Bally Technologies, Inc. (NYSE: BYI):
Bally Technologies' Chief Executive
Officer Richard Haddrill (Photo: Business Wire)
- SECOND QUARTER REVENUE UP 15 PERCENT
TO $210 MILLION WITH DILUTED EPS OF $0.54
- FOURTH SEQUENTIAL RECORD QUARTERLY
GAMING OPERATIONS REVENUE
- WIDE-AREA PROGRESSIVE INSTALLED BASE
GROWS 36 PERCENT
- UPDATES FISCAL 2012 DILUTED EPS
GUIDANCE TO $2.25 TO $2.45
Bally Technologies, Inc. (NYSE: BYI), a leader in slots,
video machines, casino management, interactive and mobile
applications, and networked systems for the global gaming industry,
announced today diluted earnings per share (“Diluted EPS”) of $0.54
and $0.99 on revenue of $210 million and $405 million for the three
months and six months ended December 31, 2011, respectively.
“As we celebrate 80 years of success, I am proud that Bally
remains a source of true innovation with exciting growth
opportunities,” said Richard M. Haddrill, the Company’s Chief
Executive Officer. “Our recent innovations have resulted in four
consecutive quarters of year-over-year revenue and
earnings-per-share growth. Numerous of our investments of recent
years are now producing good results.”
“In addition to repurchasing approximately 330,000 of our shares
during the quarter for $10 million, we also paid down $19 million
of debt which reduced our leverage ratio to below 2.0 times,” said
Neil Davidson, the Company’s Chief Financial Officer. “This quarter
represents the 17th quarter in a row that we have repurchased
stock.”
As of December 31, the Company had $111 million available under
its Board-authorized share repurchase plan. Further, as long as the
Company’s leverage ratio remains below 2.0 times, the Company’s
share repurchases are not restricted under the terms of its credit
agreement. The decline below 2.0 times also resulted in a 25-basis
point decline in the Company’s borrowing costs.
Second Quarter Fiscal 2012
Highlights
Three Months Ended December 31, Six Months Ended
December 31,
2011
%Rev
2010
%Rev
2011
%Rev
2010
%Rev
(dollars in millions, except per share amounts)
Revenues:
Gaming Equipment $ 70.2 33 % $ 59.2 33 % $
134.6 33 % $ 110.2 31 % Gaming Operations 86.2 41 % 77.1 42 % 171.2
42 %
156.3
44 % Systems 54.0 26 % 46.4 25 % 99.6 25 %
87.0
25 % Total revenues $ 210.4 100 % $ 182.7 100 % $ 405.4 100 % $
353.5 100 %
Gross Margin: Gaming Equipment (1) $ 30.0
43 % $ 29.0 49 % $ 58.4 43 % $ 53.9 49 % Gaming Operations 62.4 72
% 54.4 71 % 123.1 72 %
111.4
71 % Systems (1) 40.1 74 % 33.6 72 % 74.6 75 %
63.3
73 % Total gross margin $ 132.5 63 % $ 117.0 64 % $ 256.1 63 % $
228.6 65 % Selling, general and administrative $ 61.3 29 % $
55.2 30 % $ 118.5 29 % $ 106.8 30 % Research and development costs
22.4 11 % 21.3 12 % 45.8 11 %
42.7
12 % Depreciation and amortization 5.8 3 % 4.8 3 %
11.4 3 %
9.4
3 % Operating income $ 43.0 20 % $ 35.7 20 %
$
80.4
20 % $ 69.7 20 % Adjusted EBITDA $ 67.2 $ 57.2
$
126.3
$ 115.0 Diluted EPS from continuing operations $ 0.54 $ 0.49
$
0.99
$ 0.89
(1)
Gross Margin from Gaming Equipment and
Systems excludes amortization related to certain intangibles,
including core technology and license rights, which are included in
depreciation and amortization.
Three
Months EndedDecember 31,
Six Months EndedDecember
31,
2011 2010 2011
2010 Operating Statistics New gaming devices 3,636 3,468
7,035 6,291 New unit Average Selling Price (“ASP”) $ 17,201 $
15,244 $ 16,922 $ 15,442
As of December 31,
2011 2010 End-of-period installed base:
Game-monitoring units 406,000 392,000 Customer sites 631 609
Linked progressive systems 1,263 937 Rental and daily-fee games
14,624 13,352 Lottery systems 10,832 8,125 Centrally determined
systems 47,461 50,609
“Our innovative products are driving growth for all of our
divisions,” said Ramesh Srinivasan, the Company’s President and
Chief Operating Officer. “Recently released products including the
Pro Curve™, the Pro V32™, and new ALPHA 2™ content positively
impacted North America ship share. We again set new records in
Gaming Operations this quarter on the continued growth of such
premium games as Cash Wizard™ and Vegas Hits™, the growth in our
wide-area progressive installed base, and the placement of games at
the newly opened Resorts World Casino New York. Additionally, the
powerful combination of iVIEW Display Manager™ (‘DM’) and Elite
Bonusing Suite™ applications such as DM Tournaments™ and U-Spin
Bonusing™ continues to drive incremental demand with backlog for
iVIEW DM at record levels. We look forward to showcasing our latest
innovative Systems products in action at our upcoming annual
Systems User Conference in March.”
Highlights of Certain Results for the Three Months Ended
December 31, 2011
Overall
- Total revenue increased 15 percent to
$210 million as compared with $183 million last year.
- Adjusted EBITDA (earnings before
interest, taxes, depreciation and amortization, including
share-based compensation), a non-GAAP financial measure, increased
18 percent to $67 million as compared with $57 million last
year.
- Selling, general and administrative
expenses (“SG&A”) declined to 29 percent of total revenues from
30 percent last year. SG&A increased $6 million primarily due
to increases in payroll, regulatory, and other infrastructure
expenses to support key new markets and an increase in bad debt
resulting from a general increase in accounts receivable associated
with increasing revenues and heavier weighting to international
markets. Bad debt as a percentage of revenue remains at
approximately 1%.
- Research and development expenses
(“R&D”) decreased to 11 percent of total revenues compared to
12 percent last year, with revenues growing faster than R&D
expense growth, as past R&D efforts begin to pay off with
increased product acceptance among our customer base. R&D
increased $1 million primarily due to an increase in payroll.
- Operating income increased 20 percent
to $43 million compared with $36 million last year. Operating
margin was 20 percent.
- Diluted EPS from continuing operations
increased 10 percent to $0.54 from last year’s $0.49, which
included a prior-period benefit of $0.05 per diluted share from the
reinstatement of the U.S. research and development tax credit.
Gaming Equipment
- Revenues increased 19 percent to $70
million as compared with $59 million last year, driven by higher
ASP and unit sales.
- ASP of new gaming devices increased 13
percent to $17,201 per unit from $15,244 last year, primarily as a
result of product mix, including a heavier sales mix towards Pro
Curve during the quarter, and an increase in ASP from international
sales.
- New-unit sales to international
customers were 25 percent of total new-unit shipments.
- Gross margin decreased to 43 percent
from 49 percent last year, primarily due to higher costs for the
initial production runs of several models of the Pro Series™ line
of cabinets, which were released in late fiscal 2011, and a heavier
sales mix towards Pro Curve during the quarter.
Gaming Operations
- Revenues increased 12 percent to a
quarterly record of $86 million as compared with $77 million last
year, driven by growth in the installed base of premium and
wide-area progressive games, as well as placement of games at the
newly opened Resorts World Casino New York.
- Gross margin remained relatively
consistent at 72 percent compared to 71 percent last year.
Systems
- Revenues increased 16 percent to $54
million as compared with $46 million last year, due to increases in
software and services and maintenance revenues.
- Maintenance revenues increased to a
record $18 million as compared with $16 million last year.
- Gross margin increased to 74 percent
from 72 percent last year, primarily as a result of the change in
mix of products sold and an increase in maintenance revenues.
Specifically, hardware sales were 33 percent of systems revenues,
and software and service sales were 33 percent, as compared to 40
percent for hardware and 26 percent for software and services in
the same period last year.
Highlights of Certain Results for the Six Months Ended
December 31, 2011
Overall
- Total revenue increased 15 percent to
$405 million as compared with $354 million last year.
- Adjusted EBITDA increased 10 percent to
$126 million as compared with $115 million last year.
- SG&A declined to 29 percent of
total revenues from 30 percent last year. SG&A increased $12
million primarily due to increases in payroll, regulatory, legal,
and other infrastructure expenses to support key new markets and an
increase in bad debt.
- R&D decreased to 11 percent of
total revenues as compared with 12 percent last year, with revenues
growing faster than R&D expense growth, as past R&D efforts
begin to pay off with increased product acceptance among our
customer base. R&D increased $3 million primarily due to an
increase in payroll.
- Operating income increased 15 percent
to $80 million compared with $70 million last year. Operating
margin was 20 percent.
- Diluted EPS from continuing operations
increased 11 percent to $0.99 from last year’s $0.89, which
included a prior-period benefit of $0.05 per diluted share from the
reinstatement of the U.S. research and development tax credit.
Gaming Equipment
- Revenues increased 22 percent to $135
million as compared with $110 million last year, driven by higher
ASP and unit sales.
- ASP of new gaming devices increased 10
percent to $16,922 per unit from $15,442 last year, primarily as a
result of product mix and an increase in ASP from international
sales.
- New-unit sales to international
customers were 28 percent of total new-unit shipments.
- Gross margin decreased to 43 percent
from 49 percent last year, primarily due to higher costs for the
initial production runs of several models of the Pro Series line of
cabinets, which were released in late fiscal 2011, and a heavier
sales mix towards Pro Curve during the second quarter.
Gaming Operations
- Revenues increased 10 percent to a
record $171 million as compared with $156 million last year, driven
by growth in the installed base of premium and wide-area
progressive games, as well as placement of games at the newly
opened Resorts World New York.
- Gross margin remained relatively
consistent at 72 percent compared to 71 percent last year.
Systems
- Revenues increased 14 percent to $100
million as compared with $87 million last year, due to increases in
software and services and maintenance revenues.
- Maintenance revenues increased to a
record $36 million as compared with $32 million last year.
- Gross margin increased to 75 percent
from 73 percent last year, primarily as a result of the change in
mix of products sold and an increase in maintenance revenues.
Specifically, hardware sales were 31 percent of systems revenues,
and software and service sales were 33 percent, as compared to 39
percent for hardware and 24 percent for software and services in
the same period last year.
Fiscal 2012 Business Update
The Company updated its fiscal 2012 guidance for Diluted EPS
from continuing operations to a range of $2.25 to $2.45, which
includes $0.99 per diluted share earned during the first half of
fiscal 2012.
The Company has provided this earnings guidance for fiscal 2012
to give investors general information on the overall direction of
its business at this time. The guidance provided is subject to
numerous uncertainties, including, among others, overall economic
and capital-market conditions, the market for gaming devices and
systems, changes in gaming legislation, the timing of new
jurisdictions and casino openings, the timing and completion of new
systems installations, competitive product introductions, complex
revenue-recognition rules related to the Company’s business,
and assumptions about the Company’s new product introductions and
regulatory approvals. The Company does not intend and undertakes no
obligation to update its forward-looking statements, including
forecasts, potential opportunities for growth in new and existing
markets, and future prospects for proposed new products.
Accordingly, the Company does not intend to update guidance during
the quarter. Additional information about the factors that could
potentially affect the Company’s financial results included in
today’s press release can be found in the Company’s Annual Report
on Form 10-K and quarterly reports on Form 10-Q.
Non-GAAP Financial Measures
The following table reconciles the Company’s net income
attributable to Bally Technologies, Inc., as determined in
accordance with generally accepted accounting principles (“GAAP”),
to Adjusted EBITDA:
Three Months Ended
Six Months Ended December 31, December 31,
2011 2010 2011
2010 (in 000s) Income from continuing operations, net
of tax $ 24,268 $ 27,252 $ 44,660 $ 49,444 Interest expense, net
3,339 1,776 6,612 3,690 Income tax expense 14,688 6,347 26,541
18,632 Depreciation and amortization 20,984 18,481 41,193 36,605
Share-based compensation 3,890 3,362 7,282 6,646 Adjusted EBITDA $
67,169 $ 57,218 $ 126,288 $ 115,017
Adjusted EBITDA is a supplemental non-GAAP financial measure
used by the Company’s management and by some industry analysts to
evaluate the Company’s ability to service debt, and is used by some
investors and financial analysts in the gaming industry in
measuring and comparing Bally’s leverage, liquidity, and operating
performance to other gaming companies. Adjusted EBITDA should not
be considered an alternative to operating income or net cash from
operations as determined in accordance with GAAP. Not all companies
calculate Adjusted EBITDA the same way, and the Company’s
presentation may be different from those presented by other
companies.
Earnings Conference Call and Webcast
As previously announced, the Company is hosting a conference
call and webcast today at 4:30 p.m. EST (1:30 p.m. PST). The
conference-call dial-in number is 866-271-0675 or 617-213-8892
(International); passcode “Bally”. The webcast can be accessed by
visiting BallyTech.com and selecting “Investor Relations.”
Interested parties should initiate the call and webcast process at
least five minutes prior to the beginning of the presentation. For
those who miss this event, an archived version will be available at
BallyTech.com until March 1, 2012.
About Bally Technologies,
Inc.
With a history dating back to 1932, Las Vegas-based Bally
Technologies designs, manufactures, operates, and distributes
advanced technology-based gaming devices and systems worldwide, as
well as interactive and mobile solutions. Bally’s product line
includes reel-spinning slot machines, video slot machines,
wide-area progressives, and Class II, lottery, and central
determination games and platforms. Bally also offers an array of
casino management, slot accounting, bonusing, cashless, and
table-management solutions. Additional Company information,
including the Company’s investor presentation, can be found at
BallyTech.com. Connect with Bally on Facebook, Twitter, YouTube and
LinkedIn.
This news release may contain “forward-looking” statements
within the meaning of the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, and is subject to
the safe harbors created thereby. Forward-looking statements are
subject to change and involve risks and uncertainties that could
significantly affect future results, including those risks detailed
from time to time in the Company’s filings with the Securities and
Exchange Commission. Although the Company believes any expectations
expressed in any forward-looking statements are reasonable, future
results may differ materially from those expressed in any
forward-looking statements. The Company undertakes no obligation to
update the information in this press release except as required by
law and represents that the information speaks only as of today’s
date.
— BALLY TECHNOLOGIES, INC. —
BALLY TECHNOLOGIES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED DECEMBER 31, 2011 AND DECEMBER 31, 2010
Three Months EndedDecember
31,
Six Months EndedDecember
31,
2011 2010 2011
2010 (in 000s, except per share amounts) Revenues:
Gaming equipment and systems $ 124,217 $ 105,639 $ 234,230 $
197,227 Gaming operations 86,240 77,087 171,194 156,307 210,457
182,726 405,424 353,534 Costs and expenses: Cost of gaming
equipment and systems (1) 54,073 43,030 101,174 79,987 Cost of
gaming operations 23,858 22,692 48,090 44,914 Selling, general and
administrative 61,304 55,185 118,526 106,799 Research and
development costs 22,377 21,360 45,763 42,744 Depreciation and
amortization 5,806 4,744 11,441 9,371 167,418 147,011 324,994
283,815 Operating income 43,039 35,715 80,430 69,719 Other income
(expense): Interest income 1,146 1,221 2,470 2,340 Interest expense
(4,485 ) (2,997 ) (9,082 ) (6,030 ) Other, net (728 ) (323 ) (2,584
) 1,524 Income from continuing operations before income taxes
38,972 33,616 71,234 67,553 Income tax expense
(14,688
) (6,347 ) (26,541 ) (18,632 ) Income from continuing operations
24,284 27,269 44,693 48,921 Loss on sale of discontinued
operations, net of tax — — — (403
)
Net income 24,284 27,269 44,693 48,518
Less net income (loss) attributable to
noncontrolling interests
16 17 33 (523 ) Net income attributable to Bally Technologies, Inc.
$ 24,268 $ 27,252 $ 44,660 $ 49,041
Basic earnings per share attributable to
Bally Technologies, Inc.:
Income from continuing operations $ 0.57 $ 0.51 $ 1.03 $ 0.93 Loss
on sale of discontinued operations — — — (0.01 ) Basic earnings per
share $ 0.57 $ 0.51 $ 1.03 $ 0.92 Diluted earnings per share
attributable to Bally Technologies, Inc.: Income from continuing
operations $ 0.54 $ 0.49 $ 0.99 $ 0.89 Loss on sale of discontinued
operations — — — (0.01 ) Diluted earnings per share $ 0.54 $ 0.49 $
0.99 $ 0.88 Weighted average shares outstanding: Basic
42,870 53,291 43,296 53,485 Diluted 44,771 55,943 45,176 55,990
Amounts attributable to Bally Technologies, Inc.: Income from
continuing operations, net of tax $ 24,268 $ 27,252 $ 44,660 $
49,444 Loss on sale of discontinued operations, net of tax — — —
(403 ) Net income $ 24,268 $ 27,252 $ 44,660 $ 49,041 (1)
Cost of gaming equipment and systems excludes amortization
related to certain intangibles, including core technology and
license rights, which are included in depreciation and
amortization.
BALLY TECHNOLOGIES, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
AS OF DECEMBER 31, 2011 AND JUNE 30,
2011
December 31,2011
June 30, 2011
(in 000s, except share amounts) ASSETS Current
assets: Cash and cash equivalents $ 44,922 $ 66,425 Restricted cash
9,768 8,419 Accounts and notes receivable, net of allowances for
doubtful accounts of $13,293 and $11,059 231,121 235,246
Inventories 69,830 68,634 Prepaid and refundable income tax 13,258
36,332 Deferred income tax assets 29,043 29,318 Deferred cost of
revenue 13,512 13,795 Prepaid assets 13,576 10,524 Other current
assets 5,880 4,984 Total current assets 430,910 473,677 Restricted
long-term investments 12,982 12,485
Long-term accounts and notes receivables,
net of allowances for doubtful accounts of $1,267 and $507
51,729
46,659 Property, plant and equipment, net of accumulated
depreciation of $54,843 and $51,570 30,532 33,266 Leased gaming
equipment, net of accumulated depreciation of $186,375 and $176,137
115,375 96,691 Goodwill 168,609 162,110 Intangible assets, net
35,798 34,865 Deferred income tax assets 14,061 12,120 Income tax
receivable 11,897 10,972 Deferred cost of revenue 20,334 23,193
Other assets, net 22,425 21,356 Total assets $ 914,652 $ 927,394
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 30,500 $ 38,411 Accrued and other liabilities
54,934 58,295 Customer deposits 9,130 4,930 Jackpot liabilities
9,832 11,894 Deferred revenue 35,192 28,900 Income tax payable
1,785 3,033 Current maturities of long-term debt 15,141 15,153
Total current liabilities 156,514 160,616 Long-term debt, net of
current maturities 472,750 500,250 Deferred revenue 34,383 34,788
Other income tax liability 10,688 9,321 Other liabilities 17,110
7,827 Total liabilities 691,445 712,802 Commitments and
contingencies Stockholders’ equity:
Special stock, 10,000,000 shares
authorized: Series E, $100 liquidation value; 115 shares issued and
outstanding
12 12
Common stock, $.10 par value; 100,000,000
shares authorized; 61,925,000 and 61,541,000 shares issued and
43,380,000 and 44,397,000 outstanding
6,186 6,149 Treasury stock at cost, 18,545,000 and 17,144,000
shares (676,030 ) (634,268 ) Additional paid-in capital 454,666
442,713 Accumulated other comprehensive loss (11,666 ) (3,064 )
Retained earnings 448,407 401,363 Total Bally Technologies, Inc.
stockholders’ equity 221,575 212,905 Noncontrolling interests 1,632
1,687 Total stockholders’ equity 223,207 214,592 Total liabilities
and stockholders’ equity $ 914,652 $ 927,394
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