Richard Haddrill - Chief Executive Officer
Robert Caller - Chief Financial Officer
Gavin Isaacs - Chief Operating Officer
Ramesh Srinivasan - Executive Vice President of Systems
Bill Lerner - Union Gaming
David Katz - Oppenheimer
Steve Altebrando - Sidoti
Todd Eilers - Roth Capital
David Bain - Sterne
Bally Technologies Inc. (BYI) F1Q10 Earnings Call October 29, 2009 4:30 PM ET
Welcome to the first quarter 2010 Bally Technologies Incorporated conference call. My name is Canus and I’ll be your coordinator for today’s call. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session after management remarks. (Operator Instructions)
At this time I’d like to turn the call over to Richard Haddrill, Chief Executive Officer. Sir, you may proceed.
Thank you, Cantus. Welcome everyone to Bally Technologies first quarter fiscal 2010 earnings call. We are pleased to report a very strong start to fiscal 2010. We set several quarterly and all time records and we continue to see growth in the real earnings and cash flow power of our company. In addition, this is the ninth quarter in a row that we have either met or exceeded analyst estimates for diluted EPS.
For today’s call, Robert Caller, our CFO, will highlight our financial results. Gavin Isaacs, our COO; and Ramesh Srinivasan, EVP of Systems, will then discuss each of the games and systems business units and finally I’ll have some overall comments and update our guidance for fiscal 2010.
We will then open it up for questions. Robert.
Thanks, Dick. Quickly let me review our Safe Harbor language. Today’s call and simultaneous webcast contain forward-looking statements about Bally and our future business. These forward-looking statements are based on currently available information. Actual results could differ materially from those anticipated in the forward-looking statements and reported results should not be considered an indication of future performance.
More information on factors, risks and uncertainties that may affect our business and financial results or may cause us not to achieve our forecast are included in our Annual Report on form 10-K for the year ended June 30, 2009 and in other public filings we have made with the Securities and Exchange Commission. The forward-looking statements made on this call and webcast, the archived version of the webcast and any transcripts of this call speak only as of this date, October 29, 2009.
Today’s call and webcast may include non-GAAP financial measures within the meaning of Regulation G. A reconciliation of all such non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today’s press release. Today we reported our financial results for the three months ended September 30, 2009, the first quarter of our fiscal 2010 year.
Overall we recorded record fully diluted earnings per share for the quarter of $0.53 per share on $196.5 million of revenue, as compared to $0.52 in the comparable quarter of the prior year. Our operating margin during the quarter set an all time record at 26% as compared to 23% in the comparable prior year period. We have the highest operating margin in the industry and we are well positioned to capitalize on revenue growth.
Cash flows from operating activities increased to a first quarter record of $39.9 million, a 59% increase over the prior year period. Revenues from gaming operations also set an all time record during the quarter at $71.3 million. Revenues from game sales were $62 million for the quarter reflecting the lower number of new openings and expansions in the quarter combined with a continued sluggish replacement cycle.
We believe our ship share was in the 20%, 20s and consistent with the past year. Our game sale margin was 48% for the quarter compared to 44% in the comparable prior year period, and reflects our increased ASPs and continued improvement in manufacturing efficiencies and inventory management.
Systems revenues were $54 million. The margin on systems revenues was 67% for the quarter as compared to 68% in the comparable prior year quarter. As a result of increasing services revenue, cost of services are now included in cost of sales instead of SG&A. We reclassified prior year amounts for consistent presentation. In addition, the margin was lower than our target range due to the hardware and software mix, and associated costs, as well as some expediting cost related to a very busy September for go lives.
Maintenance revenue set a first quarter record of $13.5 million, a 10% increase over the prior year period. SG&A expenses decreased to $46.9 million for the quarter as compared to $57.2 million in the prior year quarter, a decline of 18%, representing 23.9% of revenue. SG&A declined as a result of lower payroll and incentive compensation, legal and professional fees, and other cost saving initiatives.
While we do expect SG&A to rise in the second quarter, the successful resolution of our legal matters and the elimination of all previously reported material weaknesses in our internal controls should enable us to effectively manage our legal and accounting spend in future periods. The effective income tax rate for the quarter was 35.8% and was within the expected range for the year of 35% to 37%.
Turning to the balance sheet, as of September 30, 2009, we had unrestricted cash of $84.9 million, an increase of $20.3 million from June 30, 2009. In addition, we have $75 million available under our revolver. Our leverage ratio continues to remain comfortably under one turn. We are using our excess working capital to prudently assist our customers in selected financing transactions, pursuing acquisition opportunities and repurchasing stock. As forecast, our trailing 12 month DSOs increased marginally at September 30 to 104 days.
During the quarter we repurchased 392,000 shares of our common stock or approximately $15.2 million, at an average price of $38.87 per share. Since September 30, we repurchased an additional 204,000 shares or approximately $7.5 million, at an average price of $36.71. We have approximately $39 million remaining under our authorized share repurchase plan.
Last week the U.S. Court of Appeals affirmed the Nevada federal district court’s decision in favor of Bally in the wheel and the iVIEW case. The Appeal Court’s decision disposes of IGT’s case against Bally, leaving only Bally’s antitrust claims against IGT for trial. A trial date for the antitrust case has not yet been set.
Now, I’ll turn the call over to Gavin, for some more discussion of gaming equipment and gaming operations results.
Thanks, Robert. We recorded another excellent quarter for gaming operations, maintained our game sales ship share and increased our margin in the toughest quarter, which I have been associated. Most importantly, we continue to improve our product performance and our product pipeline is excellent.
During the quarter we shipped 3,936 total sale units, of which 2,418 were to customers in North America. Of the units recognized in North America, all but 87 were replacement sales, continuing to reflect the weak North American replacement market, as well as the very low level of new property openings and expansions. We did not recognize any CityCenter Aria units in the current quarter, where our share is consistent and in the low 20s.
Despite the difficult economic environment, spirited financing terms and aggressive discounting from one of our competitors, we estimate our ship share during the quarter will be in the low 20s and consistent with our ship share over the past year. We are particularly pleased with this result given that we are competing against new cabinets and platforms from our competition. We are very excited by the prospect of releasing our new range of products at G2E. The initial customer feedback has been very positive.
Our 48% game sale margin for the quarter, up from 44% last year, reflects our ability to price our products sensibly and the positive impact of our process improvement initiatives. Our video product performance is improving. A majority of our unit sales in North America were video, with many of them in our high performing and increasingly popular V32 cabinet. This and an improved quarterly increase in the sale of conversion kits in North America resulted in a positive margin impact.
We continue to expect margin on our game sales will be the high 40s over the next several quarters, and we believe moving it into the low 50s is achievable within the next two years. Our international momentum continues to build, as reflected by another solid quarter. We sold 1,518 units internationally, or 39% of total unit sales.
I believe that Bally is underrepresented in North America and even more so internationally. There will be new and exciting international opportunities for Bally over the next 12 to 24 months. We’ve been building infrastructure in anticipation, and our team is ready to execute. We are excited about new opportunities for us in markets like Italy, Singapore, Australia, and potentially Brazil.
Gaming Operations delivered another record quarter, with revenues increasing to an all-time high of $71.3 million. During the quarter, we achieved both an increase in the number of premium games placed and an increase in our overall revenue per day compared to the June quarter. We also continued to focus on more efficient management of our assets. Margins on gaming operations were in line with expectations at 73% for the quarter.
In our premium product range, we have just launched our new Digital Tower series of products and our new Jumbo cabinet. Our Fireball Digital Tower game is performing at levels well above two times house average, and new demand for installations of it and 77777 Jackpot remained strong. More games will follow to support the fast growing Digital Tower series of games.
Further, commencing in quarter two, we are very excited about our new spinning-wheel games and DualVision community games, which will be available to gaming operations. Our current order backlog for our newer premium products is the strongest we have seen in the past 12 months.
In game sales, we continue to produce world class mechanical-reel products. This quarter we are adding our transparent reels and the much anticipated classic games, specifically designed replace the footprint of 40,000 to 50,000 successful but aging pre-ALPHA high-denomination centers.
We have seen success in our video product with the V32 upright cabinet. Initially, it was released only with Roulette and Quick Hit Platinum, both of which has and continued to be outstanding performers.
During Q4 of last year, we released four new V32 titles, which are all performing very well. We will release more titles each quarter for this cabinet. We are very excited about the products we will launch at this year’s G2E. We believe the innovation you’ll see from Bally at G2E will blow you away.
We will feature over 188 unique game titles, of which 108 have never been seen before; and more than 300 total games for Class II, Class III, central determination, and video lottery markets worldwide. This is our largest G2E game showcase ever, reflecting our commitment to increasing our games portfolio in this fiscal year by 100%. Most importantly, over 90% of our new titles should be released before the end of spring.
We are introducing two sleek new cabinets at G2E. The first of our Pro Series cabinets is the dual-screen Slant cabinet. This will be followed in Q4 by our new upright video cabinet. Both are state-of-the-art and our backwards compatible with our existing library of game titles.
We will also show our new ALPHA 2 platform, which leapfrogs our competition with its dual core CPU, and its state-of-the-art 3D video card and engine. It is more powerful in every aspect including processing speed, memory capacity and hard disk storage. This makes the ALPHA 2 an ideal platform to meet the future server based needs of our customers. Together they provide a platform whereby our game developers can make huge advances in game mechanics that will bring greater pleasure to players and revenues to our customers.
Initial customer feedback has been outstanding. We believe these cabinets and our new platform will enable us to compete strongly with our competitors in the video sector. We will highlight our new Spinnation series of spinning wheel video and mechanical reel slots. Following on the success of our first two Digital Tower games, we will introduce three new Digital Tower games at G2E. Our Cash Spin game, featuring its USpin feature, is an industry first and will be the talk of G2E.
Reel Image, another industry first from Bally, uses proprietary software and hardware to present a series of three, four or five video reel that actually curve to resemble the look, feel and play dynamics of a mechanical reel spinner. Reel Image is targeted for video markets and downloadable applications. In addition to these games, we will have community and group play games, multi area progressive titles and some other unique and new experiences.
We will be highlighting our extensive library of mechanical reels to replace our aging S6000 range. We will also have multiple new video titles for all of our cabinets, which will display further advances that we have made in the video field. Although demand over the past 12 months has been adversely affected by global economic conditions, we have continued to invest in our products and this will be clearly evident at G2E. We are all very excited about our upcoming launches. There is a great feeling of momentum within the company.
We certainly have seen more customer interest in our products since September and those increased levels of interest seem to be continuing. There’ve been several recent jurisdictional developments fill by the economic situation which we believe will benefit Bally greatly in the long term. We are extremely well positioned to take advantage of these opportunities due to our experience in multiple markets Class II, central determination, luxury, routes and our broad portfolio of products including systems, bar top, multi game, line games and poker.
Domestically we are focused on expansion opportunities in Illinois, Ohio, Kansas, Iowa, Maryland, and Massachusetts. We are also engaged in expanding our already strong position in Mexico as it moves to Class III gaming and we’re excited about opportunities in the Italian VLT market. We plan to reenter the Australian market in the next few weeks, at a time when it is repositioning itself for large scale replacements.
Further, as we continue to grow and become a strong player in South America opportunities will arise in that region. All of these should put us in a good position to expand internationally. None are in our forecast, but some have the potential to favorably impact the latter half of the fiscal year. Personally I am excited and motivated by our team, our products and by the opportunities which are on our horizons.
Now I’ll turn it over to Ramesh for additional titles on our systems.
Thank you, Gavin. Systems revenue for the quarter was $54 million, a 15% increase from the previous quarter and 3% increase from the comparable prior year quarter. The gross margin for the quarter was at 67%. This being less than the usual low-to-mid 70% range can be attributed to the following reasons.
One, high proportion of iVIEW and other hardware in the revenue mix and two, an unusually high cost of parts and services, partially due to September being the busiest month we’ve ever had in terms of systems implementations, all very successful I might add. We expect systems margins to get back to the 70s in the near future. Maintenance revenues for the quarter were $13.5 million a 10% increase over the comparable prior year period.
For the first time, we are initiating guidance on systems revenue for fiscal year 2010, which we expect to be in a range of $220 million to $230 million. Of this total, we expect maintenance revenues to be in the range of $58 million to $62 million. The healthy trend of increased systems related decision making in the industry that we have witnessed since April 2009 is continuing. Q1 and Q2 thus far have been very good quarters for us in terms of sales contracts closed.
These wins include; one, competitive system replacements in Louisiana, the United Kingdom, Missouri, and Detroit; two new casino additions in South Dakota, Kansas, Chile, and Morocco; three change of a major corporation systems standard in our favor in Macau, which included our first installation of table view in that region. Our first site with this customer went live late September and we have now successfully expanded that relationship to multiple sites.
Four, expansion of partnerships with various gaming corporations involving casino sites in Las Vegas, Missouri, Singapore and California, and five expanded media management solution related wins in Florida and Europe; in Mexico we now have over 70 casino sites running and over 14,000 games connected to Bally Systems and the upcoming Class II to Class III migration there opens up very good opportunities for us and we’re negotiating significant agreements for both games and systems in Italy.
During the past few weeks, I have seen first and some important international systems replacement and other new opportunities on the verger of opening up, making it easy to remain bullish about our future and all this summits an economic climate that remains very challenging. We are well positioned to do even better as the global economy improves. We have now completed the hard work of reengineering our core products.
Every version 11 release across our entire product line has now been successfully deployed in various parts of the world, further strengthening our leadership position. Our server gaming launches, including iVIEW DM, media management, Bally Command Center and Business Intelligence are gaining good acceptance in the industry as well. We have been running a very successful free trial of our forward and backward compact of the iVIEW DM product at Pechanga for close to a year now.
This install has been expanded to 450 games as we speak and is expected to grow to around 1200 games by early calendar 2010. All our recently launched products are designed to work on both current and new casino floors with both old and new games. This backward compatibility strategy is a distinct advantage in business systems.
Our Bally Command Center product, which is already used in multiple casinos for downloading iVIEW marketing content to the floor in minutes using the G2S protocol has now completed a technology field trial on a live casino floor and is poised to be used in various casino sites for multiple purposes, including downloading and managing games. This product can easily manage current games from all suppliers.
The Bally Command Center product, combined with our CoolSign media management and the launch of iVIEW DM, now allow us to create exciting floor wide player experiences. A number of senior gaming executive teams have visited our newly redesigned system show room here in Vegas during the past few weeks and their reactions have been uniformly positive and very encouraging.
Now let me turn the call back over to Dick.
Thank you, Ramesh, Gavin and Robert. As I mentioned in my opening remarks, we are off to a strong start in fiscal 2010. While the economy, the consumer and our customers continue to face many challenges that will affect demand in our fiscal year, we are sensing cautious optimism return to many of our customers. Our business model continues to prove itself.
Based on our solid start for fiscal 2010, our current visibility, our new product pipeline, and our expectations for customer spend in calendar 2010. We are now estimating fully diluted earnings per share of $2.30 to $2.55 for our fiscal year. This compares to our initial forecast of a few months ago of $2.25 to $2.50 and was raised due to our improved margins and revenue visibility.
So in closing, I would like to leave you with some important points. First, our fully diluted EPS in last fiscal year was $2.22 per share, a company record during the worst economy in 80 years. Number two, we’re currently forecasting an increase in earnings per share to between $2.30 and $2.55 for our fiscal year 2010 in still a very challenging economic environment.
As I said, we have an excellent business model with improving margins. Now as the revenue environment starts to pick up, we should have very good earnings leverage. Our 26% operating margin is the highest in the industry and we believe has the potential to increase to 28% to 30% over the next few years.
Number three, we’ve got an outstanding team of executives and employees with experience in both gaming and technology. We are as motivated as ever, having fun and executing well. We’ve now achieved nine straight quarters of meeting or beating analyst estimates.
Number four, our leadership in systems continues to grow. With our competitive replacements, our newly rewritten core products, innovative new products and the continued evolution of server based gaming, we are very pleased with our strategic position for the future as games and systems converge.
Number five, our R&D investment is very productive and our rate of innovation has never been stronger. We plan to release twice as many game titles in fiscal 2010 as we did last year. We are taking 30% more space at this year’s G2E and we’re releasing ALPHA 2, our new game platform, and our new Pro Series of cabinets for the future, and exciting new technologies in both games and systems. Please come see us at G2E.
Number six, we continue to capitalize on our international growth opportunity. Over the last five years, when Bally has nearly doubled its total revenues, our international revenues have increased from 6% to 18% of those total revenues. We continue to build infrastructure here and expect international revenues to be between 20% and 30% of total revenues within the next few years.
Finally number seven, with government revenue shortfalls around the globe, we see an exciting opportunity to capitalize on jurisdictional expansion in our fiscal 2011 and beyond. Our people and our products position us well to take advantage of these opportunities. I’m more excited than ever about our future. My thanks to the entire Bally team for another great quarter, and positioning us so well for the future, and my thanks to our investors for your continued support.
With that Canus, we’ll open it up to questions.
(Operator Instructions) Your first question comes from Bill Lerner - Union Gaming.
Bill Lerner - Union Gaming
A few questions for you; one, Gavin, you mentioned something about pricing relative to your peer group, you mentioned one competitor. Just can you give us a proxy, is this a small competitor? I just want to get the sense that pricing or I would like to confirm that pricing is generally rational and then I’ve got some follow-up.
The pricing is generally rational, Bill. We’re talking about a smaller competitor in this market.
Bill Lerner - Union Gaming
Then one more for Gavin, actually you talked about obviously unit counts were a little bit lower or were lower this quarter than we’ve seen in the recent past. Obviously, it’s a function of the external environment with very little replacement and new openings, but it strikes me as, if you had booked Aria that numbers would have been relatively consistent with the last few quarters.
So I’m guessing that it’s a function of how conservative you guys are in terms of booking units, but in terms of magnitude, if I’m correct in this line of thinking, is it 400 plus units and a few cents in EPS that we would have seen this quarter, that we’ll see next quarter for no other reason other than the way you guys account for things?
I think that’s about accurate, Bill. We’re the second to report, so we don’t know the full numbers out there. We could even be higher than what we thought our ship share could be.
Bill Lerner - Union Gaming
Then I guess two other; I’ll try to be quick on these last two. One, I don’t know whether this is for Dick or Ramesh, but you guys are giving systems guidance, total systems revenue guidance for the first time.
Is that a function of that, I know maintenance, which is a higher visibility piece of your systems revenue is getting bigger. Is that a function of having more visibility in systems? Is there some other reason and Ramesh, how much visibility do you think you have in that systems guidance? Is it 50%? Is it at 60% of that revenue and then a last one, I promise.
The fact we’re giving systems guidance now is both a reflection of better visibility and better confidence in the business. Our leadership position is strengthening and the kind of feedback we’re getting from customers and the opportunities we have. It also reflects an increased confidence level in the business. I would say that in terms of overall visibility of the number given a considerable majority of it, we have pretty certain visibility to us.
Bill Lerner - Union Gaming
Last one, during the quarter you guys announced iVIEW DM of course at Pechanga. You alluded to it or you mentioned it on the call. Can you color that in a little bit, level of importance we should be attributing to that? I get the sense that there’s been this focus for a long period of time with respect to server based gaming that you guys are essentially delivering to Pechanga, but haven’t really been focused on.
Bill, first thanks for fleshing out that Ramesh is a sandbagger. I’ve been working him for 10 years and now I’ve finally figured it out. It took your help to get there, but with respect to the Pechanga deployment, it is important. We spent about a year really refining iVIEW DM in terms of how players interact with this player portal, right, whether it’s iVIEW or iVIEW DM. It’s given us a lot of great feedback.
So now we are rolling it out. I think today its 450 games. It will be 600 games within the next week or so and then onto 1,200 games early next calendar year. Maybe as important as iVIEW and iVIEW DM becoming a more refined technology network for players is the content that we’re now studying to be able to deliver on iVIEW and iVIEW DM.
With high-speed floor networks we can do streaming video, much more powerful connections with the player marketing database. So we encourage interested investors to visit Pechanga and see what’s really happening with this picture-in-picture and customer communication network. We are studying to coordinate it with CoolSigns more. It’s very powerful. G2E will have a terrific demo as well for investors and customers to come see.
Your next question comes from David Katz - Oppenheimer.
David Katz - Oppenheimer
Really just a couple of housekeeping things, which is what kind of a tax rate should we be assuming in all of this? It’s been jumping around just a little bit, Robert.
Yes, David, I think that we had 35.8% in the current quarter and I think that’s right in the midpoint of the range and so I think 36% is a good proxy for an effective tax rate for the year.
David Katz - Oppenheimer
Along with your systems guidance and I do, and thank you for giving that out. We’ve been sort of asking about the visibility on that for a while. The quarter did have a little bit lower margins than what we built in. I recognize what the drivers are that pushed that around. As you look at the guidance that you have given us, is there anything you can share with us in terms of the mix of hardware and software that’s embedded in there, just to help us think through the margin issue on that?
Just to be clear we did reclassify this services cost because it’s becoming a bigger part of our system business out of SG&A up to systems cost of sales and it impacts our system margins by about 2% to 3% a quarter and it impacts our SG&A by less than 1% a quarter. So as you are looking at your historical models and going forward, those benchmarks will be useful and we’ve done the reclassification and will do that as we report historical financial statements.
So when we think about system margins after those adjustments, meaning that the cost of sales of services will now be charged against systems margins. We would still see systems margins being in the low 70s-% for the balance of the year. I’m not saying we won’t have variances out of that where it could be higher or lower; but that would be the target range, low 70s.
Your next question comes from Steve Altebrando - Sidoti.
Steve Altebrando - Sidoti
The gross margin in the equipment side really jumps off the page to me as being very impressive, given where the volumes are. Can you just give some color into that and if there’s any inventory benefit?
I think it’s a mixture. It’s a mixture of product mix, responsible pricing, and better manufacturing efficiencies than inventory management. All of those things have culminated. We had no surprises in the quarter and despite its fairly well back-end loaded, we managed to keep everything, all our costs in control.
Steve, we are selling more conversion kits; and Gavin and his team continue to drive down the box cost. So that’s one reason why we are cautiously optimistic that we keep it in the high 40s and eventually get up to the low 50s as we sell more video and keep driving supply chain efficiencies.
Steve Altebrando - Sidoti
Also in the product sales, it looks like the other category, if you back out units, ASPs that seems to actually be declining actually on a year-over-year basis. Is there any reasoning to that?
We aren’t selling many used units and we aren’t doing any OEM units at this stage. We used to do them in the past.
Your next question comes from Todd Eilers - Roth Capital.
Todd Eilers - Roth Capital
My question is on international. Clearly on the equipment sales side, obviously some light shipments there, but it looks like international was fairly decent number for you guys. Can you maybe highlight a couple of key markets that maybe drove that? Could that possibly be maybe the transition of Mexico to Class III? Did you start to ship some Class III units down there?
We actually shipped our first units into Mexico, but they were actually Class II; and that was roughly about 15% of that number. The rest of the regions contributed fairly well. We had good products in South America, good sales down there. Nonetheless in Europe and Asia had a good quarter again; and South Africa was beginning to kick for us as a good little market. Our product is performing very well down there.
Fair to say, Gavin that we have shipped into Mexico before, but without margin, we’ve been selling those units at either no margin or participation. These were our first…
These were our first sale units in Mexico.
Todd Eilers - Roth Capital
As we kind of look forward, how should we expect the transition to Class III in Mexico to impact you guys? Would we expect to see more sales volume coming from that market, but possibly some of your recurring revenue games may be coming off? How should we look at that going forward?
We’re expecting to see cautious and responsible growth in both parts of the business. We will sell more units down there, because we haven’t done a lot of bet in the past, although we don’t expect to see a big drop in our gaming operations business either, but we’re expecting to see growth, but we think that needs to be responsible growth.
Todd, part of our Gaming Operations business in Mexico is also systems fees, which we also expect to expand. Then depending on customer needs, some customers can buy; others want to participate. We just don’t know what the mix is going to be now, but we do expect good business in Mexico over the next 18 months.
Todd Eilers - Roth Capital
Then just one other question as it relates to the systems of business. Going back to the Pechanga expansion of the iVIEW DM product there, I believe that’s going to be expanded to just Bally, Konami, and Aristocrat games.
Do you think Pechanga’s decision to move forward on more of a larger scale with that product might help push some of the other suppliers that have not given you guys the ability to add their games to that product? Do you think that might help push them in that direction? Should we expect to see maybe some progress on that going forward?
We would expect that and certainly the customers want that kind of interoperability. I think in general, the manufacturers are trying to work more cooperatively together in this area and look for more coopetition that benefits customers, players, and suppliers, and the industry.
Your final question comes from David Bain - Sterne.
David Bain - Sterne
Actually just a follow-up to Todd’s question there on the Pechanga. Of the 1,250 games that DM will be ported on early calendar year, will that remain all Bally-Aristocrat-Konami? If so, just kind of looking forward, they did state that they were going to do it across their entire floor. At what point do you think that we see some of this coopetition as you noted?
Pechanga has actually secured the rights to 5,000 iVIEW DMs, so that it would be not just their existing floor, but expansion plans as well. We just think that won’t be that far down the road. We think that the more we talk to our competitors, the more we’re all committed to moving technology into the industry faster. Gaming is just way too far behind in technology and trying to benefit our customers and do more cooperative product interoperability.
So I think it will happen pretty soon that we’ll see iVIEW DM on other suppliers’ games. It’s not difficult to do. We’ve been able to do it on every competitor’s game, even 10 year old games. All we need is the okay, or the customer needs the okay from the manufacturers. We would expect that. We would expect it pretty soon.
David Bain - Sterne
Also Gavin, I know you noted Reel Image and that product sounds pretty interesting. I’m wondering if there is a timeline associate to the rollout.
We’re hoping to get it towards the beginning of summer into some markets. It’s particularly designed as I mentioned for the video markets, and we think that we’re working very hard to get that out there into those markets, ideally around before Memorial Day.
David Bain - Sterne
This final one, it was mentioned that systems implementation was the strongest that you guys have experienced ever in September. In terms of revenue hitting, would some of the hit September quarter, and then we’re going to look for the second quarter in terms of the remainder? Or just going to get spread out? How do we look at that at this point?
It certainly was a busy September quarter for implementation teams and what Ramesh’s point was, we had to spend some additional costs, because so much was going on at that time, flying implementation people around, expediting parts, etc. Much of the revenue would have been in September, but some go-lives, the revenue would be spread over the following 12 months and some will have some follow on revenue in the second and third quarter.
In general, I think we’re comfortable with the systems guidance we’ve given, $20 million to $30 million. It just happened to be several go lives hit in the last couple weeks of September to make it a very busy period. Also just on your Reel Image question, just so that other people listening on Reel Image, it’s a stepper product that’s really done with video technology, right.
So what exciting about it’s certain marketplace that haven’t been able to have stepper-like products, that have been video-only markets, can now get a stepper-like product, and it’s also great for downloading game content. So we’re really excited about that along with a lot of the other things Gavin talked about.
Canus, I think we’ll probably wrap it up now and just say thanks to our investors for your questions and interest and we’re very excited about G2E and the coming quarters.
Thank you, sir and thank you for participation on today’s conference. You may now disconnect. Have a great day.
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