Bally Technologies, Inc. (NYSE: BYI)
Bally Technologies' President and Chief
Executive Officer Ramesh Srinivasan (Photo: Business Wire)
- SYSTEMS REVENUE SETS QUARTERLY
RECORD OF $76 MILLION, UP 48 PERCENT FROM PRIOR YEAR
- WIDE-AREA PROGRESSIVE INSTALLED BASE
GROWS 12 PERCENT AND SETS RECORD QUARTERLY REVENUE
- INCREASES FISCAL 2014 DILUTED EPS
GUIDANCE TO $3.80 TO $4.10
Bally Technologies, Inc. (NYSE: BYI), a leader in slots,
video machines, casino-management systems, interactive
applications, and networked and server-based systems for the global
gaming industry, today announced record quarterly diluted earnings
per share (“Diluted EPS”) of $0.97 and first-quarter record revenue
of $249 million for the three months ended September 30, 2013.
“We continue to focus on and execute very well on all aspects of
our core business, while undertaking significant and successful
integration planning efforts in preparation for the planned
acquisition of SHFL entertainment, which is expected to close
before calendar 2013 year-end,” said Ramesh Srinivasan, the
Company’s President and Chief Executive Officer. “Our Systems
business continues to build momentum globally, as our track record
of success and investments in R&D and customer services and
support paves the way for even greater industry leadership. We
showcased seven new wide-area progressive (“WAP”) titles at last
month’s Global Gaming Expo (“G2E”), up from three new titles shown
last year, reflecting our escalating R&D commitment to our
gaming operations footprint. Customer response to our new WAP,
premium, and for-sale content, as well as to our new Pro Wave™
cabinet, which was one of the stars of the show, was very
encouraging.”
“Operating margins increased to 25 percent when excluding costs
related to the planned acquisition of SHFL entertainment, which
marks our highest quarterly level in more than three years,” said
Neil Davidson, the Company’s Chief Financial Officer. “Revenues
that are recurring in nature were a quarterly record and
represented 57 percent of total revenues driven by a first-quarter
record in WAP revenue and quarterly records in systems maintenance
and services revenues. During August, we amended our existing
credit facility and successfully syndicated our new $1.1 billion
Term Loan B with an all-in yield of 4.375 percent. The planned
acquisition of SHFL entertainment will be funded with proceeds from
the Term Loan B and excess capacity on our existing Revolving
Credit Facility, which had $505 million undrawn as of September 30,
2013.”
First Quarter Fiscal Year 2014
Highlights
Three Months Ended September 30,
2013 % Rev 2012
% Rev (dollars in millions, except per share amounts)
Revenues: Gaming Equipment $ 71.3 29 % $ 82.7 35 % Gaming
Operations 101.9 41 % 101.2 43 % Systems 76.1 30 % 51.3 22 % Total
revenues $ 249.3 100 % $ 235.2 100 %
Gross Margin:
Gaming Equipment (1) $ 36.0 50 % $ 39.2 47 % Gaming Operations 71.3
70 % 70.1 69 % Systems (1) 56.9 75 % 39.5 77 % Total gross margin $
164.2 66 % $ 148.8 63 % Selling, general and administrative
$ 72.4 29 % $ 64.5 27 % Research and development costs 29.5 12 %
25.1 11 % Depreciation and amortization 5.3 2 % 5.6 2 % Operating
income $ 57.0 23 % $ 53.6 23 % Adjusted EBITDA $ 86.7 $ 78.8
Diluted EPS $ 0.97 $ 0.77
(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
EndedSeptember 30, 2013 2012
Operating Statistics New gaming devices 3,995 4,608 New unit
Average Selling Price (“ASP”) $ 16,307 $ 16,853
As of September 30, 2013
2012 End-of-period installed base: Linked progressive
systems 2,522 2,251 Rental and daily-fee games 14,533 14,971
Lottery systems (2) 11,907 12,040 Centrally determined systems
33,711 39,192
(2)
Excludes 727 and 537 electronic table
games operating as of September 30, 2013 and 2012,
respectively.
Highlights of Certain Results for the Three Months Ended
September 30, 2013
Overall
- Total revenue increased 6 percent to a
first-quarter record $249 million as compared with $235 million
last year.
- Adjusted EBITDA (earnings before
interest, taxes, depreciation and amortization, share-based
compensation and acquisition-related costs), a non-GAAP financial
measure, increased 10 percent to a first-quarter record $87 million
as compared with $79 million last year.
- Selling, general and administrative
expenses (“SG&A”) increased to 29 percent of total revenues as
compared with 27 percent last year, primarily driven by $5 million
of costs associated with the planned acquisition of SHFL
entertainment. After adjusting for acquisition-related costs,
SG&A was 27 percent of total revenues in the current
period.
- Research and development expenses
(“R&D”) increased to 12 percent of total revenues as compared
with 11 percent last year.
- Operating income increased 6 percent to
a first-quarter record $57 million compared with $54 million last
year. After adjusting for acquisition-related costs, operating
margin increased to 25 percent from 23 percent last year.
- Diluted EPS increased 26 percent to a
quarterly record $0.97 from $0.77 last year.
Gaming Equipment
- Revenues decreased 14 percent to $71
million as compared with $83 million last year, driven primarily by
the expected absence of sales of Canadian video lottery terminal
units in the current period compared to 670 units last year.
Current period sales included the shipment of 456 units into the
Illinois video gaming terminal (“VGT”) market.
- ASP of new gaming devices decreased 3
percent to $16,307 per unit from $16,853 last year, primarily as a
result of lower ASP’s in certain international jurisdictions.
- New-unit sales to international
customers were 20 percent of total new-unit shipments.
- Gross margin increased to 50 percent
from 47 percent last year, due to continued cost reductions on the
Pro Series™ line of cabinets and sales mix.
Gaming Operations
- Revenues increased to a first-quarter
record $102 million as compared with $101 million last year, driven
primarily by a 12 percent growth in the installed base of WAP
games, as well as a first-quarter record for lottery systems
revenue.
- Gross margin increased to 70 percent
from 69 percent last year, primarily due to lower jackpot
expense.
Systems
- Revenues increased 48 percent to a
quarterly record $76 million as compared with $51 million last
year.
- Maintenance revenues increased 21
percent to a quarterly record $25 million as compared with $21
million last year.
- Gross margin decreased to 75 percent
from 77 percent last year, primarily as a result of the change in
product mix. Specifically, hardware sales were 30 percent of
systems revenues, and software and service sales were 37 percent,
as compared to 26 percent for hardware and 34 percent for software
and services in the same period last year.
Fiscal 2014 Business Update
The Company has made significant progress toward completing the
planned acquisition of SHFL entertainment since announcing the
transaction on July 16, 2013. During the first quarter of fiscal
2014, the applicable waiting period under the Hart-Scott-Rodino
Antitrust Act of 1976 expired. The Company also successfully
syndicated the Term Loan B financing and continued to make very
good progress in securing required gaming regulatory approvals. Key
executives from both companies are leading detailed integration
planning efforts to ensure a seamless transition plan for customers
and employees. The Company also announced earlier this week that
Kevin Verner resigned from the Board of Directors to serve as a
consultant and oversee the planning and post-integration efforts
for the acquisition. As a result of all the efforts undertaken by
key personnel in both companies, the acquisition is expected to
close prior to the end of this calendar year. The completion of the
SHFL entertainment acquisition remains subject to SHFL shareholder
approval, the approval of certain gaming regulatory authorities,
and other customary closing conditions.
In connection with the pending acquisition of SHFL
entertainment, the Company incurred professional and other fees
totaling approximately $5.2 million during the first quarter of
fiscal 2014, with additional acquisition-related fees and expenses
anticipated to be incurred throughout the balance of fiscal
2014.
The Company increased its fiscal 2014 guidance for Diluted EPS
to a range of $3.80 to $4.10 and now expects that quarterly Diluted
EPS will be fairly equally weighted during fiscal 2014. This
guidance does not reflect the impact of the planned acquisition of
SHFL entertainment or any acquisition-related costs or savings or
the effect of the favorable tax settlement realized during the
first quarter of fiscal 2014.
The Company has provided this range of earnings guidance for
fiscal 2014 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 September 30,
2013 2012 Net income attributable to
Bally Technologies, Inc. $ 37,784 $ 32,532 Interest expense, net
1,946 3,473 Income tax expense 16,172 18,429 Depreciation and
amortization 22,051 21,319 Share-based compensation 3,462 3,021
Acquisition-related costs 5,238 — Adjusted EBITDA $ 86,653 $ 78,774
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.
The following table reconciles the Company’s Diluted EPS, as
determined in accordance with GAAP, to non-GAAP EPS:
Three Months Ended September 30,
2013 2012 Diluted EPS $ 0.97 $ 0.77
Acquisition-related costs 0.08 — One-time tax benefit (0.09 ) —
Non-GAAP EPS $ 0.96 $ 0.77
Non-GAAP EPS is a supplemental non-GAAP financial measure that
the Company’s management believes more accurately reflects the
Company’s operating results for the periods presented. Non-GAAP EPS
should not be considered an alternative to Diluted EPS as
determined in accordance with GAAP.
The one-time tax benefit relates to the reduction of
unrecognized tax benefits and a corresponding reduction of income
tax expense of approximately $3.6 million in the three months ended
September 30, 2013 related to settlement of the IRS examination of
the Company’s United States federal income tax returns for 2006
through 2009.
Earnings Conference Call and Webcast
As previously announced, the Company is hosting a conference
call and webcast today at 4:30 p.m. EDT (1:30 p.m. PDT). The
conference-call dial-in number is 866-524-3160 or 412-317-6760
(International). 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 November 30, 2013.
About Bally Technologies, Inc.
Founded in 1932, Bally Technologies (NYSE: BYI) provides the
global gaming industry with innovative games, systems, mobile, and
iGaming solutions that drive revenue and provide operating
efficiencies for gaming operators. For more information, please
contact Laura Olson-Reyes, Senior Director, Marketing &
Corporate Communications, at 702-584-7742, or visit
http://www.ballytech.com. Connect with Bally on Facebook, Twitter,
YouTube, LinkedIn, and Pinterest.
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
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONSFOR THE THREE MONTHS ENDED SEPTEMBER 30, 2013 AND
2012
Three Months Ended September 30,
2013 2012 (in 000s, except per share
amounts) Revenues: Gaming equipment and systems $ 147,387 $
134,011 Gaming operations 101,902 101,140 249,289 235,151 Costs and
expenses: Cost of gaming equipment and systems (1) 54,506 55,354
Cost of gaming operations 30,619 30,993 Selling, general and
administrative 72,427 64,516 Research and development costs 29,504
25,095 Depreciation and amortization 5,265 5,604 192,321 181,562
Operating income 56,968 53,589 Other income (expense): Interest
income 2,481 1,144 Interest expense (4,427 ) (4,617 ) Other, net
(900 ) (743 ) Income from operations before income taxes 54,122
49,373 Income tax expense (16,172 ) (18,429 ) Net income 37,950
30,944 Less net income (loss) attributable to noncontrolling
interests 166 (1,588 ) Net income attributable to Bally
Technologies, Inc. $ 37,784 $ 32,532 Basic and Diluted
earnings per share attributable to Bally Technologies, Inc.: Basic
earnings per share $ 0.98 $ 0.80 Diluted earnings per share $ 0.97
$ 0.77 Weighted average shares outstanding: Basic 38,381
40,868 Diluted 39,091 42,115
(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
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETSAS OF SEPTEMBER 30, 2013 AND JUNE 30, 2013
September 30,2013 June 30,
2013 (in 000s, except share amounts) ASSETS
Current assets: Cash and cash equivalents $ 66,216 $ 63,220
Restricted cash 13,422 12,939 Accounts and notes receivable, net of
allowances for doubtful accounts of $14,272 and $14,813 258,743
248,497 Inventories 66,097 68,407 Prepaid and refundable income tax
13,249 21,845 Deferred income tax assets 38,659 38,305 Deferred
cost of revenue 21,505 22,417 Prepaid assets 18,526 14,527 Other
current assets 2,691 2,920 Total current assets 499,108 493,077
Restricted long-term investments 14,952 14,786 Long-term accounts
and notes receivables, net of allowances for doubtful accounts of
$2,369 and $1,764 61,862 65,456 Property, plant and equipment, net
of accumulated depreciation of $63,556 and $60,556 36,709 35,097
Leased gaming equipment, net of accumulated depreciation of
$217,561 and $209,680 109,028 113,751 Goodwill 172,386 172,162
Intangible assets, net 23,829 25,076 Deferred income tax assets
17,481 17,944 Income tax receivable 1,837 1,837 Deferred cost of
revenue 13,182 12,105 Other assets, net 31,635 27,974 Total assets
$ 982,009 $ 979,265
LIABILITIES AND STOCKHOLDERS’
EQUITY Current liabilities: Accounts payable $ 33,954 $ 25,863
Accrued and other liabilities 86,547 91,127 Jackpot liabilities
11,012 11,731 Deferred revenue 54,757 62,254 Income tax payable
12,957 11,345 Current maturities of long-term debt 26,447 24,615
Total current liabilities 225,674 226,935 Long-term debt, net of
current maturities 527,500 580,000 Deferred revenue 30,647 23,696
Other income tax liability 9,489 12,658 Other liabilities 21,717
16,804 Total liabilities 815,027 860,093 Commitments and
contingencies Stockholders’ equity:
Common stock, $.10 par value; 100,000,000
shares authorized; 65,472,000 and 65,318,000 shares issued and
38,956,000 and 38,855,000 outstanding
6,539 6,523
Treasury stock at cost, 26,516,000 and
26,463,000 shares
(1,081,949 ) (1,058,381 ) Additional paid-in capital 569,212
535,759 Accumulated other comprehensive loss (10,733 ) (10,692 )
Retained earnings 684,123 646,339 Total Bally Technologies, Inc.
stockholders’ equity 167,192 119,548 Noncontrolling interests (210
) (376 ) Total stockholders’ equity 166,982 119,172 Total
liabilities and stockholders’ equity $ 982,009 $ 979,265
Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20131030006494/en/
Bally Technologies, Inc.Laura Olson-Reyes,
702-584-7742Senior Director, Marketing & Corporate
CommunicationsLolson-reyes@ballytech.comMichael Carlotti,
702-584-7995Vice President of Treasury and Investor
Relationsmcarlotti@ballytech.comMike Trask, 702-584-7451Mobile:
702-330-6679Corporate Communications
ManagerMTrask@ballytech.com