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BYI BUSINESS UPDATE CALL: “NOTES”

Below are our notes from the business update.  We will follow up with a more detailed note shortly.

CONF CALL:

  • Agreement to sell Rainbow will allow them to concentrate on their core business – no surprise since this has been rumored in a while
  • Reluctance of customers
  • Low win per day in gaming operations seems to be bouncing back – claim it was weather related
  • Alabama negatively impacting them by 2-3 cents per quarter
  • Italy placements will begin in latter half of 2010.  BYI expects to play a meaningful role on both the games and systems side. Expects to place over 3,000 games and get several systems contracts
  • Releasing Alpha 2 with a 10 times improvement in processing power over Alpha 1. 
  • Digital Towers – great – 900 Powerballs and have commitments for 1300 slot products for their wheel products. 
  • Continue to take share on the systems business.
  • Canada RFP’s represent a big opportunity for them as do other new markets

Q&A

  • No difference between big operators and small ones on the replacement side
  • G2E meetings were very positive, but the orders just didn’t come – which was surprising based on the feedback from G2E.  Thinks part of this is due to weather and weak performance in Jan & Feb.  Their numbers in game operations bounced back in March and hopes that implies an uptick in operators results
  • Write-offs in Alabama? Not yet, hoping that they will have more clarity in the next few days there.
  • Rainbow – in discontinued operations? 10-11 cents a share from loss of Rainbow. But if they use the proceeds then it’s neutral from an accretion/ dilution standpoint.  Tax basis on Rainbow? Estimate net proceeds of around $60MM (+/- $5MM)
  • Credit Facility Amendment?  Gives them more market pricing and more flexibility to use their balance sheet – old deal was done in the a rough time in the market
  • Still think that their market share is still in their 20% range +/- several percent
  • Think that they can get about 500 cash spins out until the end of June. Alpha 2 platform not out until Sept 2010.  Those 500 are included in the 1,300 wheel number.
  • Fireballs are replacing their products, while Cash Spin is helping them gain incremental floor share (50% or less cannibalization). 
  • Systems business lead time – is that getting shorter or longer?
    • Well shorter since it has shifted more to maintenance products from new openings
    • But its taking customers longer to make decisions
    • Guidance they are giving for the balance of this year is mostly for business in the bag – but there could be some slippage for openings.  However for next year – when they give guidance, a lot of it will be based on upgrade assumptions.