Drmicrocap
11 years ago
SHFL entertainment, Inc. Reports Revenue Of $73.5 Million In Third Quarter, Up 16% Year-Over-Year
PR NewswirePress Release: SHFL entertainment, Inc. โ 20 hours
LAS VEGAS, Sept. 6, 2013 /PRNewswire/ -- SHFL entertainment, Inc. (NASDAQ Global Select Market: SHFL) ("SHFL" or the "Company") today announced its results for the Third Quarter ended July 31, 2013.
(Logo: http://photos.prnewswire.com/prnh/20121008/LA88315LOGO)
Third Quarter 2013 Financial Highlights
โขTotal revenue grew 16% to $73.5 million primarily due to a 79% year-over-year increase in Electronic Table Systems ("ETS") revenue. The Electronic Gaming Machine ("EGM"), Utility and Proprietary Table Games ("PTG") businesses also contributed to overall growth in the quarter.
โขRecurring revenue increased to $31.4 million, a 5% year-over-year increase. The $1.1 million increase in PTG recurring revenue contributed to 68% of the overall increase in recurring revenue.
โขAdjusted for one-time expenses of $3.6 million, or $0.05 per share, related to entering into a definitive agreement and plan of merger (the "Merger Agreement") with Bally Technologies, Inc. ("Bally"), non-GAAP earnings per share ("EPS") were $0.16 in the third quarter. Diluted earnings per share ("EPS") decreased $0.07 year-over-year to $0.11.
โขNet income declined $4.0 million year-over-year to $6.4 million. Adjusted for one-time expenses related to the Merger Agreement with Bally, net income was $9.5 million in the third quarter.
โขGross margin decreased 80 basis points year-over-year to 62%, due to the mix of segment performance, primarily driven by increased revenue in the ETS segment. Gross margin was also impacted by an increase in headcount of the Company's service team that has expanded to service the growing product footprint globally. To a lesser extent, gross margin was affected this quarter by increased depreciation on old Table Master units in the ETS segment.
โขSelling, general and administrative ("SG&A") expenses increased $8.3 million compared to the prior year period. Approximately $3.6 million of the increase was due to expenses related to the Merger Agreement with Bally. Also contributing to the increase were: $1.6 million in higher payroll and related expenses arising from increased headcount across various departments and higher stock based compensation and medical costs; a $1.1 million increase in costs associated with the establishment of the iGaming product management and sales teams and, to a lesser extent, litigation costs incurred to protect the Company's valuable intellectual property from online infringement; and $1.1 million split evenly between the Company's expanded participation in tradeshows to support new market growth and litigation expenses related primarily to the Company's ETS segment.
โขResearch and Development ("R&D") expenses increased $2.4 million year-over-year due to an increase in headcount and product approval expenses related to several initiatives across all product segments. Approximately $0.7 million of the increase was due to expansion of the iGaming department and platform development for the Company's online game content. Other initiatives included the creation of new EGM titles for the Equinox cabinet, development of next-generation Utility products, strengthening the Company's current PTG progressive offerings, and enhancements to next-generation ETS products including Table Master Fusion, SHFL FUSION Hybrid, and SHFL FUSION Virtual.
โขOperating margin decreased year-over-year to 12% due to increased operating expenses discussed above. Adjusted for one-time expenses related to the Merger Agreement with Bally, operating margin was 16% in the quarter.
โขAdjusted EBITDA declined 3% year-over-year to $20.5 million due to the previously mentioned increase in operating expenses, slightly offset by the increase in total Company revenue.
โขFree Cash Flow ("FCF")1, a non-GAAP financial measure, was down 57% year-over-year to $5.1 million. FCF was impacted by an increase of $6.3 million in capital expenditures related to the construction of the Company's new consolidated facility in Las Vegas. The decline in FCF was slightly offset by a $0.7 million decrease year-over-year in cash paid for taxes.
Third Quarter 2013 Business Segment Highlights
Utility
โขUtility recurring revenue grew to $14.1 million compared to $13.7 million in the prior year period. The 3% increase was due primarily to a rise in the shuffler average lease price as customers continued to upgrade to newer shuffler models. New shuffler lease placements, in particular the MD3, also contributed to the increase.
โขTotal Utility revenue grew 5% year-over-year to $25.6 million. Shuffler sales increased 11% over the prior period driven by sales of approximately 270 MD3 shufflers in Asia and, to a lesser extent, sales in Australia and the U.S.
โขTotal shufflers on lease increased year-over-year to 8,287. Incremental MD3 placements and, to a lesser extent, iDeal and one2six placements drove increases in the lease installed base in the quarter.
โขGross margin fell 210 basis points year-over-year to 61% due mainly to the previously mentioned increase in headcount of the Company's service team to support shuffler growth in new table games markets in the U.S. and expansion into Asia.
โขTotal MD3 shufflers installed grew 1,896 units year-over-year to 3,277. Placements were driven by sales in Asia in addition to an increase in incremental lease placements over the prior year period. Approximately 45% of MD3 shufflers are currently on lease.
Proprietary Table Games2
โขPTG recurring revenue increased 9% year-over-year to $13.4 million. Increased lease placements in premium table games (Ultimate Texas Hold'em, Mississippi Stud), side bets (6 Card Bonus, King's Bounty, House Money), and progressives (Ultimate Texas Hold'em Progressive, Three Card Poker Progressive) contributed to recurring revenue growth.
โขTotal PTG revenue increased 7% year-over-year to $13.8 million driven primarily by strong lease placements.
โขGross margin remained relatively flat year-over-year at 82%.
โขTotal progressive units installed grew 10% year-over-year to 1,258, driven by installations of Ultimate Texas Hold'em Progressive and Three Card Poker Progressive.
Electronic Table Systems
โขTotal ETS revenue grew 79% year-over-year to $10.8 million driven by increased sales of SHFL FUSION Hybrid in Asia and New Zealand, and sales of SHFL FUSION Virtual in Australia.
โขETS recurring revenue stayed relatively flat at $3.6 million compared to the prior year period. The removal of Table Master units in Maryland was offset by increased placements of SHFL FUSION Hybrid in New York and, to a lesser extent, greater i-Table recurring revenue.
โขETS gross margin increased to 46% compared to 34% in the prior year period. The previously discussed increase in total sales revenue, partially offset by increased depreciation of old Table Master units, drove the increase.
Electronic Gaming Machines
โขTotal EGM revenue grew 16% year-over-year to $23.2 million. The increase was driven primarily by greater placements in Asia over the prior year period and, to a lesser extent, higher average sales prices. Adjusted for foreign exchange, EGM revenue grew to $23.8 million in the quarter.
โขGross margin remained relatively flat year-over-year at 60%.
โขThere were 1,116 EGM units sold in the quarter compared to 1,021 in the year-ago quarter. The increase was due to approximately 250 placements into Asia in the quarter, driven by sales of the Duo Fu Duo Cai progressive jackpot link.
Further detail and analysis of the Company's financial results for the third quarter ended July 31, 2013, is included in its Form 10-Q, which the Company intends to file with the Securities and Exchange Commission today, September 6, 2013. No conference call will be held. On July 15, 2013, SHFL entered into a definitive agreement and plan of merger with Bally (BYI), pursuant to which Bally has agreed to acquire the Company at a per share price of $23.25 in cash for total consideration of approximately $1.3 billion subject to the satisfaction of the conditions set forth therein.
About SHFL entertainment, Inc.
SHFL entertainment, Inc. is a leading global gaming supplier committed to making gaming more fun for players and more profitable for operators through product innovation, and superior quality and service. The Company operates in legalized gaming markets across the globe and provides state-of-the-art, value-add products in five distinct categories: Utility products, which include automatic card shufflers and roulette chip sorters; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game configurations; Electronic Gaming Machines, which include video slot machines; and newly introduced iGaming, which features online versions of SHFL entertainment, Inc.'s table games, social gaming and mobile applications. The Company is included in the S&P SmallCap 600 Index. Information about the Company and its products can be found on the Internet at www.shfl.com, or on Facebook and Twitter.
Forward-Looking Statements
This release contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this release other than statements that are purely historical are forward-looking statements. Forward-looking statements in this press release include without limitation: (1) the Company's belief that its innovation will continue to drive competition; (2) the Company's intention to continue to execute against our strategic initiatives; (3) the Company's belief that EPS, Adjusted EBITDA and FCF are useful, widely referenced performance measures in the Company's industry and the Company's belief that references to them are helpful to investors; (4) the Company's estimates of diluted EPS, Adjusted EBITDA and FCF and the assumptions upon which they are based; (5) the Company's belief that investing in its intellectual property is an important use of cash; (6) the Company's ability to develop products that achieve commercial success in the very competitive marketplace in which the Company operates; and (7) the fact that the Company competes in a single industry and is dependent on the success of its customers and the risks that impact the Company's customers, including a change in demand for gaming, a downturn in general worldwide economic conditions, or the gaming industry may adversely impact the Company or its results of operations. The Company's beliefs, expectations, forecasts, objectives, anticipations, intentions and strategies regarding the future, including without limitation those concerning expected operating results, revenues and earnings are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements, including but not limited to: (1) unexpected changes in demand for or increased competition with the Company's products; (2) unexpected factors that limit or eliminate the Company's ability to implement its strategic plan or undertake or complete any of its growth initiatives; (3) inaccuracies in the Company's assumptions as to the financial measures that investors use or the manner in which such financial measures may be used by such investors; (4) reduced demand for or increased competition with the Company's products that affects its EPS and Adjusted EBITDA; (5) unexpected changes to the Company's balance sheet or cash flows that would impede the Company's ability to pursue protection and pursuit of its intellectual property; (6) the Company's inability to accurately gauge the commercial appeal of its products; (7) unexpected changes in the market and economic conditions and reduced demand for or increased competition with the Company's products; (8) the risk that the conditions to the closing of the merger are not satisfied (including a failure of the shareholders of SHFL to approve, on a timely basis or otherwise, the merger and the risk that regulatory approvals required for the merger are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated); (9) litigation relating to the merger; (10) uncertainties as to the timing of the consummation of the merger and the ability of each of SHFL and Bally to consummate the merger; (11) risks that the proposed transaction disrupts the current plans and operations of SHFL; (12) the ability of SHFL to retain and hire key personnel; (13) competitive responses to the proposed merger; (14) unexpected costs, charges or expenses resulting from the merger; (15) the failure by Bally to obtain the necessary debt financing arrangements set forth in the commitment letter received in connection with the merger; (16) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; and (17) legislative, regulatory and economic developments. Additional information on risk factors that could potentially affect the Company's financial results may be found in documents filed by the Company with the Securities and Exchange Commission, including the Company's current reports on Form 8-K, quarterly reports on Form 10-Q and its latest annual report on Form 10-K, and are based on information available to the Company on the date hereof. The Company does not intend, and assumes no obligation, to update any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release.
1 Free Cash Flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.
2 As of FY 2013, revenues from the iGaming segment are being reported separately from the Proprietary Table Games segment. Please see page 13 for more details.
SHFL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
July 31,
July 31,
2013
2012
2013
2012
Revenue:
Product leases and royalties
$ 29,349
$ 27,830
$ 87,941
$ 80,730
Product sales and service
44,185
35,556
121,791
104,763
Total revenue
73,534
63,386
209,732
185,493
Costs and expenses:
Cost of leases and royalties
10,484
9,475
30,938
27,853
Cost of sales and service
17,272
13,889
45,050
39,308
Gross profit
45,778
40,022
133,744
118,332
Selling, general and administrative
27,257
19,007
71,169
55,991
Research and development
10,052
7,622
27,400
23,074
Total costs and expenses
65,065
49,993
174,557
146,226
Income from operations
8,469
13,393
35,175
39,267
Other income (expense):
Interest income
209
116
551
429
Interest expense
(266)
(367)
(789)
(1,222)
Other, net
228
180
498
209
Total other income (expense)
171
(71)
260
(584)
Income before income taxes
8,640
13,322
35,435
38,683
Income tax provision
2,231
2,898
10,122
10,875
Net income
$ 6,409
$ 10,424
$ 25,313
$ 27,808
Basic earnings per share:
$ 0.11
$ 0.19
$ 0.44
$ 0.50
Diluted earnings per share:
$ 0.11
$ 0.18
$ 0.44
$ 0.49
Weighted average shares outstanding:
Basic
57,117
56,284
56,927
55,700
Diluted
57,789
57,029
57,623
56,445
SHFL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
July 31,
October 31,
2013
2012
ASSETS
Current assets:
Cash and cash equivalents
$41,819
$24,160
Accounts receivable, net of allowance for bad debts of $391 and $491
39,332
45,708
Investment in sales-type leases and notes receivable, net of allowance
for bad debts of $42 and $8
9,366
9,287
Inventories
31,335
21,906
Prepaid income taxes
10,879
4,053
Deferred income taxes
3,782
4,622
Other current assets
7,467
6,901
Total current assets
143,980
116,637
Investment in sales-type leases and notes receivable, net of current portion
8,772
6,310
Products leased and held for lease, net
32,275
34,639
Property and equipment, net
30,217
17,417
Intangible assets, net
54,861
62,836
Goodwill
85,435
84,950
Deferred income taxes
3,173
5,183
Other assets
2,510
3,079
Total assets
$361,223
$331,051
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$13,386
$6,702
Accrued liabilities and other current liabilities
21,337
22,402
Deferred income taxes
16
16
Customer deposits
3,714
3,383
Income tax payable
3,738
4,179
Deferred revenue
4,595
4,799
Current portion of long-term debt
530
-
Total current liabilities
47,316
41,481
Long-term debt
1,296
1,303
Other long-term liabilities
1,690
2,004
Deferred income taxes
2,528
1,493
Total liabilities
52,830
46,281
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; 151,368 shares authorized;
56,612 and 55,973 shares issued and outstanding
566
560
Additional paid-in capital
144,728
135,758
Retained earnings
144,757
119,444
Accumulated other comprehensive income
18,342
29,008
Total shareholders' equity
308,393
284,770
Total liabilities and shareholders' equity
$361,223
$331,051
SHFL ENTERTAINMENT, INC.
SUPPLEMENTAL DATA
(Unaudited, in thousands)
Three Months Ended
Nine Months Ended
July 31,
July 31,
2013
2012
2013
2012
Cash Flow Data:
Cash provided by operating activities
$ 16,467
$ 15,264
$ 34,720
$ 35,868
Cash used in investing activities:
Payments for products leased and held for lease
$ (4,162)
$ (4,521)
$ (10,785)
$ (11,227)
Purchases of property and equipment
(7,356)
(1,612)
(13,727)
(5,852)
Purchases of intangible assets
(1,668)
(230)
(1,807)
(4,333)
Acquisition of business
-
-
(1,590)
(5,500)
Proceeds from sale of leased assets
1,145
611
6,285
1,640
Proceeds from sale of assets
-
-
-
-
Other
(74)
(236)
(549)
(690)
$(12,115)
$ (5,988)
$ (22,173)
$ (25,962)
Cash provided by (used in) financing activities
$ (3,317)
$ (4,740)
$ 5,285
$ (5,435)
Free cash flow (2)
$ 5,129
$ 11,859
$ 23,769
$ 31,506
Reconciliation of net income to Adjusted EBITDA:
Net income
$ 6,409
$ 10,424
$ 25,313
$ 27,808
Other expense (income)
(171)
71
(260)
584
Share-based compensation
1,656
1,014
4,543
3,063
Income tax provision
2,231
2,898
10,122
10,875
Depreciation and amortization
6,784
6,260
20,440
18,657
Ongame acquisition expenses
-
500
-
2,152
Expenses related to Merger Agreement with Bally
3,610
-
4,010
-
Adjusted EBITDA (1)
$ 20,519
$ 21,167
$ 64,168
$ 63,139
1.
Adjusted EBITDA is earnings before other expense (income), provision for income taxes, depreciation and amortization expense, Ongame acquisition expenses, expenses related to the Merger Agreement with Bally, and share-based compensation. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is a useful performance measure and is widely used to measure performance, and as a basis for valuation, within the Company's industry. Adjusted EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison. Management uses Adjusted EBITDA as a measure of the operating performance and to compare the operating performance with those of its competitors. The Company also presents Adjusted EBITDA because it is used by some investors as a way to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming equipment suppliers have historically reported Adjusted EBITDA as a supplement to financial measures in accordance with U.S. generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered as an alternative to operating income (loss), as an indicator of the Company's performance, as an alternate to cash flows from operating activities, as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income (loss), Adjusted EBITDA does not include depreciation and amortization or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA.
2.
Free cash flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.
SHFL ENTERTAINMENT, INC.
BUSINESS SEGMENT DATA
(Unaudited, in thousands)
Three Months Ended
Nine Months Ended
July 31,
July 31,
2013
2012
2013
2012
Utility:
Revenue
$ 25,644
$ 24,382
$ 81,445
$ 68,988
Gross profit
15,529
15,285
51,663
42,622
Gross margin
60.6%
62.7%
63.4%
61.8%
Proprietary Table Games:
Revenue
$ 13,839
$ 12,989
$ 40,670
$ 36,300
Gross profit
11,338
10,629
33,352
29,671
Gross margin
81.9%
81.8%
82.0%
81.7%
Electronic Table Systems:
Revenue
$ 10,822
$ 6,053
$ 25,040
$ 21,183
Gross profit
4,943
2,055
10,396
8,868
Gross margin
45.7%
34.0%
41.5%
41.9%
Electronic Gaming Machines:
Revenue
$ 23,167
$ 19,957
$ 62,229
$ 56,699
Gross profit
13,956
12,048
38,043
34,848
Gross margin
60.2%
60.4%
61.1%
61.5%
iGaming:
Revenue
$ 62
$ 5
$ 348
$ 2,323
Gross profit
12
5
290
2,323
Gross margin
19.4%
100.0%
83.3%
100.0%
Total:
Revenue
$ 73,534
$ 63,386
$209,732
$185,493
Gross profit
45,778
40,022
133,744
118,332
Gross margin
62.3%
63.1%
63.8%
63.8%
Adjusted EBITDA
$ 20,519
$ 21,167
$ 64,168
$ 63,139
as a percentage of total revenue
27.9%
33.4%
30.6%
34.0%
Income from operations
$ 8,469
$ 13,393
$ 35,175
$ 39,267
as a percentage of total revenue
11.5%
21.1%
16.8%
21.2%
Drmicrocap
11 years ago
Bally Technologies, Inc. to Acquire SHFL Entertainment, Inc.
Combination Will Create a World-Class Gaming Organization With the Industry's Most Diversified Suite of Innovative Products and Successful Brands
PR NewswirePress Release: SHFL entertainment, Inc. โ Tue, Jul 16, 2013 8:00 AM EDT..
LAS VEGAS, July 16, 2013 /PRNewswire/ -- SHFL entertainment, Inc. (NASDAQ Global Select Market: SHFL) ("SHFL" or the "Company") today announced that it has entered into a definitive agreement and plan of merger with Bally Technologies, Inc. (BYI) ("Bally"), pursuant to which Bally has agreed to acquire the Company at a per share price of $23.25 in cash for total consideration of approximately $1.3 billion. This consideration represents a premium of 37% over the average closing price of SHFL common stock for the 90 days ended July 15, 2013 and a premium of 24% over the closing price of SHFL common stock on July 15, 2013.
(Logo: http://photos.prnewswire.com/prnh/20121008/LA88315LOGO)
The transaction, which was unanimously approved by both the SHFL and Bally Boards of Directors, combines two best-in-class, highly complementary and customer-centric gaming technology companies with a shared focus on innovation.
"We believe that now is the right time to join forces with Bally as there is a unique opportunity to combine each other's many strengths, particularly our talented teams who have been the key drivers of success for each organization. It also represents an opportunity for our shareholders to receive a significant premium for their shares," said Gavin Isaacs, SHFL's Chief Executive Officer. "Like SHFL, Bally focuses on creating both entertaining player experiences through high-performing content and state-of-the-art technological solutions to increase productivity on the casino floor. United, we become a larger, stronger organization that we believe will best position the company for future growth. Equally important, we share a common vision to build the industry's leading supplier based on delivering superior products, solutions and services to customers around the world."
"Both Bally and SHFL have long histories of proven innovation, excellent customer service and successfully anticipating and adapting to changes within our industry, which makes bringing our two companies together a great strategic fit," said Ramesh Srinivasan, Bally's President and Chief Executive Officer. "The transformational acquisition of SHFL โ which joins two high-caliber, talented and creative teams โ will further enhance our ability to deliver future growth and serve our customers. SHFL's intellectual property, renowned brands and industry-leading suite of diverse, high-performance products will enable us to offer an unparalleled offering of gaming products and services, which โ when combined with our content, technology, operational capabilities and respective geographic footprints โ will provide the most comprehensive product portfolio offered around the world."
Additional Transaction Details
Bally will acquire all of the outstanding shares of SHFL for a per share price of $23.25 in cash, representing a total enterprise value of approximately $1.3 billion, including debt of $8 million and cash of $41 million as of April 30, 2013.
The transaction is subject to approval by SHFL's shareholders, required regulatory and other approvals and customary closing conditions. The transaction is expected to close no later than June 15, 2014. Bally has obtained committed financing to complete the acquisition and the transaction is not subject to a financing contingency.
Conference Call and Webcast
Bally is hosting a conference call and webcast today for its investors at 8:30 a.m. EDT (5:30 a.m. PDT). The conference call dial-in number is 1-866-843-0890 or 1-412-317-9250 (International); passcode 1154979. 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. Gavin Isaacs also will be participating in the conference call.
Financial and Legal Advisory
Macquarie Capital served as SHFL's exclusive financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to SHFL.
Goldman, Sachs & Co. and Groton Partners served as financial advisors and Gibson, Dunn & Crutcher LLP served as the legal advisor to Bally. Wells Fargo Bank, JPMorgan Chase Bank, N.A., Bank of America Merrill Lynch, Goldman Sachs Bank USA and Union Bank, N.A. provided the committed financing for the transaction.
About SHFL entertainment, Inc.
SHFL entertainment, Inc. is a leading global gaming supplier committed to making gaming more fun for players and more profitable for operators through product innovation, and superior quality and service. The Company operates in legalized gaming markets across the globe and provides state-of-the-art, value-add products in five distinct categories: Utility products, which include automatic card shufflers and roulette chip sorters; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game configurations; Electronic Gaming Machines, which include video slot machines; and newly introduced iGaming, which features online versions of SHFL's table games, social gaming, and mobile applications. The Company is included in the S&P SmallCap 600 Index. Information about the Company and its products can be found on the Internet at www.SHFL.com, or on Facebook and Twitter.
Forward Looking Statements
This communication may contain forward-looking statements. Forward-looking statements may be typically identified by such words as "may," "will," "should," "expect," "anticipate," "plan," "likely," "believe," "estimate," "project," "intend," and other similar expressions among others. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause our actual results to differ materially from the expectations expressed in the forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, any or all of our forward-looking statements may prove to be incorrect. Consequently, no forward-looking statements may be guaranteed and there can be no assurance that the actual results or developments anticipated by such forward looking statements will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, SHFL entertainment, Inc. (the "Company") or its business or operations. Factors which could cause our actual results to differ from those projected or contemplated in any such forward-looking statements include, but are not limited to, the following factors: (1) the risk that the conditions to the closing of the merger are not satisfied (including a failure of the shareholders of the Company to approve, on a timely basis or otherwise, the merger and the risk that regulatory approvals required for the merger are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated); (2) litigation relating to the merger; (3) uncertainties as to the timing of the consummation of the merger and the ability of each of the Company and Bally Technologies, Inc. ("Bally") to consummate the merger; (4) risks that the proposed transaction disrupts the current plans and operations of the Company; (5) the ability of the Company to retain and hire key personnel; (6) competitive responses to the proposed merger; (7) unexpected costs, charges or expenses resulting from the merger; (8) the failure by Bally to obtain the necessary debt financing arrangements set forth in the commitment letter received in connection with the merger; (9) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; and (10) legislative, regulatory and economic developments. The foregoing review of important factors that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in the Company's most recent Annual Report on Form 10-K for the year ended October 31, 2012, and our more recent reports filed with the U.S. Securities and Exchange Commission (the "SEC"). The Company can give no assurance that the conditions to the Merger will be satisfied. Except as required by applicable law, the Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Additional Information and Where to Find It
This communication is being made in respect of the proposed transaction involving the Company and Bally. The proposed transaction will be submitted to the shareholders of the Company for their consideration. In connection with the proposed transaction, the Company will prepare a proxy statement to be filed with the SEC. The Company and Bally also plan to file with the SEC other documents regarding the proposed transaction. THE COMPANY'S SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. When completed, a definitive proxy statement and a form of proxy will be mailed to the shareholders of the Company. The Company's shareholders will be able to obtain, without charge, a copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC's website at http://www.sec.gov. The Company's shareholders will also be able to obtain, without charge, a copy of the proxy statement and other relevant documents (when available) by going to the Company's Investor Relations website page at http://ir.shfl.com or by contacting Investor Relations by mail to SHFL entertainment, Inc., Attn: Investor Relations, 1106 Palms Airport Drive, Las Vegas, NV 89119, or by phone at (702) 897-7150.
Participants in Solicitation
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company's shareholders with respect to the meeting of shareholders that will be held to consider the proposed Merger. Information about the Company's directors and executive officers and their ownership of the Company's common stock is set forth in the proxy statement for the Company's 2013 Annual Meeting of Shareholders, which was filed with the SEC on February 1, 2013. Shareholders may obtain additional information regarding the interests of the Company and its directors and executive officers in the proposed Merger, which may be different than those of the Company's shareholders generally, by reading the proxy statement and other relevant documents regarding the proposed Merger, when it becomes available. You may obtain free copies of this document as described in the preceding paragraph.
Drmicrocap
11 years ago
..
SHFL Entertainment, Inc. Reports Record Revenue Of $77.4 Million In Second Quarter, Up 17% Year-Over-Year
SHFL Also Achieves Record Net Income of $11.8 Million and Record Adjusted EBITDA of $25.4 Million
PR NewswirePress Release: SHFL entertainment โ 11 minutes ago...
.
Email
LAS VEGAS, June 4, 2013 /PRNewswire/ -- SHFL entertainment, Inc. (NASDAQ Global Select Market: SHFL) ("SHFL" or the "Company") today announced its results for the second quarter ended April 30, 2013.
(Logo: http://photos.prnewswire.com/prnh/20121008/LA88315LOGO)
"Our record second quarter results reflect a continuation of the strong worldwide demand for our innovative products, particularly in Australia and Asia," said Gavin Isaacs, SHFL's Chief Executive Officer. "What's more, we achieved 17% year-over-year growth against a strong comparable quarter last year that included over $2 million in sales from new openings. The MD3 card shuffler helped fuel this quarter's growth with record placements of 520 units, its strongest performance to date. Our slot machine, shuffler, and specialty table games businesses continued to gain momentum, with each segment reporting record revenue in the quarter. Given the 22% increase in net profit that we announced today, we strongly believe that consistent execution against our strategic initiatives is the right blueprint for building long-term, sustainable value for our shareholders."
Second Quarter 2013 Financial Highlights
โขTotal revenue grew to a record $77.4 million, representing a 17% increase from the prior year period. The Utility, Electronic Gaming Machine ("EGM"), and Proprietary Table Games ("PTG") businesses all saw double-digit growth over the same period last year.
โขRecurring revenue grew 8% year-over-year to $31.2 million. A $1.2 million increase in PTG recurring revenue accounted for over half of recurring revenue growth.
โขNet income increased 22% year-over-year to a record $11.8 million.
โขCompared to the prior year quarter, diluted earnings per share ("EPS") increased 24% to $0.21. Excluding adjustments for expenses related to the terminated Ongame acquisition in last year's comparable quarter, EPS grew 5%.
โขGross margin, driven by an increase in Utility, EGM, and PTG revenue, grew 40 basis points year-over-year to 65%.
โขOperating margin was relatively flat year-over-year at 22%.
โขSelling, general and administrative ("SG&A") expenses grew to approximately $23.9 million, up $4.1 million year-over-year. The increase primarily relates to the following: $1.5 million in compensation and related expenses, driven by growth related to headcount increases as well as increased medical costs; $0.5 million was due to greater sales and profit-driven compensation expenses as a result of more revenue during the current quarter; $1.3 million was due to legal expenses, driven largely by costs associated with protecting and defending the Company's valuable intellectual property; $0.5 million was due to expanding the Company's iGaming sales team and offices; $0.4 million was related to advertising and tradeshow expenses. Slightly offsetting SG&A expenses were corporate development and due diligence expenses, which relate to the Company's evaluation of strategic M&A, and were $0.6 million less in the current quarter than the year-ago quarter; the prior year period included expenses from the terminated Ongame acquisition.
โขResearch & Development ("R&D") expenses increased $1.2 million year-over-year to $9.1 million. The increased costs were evenly divided between the hiring of additional iGaming personnel and compliance expenses for new content releases and territory expansion related to the EGM segment.
โขAdjusted EBITDA grew 7% year-over-year to a record $25.4 million.
โขFree Cash Flow ("FCF")1, a non-GAAP financial measure, was down $3.1 million year-over-year to $8.6 million. FCF was impacted by an approximately $2.3 million increase in cash taxes paid due to increased profitability in the U.S. and Australia, in addition to an increase of $2.5 million in capital expenditures, largely attributable to the Company's construction of a new consolidated facility in Las Vegas.
"Our diverse businesses continue to deliver solid financial results," said Linster Fox, SHFL's Chief Financial Officer. "We are confident that keeping our IP-rich businesses well-capitalized has been, and will continue to be, our most important use of cash. However, given our balance sheet's current strong position, we will continue to look at the best way to manage a balance between investing in our business and capital allocation for potential M&A, stock repurchases, and dividends."
Second Quarter 2013 Business Segment Highlights
Utility
โขUtility recurring revenue grew 3% year-over-year to $13.7 million, primarily driven by MD3 card shuffler lease placements in the U.S.
โขTotal Utility revenue increased 22% over the prior year period to $30.5 million. Growth was driven by sales of the MD3 shuffler in Asia as well as the sale of previously leased i-Deal shufflers to a large casino customer in the U.S.
โขTotal shufflers on lease declined by 28 units year-over-year to 8,073. The decrease was driven by the sale of previously leased i-Deal shufflers to a large casino customer in the U.S. and slightly offset by new shuffler lease placements.
โขGross margin grew 120 basis points year-over-year to 66%, driven by the sale of previously leased i-Deal shufflers to a large casino customer in the U.S., in addition to shuffler sales in Asia and the U.S.
โขTotal MD3 units installed totaled 2,734, representing an increase of 1,781 units year-over-year. 520 of those units were placed in the second quarter. Approximately 50% of all MD3 units are currently on lease.
Proprietary Table Games2
โขPTG recurring revenue increased 11% year-over-year to $13.0 million. Increased lease placements in all PTG categories - premium table games (Ultimate Texas Hold'em, Mississippi Stud), side bets (6 Card Bonus, Fire Bet), and progressives (Ultimate Texas Hold'em Progressive, Three Card Poker Progressive) โ contributed to recurring revenue growth.
โขTotal PTG revenue increased 18% year-over-year to $14.0 million driven by strong lease placements and increased sales revenue.
โขGross margin increased 20 basis points to 82% due to the increase in total revenues.
โขTotal progressive units installed grew 12% year-over-year to 1,245, driven by installations of Ultimate Texas Hold'em Progressive and Three Card Poker Progressive.
Electronic Table Systems ("ETS")
โขETS recurring revenue grew 16% to $4.3 million, compared to $3.7 million in the prior year period, due largely to increased placements of SHFL Fusion Virtual (formerly Vegas Star) on participation in New York. To a lesser extent, increases in recurring revenue from SHFL Fusion Hybrid (formerly Rapid) and i-Table also contributed to the increase.
โขTotal ETS revenue grew 4% year-over-year to $7.1 million driven by increased sales of SHFL Fusion Virtual in Australia.
โขETS gross profit decreased 420 basis points year-over-year to 35% due to accelerated depreciation of Table Master units on lease in advance of the new Table Master Fusion launch.
Electronic Gaming Machines
โขTotal EGM revenue grew 16% year-over-year to a record $25.7 million, driven primarily by strong sales in Australia and Asia.
โขGross margin remained relatively flat year-over-year at 62%.
โขThere were 1,192 net sold EGM units in the quarter compared to 1,044 in the year-ago quarter. The current year period included the removal of 78 older eStar units on lease, slightly offset by the addition of 36 Equinox units on lease.
โขApproximately 100 units of the Duo Fu Duo Cai progressive jackpot link were sold in Macau in the quarter.
Further detail and analysis of the Company's financial results for the second quarter ended April 30, 2013, is included in its Form 10-Q, which the Company intends to file with the Securities and Exchange Commission today, June 4, 2013.
Webcast & Conference Call Information
Company executives will provide additional perspective on the Company's second quarter results during a conference call on June 4, 2013 at 2:00 pm Pacific Time. Those interested in participating in the call may do so by dialing (201) 689-8263 or toll-free (877) 407-0792 and requesting SHFL entertainment's Second Quarter 2013 Conference Call. A hardcopy of the presentation materials may be printed from the SHFL entertainment, Inc. Investor Relations website, http://ir.shfl.com, shortly before the start of the call. In conjunction with the call, a live audio webcast and a Company slide presentation highlighting second quarter performance may be accessed at http://ir.shfl.com. In order to access the live audio webcast please allow at least 15 minutes before the start of the call to visit SHFL entertainment's Investor Relations website and download/install any necessary audio/video software for the webcast. Immediately following the call and through July 4, 2013, a playback can be heard 24-hours a day by dialing (858) 384-5517 or toll-free (877) 870-5176; replay pin number 414102. Highlights from the conference call can be accessed on the Company's Investor Relations Twitter account, www.twitter.com/shfl_news.
About SHFL entertainment, Inc.
SHFL entertainment, Inc. is a leading global gaming supplier committed to making gaming more fun for players and more profitable for operators through product innovation, and superior quality and service. The Company operates in legalized gaming markets across the globe and provides state-of-the-art, value-add products in five distinct categories: Utility products, which include automatic card shufflers and roulette chip sorters; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game configurations; Electronic Gaming Machines, which include video slot machines; and newly introduced iGaming, which features online versions of SHFL entertainment's table games, social gaming, and mobile applications. The Company is included in the S&P SmallCap 600 Index. Information about the Company and its products can be found on the Internet at www.shfl.com, or on Facebook, Twitter and YouTube.
Forward Looking Statements
This release contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this release other than statements that are purely historical are forward-looking statements. Forward-looking statements in this press release include without limitation: (a) the Company's belief that its innovation will continue to drive competition; (b) the Company's intention to continue to execute against our strategic initiatives; (c) the Company's belief that EPS, Adjusted EBITDA and FCF are useful, widely referenced performance measures in the Company's industry and the Company's belief that references to them are helpful to investors; (d) the Company's estimates of diluted EPS, Adjusted EBITDA and FCF and the assumptions upon which they are based; (e) the Company's belief that investing in its intellectual property is an important use of cash; (f) the Company's ability to develop products that achieve commercial success in the very competitive marketplace in which the Company operates; (g) the fact that the Company competes in a single industry and is dependent on the success of its customers and the risks that impact the Company's customers, including a change in demand for gaming, a downturn in general worldwide economic conditions, or the gaming industry may adversely impact the Company or its results of operations. The Company's beliefs, expectations, forecasts, objectives, anticipations, intentions and strategies regarding the future, including without limitation those concerning expected operating results, revenues and earnings are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements, including but not limited to: (a) unexpected changes in demand for or increased competition with the Company's products; (b) unexpected factors that limit or eliminate the Company's ability to implement its strategic plan or undertake or complete any of its growth initiatives; (c) inaccuracies in the Company's assumptions as to the financial measures that investors use or the manner in which such financial measures may be used by such investors; (d) reduced demand for or increased competition with the Company's products that affects its EPS and Adjusted EBITDA; (e) unexpected changes to the Company's balance sheet or cash flows that would impede the Company's ability to pursue protection and pursuit of its intellectual property; (f) the Company's inability to accurately gauge the commercial appeal of its products; and (g) unexpected changes in the market and economic conditions and reduced demand for or increased competition with the Company's products. Additional information on risk factors that could potentially affect the Company's financial results may be found in documents filed by the Company with the Securities and Exchange Commission, including the Company's current reports on Form 8-K, quarterly reports on Form 10-Q and its latest annual report on Form 10-K, and are based on information available to the Company on the date hereof. The Company does not intend, and assumes no obligation, to update any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release.
1
Free Cash Flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.
2
As of FY 13, revenues from the iGaming segment are being reported separately from the Proprietary Table Games segment. Please see Business Segment Data table for more details.
SHFL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
April 30,
April 30,
2013
2012
2013
2012
Revenue:
Product leases and royalties
$ 29,240
$ 26,947
$ 58,592
$ 52,900
Product sales and service
48,174
39,107
77,606
69,207
Total revenue
77,414
66,054
136,198
122,107
Costs and expenses:
Cost of leases and royalties
10,582
9,427
20,454
18,378
Cost of sales and service
16,738
14,138
27,778
25,419
Gross profit
50,094
42,489
87,966
78,310
Selling, general and administrative
23,866
19,804
43,912
36,984
Research and development
9,101
7,925
17,348
15,452
Total costs and expenses
60,287
51,294
109,492
96,233
Income from operations
17,127
14,760
26,706
25,874
Other income (expense):
Interest income
188
174
342
313
Interest expense
(299)
(378)
(523)
(855)
Other, net
315
(146)
270
29
Total other income (expense)
204
(350)
89
(513)
Income before income taxes
17,331
14,410
26,795
25,361
Income tax provision
5,491
4,675
7,891
7,977
Net income
$ 11,840
$ 9,735
$ 18,904
$ 17,384
Basic earnings per share:
$ 0.21
$ 0.17
$ 0.33
$ 0.31
Diluted earnings per share:
$ 0.21
$ 0.17
$ 0.33
$ 0.31
Weighted average shares outstanding:
Basic
56,984
55,751
56,832
55,408
Diluted
57,721
56,653
57,541
56,154
SHFL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
April 30,
October 31,
2013
2012
ASSETS
Current assets:
Cash and cash equivalents
$40,808
$24,160
Accounts receivable, net of allowance for bad debts of $359 and $491
47,506
45,708
Investment in sales-type leases and notes receivable, net of allowance
for bad debts of $224 and $8
9,342
9,287
Inventories
28,079
21,906
Prepaid income taxes
8,806
4,053
Deferred income taxes
4,847
4,622
Other current assets
8,308
6,901
Total current assets
147,696
116,637
Investment in sales-type leases and notes receivable, net of current portion
6,499
6,310
Products leased and held for lease, net
32,235
34,639
Property and equipment, net
23,717
17,417
Intangible assets, net
58,591
62,836
Goodwill
88,156
84,950
Deferred income taxes
3,548
5,183
Other assets
2,588
3,079
Total assets
$363,030
$331,051
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$12,102
$6,702
Accrued liabilities and other current liabilities
18,098
22,402
Deferred income taxes
16
16
Customer deposits
3,206
3,383
Income tax payable
3,189
4,179
Deferred revenue
6,177
4,799
Current portion of long-term debt
530
-
Total current liabilities
43,318
41,481
Long-term debt
7,299
1,303
Other long-term liabilities
2,085
2,004
Deferred income taxes
1,998
1,493
Total liabilities
54,700
46,281
Commitments and contingencies (See Note 11)
Shareholders' equity:
Common stock, $0.01 par value; 151,368 shares authorized;
56,384 and 55,973 shares issued and outstanding
564
560
Additional paid-in capital
140,517
135,758
Retained earnings
138,348
119,444
Accumulated other comprehensive income
28,901
29,008
Total shareholders' equity
308,330
284,770
Total liabilities and shareholders' equity
$363,030
$331,051
SHFL ENTERTAINMENT, INC.
SUPPLEMENTAL DATA
(Unaudited, in thousands)
Three Months Ended
Six Months Ended
April 30,
April 30,
2013
2012
2013
2012
Cash Flow Data:
Cash provided by operating activities
$ 5,042
$ 4,161
$ 18,253
$ 20,604
Cash used in investing activities:
Payments for products leased and held for lease
$ (3,778)
$ (2,856)
$ (6,623)
$ (6,706)
Purchases of property and equipment
(4,944)
(3,358)
(6,371)
$ (4,240)
Purchases of intangible assets
(91)
(73)
(139)
(4,103)
Acquisition of business
(1,590)
-
(1,590)
(5,500)
Proceeds from sale of leased assets
3,987
988
5,140
1,029
Proceeds from sale of assets
-
-
-
-
Other
(235)
(236)
(475)
(454)
$ (6,651)
$ (5,535)
$(10,058)
$(19,974)
Cash provided by (used in) financing activities
$ 7,766
$ (2,429)
$ 8,602
$ (695)
Free cash flow (2)
$ 8,623
$11,758
$ 18,240
$ 19,648
Reconciliation of net income to Adjusted EBITDA:
Net income
$11,840
$ 9,735
$ 18,904
$ 17,384
Other expense (income)
(204)
350
(89)
513
Share-based compensation
1,478
1,117
2,887
2,049
Income tax provision
5,491
4,675
7,891
7,977
Depreciation and amortization
6,768
6,380
13,656
12,397
Ongame acquisition expenses
-
1,448
-
1,653
Adjusted EBITDA (1)
$25,373
$23,705
$ 43,249
$ 41,973
1.
Adjusted EBITDA is earnings before other expense (income), provision for income taxes, depreciation and amortization expense, Ongame acquisition expenses, and share-based compensation. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is a useful performance measure and is widely used to measure performance, and as a basis for valuation, within the Company's industry. Adjusted EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison. Management uses Adjusted EBITDA as a measure of the operating performance and to compare the operating performance with those of its competitors. The Company also presents Adjusted EBITDA because it is used by some investors as a way to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming equipment suppliers have historically reported Adjusted EBITDA as a supplement to financial measures in accordance with U.S. generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered as an alternative to operating income (loss), as an indicator of the Company's performance, as an alternate to cash flows from operating activities, as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income (loss), Adjusted EBITDA does not include depreciation and amortization or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA.
2.
Free cash flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.
SHFL ENTERTAINMENT, INC.
BUSINESS SEGMENT DATA
(Unaudited, in thousands)
Three Months Ended
Six Months Ended
April 30,
April 30,
2013
2012
2013
2012
Utility:
Revenue
$30,517
$24,990
$ 55,801
$ 44,606
Gross profit
20,077
16,154
36,134
27,337
Gross margin
65.8%
64.6%
64.8%
61.3%
Proprietary Table Games:
Revenue
$14,003
$11,886
$ 26,831
$ 23,311
Gross profit
11,509
9,750
22,014
19,042
Gross margin
82.2%
82.0%
82.0%
81.7%
Electronic Table Systems:
Revenue
$ 7,113
$ 6,866
$ 14,218
$ 15,130
Gross profit
2,483
2,684
5,453
6,813
Gross margin
34.9%
39.1%
38.4%
45.0%
Electronic Gaming Machines:
Revenue
$25,745
$22,244
$ 39,062
$ 36,742
Gross profit
15,994
13,833
24,087
22,800
Gross margin
62.1%
62.2%
61.7%
62.1%
iGaming:
Revenue
$ 36
$ 68
$ 286
$ 2,318
Gross profit
31
68
278
2,318
Gross margin
86.1%
100.0%
97.2%
100.0%
Total:
Revenue
$77,414
$66,054
$136,198
$122,107
Gross profit
50,094
42,489
87,966
78,310
Gross margin
64.7%
64.3%
64.6%
64.1%
Adjusted EBITDA
25,373
23,705
43,249
41,973
as a percentage of total revenue
32.8%
35.9%
31.8%
34.4%
Income from operations
$17,127
$14,760
$ 26,706
$ 25,874
as a percentage of total revenue
22.1%
22.3%
19.6%
21.2%