Bally Technologies, Inc. Reports Record Revenue of $997 Million and Record Diluted EPS of $3.45 for

Bally Technologies, Inc. Reports Record Revenue of $997 Million and Record Diluted EPS of $3.45 for the Year Ended June 30, 2013

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

Bally Technologies' Chief Financial Officer Neil Davidson. (Photo: Business Wire)

Bally Technologies' Chief Financial Officer Neil Davidson. (Photo: Business Wire)

  • FOURTH QUARTER REVENUE INCREASES TO A RECORD $264 MILLION WITH RECORD DILUTED EPS OF $0.95
  • SYSTEMS REVENUE SETS ANNUAL RECORD OF $252 MILLION, INCREASING 19 PERCENT FROM PRIOR YEAR
  • WIDE-AREA PROGRESSIVE INSTALLED BASE GROWS 38 PERCENT AND SETS RECORD ANNUAL REVENUE

Bally Technologies, Inc. (NYS: 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 quarterly diluted earnings per share ("Diluted EPS") of $0.95 and record quarterly revenue of $264 million for the three months ended June 30, 2013. Diluted EPS was a record $3.45 on record annual revenues of $997 million for the year ended June 30, 2013.


"Fiscal 2013 was a truly momentous year in Bally's history," said Ramesh Srinivasan, the Company's President and Chief Executive Officer. "We made enormous progress in many different ways, including continued growth in wide-area progressive ("WAP") units, record Gaming Operations revenue, significant success in new markets like Canada, Illinois, and South Africa, establishing new revenue records in Systems while setting up Systems for further growth in the years ahead, and the launch of Bally content in regulated online jurisdictions. These achievements position us well for continued growth in fiscal 2014 and beyond."

Srinivasan added, "The planned acquisition of SHFL entertainment will position us even better as an innovative end-to-end gaming solutions provider. We remain steadfastly focused on executing well in our core business and are looking forward to this September's Global Gaming Expo, where we will demonstrate our industry-leading cross-platform solutions for games, systems, and interactive. We will also demonstrate how well positioned and ready we are to connect operators' gaming worlds through a single view of the player."

"Bally remains unwavering in its commitment to shareholder value, as demonstrated by the 38 percent two-year Diluted EPS compound annual growth rate, among many other critical metrics," said Neil Davidson, the Company's Chief Financial Officer. "The growth and stability of our revenues that are recurring in nature continue to provide significant financial flexibility. With the planned acquisition of SHFL entertainment we now expect to utilize the majority of our excess free cash flow to repay debt. Since June 30, we have paid down an additional $45 million on our revolving credit facility placing our leverage at 1.7x."

Fiscal Year 2013 Highlights

   

Three Months Ended June 30,

Year Ended June 30,

2013

 

%
Rev

 

2012

 

%
Rev

2013  

%
Rev

  2012  

%
Rev

(dollars in millions, except per share amounts)
Revenues:                          
Gaming Equipment $ 88.7 34 % $ 96.8 39 %   $ 339.8 34 % $ 310.7 35 %
Gaming Operations 102.8 39 % 93.7 38 %   405.0 41 % 357.4 41 %
Systems 72.9 27 %   55.3 23 % 252.2 25 % 211.7 24 %
Total revenues $ 264.4 100 % $ 245.8 100 % $ 997.0 100 % $ 879.8 100 %
 
Gross Margin:
Gaming Equipment (1) $ 44.0 50 % $ 44.8 46 % $ 170.6 50 % $ 139.8 45 %
Gaming Operations 71.0 69 % 67.1 72 % 282.8 70 % 257.7 72 %
Systems (1) 57.7 79 %   40.9 74 % 192.6 76 % 155.9 74 %
Total gross margin $ 172.7 65 % $ 152.8 62 % $ 646.0 65 % $ 553.4 63 %
 
Selling, general and administrative $ 72.1 27 % $ 62.7 26 % $ 276.7 28 % $ 245.0 28 %
Research and development costs 30.3 11 % 25.6 10 % 111.1 11 % 96.2 11 %
Loss contingency accrual 10.0 4 % 10.0 1 %
Depreciation and amortization 5.7 3 %   5.7 2 % 22.7 3 % 22.8 3 %
Operating income $ 64.6 24 % $ 48.8 20 % $ 235.5 24 % $ 179.4 20 %
Adjusted EBITDA $ 87.5 $ 81.8 $ 332.5 $ 282.5
Diluted EPS $ 0.95 $ 0.61 $ 3.45 $ 2.28

(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
June 30,

Year Ended
June 30,

2013   2012 2013   2012
Operating Statistics
New gaming devices 4,911 5,322 19,007 16,504
New unit Average Selling Price ("ASP") $ 16,224 $ 17,182 $ 16,411 $ 17,044

 

 

 

As of June 30,

2013

2012

End-of-period installed base:

Linked progressive systems

2,463

1,792

Rental and daily-fee games

14,855

14,890

Lottery systems

11,846

11,718

Centrally determined systems

35,284

47,633

 

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

Overall

  • Total revenue increased 8 percent to a quarterly record $264 million as compared with $246 million last year.
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including share-based compensation), a non-GAAP financial measure, increased 7 percent to a quarterly record $88 million as compared with $82 million last year.
  • Selling, general and administrative expenses ("SG&A") increased to 27 percent of total revenues as compared with 26 percent last year, driven by an increase in payroll to support key new markets.
  • Research and development expenses ("R&D") increased to 11 percent of total revenues as compared with 10 percent last year.
  • Operating income increased 32 percent to a quarterly record $65 million compared with $49 million last year. Operating margin increased to 24 percent from 20 percent last year. The prior period included a loss contingency of $10 million related to certain legal matters.
  • Diluted EPS increased 56 percent to a quarterly record $0.95 from $0.61 last year. Non-GAAP EPS increased 22 percent to $0.95 from $0.78 last year.

Gaming Equipment

  • Revenues decreased 8 percent to $89 million as compared with $97 million last year, driven by fewer new casino openings. Current period sales included the shipment of 200 Canadian video lottery terminals ("VLT"), as well as the shipment of 713 units into the Illinois video gaming terminal ("VGT") market.
  • ASP of new gaming devices decreased 6 percent to $16,224 per unit from $17,182 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 24 percent of total new-unit shipments.
  • Gross margin increased to 50 percent from 46 percent last year, due to continued cost reductions on the Pro Series™ line of cabinets and sales mix.

Gaming Operations

  • Revenues increased 10 percent to a quarterly record $103 million as compared with $94 million last year, driven primarily by a 38 percent growth in the installed base of WAP games, as well as record quarterly lottery systems revenue.
  • Gross margin decreased to 69 percent from 72 percent last year, primarily due to higher jackpot expense and higher depreciation expense.

Systems

  • Revenues increased 32 percent to a quarterly record $73 million as compared with $55 million last year.
  • Maintenance revenues increased 25 percent to a quarterly record $25 million as compared with $20 million last year.
  • Gross margin increased to 79 percent from 74 percent last year, primarily as a result of the change in product mix. Specifically, hardware sales were 28 percent of systems revenues, and software and service sales were 38 percent, as compared to 29 percent for hardware and 35 percent for software and services in the same period last year.

Highlights of Certain Results for the Fiscal Year Ended June 30, 2013

Overall

  • Total revenue increased 13 percent to a record $997 million as compared with $880 million last year.
  • Adjusted EBITDA increased 18 percent to a record $332 million as compared with $282 million last year.
  • SG&A remained constant at 28 percent of total revenues.
  • R&D remained constant at 11 percent of total revenues.
  • Operating income increased 31 percent to a record $236 million compared with $179 million last year. Operating margin increased to 24 percent from 20 percent last year. The prior period included a loss contingency of $10 million related to certain legal matters.
  • Diluted EPS increased 51 percent to a record $3.45 from $2.28 last year. Non-GAAP EPS increased 41 percent to $3.45 from $2.45 last year.

Gaming Equipment

  • Revenues increased 9 percent to $340 million as compared with $311 million last year, driven by higher domestic replacement sales, including 2,226 Canadian VLT shipments, as well as by 1,943 shipments into the Illinois VGT market.
  • ASP of new gaming devices decreased 4 percent to $16,411 per unit from $17,044 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 19 percent of total new-unit shipments.
  • Gross margin increased to 50 percent from 45 percent last year, due to continued cost reductions on certain models of the Pro Series cabinets and sales mix.

Gaming Operations

  • Revenues increased 13 percent to a record $405 million as compared with $357 million last year, driven by 38 percent growth in the installed base of WAP games, as well as record annual lottery systems revenue.
  • Gross margin decreased to 70 percent from 72 percent last year, primarily due to higher jackpot expense.

Systems

  • Revenues increased 19 percent to a record $252 million as compared with $212 million last year.
  • Maintenance revenues increased 22 percent to a record $91 million as compared with $75 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 30 percent of systems revenues, and software and service sales were 34 percent, as compared to 32 percent for hardware and 33 percent for software and services in the same period last year.

Fiscal 2014 Business Update

The Company reiterated fiscal 2014 guidance for Diluted EPS of $3.70 to $4.05 provided on July 16, 2013. As a result of normal seasonal trends, the timing of new openings and major systems installs, the Company expects that its Diluted EPS in the second half of fiscal 2014 will exceed the first half, with the second quarter being stronger than the first quarter. This guidance anticipates continued year-over-year growth in each of game sales, gaming operations, and systems revenues. This guidance does not reflect the impact of the planned acquisition of SHFL entertainment or any acquisition-related costs or savings.

The Company has provided this range of earnings guidance for fiscal 2014 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,
2013   2012 2013   2012
(in 000s)
Net income attributable to Bally Technologies, Inc. $ 37,337 $ 26,521 $ 141,444 $ 101,148
Loss contingency accrual 10,000 10,000
Interest expense, net 2,986 2,620 12,792 12,157
Income tax expense 21,229 19,295 76,574 63,549
Depreciation and amortization 22,266 20,128 88,272 81,453
Share-based compensation 3,704 3,186 13,380 14,172
Adjusted EBITDA $ 87,522 $ 81,750 $ 332,462 $ 282,479
 

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,
2013   2012 2013   2012
 
Diluted EPS $ 0.95 $ 0.61 $ 3.45 $ 2.28
Loss contingency accrual, net of tax 0.17 0.17
Non-GAAP EPS $ 0.95 $ 0.78 $ 3.45 $ 2.45
 

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.

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