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Bally Technologies, Inc. Reports Record Second-Quarter Fiscal 2013 Diluted EPS Of $0.80, Up 48 Percent From Prior Year

Stocks in this article: BYI

Bally Technologies, Inc. (NYSE: BYI):

  • WIDE-AREA PROGRESSIVE INSTALLED BASE GROWS 87 PERCENT AND SETS RECORD QUARTERLY REVENUE
  • SYSTEMS MAINTENANCE REVENUE INCREASES 28 PERCENT AND SETS RECORD QUARTERLY REVENUE OF $23 MILLION
  • INCREASES FISCAL 2013 DILUTED EPS GUIDANCE TO $3.20 TO $3.40

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, today announced record second-quarter diluted earnings per share (“Diluted EPS”) of $0.80 and record second-quarter revenue of $238 million for the three months ended December 31, 2012.

“Our second quarter fiscal 2013 demonstrated continued momentum in all major business areas,” said Ramesh Srinivasan, the Company’s President and Chief Executive Officer. “We are excited about our scheduled product launches over the next few months, including new wide-area progressive (‘WAP’) games featuring Hot Shot Progressive® and NASCAR®, as well as the recently released Pawn Stars™ premium daily-fee game. The Elite Bonusing Suite™ is gaining further traction with additional customer purchases in the second quarter. Finally, traditional domestic replacement sales were up year-over-year for the seventh consecutive quarter, based on continued acceptance of our growing library of game content and our increasing presence in video lottery. I am happy with Bally’s trajectory and the steadily increasing visibility we have into our near- and long-term future growth.”

“Operating margins increased to 24 percent, reflecting our ability to leverage infrastructure and continue to realize efficiencies in our supply chain,” said Neil Davidson, the Company’s Chief Financial Officer. “Further, we continued to build revenues that are recurring in nature as we set records in both WAP and systems maintenance revenues. We are thoughtfully allocating capital to invest in our growth and to enhance shareholder value. This quarter represents the 21 st quarter in a row that we have repurchased stock. During the second quarter, we purchased 530,000 shares of common stock for $24 million at $45.43 per share.”

As of today, the Company has approximately $126 million available under its Board-authorized share repurchase plan. Additionally, the Company’s leverage ratio remains below 2.0 times, which leaves the Company’s share repurchases unrestricted under the terms of its credit agreement.

Second Quarter Fiscal Year 2013 Highlights

                   
Three Months Ended December 31, Six Months Ended December 31,

2012

% Rev

2011

% Rev

2012

% Rev

2011

% Rev

(dollars in millions, except per share amounts)
Revenues:                      
Gaming Equipment $ 82.6 35 % $ 70.2 33 %   $ 165.3 35 % $ 134.6 33 %
Gaming Operations 99.0 41 % 86.2 41 %   200.2 42 % 171.2 42 %
Systems 56.7 24 %   54.0 26 % 108.0 23 % 99.6 25 %
Total revenues $ 238.3 100 % $ 210.4 100 % $ 473.5 100 % $ 405.4 100 %
 
Gross Margin:
Gaming Equipment (1) $ 43.9 53 % $ 30.0 43 % $ 83.1 50 % $ 58.4 43 %
Gaming Operations 69.7 70 % 62.4 72 % 139.8 70 % 123.1 72 %
Systems (1) 43.2 76 %   40.1 74 % 82.7 76 % 74.6 75 %
Total gross margin $ 156.8 66 % $ 132.5 63 % $ 305.6 65 % $ 256.1 63 %
 
Selling, general and administrative $ 67.9 28 % $ 61.3 29 % $ 132.4 28 % $ 118.5 29 %
Research and development costs 26.6 11 % 22.4 11 % 51.7 11 % 45.8 11 %
Depreciation and amortization 5.7 3 %   5.8 3 % 11.3 3 % 11.4 3 %
Operating income $ 56.6 24 % $ 43.0 20 % $ 110.2 23 % $ 80.4 20 %
Adjusted EBITDA $ 81.1 $ 67.2 $ 159.9 $ 126.3
Diluted EPS $ 0.80 $ 0.54 $ 1.57 $ 0.99
(1)   Gross Margin from Gaming Equipment and Systems excludes amortization related to certain intangibles, including core technology and license rights, which are included in depreciation and amortization.
 

Three Months Ended December 31,

 

Six Months Ended December 31,

2012   2011 2012   2011
Operating Statistics
New gaming devices 4,565 3,636 9,173 7,035
New unit Average Selling Price (“ASP”) $ 16,553 $ 17,201 $ 16,704 $ 16,922
          As of December 31,
2012   2011
End-of-period installed base:
Linked progressive systems 2,320 1,263
Rental and daily-fee games 14,962 14,624
Lottery systems 12,222 10,832
Centrally determined systems 37,120 47,461

Highlights of Certain Results for the Three Months Ended December 31, 2012

Overall

  • Total revenue increased 13 percent to a second-quarter record $238 million as compared with $210 million last year.
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including share-based compensation), a non-GAAP financial measure, increased 21 percent to a second-quarter record $81 million as compared with $67 million last year.
  • Selling, general and administrative expenses (“SG&A”) declined to 28 percent of total revenues from 29 percent last year.
  • Research and development expenses (“R&D”) remained constant at 11 percent of total revenues.
  • Operating income increased 32 percent to $57 million compared with $43 million last year. Operating margin increased to 24 percent from 20 percent last year.
  • Diluted EPS increased 48 percent to a second-quarter record $0.80 from $0.54 last year.

Gaming Equipment

  • Revenues increased 18 percent to $83 million as compared with $70 million last year, driven by higher domestic replacement sales, the shipment of 568 Canadian Video Lottery Terminals (“VLT”), and the shipments of units into the Illinois Video Gaming Terminal (“VGT”) market.
  • ASP of new gaming devices decreased 4 percent to $16,553 per unit from $17,201 last year, primarily as a result of a higher mix of lower-ASP VLT and VGT units sold in the quarter.
  • New-unit sales to international customers were 17 percent of total new-unit shipments.
  • Gross margin increased to 53 percent from 43 percent last year, due to continued cost reductions on the Pro Series™ line of cabinets and sales mix, a reduction in cost due to a customer contract election, and an increase in conversion kit revenue.

Gaming Operations

  • Revenues increased 15 percent to a second-quarter record $99 million as compared with $86 million last year, driven primarily by 87 percent growth in the installed base of WAP games.
  • Gross margin decreased to 70 percent from 72 percent last year, primarily due to higher jackpot expense.

Systems

  • Revenues increased 5 percent to $57 million as compared with $54 million last year.
  • Maintenance revenues increased 28 percent to a record $23 million as compared with $18 million last year.
  • Gross margin increased to 76 percent from 74 percent last year, primarily as a result of the change in mix of products. Specifically, hardware sales were 27 percent of systems revenues, and software and service sales were 32 percent, as compared to 33 percent for hardware and 33 percent for software and services in the same period last year.

Highlights of Certain Results for the Six Months Ended December 31, 2012

Overall

  • Total revenue increased 17 percent to a record $473 million as compared with $405 million last year.
  • Adjusted EBITDA increased 27 percent to a record $160 million as compared with $126 million last year.
  • SG&A declined to 28 percent of total revenues from 29 percent last year.
  • R&D remained constant at 11 percent of total revenues.
  • Operating income increased 37 percent to a record $110 million compared with $80 million last year. Operating margin increased to 23 percent from 20 percent last year.
  • Diluted EPS increased 59 percent to a record $1.57 from $0.99 last year.

Gaming Equipment

  • Revenues increased 23 percent to $165 million as compared with $135 million last year, driven by higher domestic replacement sales, Canadian VLT shipments, and shipments into the Illinois VGT market.
  • ASP of new gaming devices decreased 1 percent to $16,704 per unit from $16,922 last year, primarily as a result of a higher mix of lower-ASP VLT and VGT units sold.
  • New-unit sales to international customers were 17 percent of total new-unit shipments.
  • Gross margin increased to 50 percent from 43 percent last year, primarily due to mix and cost reductions on certain models of the Pro Series line of cabinets and sales mix.

Gaming Operations

  • Revenues increased 17 percent to a record $200 million as compared with $171 million last year, driven by 87 percent growth in the installed base of WAP games, as well as previously placed games at Resorts World Casino New York City which opened in late calendar 2011.
  • Gross margin decreased to 70 percent from 72 percent last year, primarily due to higher jackpot expense.

Systems

  • Revenues increased 8 percent to $108 million as compared with $100 million last year.
  • Maintenance revenues increased 22 percent to a record $44 million as compared with $36 million last year.
  • Gross margin increased to 76 percent from 75 percent last year, primarily as a result of the change in mix of products. Specifically, hardware sales were 26 percent of systems revenues, and software and service sales were 33 percent, as compared to 31 percent for hardware and 33 percent for software and services in the same period last year.

Fiscal 2013 Business Update

The Company increased its fiscal 2013 guidance for Diluted EPS to a range of $3.20 to $3.40. This guidance assumes an effective tax rate between 36 percent and 37 percent for the fiscal year.

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