA were video
- The increase in conversion sales benefiting margins, and margins should remain above 50% in the next 2 quarters
- International unit - got 22% of the units shipped to Resorts World Singapore
- International opportunities for BYI over the next 12 months:
- Italy shipments will begin in the summer on both a sale and participation basis
- Mexico, Singapore and Australia reintroduction in 2011
- Game operations- the horrible weather in Dec exasperated the normal seasonal weakness
- Premium products continued to perform well - especially the Digital Series
- Very excited about the Spinning Wheel game (end of 3Q) and Dual Cinevision game will lauch in the March Q and their backlog for these games continues to improve
- Initial Mexican placements (Class III) have been very good with material increases in win per day
- The current volume of systems business continues. However, there are still a higher than normal postponement of technology decisions
- Sands, SJM and Galaxy are all now BYI customers. SJM is switching to BYI system at Lisboa. Galaxy World will be the first casino to go live with iView DM
- iView DM continues to perform well at Pechanga
- Elite bonusing suite server is in place in several casinos and will launch applications like iSpin on it in the June & Sept Qs
- While they continue to sense more optimism from their clients they expect that to build throughout the calendar year
- 4Q is expected to be stronger than Q3
- Expect that international will grow to 30% of their business in several years
- Potential to increase their operating margin to 28-30% over the next few years
Q&A
- Have 17 games on the V32 cabinet
- NY Lottery extension. BYI has just over 50% of the devices in the state of NY which was set to expire at the end of this year until this extension. Will benefit them when Acqueduct opens (expects early 2011)
- Cash from operations? $50MM for the 6 months ended Dec 31 - lower y-o-y due to working capital
- Capex? $6.5MM for the six months ended (corporate) plus $22MM on game operation capital expenditures
- Uses of FCF? Will likely use more cash to repurchase stock and finance customer purchases. There are also a number of opportunities to acquire and invest in businesses. Have no near term plans to issue a dividend.
- Video shipments were over 60% of shipments in the Q. Alpha 2 platform and more titles will help them continue to make traction in video
- Canada RFP's?
- One of their objectives is to insure interoperability
- Each province is independent, but they are coordinating to establish industry standards
- Expect revenue from there to be recognized over several years
- How do they view systems contract revenues funneling in?
- Takes 3-6 months to make a decision for any facility and then it can take another 6 months for a facility to open
- S6000 replacements with Classics Series as BYI will stop supporting that platform in March 2010
- Pricing benefit of Alpha 2 and timing? Expect pricing to ramp over a 12 month period from the release date this summer. Should help margins and ASPs (so does simply getting more video share since that has higher margins than reels)
- This quarter's ASP's were depressed due to a large international shipment of a "stripped down" cabinet
- Conversion kit sales were actually lower than last quarter
- iView DM is set for trail at the Bellagio? There is no iView DM trial at Bellagio. There are 2 large customers that will start trialing it soon and several are going live shortly
- Delay in systems / technology changes since implementation takes longer as do approvals. Also capital budgets aren't as fixed as most people think - they are tweaked on a monthly basis.
- Decline in WAP games? Haven't released a lot of product on WAP platform in a while. They just recently launched some new products and have a few more in the pipeline
- Financing to operators was beginning to decline at WMS? Their DSO's are still below their competitors... Seeing about the same financing opportunities as they did 6 months ago. Expect DSO's to increase slightly and then level off
- iView DMs at Pechanga are at 550, balance will go live in a few months. Feedback has been very positive. So far all they have done at Pechanga is a technical proof and now they are getting ready to launch applications
- Aria? Games at Aria are doing very well. Think that they will get DM on the floor in the next 90 days.
- Gaming ops detail? Fireball and 7777 Digital Towers growing well. Number of the premium titles increased by 59 units q-o-q. Win per unit was also up from the prior year
- Did the system get installed in Kashada? Yes in Sept Q
