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In preparation for BYI's F4Q earnings release on August 12th, we’ve put together the pertinent forward looking commentary from BYI's F3Q earnings release/call and subsequent conferences.

Post Earnings Conference Commentary

General Comments

  • “If you go out and count up all the machines in North America today, you will count about 13% of those are Bally machines and yet, over the last year and a half or so, we’ve been shipping and getting around the 20% range in casino openings and in ship share.”
  • “Last quarter, our ship share was at a low for the last couple of years at about 15%. Part of that is, if not all of that is due to our announced launch of our ALPHA II platforms and our Pro Series cabinets; [we are] starting a few shipments of the Pro Series in June and then in the September quarter.”
  • “Several of our competitors have more aggressively discounted over the last 2 or 3 quarters and more aggressively financed customer purchases on term sales. It’s our belief that discounting and too aggressive financing do get you short-term need, but because of return on investment is so strong on the products, it will bite you in future quarters. “
  • [Gaming operations] ”Over half of our games that are out there bring us daily revenue on fixed daily fees…typical participation units out where a customer can return it on 90 days notice - most of the daily fee arrangements we have or at least many of them have a longer required notice period or an initial term that’s longer that protects our capital.”

Forward Looking

  • “Cash Spin product that’s being very well received just launched about 45 days ago… 1,000 orders right out of the blocks and the performance numbers and the early placements have been very, very strong and we look to do more of that interactive style gaming. We showed in iDeck instead of a button deck. We will be launching that before the end of this year.”
  • “So we would expect our ship share to be bouncing around not in our low 20s maybe for the next quarter or two, but then building from there and our guidance reflects that.” 
  • “Gross margins …in our game sales sector have been increasing over the last couple of years and now is in the sort of low 50s% range. We think that could stay there and grow over the next year or two as we sell more conversion kits, as we get a bigger footprint of video games.  But obviously, with the new cabinet launch, we’re not going to have new supply chain gains until we get 6 or 9 months into that new launch. So we’re comfortable with a 50% margin range, but then growing say 12 months out from now to the low mid 50s.”
  • “Excited that this summer, we will launch the iVIEW DM product.”
  • “We would expect to generate revenue from Italy before the end of this calendar year  and we’ve announced 3,600 units in that 57,000 unit market, of which we are estimating right now about two-thirds of the recurring revenue over a long period of time. So don’t expect it to be as profitable as our U.S. units but expect the capital to be depreciative over the long period of time and about a third of the Italy units we expect to be sales; that’s our best guess right now.”
  • “We think still 20 to 50% are not spoken for, because most of the operators we know are only going to put out about half of their devices to start, because of capital constraints, facilities on building et cetera. So even within the 57,000, I would be disappointed within the next 6 months that we don’t get another chunk of machines out of that 57,000.”
  • “So we’re on track for hopefully getting our first shipments in Australia early in ‘11; beyond this initial batch, much of the technical work is done; we think this will be a nice market for us.”

YouTUBE from FQ3

  • “We now expect an effective tax rate for the year of between 34 and 36% due to higher income levels and lower tax jurisdictions”
  • “We expect to close the Rainbow sale around the end of June, which will add approximately $60 to 65 million in cash to our balance sheet after income taxes and transaction costs.”
  • “Entering into this calendar year, we were optimistic that our customers would be buying replacement games at a higher rate than they had spent to-date.  We remain optimistic that such an uptick will happen in the not too distant future and believe we are well positioned to take advantage of increased spending levels.”
  • “Dual Vision is on trial, and initial results are so strong that we will launch the product to our sales force next week.”
  • Systems Business: “Delayed decisions continue to be a challenge as well.”
  • “We anticipate wide deployment of iVIEW Display Managers during the remainder of the calendar year, including one international casino going live with DM across about 80% of their slot floors this June. We expect to release multiple new software applications that will add value to products like the iVIEW DM and the Elite Bonusing Suite during the coming months.”
  • “Now, our current guidance for fiscal 2010 remains at $2.15 to $2.25 per fully diluted share, which includes Rainbow operations for the full fiscal year, but excludes the Alabama impairment and any gain on the sale of Rainbow, should it close by June 30 as is currently planned.”
  • “Alabama has represented between $0.02 and $0.03 per quarter to us in the third and fourth quarter, about 1,750 games and you saw the impact of the impairment which we decided to take in light of the legislature in Alabama not acting before the session closed on a referendum for the fall.  We thought it was prudent to take the asset write off at this time, even though there is still hope for Alabama gaming to not only resurface as strong as it was, but possibly even stronger.  A few venues remain open and we’ll continue to record that revenue on a cash basis.”
  • Q: “So you didn’t really lose any games relative to last quarter in that category. They were just not generating the revenue they did?”
    • A: Correct. That is correct.