Global Gaming Expo

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

Category:

Thursday, August 9, 2012 1:01 pm PDT

Dateline:

LAS VEGAS

Public Company Information:

NYSE:
BYI
"We increased the Cash Connection wide-area progressive ("

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 19th 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  

Contact:

Bally Technologies, Inc.
Laura Olson-Reyes, 702-584-7742
Senior Director, Marketing & Corporate Communications
Lolson-reyes@ballytech.com
Michael Carlotti, 702-584-7995
Vice President of Treasury and Investor Relations
mcarlotti@ballytech.com
Mike Trask, 702-584-7451
Mobile: 702-330-6679
Corporate Communications Manager
MTrask@ballytech.com

Media Contacts

Social Media

Bally Buzz