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Bally Technologies reports results13 May 2008LAS VEGAS, Nevada -- (PRESS RELEASE) -- Bally Technologies, Inc. (NYSE: BYI), a leader in slots, video machines, casino management systems and networked solutions for the global gaming industry, announced today record diluted earnings per share ("Diluted EPS") for the three and nine months ended March 31, 2008 of $0.52 and $1.31, respectively, and record revenue of $232.6 million and $652.3 million, respectively. Diluted EPS adjusted for share-based compensation ("Adjusted EPS") for the three and nine months ended March 31, 2008 was $0.56 and $1.42, respectively. "The continued momentum in all of our technology businesses drove record third-quarter earnings," said Richard M. Haddrill, the Company's Chief Executive Officer. "Another strong systems quarter reflects the continued demand for our Networked Floor of the Future technologies and vision highlighted by new customer contracts and demand for our iVIEW(TM) network that delivers interactive player content." "Our gaming equipment division shipped over 7,300 sale units in the current quarter, which included a significant number of sale units delivered to a major domestic lottery that were not recognized in revenue in the current quarter," said Gavin Isaacs, the Company's Chief Operating Officer. "We are pleased with our steady increase in North America ship share, our ability to leverage our broad product portfolio for Class III, Class II, and central-determination markets, and the growth of international units to 25 percent of our total sale units in the current quarter. We attribute this success to our investments in game content and our recent investments in our international infrastructure."
Third Quarter Fiscal 2008 Highlights
Three Months Ended Nine Months Ended
March 31, March 31,
2008 2007 2008 2007
(dollars in millions, except per share amounts)
Revenues:
Bally Gaming and Systems $ 219.6 $ 162.2 $ 616.1 $ 443.9
Casino Operations 13.0 13.0 36.2 36.0
Total revenue $ 232.6 $ 175.2 $ 652.3 $ 479.9
Net income $ 30.2 $ 6.6 $ 75.9 $ 3.8
Adjusted EBITDA $ 74.2 $ 36.4 $ 196.6 $ 86.2
Diluted EPS $ 0.52 $ 0.12 $ 1.31 $ 0.07
Three Months Ended March 31, 2008 Compared with Three Months Ended March 31, 2007 -- Total revenues increased 33 percent to $232.6 million as compared with
$175.2 million in the same period last year.
-- Operating income increased by $36.5 million to $54.9 million as
compared with $18.4 million in the same period last year.
-- Operating margin was 24 percent in the three months ended March 31,
2008 as compared with 10 percent in the same period last year.
-- Net income increased by $23.6 million to $30.2 million, as compared
with $6.6 million in the same period last year.
-- Adjusted EBITDA was $74.2 million, a 104-percent increase as compared
with the same period last year.
-- Selling, general and administrative ("SG&A") expenses declined to 26
percent of total revenue from 29 percent for the same period last year.
SG&A expenses in the current quarter and year-to-date period benefited
by $2.7 million from the resolution of table-technology disputes.
Nine Months Ended March 31, 2008 Compared with Nine Months Ended March 31, 2007 -- Total revenues increased 36 percent to $652.3 million as compared with
$479.9 million in the same period last year.
-- Operating income increased by $110.4 million to $142.8 million as
compared with $32.4 million in the same period last year.
-- Operating margin was 22 percent in the nine months ended March 31, 2008
as compared with 7 percent in the same period last year.
-- Net income increased by $72.1 million to $75.9 million, as compared
with $3.8 million in the same period last year.
-- Adjusted EBITDA was $196.6 million, a 128-percent increase as compared
with the same period last year.
-- SG&A expenses declined to 27 percent of total revenue from 31 percent
for the same period last year.
During the third quarter of fiscal 2008, the Company repurchased 280,000 shares of its common stock, at prices between $33.15 to $41.25, for total consideration of $10.7 million. Year to date, the Company has repurchased 429,253 shares for total consideration of $16.7 million. The Company has $64.3 million remaining available under its existing share repurchase authorization. "Our third quarter results continue to show the improvements in our operating leverage," said Robert C. Caller, the Company's Chief Financial Officer. "Our operating income increased to 24 percent of revenue from 10 percent in the comparable period last year and from 20 percent in the December 2007 quarter despite the current economic environment and challenging replacement cycle."
Unaudited summary financial information for the Bally Gaming Equipment and
Systems segment for the three and nine months ended March 31, 2008 and 2007 is
presented below:
Three Months Ended March 31,
% %
2008 Rev 2007 Rev
Revenues:
Gaming Equipment (1) $ 103.7 47 % $ 86.7 53 %
Gaming Operations 58.9 27 % 44.7 28 %
Systems (1) 57.0 26 % 30.8 19 %
Total revenues $ 219.6 100 % $ 162.2 100 %
Gross Margin:
Gaming Equipment $ 45.5 44 % $ 30.6 35 %
Gaming Operations 41.3 70 % 26.1 58 %
Systems 40.2 71 % 23.4 76 %
Total gross margin $ 127.0 58 % $ 80.1 49 %
Selling, general and administrative $ 52.0 24 % $ 41.8 26 %
Research and development costs 15.1 7 % 12.5 8 %
Depreciation and amortization 3.7 2 % 5.2 3 %
Operating income $ 56.2 25 % $ 20.6 13 %
Nine Months Ended March 31,
% %
2008 Rev 2007 Rev
(dollars in millions)
Revenues:
Gaming Equipment (1) $ 296.4 48 % $ 219.4 50 %
Gaming Operations 167.2 27 % 125.8 28 %
Systems (1) 152.5 25 % 98.7 22 %
Total revenues $ 616.1 100 % $ 443.9 100 %
Gross Margin:
Gaming Equipment $ 132.1 45 % $ 74.8 34 %
Gaming Operations 108.7 65 % 72.5 58 %
Systems 111.1 73 % 69.3 70 %
Total gross margin $ 351.9 57 % $ 216.6 49 %
Selling, general and administrative $ 143.6 23 % $ 124.0 28 %
Research and development costs 43.1 7 % 38.4 9 %
Depreciation and amortization 11.1 2 % 13.8 3 %
Operating income $ 154.1 25 % $ 40.4 9 %
(1) Gross Margin from Gaming Equipment and Systems excludes amortization
related to certain intangibles, including core technology and license
rights, which is included in depreciation and amortization.
Three Months Ended Nine Months Ended
March 31, March 31,
2008 2007 2008 2007
Operating Statistics:
New gaming devices sold 6,742 6,032 19,037 14,131
Original Equipment Manufacturer
("OEM") units sold - - - 1,605
New unit Average Selling Price
("ASP") $13,427 $12,984 $13,281 $12,628
End-of-period installed base:
Wide-area and local-area
progressive systems 1,259 1,389
Rental and daily-fee
games (1) 12,377 5,916
Lottery systems 7,980 7,736
Centrally determined
systems (1) (2) 42,924 32,690
(1) Certain devices previously included in centrally determined systems
that were converted to standalone devices have been reclassified to
rental and daily-fee games.
(2) Daily fee revenue from approximately 9,100 units included in centrally
determined systems end-of-period installed base total as of March 31,
2008 are currently being deferred until completion of certain
contractual commitments. There were no similar deferrals as of March
31, 2007.
Highlights of Certain Results for the Three Months Ended March 31, 2008
Gaming Equipment
-- Revenues increased 20 percent to approximately $103.7 million as
compared with the same period last year.
-- New gaming device sales increased 12 percent to 6,742 units as
compared with 6,032 units in the same period last year.
-- Average selling price ("ASP") of new gaming devices, excluding OEM
sales, increased 3 percent as a result of product mix and price
increases taking effect in the period.
-- Gross margin increased from 35 percent in the same period last year
to 44 percent, primarily due to the increase in ASP discussed above
and improved purchasing and manufacturing efficiencies due to
increased volumes and lower manufacturing costs due to the
standardization of game platforms. Margins in the current quarter
were negatively impacted by approximately $0.9 million in inventory
charges associated with the consolidation of European inventories.
Gaming Operations
-- Revenues increased 32 percent to approximately $58.9 million as
compared with the same period last year.
-- Gross margin increased to 70 percent from 58 percent for the same
period last year, principally due to increases in participation and
rental revenue with a relatively fixed cost of operating expenses
and a decrease in funding jackpot liabilities related to our wide-
area progressives.
-- Revenue and gross margin in fiscal 2007 included daily fees that
relate to certain contracts which have been deferred in fiscal 2008
due to new contractual commitments made to the customers.
Approximately $3.8 million in daily fees generated during the third
quarter of fiscal 2008 were deferred pending delivery of the
commitments.
Systems
-- Revenues increased 85 percent to approximately $57.0 million as
compared with the same period last year, primarily as a result of
continued acceptance of the Company's products including the
Company's iVIEW(TM) player-communication devices and Power
Bonusing(TM) software.
-- Gross margin declined to 71 percent from 76 percent for the same
period last year as a result of product mix.
-- Maintenance revenues increased to approximately $10.0 million from
approximately $8.5 million in the same period last year.
-- As of March 31, 2008, the total number of iVIEW player-
communication devices purchased and committed to be purchased was
approximately 111,000 units.
Highlights of Certain Results for the Nine Months Ended March 31, 2008
Gaming Equipment
-- Revenues increased 35 percent to approximately $296.4 million as
compared with the same period last year.
-- New gaming device sales increased 35 percent to 19,037 units as
compared with 14,131 units in the same period last year.
-- ASP of new gaming devices, excluding OEM sales, increased 5 percent
primarily due to product mix and price increases during the period.
-- Gross margin increased to 45 percent from 34 percent in the same
period last year, primarily due to the increase in ASP discussed
above, the elimination of lower margin OEM sales, and improved
purchasing and manufacturing efficiencies due to increased volumes
and lower manufacturing costs due to the standardization of game
platforms.
Gaming Operations
-- Revenues increased 33 percent to approximately $167.2 million as
compared with the same period last year.
-- Gross margin increased to 65 percent from 58 percent for the same
period last year principally due to increases in participation and
rental revenue with a relatively fixed cost of operating expenses.
-- Revenue and gross margin in fiscal 2007 included daily fees that
relate to certain contracts which have been deferred in fiscal 2008
due to new contractual commitments made to customers. Approximately
$11.4 million in daily fees generated during the nine months ended
March 31, 2008 were deferred pending delivery of the commitments.
Systems
-- Revenues increased 55 percent to approximately $152.5 million as
compared with the same period last year primarily as a result of
continued acceptance of the Company's products including iVIEW
player-communication devices and Power Bonusing software.
-- Gross margin increased to 73 percent from 70 percent in the same
period last year primarily as a result of product mix.
-- Maintenance revenues increased to approximately $28.8 million from
approximately $24.0 million in the same period last year.
Business Update -- Fiscal 2008 and 2009 The Company also announced it narrowed the range for fiscal 2008 guidance for Diluted EPS to $1.78 to $1.90, from an earlier range of $1.60 to $1.90. Adjusted EPS is now estimated between $1.93 to $2.05, from an earlier range of $1.75 to $2.05. The Company now expects revenue for fiscal 2008 to exceed $885 million, representing a 30-percent increase over fiscal 2007. The Company initiated fiscal 2009 guidance for Diluted EPS of $2.10 to $2.50 and Adjusted EPS between $2.27 to $2.67. The Company's fiscal 2009 Diluted EPS and revenue guidance anticipates continued year-over-year growth in each of game sales, gaming operations, and system revenues. The Company forecasts an increase in the placement of premium daily-fee games and rental games, a modest increase in the number of gaming devices sold with continued margin improvements on game sales, and continued growth in its system business. The Company also expects its selling, general and administrative expenses as a percentage of revenue to be lower in fiscal 2009 as compared with fiscal 2008 and expects improved operating margin in fiscal 2009 as compared with fiscal 2008. The Company has provided this broad range of earnings guidance for fiscal 2009 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 conditions, the market for gaming devices and systems, 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 may update this fiscal 2009 guidance from time to time as the year progresses. Non-GAAP Financial Measures
The following table reconciles the Company's net income, as determined in
accordance with generally accepted accounting principles ("GAAP"), to Adjusted
EBITDA:
Three Months Ended Nine Months Ended
March 31, March 31,
2008 2007 2008 2007
(in 000s)
Net income $ 30,249 $ 6,582 $ 75,947 $ 3,838
Interest expense, net 5,494 6,976 17,997 23,773
Income tax expense 18,939 4,493 47,283 2,806
Depreciation and amortization 16,085 15,342 45,339 44,672
Share-based compensation 3,435 2,978 10,020 11,090
Adjusted EBITDA $ 74,202 $ 36,371 $ 196,586 $ 86,179
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including asset charges and share-based compensation) is a supplemental non-GAAP financial measure used by the Company's management and is commonly used by industry analysts to evaluate the Company's financial performance. Adjusted EBITDA provides additional information about the Company's ability to service debt and is frequently used by 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 the Adjusted EPS:
Three Nine
Months Months
Ended Ended
March 31, March 31, Fiscal 2008 Range Fiscal 2009 Range
2008 2008 Low High Low High
Diluted EPS $ 0.52 $ 1.31 $1.78 $1.90 $ 2.10 $ 2.50
Share-based
compensation,
net of income
tax benefit 0.04 0.11 0.15 0.15 0.17 0.17
Adjusted EPS $ 0.56 $ 1.42 $ 1.93 $ 2.05 $ 2.27 $2.67
The Company provides Adjusted EPS for the three months and nine months ended March 31, 2008 and the estimated range of Adjusted EPS for fiscal 2008 and 2009 in this press release as additional information regarding the Company's operating results for the three months and nine months ended March 31, 2008 and expected operating results for fiscal 2008 and 2009. Adjusted EPS adds back the impact of stock-based compensation, net of tax, to Diluted EPS as determined in accordance with GAAP. The Company believes that this presentation of Adjusted EPS facilitates investors' understanding of Bally's historical operating trends because it provides important supplemental information in evaluating the operating results of the business. Adjusted EPS is not an alternative to Diluted EPS as determined in accordance with GAAP. |