Start Time: 16:30
End Time: 17:26
Bally Technologies Inc. (BYI)
Q2 2010 Earnings Conference Call
January 27, 2010 4:30 pm ET
Executives
Richard Haddrill - CEO
Robert Caller - CFO
Gavin Isaacs - COO
Ramesh Srinivasan - EVP of Systems
Analysts
Todd Eilers - Roth Capital Partners
David Katz - Oppenheimer
David Bain - Sterne Agee
Bill Lerner - Union Gaming
Joe Greff - JPMorgan
Steve Kent - Goldman Sachs
Justin Sebastiano - Morgan Joseph
Ryan Worst - Brean Murray
Operator
Good day ladies and gentlemen, and welcome to the second quarter 2010 Bally Technologies Incorporated conference call. My name is Tisha and I will be your coordinator for today's call. [Operator Instructions]. At this time, I would like to turn the call over to Richard Haddrill, Chief Executive Officer. Please proceed, sir.
Richard Haddrill
Thank you, Tisha. And welcome everyone to Bally Technologies' second quarter fiscal 2010 earnings call. We reported another solid quarter despite difficult economic and industry conditions. We set several quarterly and all time records, including record systems revenue of $58 million and a record gaming equipment margin of 53%.
For today's call, Robert Caller, our CFO will cover our overall financial results. Gavin Isaacs, our COO, and Ramesh Srinivasan, EVP of Systems, are joining us from the IGE show in London and will discuss the highlights of each of the games and systems business units.
Finally, I will have some overall comments, and then we will open it up for questions. Over to you, Robert.
Robert Caller
Thanks, Dick. First, 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 30th, 2009 and other public filings that 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, January 27th, 2010.
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.
Now for our financial results. Today, we reported our financial results for the three and six months ended December 31, 2009, the second quarter of our fiscal 2000 year. Overall, we reported diluted earnings per share for the quarter of $0.58 on $213.5 million of revenue as compared to $0.59 on $233.3 million in the comparable quarter of the prior year.
In the prior year's quarter, we recognized a $3 million gain or $0.03 per share from an insurance settlement. For the six-month period, we reported diluted earnings per share of $1.11 on revenue of $410 million as compared to $1.11 per share on revenue of $470.7 million in the same period last year.
Revenues from sales to international customers set an all time record at 18.6% of total revenues for the quarter, evidencing our continued growth as a worldwide gaming technology company. Our operating margin during the quarter was consistent with previous quarters at 25.5%, and our recurring revenue increased to 46% of total revenue as compared to 41% in the comparable prior year quarter.
Revenues from game sales were $78.8 million for the quarter, reflecting the lower number of new openings and expansions in the quarter, combined with a continued sluggish replacement cycle. Game sale margins set an all time record at 53% for the quarter compared to 49% in the comparable prior year period and reflect continued improvement in manufacturing and purchasing efficiencies and inventory management.
The second quarter is seasonally the weakest quarter for gaming operations. However, revenues from 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.
Systems revenue also set an all time quarterly record at $57.6 million. The margin on systems revenue was 71% for the quarter, within our target range. Maintenance revenue set an all time record at $14.7 million, a 20% increase over the prior year period.
Selling, general and administrative expenses decreased to $55.6 million for the quarter as compared to $58 million in the prior year quarter, a decline of 4%, and represented 26% of revenue. In the second quarter of last year, we recorded $3 million in insurance proceeds from Hurricane Katrina, which was recorded as an offset to SG&A. Adjusting for this item, our SG&A declined 9% from last year. SG&A declined primarily as a result of cost savings initiatives, including lower legal and professional fees. SG&A in the second quarter includes approximately $3 million on G2E spend.
In December, the dollar strengthened against most foreign currencies, resulting in a $1 million negative foreign currency adjustment for the quarter. Our effective income tax rate for the quarter was 34%. We now expect an effective tax rate for the year between 34% and 36% due to higher income in lower taxed international jurisdictions.
Now turning to the balance sheet, as of December 31, 2009, we had unrestricted cash of $71.3 million, an increase of $6.7 million from June 30th of 2009. In addition, we have $75 million available under our revolver. During the quarter, we repurchased 402,000 shares of our common stock for approximately $16 million at an average price of $39.38 per share. Since January 1st, we have repurchased an additional 114,000 shares for approximately $5 million, leaving $95 million remaining under our new $100 million share repurchase plan.
Since, we began our repurchase plan in November of 2007, we have returned over $97 million to our shareholders through the repurchase of over 3 million shares of stock at an average cost of $31.93 per share. Our leverage ratio continues to remain well under one turn. We're using excess working capital to prudently assist our customers in selected financing transactions, pursue acquisition opportunities and repurchase stock. As planned and discussed on previous calls, our trailing 12-month DSOs continued to increase modestly to 109 days at December 31st, which is in line with our peers.
Our inventories declined to $43.7 million as of December 31st as compared to $52.9 million at June 30th, 2009, as a result of our continued lean manufacturing initiatives. As of December 31st, our inventory reflects turns about seven times.
Now, I will turn the call over to Gavin for some more discussion of gaming equipment and gaming operations results.
Gavin Isaacs
Thanks, Robert. Ramesh and I are greeting you from London, where we are attending the IGE show. I must say that the traffic through our booth and the interest in our products remains very strong. Today has been a particularly busy day. We recorded another solid quarter for both gaming equipment and gaming operations. We estimate that we maintained our game ship share in the low 20s, recorded another good performance internationally and increased our margin to an all time record of 53%, despite another challenging quarter.
Even with our older range of product, our current product performance is strong and our new product pipeline is very exciting. We were especially pleased with our showing at G2E last November and now at IGE. Our best-of-show suite of products has generated significant customer interest, which we believe will begin to translate into revenue from both game sales and gaming operations starting in the June quarter.
During the quarter, we shipped 4997 total new sale units, of which 3342 were to customers in North America. Of the units recognized in North America 2253 were replacement sales, continuing to reflect the weak North American replacement market, as well as a very low level of new property and expansion openings during the quarter.
We are pleased with our estimated low 20s percentage ship share given that we are competing against new cabinets from our competitors, and yet we're still holding our own. Customer feedback about our new range of cabinets, our new ALPHA 2 platform and the wide range of new products we debuted at G2E has been very positive. We anticipate releasing the ALPHA 2 platform and our new video cabinet in the June quarter, which we hope is great timing, given feedback we're hearing from customers with respect to their needs to refresh their floors.
Our all time record 53% game sale margin for the quarter, up from 49% last year, reflects our ability to price our products sensibly and the continued positive impact of our process improvement initiatives. The 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 units in international jurisdictions resulted in a positive margin impact. We expect the margin on our game 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 functionality, we believe there will be opportunities for further margin enhancement. Our international momentum resulted in another solid quarter for our global team. We sold 1654 units internationally, or 33% of total unit sales. A highlight was our shipment of 22% of the machines purchased by Resorts World in Singapore. This reinforces our belief that while Bally is underrepresented in North America, it is even more so internationally. There will be several new and exciting international opportunities for Bally over the next 12 months to 24 months.
The Italian government has enacted legislation which will allow approximately 57,000 VLT games. Given that the 10 concessionaires are paying EUR15,000 per device for each nine-year machine license, we believe those games will be deployed as soon as possible, likely beginning in the summer, on both a sale and participation basis.
We continue to be excited about our execution in new markets like Mexico for Class III, Singapore, and our reintroduction into Australia in financial year 2011. We have a strong team internationally and are ready to take new opportunities as they arise, including, we hope, Brazil.
Gaming operations recorded another solid quarter, with revenues of $68.6 million. The December quarter is historically the seasonally weakest quarter for gaming operations. The horrible weather in much of the country during December exacerbated this seasonal variance. We estimate that our gaming operations revenue was negatively impacted in December by approximately $1 million as a result of the bad weather.
During the quarter, we achieved an increase in the number of premium games placed. Margins on gaming operations were in the middle of our expected margin range at 70%. In our premium product range, our 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 demand for installations of it and Jackpot 7s remains strong. More games with other support the strong performing Digital Tower Series of games.
We're very excited about our new Spinning Wheel Games and the Dual Vision community game, 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.
At G2E, we highlighted our new SpinNation series of spinning wheel video and mechanical reel slots. Our Cash Spin game, where the player actually touches the screen and spins the video wheel, is an industry first. It was the talk of G2E and won the award for the best slot at the show. It is the hottest product at IGE. We anticipate launching this game at the end of Q3, ahead of our original schedule.
In game sales, we continue to produce world-class mechanical reel products. This quarter, we added our iReels and the much anticipated classic games specifically designed to replace the footprint of 40,000 to 50,000 successful but aging pre-ALPHA high-D non-steppers. The classic games are performing extremely well. We have seen success in our video product with the V32 upright cabinet. During Q4 of last year, we released four new V32 titles, which are all performing very well.
Recent jurisdictional developments continue to be discussed and are obviously fueled by the economic situation. We are well positioned to take advantage of these opportunities due to our experience in multiple markets, including Class II, Central determination Lottery analogs, the debts and customer centric focus of our team and our broad portfolio products including systems, Bar Tops, multi-games and poker.
Domestically, we are mainly focused on new and potential expansion opportunities in Illinois, Ohio, Kansas, Kentucky, Iowa, Maryland, and Massachusetts. We are also engaged in expanding our already strong position in Mexico as it moves to Class III gaming.
Initial placements have been very strong, with large improvements in win per unit. We have reentered the Australian market, something, I'm obviously excited about. Our timing is good, given Australia 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, which should put us in a good position to expand internationally. I remain very excited and motivated by our team, our products and by the opportunities which are on our horizon. We are all working feverishly hard and together to ensure we get our newest range of products, which were so well received at G2E, to market before the end of this fiscal year. We believe that the timing of our new products will be ideally suited to meet the anticipated increase in customer spending.
Now, I will turn it over to Ramesh for additional details on our systems business.
Ramesh Srinivasan
Thank you, Gavin. Systems revenue for the quarter set an all time record at $57.6 million, a 3% increase from the comparable prior year quarter. Maintenance revenue also set an all time quarterly record at $14.7 million, a 20% increase over last year. The gross margin for the quarter was within our expected range at 71%. We continue to be strong believers that customers, patrons and operators in this industry deserve a world-class systems and technology vendor, where all aspects of the business are run on organized, disciplined enterprise software principles. These state-of-the-art systems and technologies make processes like marketing uniformly to all patrons in a casino easier, more creative, more focused and player-centric, and enables getting maximum benefits for every dollar spent.
Our customers are becoming increasingly supportive of our systems philosophies and future vision. There can be no greater proof for that than the investment they are continuing to make with us, driving our revenue to record levels. Our vision is driven by our customers and we're very confident of our current direction. The positive trend of increased systems related decision making, we've witnessed since April 2009 is continuing. The current volume of systems deals we are competing for and our extremely impressive win/loss ratio continues to augur well for the future.
However, there is still a higher number of no decisions and postponed software buying decisions than we would expect in more normal market conditions. Galaxy in Macau were among our many wins during the quarter. We expect their flagship casino, StarWorld to replace the competitive system they are currently using with our accounting, marketing and table product offerings in Q4.
With this Galaxy win, the top three major operators in Macau, Sands, SJM and Galaxy are all now Bally systems customers. After going live with Bally systems at L'Arc and Oceanus, SJM is on the verge of switching to our Casino Marketplace and TableView products at Casino Lisboa as well. SJM Oceanus was also the very first Macau casino to implement our CoolSign media management product, while Galaxy will be the first one in that region to go live on iVIEW Display Manager and Business Intelligence.
Some of our other wins during the quarter included an expanded enterprise agreement for greater use of our Power Bonusing products with one of our bigger customers, a competitive replacement in a casino in Oklahoma, a new casino in Kansas. One of our U.K. customers continues to expand the use of our products by replacing the competitor one that is currently there across all their casinos at the rate of about one casino per month.
iView DM continues to perform well at Pechanga Resort & Casino. Now that this product is ready for widespread deployment, we are excited about the more attractive and effective software applications that can be deployed floor-wide using either iView or iView DM or both. Elite Bonusing Suite Server has now been deployed in multiple casinos.
Moving our bonusing applications to the server now gives us a solid base from which multiple new floor-wide marketing applications can be launched at regular intervals. We expect to release a number of such applications, including the iView DM reelspin application recently seen at G2E, during the June/July time-frame.
We've now completed over 100 Version 11 product installs worldwide across all our product lines. About nine customers across 15 casino sites are now live with SDS on Windows in their casinos. More than 10 customers are currently using our new Business Intelligence set of products and reporting good gains because of them. The Bally Command Center server based gaming product continues to perform well at more than 20 sites, downloading marketing and other content to iViews all across the floor using G2S.
CoolSign integrated media management continues to gain wider acceptance. Our journey towards becoming a world-class gaming systems provider continues to make very good progress. Our sales pipeline supports this statement. If we keep our focus and continue to work hard on the solid path we have set for ourselves, I'm very confident our successes will get even better in the not-so-distant future.
Back to you, Dick.
Richard Haddrill
Thank you, Ramesh, Gavin and Robert. We are pleased with our results for the second quarter and for the first half of fiscal 2010. As I mentioned on our last quarter's call, the economy, the consumer and our customers are challenged, and that has affected our demand for our products. While we continue to sense more optimism from many of our customers, we do expect this optimism will build as this calendar year progresses. Our business model has proven we can earn solid profits even in this constrained revenue environment.
In addition, today, 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. As we move into the second half of our fiscal 2010 and begin to formulate our preliminary thoughts about our fiscal 2011, I would like to leave you with some very important points.
First, we continue to capitalize on our international growth opportunities. Over the last five years, our international revenues have more than doubled as a percentage of our total revenues. 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.
Second, we do have an excellent business model, with overall improving net margins. This quarter, our game sales margin set a record of 53%. As the revenue environment starts to improve, we should have very good earnings leverage. We have the potential to increase our operating margin from 25% this quarter to 28% to 30% over the next couple of years.
Number three, we expect an improving replacement market, and there will be clear jurisdictional revenue expansion opportunities in fiscal 2011 in Illinois, Maryland, Canada, Aqueduct in New York and Italy, and several other markets may also come on stream in our fiscal 2011.
Number four, our overall R&D investment continues to be very productive, as evidenced by our award winning showing at G2E and this week at IGE. And number five, while we've done pretty well with our game offerings these last three to four quarters, we have major new products coming soon. 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 game 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.
And number six, our effective R&D spend is also reflected in our ongoing and growing leadership in systems. During the quarter, we had record revenues and announced several new enterprise-wide agreements with major gaming operators around the world. We continue to grow this business with both new openings and competitive replacements. Systems is a core competency of Bally and the continued evolution of server based gaming gives us a long-term competitive advantage.
Number seven, maybe most importantly, we see an exciting opportunity to match the timing of this explosion of innovation at Bally with an improving replacement cycle and the very significant jurisdictional expansions I discussed for our fiscal 2011 and beyond.
And finally, number eight, we do have 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. And my thanks to this entire Bally team for another great quarter and for positioning us so well, for honoring your commitments, and I also want to of course thank our investors for your continued support.
With that, operator, I would like to open it up for any questions.
Question-and-Answer Session
Operator
[Operator Instructions]. Your first question comes from the line of Todd Eilers with Roth Capital Partners. Please proceed.
Todd Eilers - Roth Capital Partners
Hi guys, how are you?
Richard Haddrill
Great.
Todd Eilers - Roth Capital Partners
Just a couple questions. Number one, it looks like on the product sales side, it looks like the V32 cabinet did well in the quarter. Can you maybe give us a sense of how many titles you currently have out on that platform right now versus last year, and then maybe give us a sense of how these games are performing when you add new units to a casino floor?
Richard Haddrill
Gavin, do you want to take that one?
Gavin Isaacs
I'll take that one, Dick. Todd, we have now 17 units, which are comprised in nine different banks of products for the V32. And a year ago, we had one, we only had the Quick Hit Platinum. It's taken awhile for customers to expand on that footprint. But as they are, we're finding that product performance continues to improve. Our latest offering is the 243-way Reel Power -- sorry, Reel Money, and that's initial figures from that one out of the gate are very, very strong, so confident on the V32.
Todd Eilers - Roth Capital Partners
Okay. Excellent. Also want to ask a question, I saw the press release you guys put out on the New York Lottery extension. Dick, can you maybe talk a little bit about that extension, how that might impact you guys going forward, and were there any significant changes to that deal for you guys?
Richard Haddrill
Yes, and as you're aware, we have just over 50% of the devices in the state of New York. So, this extension is pretty significant. The original contract was set to end at the end of this calendar year, so now it will go six years beyond that, a total of seven years from now, allowing us to invest more in the market, the lottery to benefit and we expect it to improve our profitability. And it will also help our profitability, of course, when Aqueduct opens, which we would, based on the governor's comments, you would expect it to be early in calendar '11, based on current comments. So that is a major contract of importance for us and for the New York Lottery.
Todd Eilers - Roth Capital Partners
Okay, great. And then one final question, on the systems side, I know there's a number of large RFPs coming up or out for bid that could be announced, I guess, in calendar 2010. Can you maybe give us a sense of size of those opportunities, maybe when we should expect to hear who the systems provider will be, when that will be announced, and maybe give us a sense of where you feel you might be competitive in those situations, what you guys might have that might give you a leg up on the competition?
Richard Haddrill
Well, I'm certainly comfortable talking about our competitive advantages. Probably for competitive reasons, though, we'd rather not discuss specific situations, and of course respecting customers and prospective customers as well. But clearly, one of the things we've done so well is to basically get core technologies working well, which has not been the case, such that customers can rely on the basic technologies that we have. We've also converted all of our systems, which have existed for as long as 30 years, to state-of-the-art technologies with our 11.0 releases, and they're integrated and they're open.
So, all of those things benefit us. Then our newer products, if you look at the makeup of our revenues in systems, the newer products continue to grow, whether it's Business Intelligence, iView and now lots of interest in iView DM, and many applications just now rolling out for iView DM. So, the ability to do gaming across the casino floor is a clear strength for us that we think will differentiate us at the same time that they can rely on our products to do the basics that they're supposed to do.
Todd Eilers - Roth Capital Partners
Okay, that's fair. Thanks, guys.
Richard Haddrill
Thank you Todd.
Operator
Your next question comes from the line of David Katz with Oppenheimer. Please proceed.
David Katz - Oppenheimer
Hi, Good afternoon. Robert, I missed it if you gave it out, but did you give us what cash from operations was and what CapEx was for the quarter? And essentially, where I'm headed with this is it looks like you may start to pile up a little more free cash flow, actually, a lot more free cash flow, if I'm looking at it correctly. And I guess the follow-up in advance of that is really what is your plan to do with that? What are your uses of cash strategy right now?
Richard Haddrill
Well, Robert will get you some of the three and six-month numbers. I'll just cover quickly our uses for it. You've seen us spend almost $100 million on stock buybacks the last couple years, especially, as we look out to 2011 and beyond. That becomes an attractive use of cash. You've also seen our DSOs, as we predicted, increase, too, as we finance customers. And we're going to continue to do that, given the high margins of our products and the competitive environment and our customers' balance sheets being on average relatively weaker than ours. We've so far done that, though, without any increase in bad debt expense, and our history there has been very solid.
There's a number of opportunities to acquire businesses or invest in businesses. We continue to look at those. We're kind of picky. We want to make sure that they're not only strategic, but near-term accretive. So, those are the major uses of our capital. We have no near-term plans to issue a dividend. We're always open to investors' view on that. But our view is that between stock buyback, acquisitions and customer financings, that's a better deployment of capital.
Robert Caller
David, we generated about a little over $50 million of cash from operating activities for the six months. That is down from what it was in the same period of last year, mainly due to an increase in our working capital, principally accounts receivable during the period.
David Katz - Oppenheimer
Okay. And how much CapEx?
Robert Caller
CapEx was about -- sorry, I'm looking here. It's been about $6.5 million for the six months. That is corporate CapEx. We spent another $22 million or so in gaming ops capital expenditures.
Richard Haddrill
And David, you're right to point out too, over the last couple of years we've done a much better job of deploying our gaming ops CapEx, not only to higher-win-per-day locations, but because of our component manufacturing, be able to retrofit games when they come back into another title. So that has caused our game ops CapEx to be under control, despite a growing installed base.
David Katz - Oppenheimer
Right. And if I can just ask one more question on another topic, and clearly the systems stuff is working, and most or certain categories of unit sales are working well, but some of the feedback that comes up from time-to-time is really on your video slot product, which has been kind of a topic for awhile. What can you share with us, for those of us that aren't necessarily experts at game math, or some of the more -- the finer points about where the challenges lie toward getting that to be a front-of-the-class product instead of a middle-of-the-class product, I think might be fair?
Richard Haddrill
Yes, a couple of things there. We've definitely improved our video performance. In fact, 63% of our shipments this quarter were video products. So, our normal target is sort of in the 40% to 60% range, Video Stepper. This time, we actually got above that kind of normal bounce around range of 40% to 60%. So, we continue to get better and better at 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 will the ALPHA 2 platform, where we will have enhanced sound and graphic capabilities.
So, we think, we've got the video math and concepts right. We're now going to give it a little extra power with the increased ALPHA platform capabilities and the Pro Series cabinet, both of those coming in the summer.
David Katz - Oppenheimer
Okay, perfect. Thanks very much. Nice work.
Richard Haddrill
Thank you.
Operator
Your next question comes from the line of David Bain with Sterne Agee. Please proceed.
David Bain - Sterne Agee
Great, thanks. First, I was hoping to follow up with Todd's questions on the upcoming RFPs. I assume you're speaking to Canada, where they have a lot of the legacy progressive product. And I was hoping you could discuss the process out there. I know that CapEx and the government are somewhat intertwined. So, it could lead to some sort of domino effects for the RFPs, so I'm trying to get a handle around that.
Richard Haddrill
You know David, first of all, our system pipeline is very significant even without Canada. But when you put Canada in, the Canadian provinces have been sharing information on the RFP, so that one of their objectives, we believe, is to ensure that certain interoperability and other characteristics are adopted that would allow the industry to move forward, actually, and make sure that Canada is one of the leading jurisdictions, that they're going to invest a lot of money in new systems.
So, we do believe that they will listen to what other jurisdictions have done, but they are still making, at least at this point, their decision separately. At one-time, one province was coordinating Oregon, we believe that is not the case right now. So, we do believe there will be some spillover, but on the other hand, they do have the ability and the desire to make an independent decision. But they are coordinating to drive technology standards, which we think is good and we think favors Bally because of our openness, our iView DM and some other creative things we've done around responsible gaming.
David Bain - Sterne Agee
Okay. That's great. On the systems guidance, I noticed you're about halfway to your guidance range at this point, and we have the Marina Sands opening in April/May. I've seen you acquire a lot of new systems contracts lately. Can you give us a sense of how you view systems contract revenue funneling in? There's already a decent portion that is backlogged into FY '11.
Richard Haddrill
Well, it does typically take, from the time a procurement process begins to evaluate, it can take anywhere from three months to over a year for a decision to be made and then another three to nine months for a go-live. So, our systems pipeline started to build in April, and March/April of last year, and continues to build. So, we view that as giving us a fair amount of visibility out over the next 12 months to 18 months. And yet any individual quarter can be difficult, because some people might say Marina Bay Sands is going to open March 31st, some might say April/May and those kind of things we have to manage investor expectations, as well as our own resources, to help our customers as they need. So, we're prepared to take Marina Bay Sands live in March, but they may likely decide to go to April or May, those are the kind of things we have to manage.
Back to Canada as well, too, we do expect the revenue to be recognized from Canada to be over several years. The decision process, especially with the government jurisdiction, can take as long as a year and then it can take another year to roll out. So, we're looking at Canada as a great opportunity, but not necessarily in the next six months. That's going to stretch out longer than that.
David Bain - Sterne Agee
Okay. And then just last question, and this is something that I've actually gotten from a few investors. If you look at the S6000 replacements with the classic series, especially as they come off service in March, I assume that's something that you would view as net additive to what you would normally ship, not something that just blends into your overall ship share that you otherwise would have had.
Richard Haddrill
Well, people have so much capital to spend, so it's not purely net additive, but it is something that each casino operator has to deal with over the next couple years as parts become less available. We've given our customers plenty of notice on this so they can plan for it. So, we feel pretty confident that over the next several years we'll get a large portion of those, which will be somewhat additive. But on the other hand, casino customers are always replacing some older product. So, it's definitely a tilt towards Bally because we have those games and we have them on our new platform, but it's not a 100% guarantee that it would be all Bally and that it would be all additive.
David Bain - Sterne Agee
Okay, great. Thank you.
Richard Haddrill
Thank you, David.
Operator
Your next question comes from the line of Bill Lerner with Union Gaming. Please proceed.
Bill Lerner - Union Gaming
Thanks. Hi guys.
Richard Haddrill
Hi Bill.
Bill Lerner - Union Gaming
You've been able to generally maintain market share despite the older ALPHA platform, the way we look at it, anyway. Can you talk about the pricing benefit of ALPHA 2 for mix, and then maybe a little bit of color around demand and timing, Dick, you mentioned June, but demand and timing of when we really notice the benefit of that in mix. Maybe it's all sort of moving towards this fiscal 2011 earnings inflection. But, I guess, my point is, are market share assumptions, because of that, and ASP estimates or implicit ASP estimates conservative or too conservative?
Richard Haddrill
We made pretty good progress on our ASPs. And in fact, in this latest quarter, ASP was flat or even down a little bit, partly due to a fairly large international sale 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 a 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, by the time you get a really robust set of titles, it builds up steadily over a 12-month period from the release date this summer. Should help ASPs, if we manage our manufacturing properly, it should definitely help margins. At the same time, as we get more video titles out and more conversion kits that should help margins. So, we do feel pretty good about our margins as we look to fiscal 2011.
Bill Lerner - Union Gaming
Thanks.
Richard Haddrill
Thank you, Bill.
Operator
Your next question comes from the line of Joe Greff with JPMorgan. Please proceed.
Joe Greff - JPMorgan
Good afternoon guys.
Richard Haddrill
Hi Joe.
Joe Greff - JPMorgan
The game sales margin of 53% was great. Obviously, its north of what a lot of folks were looking for. I was hoping you could drill down a little bit and just help us understand, how much did conversion kit revenue add to that?
Richard Haddrill
Conversion kits have, say, increased over the last 18 months, this particular quarter not quite as strong as last quarter. So much of this improvement was just good old lean manufacturing, because our ASP was relatively flat.
Joe Greff - JPMorgan
Great. And then my second question, I guess, for Ramesh, we understand that the iView DM is set for trial at Bellagio. Can you just talk about that and how many machines?
Ramesh Srinivasan
Did he say Bellagio, Dick?
Richard Haddrill
Ramesh, Joe addressed that question to you. Did you hear it?
Ramesh Srinivasan
Yes, I heard it, yes, but, no, there is no iView DM trial being planned at Bellagio that I'm aware of, though I will tell you one thing. The number of customers who are getting ready not just for trial, but for actual implementation of iView DM, I would say there are two trials being planned at relatively large casinos. No, Bellagio is not one of them. And at least, there are couple of other customers who are getting ready to go live with iView DM as they go live with our systems.
Joe Greff - JPMorgan
Great, thanks.
Richard Haddrill
But, Joe, we're happy to take that order if you have it.
Joe Greff - JPMorgan
I would love to give it to you.
Richard Haddrill
Thanks
Operator
Your next question comes from the line of Steve Kent with Goldman Sachs. Please proceed.
Steve Kent - Goldman Sachs
Hi, good afternoon. Just a couple of questions. First off, you mentioned, I think, Dick, that there were delays in decisions or that is one of the issues out there. Are those delays in decisions due to economic conditions, or are they due to some desire to wait to see sort of what other products come out? Maybe if you could just characterize that a little bit, I guess, I'm struggling with it because I would think by this point most of the larger casinos would have already said, this is what our capital expenditure plans are for 2010. But maybe I'm wrong. Also, the wide area progressive game showed a sequential decline, and I was just wondering if you could just give us a little bit of color there, whether, was it one or two casinos, or was there something more broad based?
And then finally, WMS mentioned that their financing to operators was essentially less, yet it seems like that is still part of your program, is to provide some level of financing to the operators as they buy machines. Maybe you could just explain that.
Richard Haddrill
Sure. First, on the delay in decisions, that was a comment made by Ramesh in his script based on certain systems decisions, which, when it involves a large amount of capital like that, it just seems like the level of approvals are more, causing these decisions to be evaluated more closely. It doesn't seem to be at all related to any products or competitive situations; it's just more of -- the evaluation process is more thorough when capital is scarce.
Ramesh Srinivasan
I would also add one more thing to that, Dick, is that some of those delays involve our Business Intelligence product, where people absolutely love the product, but sometimes it takes time for them to buy the product and integrate it with all their hotel systems and all that. So, they tend to take their time with it.
Richard Haddrill
Very good. And I would say, just to your comment, too, 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 have expected years ago in capital allocations these last 18 months to 24 months, where it still can move around quite a bit.
And I'll answer your third question and then ask Gavin to comment on the WAP question. With respect to financing, we were a little slower, perhaps, than our competitors to enter the financing game, but I believe our DSOs are still slightly below our key competitors. So, I don't think our financing activity is out of line at all or certainly doesn't feel overly aggressive to me, given the margins on our products and our balance sheet and our security interests. Gavin, do want to handle the WAP question?
Steve Kent - Goldman Sachs
Before Gavin answered it --
Richard Haddrill
Sure, Steve, go ahead.
Steve Kent - Goldman Sachs
No, I was just going to say, Dick, just to finish on that, do you think that your days outstanding, or Robert, do you think they'll go even lower and that the contracts coming in now are for less financing?
Richard Haddrill
We're seeing about the same financing opportunities now as we have the last six months. We would see our DSOs possibly creeping up just a little more from here, but then leveling off, would be our best guess right now. But, again, that can always change. It's just we're borrowing at less than 5%, and most of our customers have higher financing costs. And so it comes up more often than normal in purchase decisions.
Steve Kent - Goldman Sachs
I'm sorry, Gavin. I cut you off. Go ahead.
Gavin Isaacs
No, that's alright. I wanted to reinforce what Dick was saying. I'm not seeing massive changes in anyone's behavior in terms of their offering in the marketplace. In relation to our WAP, we haven't released a lot of product on our WAP for quite awhile. We've just released two new products for our quarter-million WAP, and we're just also about to release our new product for Millionaire 7s WAP. So, it's a question of replenishing the product offerings on that link, which isn't a major link, and it's obviously a huge opportunity for us going forward.
Steve Kent - Goldman Sachs
Okay, thank you.
Richard Haddrill
Thank you, Steve.
Operator
[Operator Instructions].Your next question comes from the line of Justin Sebastiano with Morgan Joseph.
Justin Sebastiano - Morgan Joseph
Thanks, I think this question is probably for Ramesh. Last quarter, you talked about the iViews at Pechanga. I think you had about 450 there. Do you have the balance there, so you have about 1200 on the floor there?
Ramesh Srinivasan
Not yet. It's still a little north of 550, I think, now. 1200 will happen in the next few months, but no, currently the number is a little above 550.
Justin Sebastiano - Morgan Joseph
Okay. And can you maybe give us a little feedback, from what Pechanga is seeing, as far as results and how perhaps other casinos can get feedback from them as well to kind of move forward with their implementation of iViews?
Ramesh Srinivasan
Generally, the feedback from them is very positive, which is the reason why they took it from 24 or so to about 550 now. During the holiday season, just before New Year's Eve, in all, they did very well, I mean, all those games did very well. So, in terms -- so far what we've done at Pechanga is basically a technical proof, right, the fact that it technically works, and that part of it has worked very well, and everyone is very happy and now we're getting ready to launch all the applications on it, which is where the real value comes in.
Justin Sebastiano - Morgan Joseph
Okay. And then as far as Aria, how is the integration with your games on, I guess, Service Window, and is there any movement towards that? Where are we on that?
Richard Haddrill
First of all, our games at Aria, where we've got 20% of the floor, are doing very well. And we, as you probably know, have been doing the iView DM in connection with the IGT system at Monte Carlo for some months. We're now turning our attention, as is IGT and MGM and our partners, back to putting DM on the floor at Aria. And I would guess that will be 90-day kind of thing, 60 to 120-day timeframe. It's not technically difficult, as we've proven, I mean, it's technically work, but not difficult, as we've proven at Monte Carlo. It's just a matter of making sure that opening went well before we finalized that. So, we expect to do that over the next 90 days.
Justin Sebastiano - Morgan Joseph
Okay. Alright, thanks, guys.
Richard Haddrill
And I should just add to the investors on the call, feel free to call Pechanga if you want some feedback.
Operator
Your next question comes from the line of Ryan Worst with Brean Murray. Please proceed.
Ryan Worst - Brean Murray
Thank you, good afternoon guys.
Richard Haddrill
Hi Ryan.
Ryan Worst - Brean Murray
Just a couple questions. Maybe Gavin can provide some more color on the gaming ops installed base. It was down sequentially, but from what it sounds like, premium games might have been up sequentially. So, just any color you could provide there would be helpful.
Gavin Isaacs
Sure. The actual, and I'm sorry, I'm running a little bit blind from the distance here for some specific numbers, but I'll give you the generalities. We have had a great deal of success with the Fireball and the 7777 Jackpot product. They're the first two in our Digital Towers. Fireball is continuing to be placed in new properties because it really is underrepresented and so we have seen a good growth in that product in particular. We've also got a whole bunch of new products coming out, and until then we're trying to hold our own with the other areas. But I think you're right in saying that the number of the premium titles has actually increased.
Richard Haddrill
And Gavin, just to help you out, Ryan, the number of premium products increased, rental on daily fee, by 59 during the quarter and by 224 from the prior year. And our win per unit was up over the prior year as well.
Ryan Worst - Brean Murray
Okay, thanks. Very helpful. And then, just as far as systems goes, were you able to -- did the system placement in Coushatta get installed in the December quarter? I was just curious about that.
Richard Haddrill
Ramesh, was that -- that was September quarter, wasn't it?
Ramesh Srinivasan
Yes, yes. I think that was the previous quarter, yes. That was the September quarter.
Ryan Worst - Brean Murray
Okay, great. Thanks. That's all I have.
Operator
There are no further questions in queue. I would now like to turn the call back over to Mr. Richard Haddrill, President and CEO, for any closing remarks.
Richard Haddrill
Just again want to thank our investors for your interest. We're excited about finishing up this year and in particular the opportunities for fiscal 2011. And we'll say thanks for now.
Operator
Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect your lines. Good day.
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