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BYI FY2Q2010 YOUTUBE

TRENDS

  • “The second quarter is seasonally the weakest quarter for gaming operations. However, revenues from the gaming operations for the quarter increased by $2.2 million over last year to $68.6 million, despite the frigid weather in many parts of the United States during December, which negatively impacted our results.”
  •  “Even with our older range of product, our current product performance is strong and our new product pipeline is very exciting. We are especially pleased with our showing at G2E last November and now at IGE. A best-of-show suite of products has generated significant customer interest, which we believe will begin to translate into revenue from both games sales and gaming operations starting in the June quarter.”
    • They are referring to the rollout of Alpha 2. We would not be surprised if BYI’s shipshare slipped in the March quarter as some operators may be holding out for the release of Alpha 2 to place BYI orders.
  • "In our premium product range at Digital Tower Series of products and our Jumbo Cabinet continue to perform well. Our Fireball Digital Tower game is our fastest growing premium game ever. New demands for installations of it and Jackpot 7s remained strong…. We are very excited about our new spinning wheel games and the Dual Vision community games, both of which will launch in the March quarter for gaming operations. Hot Shot Cash Wheel will be released in about two weeks. Our current order backlog for these newer premium products continues to improve.”
  • "Cash Spin Touch Wheel product won Best in Show at G2E and will be released in March. Our new Pro Series cabinets and our new ALPHA 2 platform will allow us to compete more effectively against the latest offerings of our competitors and will be released beginning in the June quarter. And we plan to release almost twice as many game titles this year as compared to last.”
    • We expect BYI to provide an update on interest in their Cash Spin Touch Wheel Product on their next call.
  • "63% of our shipments this quarter were video products. So our normal target is sort of… 40% to 60%. And so we continue to get better and better video with the release of the Pro Series cabinet, which is the dual-screen cabinet that really acts as one screen or two screens, if you choose, will clearly enhance video; as well the ALPHA 2 platform, where we'll have enhanced sonographic capabilities”
    • This is an important statistic since video has always been BYI’s Achilles heel.
  • "ASP was still flat or even down a little bit, probably due to a fairly large international sale of a sort of a stripped down cabinet with basic functionality, good margin, but not a very high price point. So as we look to ALPHA 2, we do expect the higher price for that cabinet due to the increased power that ALPHA 2 will have in that cabinet, and look for that to ramp over a 12-month period or so. So if we begin the launch of Pro Series and ALPHA 2 this summer, you will get a really robust set of titles. It builds up steadily over a 12-month period from the release date this summer.”
  • “We do not see capital as clear as you would like it or we would like it. We see, even if somebody has capital allocation, they always have the ability to modify that based on how the next month goes or the next quarter goes. Not in every case, but we see more variability in what we would've expected years ago in capital allocations these last 18 to 24 months where it still can move around quite a bit.”

GUIDANCE

  • "We expect the margin on our games sales will be north of 50% in the next few quarters. As we roll out our new product lines in the coming quarters with their increased functionalities, we believe there will be opportunities for further margin enhancement.”
  • “We now expect an effective tax rate for the year of between 34% and 36% due to higher income and lower tax international jurisdictions.”
  • “We continue to build international infrastructure and expect these revenues to grow from 19% to as much as 30% of total revenues within the next several years.”
  • “We have the potential to increase our operating margin from 25% this quarter to 28% to 30% over the next couple of years.”
  • “We expect an improving replacement market”
  • “We also reaffirmed our previous guidance of diluted earnings per share for fiscal 2010 of $2.30 to $2.55 per share with our fourth quarter expected to be stronger than Q3.”
    • We have F3Q2010 at $0.62 and F4Q2010 at $0.64