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Bally Technologies' President And Chief Executive Officer Ramesh Srinivasan (Photo: Business Wire)

Stocks in this article: BYI

Bally Technologies, Inc. (NYSE: BYI)

Bally Technologies' President and Chief Executive Officer Ramesh Srinivasan (Photo: Business Wire)

Bally Technologies' President and Chief Executive Officer Ramesh Srinivasan (Photo: Business Wire)

  • SYSTEMS REVENUE SETS QUARTERLY RECORD OF $76 MILLION, UP 48 PERCENT FROM PRIOR YEAR
  • WIDE-AREA PROGRESSIVE INSTALLED BASE GROWS 12 PERCENT AND SETS RECORD QUARTERLY REVENUE
  • INCREASES FISCAL 2014 DILUTED EPS GUIDANCE TO $3.80 TO $4.10

Bally Technologies, Inc. (NYSE: BYI), a leader in slots, video machines, casino-management systems, interactive applications, and networked and server-based systems for the global gaming industry, today announced record quarterly diluted earnings per share (“Diluted EPS”) of $0.97 and first-quarter record revenue of $249 million for the three months ended September 30, 2013.

“We continue to focus on and execute very well on all aspects of our core business, while undertaking significant and successful integration planning efforts in preparation for the planned acquisition of SHFL entertainment, which is expected to close before calendar 2013 year-end,” said Ramesh Srinivasan, the Company’s President and Chief Executive Officer. “Our Systems business continues to build momentum globally, as our track record of success and investments in R&D and customer services and support paves the way for even greater industry leadership. We showcased seven new wide-area progressive (“WAP”) titles at last month’s Global Gaming Expo (“G2E”), up from three new titles shown last year, reflecting our escalating R&D commitment to our gaming operations footprint. Customer response to our new WAP, premium, and for-sale content, as well as to our new Pro Wave™ cabinet, which was one of the stars of the show, was very encouraging.”

“Operating margins increased to 25 percent when excluding costs related to the planned acquisition of SHFL entertainment, which marks our highest quarterly level in more than three years,” said Neil Davidson, the Company’s Chief Financial Officer. “Revenues that are recurring in nature were a quarterly record and represented 57 percent of total revenues driven by a first-quarter record in WAP revenue and quarterly records in systems maintenance and services revenues. During August, we amended our existing credit facility and successfully syndicated our new $1.1 billion Term Loan B with an all-in yield of 4.375 percent. The planned acquisition of SHFL entertainment will be funded with proceeds from the Term Loan B and excess capacity on our existing Revolving Credit Facility, which had $505 million undrawn as of September 30, 2013.”

First Quarter Fiscal Year 2014 Highlights

     
Three Months Ended September 30,
2013   % Rev     2012   % Rev
(dollars in millions, except per share amounts)
Revenues:
Gaming Equipment $ 71.3 29 % $ 82.7 35 %
Gaming Operations 101.9 41 % 101.2 43 %
Systems 76.1 30 % 51.3 22 %
Total revenues $ 249.3 100 % $ 235.2 100 %
 
Gross Margin:
Gaming Equipment (1) $ 36.0 50 % $ 39.2 47 %
Gaming Operations 71.3 70 % 70.1 69 %
Systems (1) 56.9 75 % 39.5 77 %
Total gross margin $ 164.2 66 % $ 148.8 63 %
 
Selling, general and administrative $ 72.4 29 % $ 64.5 27 %
Research and development costs 29.5 12 % 25.1 11 %
Depreciation and amortization 5.3 2 % 5.6 2 %
Operating income $ 57.0 23 % $ 53.6 23 %
Adjusted EBITDA $ 86.7 $ 78.8
Diluted EPS $ 0.97 $ 0.77
 

(1)

Gross Margin from Gaming Equipment and Systems excludes amortization related to certain intangibles, including core technology and license rights, which are included in depreciation and amortization.

 
 
        Three Months Ended September 30,
2013   2012
Operating Statistics
New gaming devices 3,995 4,608
New unit Average Selling Price (“ASP”) $ 16,307 $ 16,853
 
 
      As of September 30,
2013   2012
End-of-period installed base:
Linked progressive systems 2,522 2,251
Rental and daily-fee games 14,533 14,971
Lottery systems (2) 11,907 12,040
Centrally determined systems 33,711 39,192
 

(2)

Excludes 727 and 537 electronic table games operating as of September 30, 2013 and 2012, respectively.

 
 

Highlights of Certain Results for the Three Months Ended September 30, 2013

Overall

  • Total revenue increased 6 percent to a first-quarter record $249 million as compared with $235 million last year.
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, share-based compensation and acquisition-related costs), a non-GAAP financial measure, increased 10 percent to a first-quarter record $87 million as compared with $79 million last year.
  • Selling, general and administrative expenses (“SG&A”) increased to 29 percent of total revenues as compared with 27 percent last year, primarily driven by $5 million of costs associated with the planned acquisition of SHFL entertainment. After adjusting for acquisition-related costs, SG&A was 27 percent of total revenues in the current period.
  • Research and development expenses (“R&D”) increased to 12 percent of total revenues as compared with 11 percent last year.
  • Operating income increased 6 percent to a first-quarter record $57 million compared with $54 million last year. After adjusting for acquisition-related costs, operating margin increased to 25 percent from 23 percent last year.
  • Diluted EPS increased 26 percent to a quarterly record $0.97 from $0.77 last year.

Gaming Equipment

  • Revenues decreased 14 percent to $71 million as compared with $83 million last year, driven primarily by the expected absence of sales of Canadian video lottery terminal units in the current period compared to 670 units last year. Current period sales included the shipment of 456 units into the Illinois video gaming terminal (“VGT”) market.
  • ASP of new gaming devices decreased 3 percent to $16,307 per unit from $16,853 last year, primarily as a result of lower ASP’s in certain international jurisdictions.
  • New-unit sales to international customers were 20 percent of total new-unit shipments.
  • Gross margin increased to 50 percent from 47 percent last year, due to continued cost reductions on the Pro Series™ line of cabinets and sales mix.

Gaming Operations

  • Revenues increased to a first-quarter record $102 million as compared with $101 million last year, driven primarily by a 12 percent growth in the installed base of WAP games, as well as a first-quarter record for lottery systems revenue.
  • Gross margin increased to 70 percent from 69 percent last year, primarily due to lower jackpot expense.

Systems

  • Revenues increased 48 percent to a quarterly record $76 million as compared with $51 million last year.
  • Maintenance revenues increased 21 percent to a quarterly record $25 million as compared with $21 million last year.
  • Gross margin decreased to 75 percent from 77 percent last year, primarily as a result of the change in product mix. Specifically, hardware sales were 30 percent of systems revenues, and software and service sales were 37 percent, as compared to 26 percent for hardware and 34 percent for software and services in the same period last year.

Fiscal 2014 Business Update

The Company has made significant progress toward completing the planned acquisition of SHFL entertainment since announcing the transaction on July 16, 2013. During the first quarter of fiscal 2014, the applicable waiting period under the Hart-Scott-Rodino Antitrust Act of 1976 expired. The Company also successfully syndicated the Term Loan B financing and continued to make very good progress in securing required gaming regulatory approvals. Key executives from both companies are leading detailed integration planning efforts to ensure a seamless transition plan for customers and employees. The Company also announced earlier this week that Kevin Verner resigned from the Board of Directors to serve as a consultant and oversee the planning and post-integration efforts for the acquisition. As a result of all the efforts undertaken by key personnel in both companies, the acquisition is expected to close prior to the end of this calendar year. The completion of the SHFL entertainment acquisition remains subject to SHFL shareholder approval, the approval of certain gaming regulatory authorities, and other customary closing conditions.

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