Bally Technologies, Inc. Reports Record Revenue of $880 Million with Non-GAAP EPS of $2.45 for the Year Ended June 30, 2012

LAS VEGAS--(BUSINESS WIRE)--Bally Technologies, Inc. (NYSE: BYI):

• FOURTH QUARTER REVENUE UP 15 PERCENT TO A RECORD $246 MILLION WITH NON-GAAP EPS OF $0.78
• WIDE-AREA PROGRESSIVE INSTALLED BASE GROWS 72 PERCENT AND SETS RECORD QUARTERLY REVENUE; CASH CONNECTION™ INSTALLED BASE INCREASES TO 625 UNITS
• COMPANY REPURCHASES $106 MILLION WORTH OF STOCK SINCE MARCH 31, 2012
• INITIATES FISCAL 2013 DILUTED EPS GUIDANCE OF $2.95 TO $3.30

Bally Technologies, Inc. (NYSE: BYI), a leader in slots, video machines, casino management, interactive applications, and networked and server-based systems for the global gaming industry, announced today quarterly non-GAAP EPS of $0.78 on record revenue of $246 million for the three months ended June 30, 2012. Non-GAAP EPS was $2.45 on record revenue of $880 million for the year ended June 30, 2012. Diluted earnings per share from continuing operations (“Diluted EPS”) was $0.61 and $2.28 for the three months and year ended June 30, 2012.

“Our fourth quarter and fiscal 2012 results validate our leadership position in gaming technology innovation,” said Richard M. Haddrill, the Company’s Chief Executive Officer. “This innovation leadership and visibility into further growth opportunities for all of our businesses for fiscal 2013 and beyond is tremendously encouraging.”

“During our fourth quarter we established a number of company records for revenues and profitability, prudently accrued $10 million for several legal matters, and purchased another $73 million of our common stock, bringing the total during fiscal 2012 to 3.9 million shares for $155 million at $40.06 per share,” said Neil Davidson, the Company’s Chief Financial Officer. “Since June 30, 2012, we purchased an additional $33 million worth of stock.”

As of today, the Company has approximately $58 million available under its Board-authorized share repurchase plan. Additionally, the Company’s leverage ratio remains comfortably below 2.0 times, which leaves the Company’s share repurchases unrestricted under the terms of its credit agreement. This quarter represented the 19^th consecutive quarter the Company has repurchased shares.

“We increased the Cash Connection wide-area progressive (“WAP”) installed base by almost 500 units in the fourth quarter including additional installations of GREASE™ and the recently launched Michael Jackson King of Pop™ to much-deserved excitement from the marketplace,” said Ramesh Srinivasan, the Company’s President and Chief Operating Officer. “Total new gaming devices sold was the strongest it has been in 13 quarters, and in late July we went live with our first VLTs in Italy. We are particularly excited about this October’s Global Gaming Expo, where we will showcase new branded WAP titles, additional content for the Elite Bonusing Suite™, and several new titles for sale and rental on the ALPHA 2™ platform.”

Fiscal Year 2012 Highlights
			Three Months Ended June 30,																Year Ended June 30,
			2012				% Rev						2011		% Rev				2012							% Rev					2011					% Rev
			(dollars in millions, except per share amounts)
Revenues:
Gaming Equipment			$	96.8			39		%		$	72.7		34		%			$		310.7			35					%		$	246.6				33	%
Gaming Operations			93.7				38		%			82.3		39		%				357.4				41					%		318.6					42	%
Systems			55.3				23		%			58.7		27		%				211.7				24					%		193.0					25	%
Total revenues			$	245.8			100		%		$	213.7		100		%			$		879.8			100					%		$	758.2				100	%
Gross Margin:
Gaming Equipment (1)			$	44.8			46		%		$	30.9		43		%			$		139.8			45					%		$	112.1				45	%
Gaming Operations			67.1				72		%			59.3		72		%				257.7				72					%		229.8					72	%
Systems (1)			40.9				74		%			42.9		73		%				155.9				74					%		142.6					74	%
Total gross margin			$	152.8			62		%		$	133.1		62		%			$		553.4			63					%		$	484.5				64	%
Selling, general and administrative (2)			$	62.7			26		%		$	60.6		28		%			$		245.0			28					%		$	225.0				30	%
Research and development costs			25.6				10		%			23.3		11		%				96.2				11					%		88.1					12	%
Loss contingency accrual			10.0				4		%			—		—						10.0				1					%		—						—
Depreciation and amortization			5.7				2		%			5.3		2		%				22.8				3					%		19.9					3	%
Operating income			$	48.8			20		%		$	43.9		21		%			$ 179.4					20					%		$	151.5				20	%
Adjusted EBITDA			$	81.8							$	67.0							$ 282.5												$	242.9
Diluted EPS			$	0.61							$	0.51							$ 2.28												$	1.82
Non-GAAP EPS			$	0.78							$	0.51							$ 2.45												$	1.82
(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.
(2)  Selling, general and administrative expenses for the year ended June 30, 2012 includes a $1.8 million impairment on notes receivable related to development financing.

				Three Months Ended							Year Ended
				June 30,							June 30,
				2012			2011				2012			2011
Operating Statistics
New gaming devices					5,322			3,829				16,504			13,537
New unit Average Selling Price (“ASP”)				$	17,182		$	16,719			$	17,044		$	15,832
											As of June 30,
											2012			2011
End-of-period installed base:
Linked progressive systems												1,792			1,059
Rental and daily-fee games												14,890			14,315
Lottery systems												11,718			8,350
Centrally determined systems												47,633			50,754

Highlights of Certain Results for the Three Months Ended June 30, 2012

Overall

• Total revenue increased 15 percent to a record $246 million as compared with $214 million last year.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including share-based compensation), a non-GAAP financial measure, increased 22 percent to a record $82 million as compared with $67 million last year.
• Selling, general and administrative expenses (“SG&A”) declined to 26 percent of total revenues from 28 percent last year. SG&A increased $2 million primarily due to an increase in payroll to support key new markets.
• Research and development expenses (“R&D”) decreased to 10 percent of total revenues compared to 11 percent last year, with revenues continuing to grow faster than R&D expense growth, as past R&D efforts continue to pay off with increased product acceptance among our customer base. Operating income increased 11 percent to $49 million compared with $44 million last year. Operating margin decreased to 20 percent from 21 percent last year. The current period includes a loss contingency of $10 million related to the potential outcome of certain legal matters.
• Non-GAAP EPS increased 53 percent to $0.78 from $0.51 last year. Diluted EPS increased 20 percent to $0.61 from $0.51 last year.

Gaming Equipment

• Revenues increased 33 percent to $97 million as compared with $73 million last year, driven by higher unit sales from both replacement and new casino openings and an increase in ASP.
• ASP of new gaming devices increased 3 percent to $17,182 per unit from $16,719 last year, primarily as a result of the mix of Pro Series™ cabinets sold in the quarter.
• New-unit sales to international customers were 22 percent of total new-unit shipments.
• Gross margin increased to 46 percent from 43 percent last year, primarily due to mix and cost reductions on certain models of the Pro Series line of cabinets.

Gaming Operations

• Revenues increased 14 percent to a record $94 million as compared with $82 million last year, driven primarily by 72 percent growth in the installed base of WAP games, as well as the placement of games at Resorts World Casino New York City which opened in late calendar 2011.
• Gross margin remained constant at 72 percent.

Systems

• Revenues decreased 6 percent to $55 million as compared with $59 million last year.
• Maintenance revenues increased 15 percent to $20 million as compared with $17 million last year.
• Gross margin increased to 74 percent from 73 percent last year, primarily as a result of the change in mix of products. Specifically, hardware sales were 29 percent of systems revenues, and software and service sales were 35 percent, as compared to 42 percent for hardware and 29 percent for software and services in the same period last year.

Highlights of Certain Results for the Fiscal Year Ended June 30, 2012

Overall

• Total revenue increased 16 percent to a record $880 million as compared with $758 million last year.
• Adjusted EBITDA increased 16 percent to a record $282 million as compared with $243 million last year.
• SG&A declined to 28 percent of total revenues from 30 percent last year. SG&A increased $20 million primarily due to increases in payroll, regulatory, and other infrastructure expenses to support key new markets and includes a $1.8 million impairment on notes receivable related to development financing.
• 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.
• Operating income increased 18 percent to a record $179 million compared with $152 million last year. Operating margin remained constant at 20 percent. The current period includes a loss contingency of $10 million related to the potential outcome of certain legal matters.
• Non-GAAP EPS increased 35 percent to $2.45 from $1.82 last year. Diluted EPS increased 25 percent to $2.28 from $1.82 last year.

Gaming Equipment

• Revenues increased 26 percent to $311 million as compared with $247 million last year, driven by higher unit sales and ASP.
• ASP of new gaming devices increased 8 percent to a record $17,044 per unit from $15,832 last year, primarily as a result of the mix of Pro Series cabinets sold in the year and an increase in ASP from international sales.
• New-unit sales to international customers were 26 percent of total new-unit shipments.
• Gross margin remained constant at 45 percent.

Gaming Operations

• Revenues increased 12 percent to a record $357 million as compared with $319 million last year, driven by 72 percent growth in the installed base of WAP games, as well as the placement of games at Resorts World Casino New York City which opened in late 2011.
• Gross margin remained constant at 72 percent.

Systems

• Revenues increased 10 percent to $212 million as compared with $193 million last year.
• Maintenance revenues increased 15 percent to a record $75 million as compared with $65 million last year.
• Gross margin remained constant at 74 percent.

Fiscal 2013 Business Update

The Company initiates fiscal 2013 guidance for Diluted EPS of $2.95 to $3.30. This guidance anticipates continued year-over-year growth in each of game sales, gaming operations, and system revenues. The Company currently anticipates an increase in the placement of its premium games, particularly WAP, an increase in the number of gaming devices sold with continued margin improvements on game sales, and continued growth in its systems business. This guidance assumes an effective tax rate between 38 percent and 39 percent compared to 38.6 percent in fiscal 2012.

The Company has provided this range of earnings guidance for fiscal 2013 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						Year Ended
			June 30,						June 30,
			2012			2011			2012				2011
			(in 000s)
Income from continuing operations, net of tax			$	26,521		$	25,456		$	101,148			$	98,666
Loss contingency accrual				10,000			—			10,000				—
Loss on extinguishment of debt			—			4,119			—				4,119
Interest expense, net			2,620			1,755			12,157				7,024
Income tax expense			19,295			12,899			63,549				45,182
Depreciation and amortization			20,128			19,497			81,453				74,980
Share-based compensation			3,186			3,307			14,172				12,907
Adjusted EBITDA			$	81,750		$	67,033		$	282,479			$	242,878

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							Year Ended
			June 30,							June 30,
			2012			2011				2012						2011
Diluted EPS			$	0.61		$	0.51					$		2.28				$		1.82
Loss contingency accrual, net of tax			0.17			—						0.17						—
Non-GAAP EPS			$	0.78		$	0.51					$		2.45				$		1.82

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.

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 866-783-2137 or 857-350-1596 (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 September 16, 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. —

Michael Jackson − ©2012 Triumph International, Inc. under license from Bravado Merchandising. All rights reserved. GREASE − ©2012 Paramount Pictures. All Rights Reserved.

BALLY TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND YEAR ENDED JUNE 30, 2012 AND 2011
			Three Months Ended June 30,							Year Ended June 30,
			2012			2011				2012					2011
			(in 000’s, except per share amounts)
Revenues:
Gaming equipment and systems			$	152,080		$	131,398			$	522,342				$	439,534
Gaming operations			93,715			82,282				357,417						318,621
			245,795			213,680				879,759						758,155
Costs and expenses:
Cost of gaming equipment and systems (1)			66,416			57,574				226,636						184,836
Cost of gaming operations			26,573			23,000				99,680						88,820
Selling, general and administrative			62,753			60,672				245,043						225,033
Research and development costs			25,581			23,254				96,182						88,086
Loss contingency accrual			10,000			—				10,000						—
Depreciation and amortization			5,686			5,266				22,775						19,845
			197,009			169,766				700,316						606,620
Operating income			48,786			43,914				179,443						151,535
Other income (expense):
Interest income			1,526			1,344				5,221						4,960
Interest expense			(4,146		)	(3,099		)		(17,378			)			(11,984			)
Loss on extinguishment of debt			—			(4,119		)		—						(4,119			)
Other, net			(568		)	371				(2,827			)			3,001
Income from continuing operations before income taxes			45,598			38,411				164,459						143,393
Income tax expense			(19,295		)	(12,899		)		(63,549			)			(45,182			)
Income from continuing operations			26,303			25,512				100,910						98,211
Loss on sale of discontinued operations, net of tax			—			—				—						(403			)
Net income			26,303			25,512				100,910						97,808
Less net income (loss) attributable to non-controlling interests			(218		)	56				(238			)			(455			)
Net income attributable to Bally Technologies, Inc.			$	26,521		$	25,456			$	101,148				$	98,263
Basic earnings per share attributable to Bally Technologies, Inc.:
Income from continuing operations			$	0.63		$	0.53			$	2.35				$	1.90
Loss on sale of discontinued operations			—			—				—						(0.01			)
Basic earnings per share			$	0.63		$	0.53			$	2.35				$	1.89
Diluted earnings per share attributable to Bally Technologies, Inc.:
Income from continuing operations			$	0.61		$	0.51			$	2.28				$	1.82
Loss on sale of discontinued operations			—			—				—						(0.01			)
Diluted earnings per share			$	0.61		$	0.51			$	2.28				$	1.81
Weighted average shares outstanding:
Basic			42,238			47,865				42,985						51,960
Diluted			43,607			50,093				44,420						54,420
Amounts attributable to Bally Technologies, Inc.:
Income from continuing operations, net of tax			$	26,521		$	25,456			$	101,148					98,666
Loss on sale of discontinued operations, net of tax			—			—				—						(403			)
Net income			$	26,521		$	25,456			$	101,148					98,263

(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 CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2012 AND 2011
			June 30, 2012				June 30, 2011
			(in 000s, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents			$	32,673			$	66,425
Restricted cash				13,645				8,419
Accounts and notes receivable, net of allowances for doubtful accounts of $14,073 and $11,059				264,842				235,246
Inventories				75,066				68,634
Prepaid and refundable income tax				13,755				36,332
Deferred income tax assets				42,822				29,318
Deferred cost of revenue				17,615				13,795
Prepaid assets				13,061				10,524
Other current assets				6,980				4,984
Total current assets				480,459				473,677
Restricted long-term investments				12,171				12,485
Long-term accounts and notes receivables, net of allowances for doubtful accounts of $3,029 and $507				55,786				46,659
Property, plant and equipment, net				30,667				33,266
Leased gaming equipment, net				121,151				96,691
Goodwill				171,971				162,110
Intangible assets, net				39,166				34,865
Deferred income tax assets				7,409				12,120
Income tax receivable				12,041				10,972
Deferred cost of revenue				16,542				23,193
Other assets, net				23,104				21,356
Total assets			$	970,467			$	927,394
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	41,414			$	38,411
Accrued and other liabilities				79,156				58,295
Customer deposits				6,154				4,930
Jackpot liabilities				11,682				11,894
Deferred revenue				46,314				28,900
Income tax payable				12,226				3,033
Current maturities of long-term debt				17,091				15,153
Total current liabilities				214,037				160,616
Long-term debt, net of current maturities				494,375				500,250
Deferred revenue				26,715				34,788
Other income tax liability				13,922				9,321
Other liabilities				23,943				7,827
Total liabilities				772,992				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; 63,150,000 and 61,541,000 shares issued and 42,102,000 and 44,397,000 outstanding				6,309				6,149
Treasury stock at cost, 21,048,000 and 17,144,000 shares				(790,633	)			(634,268	)
Additional paid-in capital				489,002				442,713
Accumulated other comprehensive loss				(13,477	)			(3,064	)
Retained earnings				504,895				401,363
Total Bally Technologies, Inc. stockholders’ equity				196,108				212,905
Noncontrolling interests				1,367				1,687
Total stockholders’ equity				197,475				214,592
Total liabilities and stockholders’ equity			$	970,467			$	927,394