Bally Technologies, Inc. (NYSE: BYI)
Bally Technologies' Chief Executive Officer Richard Haddrill (Photo: Business Wire)
- TOTAL REVENUE INCREASES TO A FIRST QUARTER RECORD OF $321 MILLION, UP 29 PERCENT FROM PRIOR YEAR
- ACHIEVES QUARTERLY ELECTRONIC GAMING MACHINE UNIT SALES OF 4,744, UP 19 PERCENT FROM PRIOR YEAR
- GAMING OPERATIONS REVENUE SETS AN ALL-TIME QUARTERLY RECORD OF $106 MILLION
Bally Technologies, Inc. (NYSE: BYI) (“Bally” or the “Company”), a leader in gaming machines, table game products, casino-management systems, interactive applications, and networked and server-based systems for the global gaming industry, today announced record first quarter revenue of $321 million and Adjusted EPS of $1.17 for the three months ended September 30, 2014. Diluted earnings per share (“GAAP Diluted EPS”) was $0.75 for the period.
“We were pleased by customer responses to the launch of several new products, including the Pro Wave 360° and Pro Theater, as well as our line-up of powerhouse brands including FriendsTM and Duck DynastyTM at last month’s Global Gaming Expo (G2E). During the quarter, Cash Wheel featuring Quick Hit, which was launched in September 2013, eclipsed a 1,000-unit installed base,” said Richard Haddrill, the Company’s Chief Executive Officer. “We achieved record first quarter revenue and excellent overall operational results in the quarter, driven primarily by strong Electronic Gaming Machines and Gaming Operations revenue. With SHFL in the mix, we grew our international new-unit sales by 168 percent, further driving our global presence. Finally, during the quarter, we announced Ontario Lottery and Gaming Corporation (OLGC) selected Bally as its central gaming management system provider, further strengthening the long-term prospects for our Systems business.”
First Quarter Fiscal Year 2015 Highlights | |||||||||||||||||||||
Three Months Ended September 30, | |||||||||||||||||||||
2014(3) | % | 2013 | % | ||||||||||||||||||
(in millions, except per share amounts) | |||||||||||||||||||||
Revenues: | |||||||||||||||||||||
Electronic Gaming Machines (“EGM”) | $ | 94.2 | 30% | $ | 71.3 | 29% | |||||||||||||||
Gaming Operations | 106.5 | 33% | 101.9 | 41% | |||||||||||||||||
Systems | 74.3 | 23% | 76.1 | 30% | |||||||||||||||||
Table Products | 45.8 | 14% | — | — | |||||||||||||||||
Total revenues | $ | 320.8 | 100% | $ | 249.3 | 100% | |||||||||||||||
Gross Margin: (1) | |||||||||||||||||||||
EGM | $ | 48.8 | 52% | $ | 36.0 | 50% | |||||||||||||||
Gaming Operations | 72.0 | 68% | 71.3 | 70% | |||||||||||||||||
Systems | 53.3 | 72% | 56.9 | 75% | |||||||||||||||||
Table Products | 37.7 | 82% | — | — | |||||||||||||||||
Total gross margin | $ | 211.8 | 66% | $ | 164.2 | 66% | |||||||||||||||
Selling, general and administrative | $ | 93.2 | 29% | $ | 72.4 | 29% | |||||||||||||||
Research and development costs | 34.4 | 11% | 29.5 | 12% | |||||||||||||||||
Depreciation and amortization | 21.8 | 7% | 5.3 | 2% | |||||||||||||||||
Operating income | $ | 62.4 | 19% | $ | 57.0 | 23% | |||||||||||||||
GAAP Diluted EPS | $ | 0.75 | $ | 0.97 | |||||||||||||||||
Non-GAAP Measures: (2) | |||||||||||||||||||||
Adjusted Operating Income | $ | 87.2 | 27% | $ | 62.2 | 25% | |||||||||||||||
Adjusted EBITDA | $ | 116.3 | 36% | $ | 86.7 | 35% | |||||||||||||||
Adjusted EPS | $ | 1.17 | $ | 0.96 |
(1) | Gross Margin excludes amortization related to intangible assets which are included in depreciation and amortization (“D&A”). | |
(2) | Adjusted Operating Income, Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including share-based compensation and restructuring and acquisition-related costs), and Adjusted EPS are Non-GAAP financial measures. Reconciliation between GAAP and Non-GAAP measures can be found at the end of this news release. | |
(3) | Results for the three months ended September 30, 2014 include SHFL entertainment, Inc. (“SHFL”) and Dragonplay Ltd (”Dragonplay”). | |
As of September 30, | |||||||
2014 | 2013 | ||||||
End-of-period installed base: | |||||||
Linked progressive systems | 2,378 | 2,522 | |||||
Rental and daily-fee games | 15,496 | 14,533 | |||||
Lottery systems (1) | 12,591 | 11,907 | |||||
Centrally determined systems | 29,311 | 33,711 | |||||
Utility products | 9,324 | NA | |||||
Proprietary Table Games (“PTG”) | 3,065 | NA | |||||
Table game progressive units, table game side bets, and add-ons | 5,761 | NA | |||||
(1) | Excludes 703 and 727 third-party Electronic Table System (“ETS”) seats operating as of September 30, 2014 and 2013, respectively. | |
Three Months Ended | ||||||||||||||
2014 | 2013 | |||||||||||||
Operating Statistics |
Units |
Average Selling |
Units | ASP | ||||||||||
New EGM | 4,744 | $17,767 | 3,995 | $16,307 | ||||||||||
Utility products | 824 | $16,967 | NA | NA | ||||||||||
Highlights of Certain Results for the Three Months Ended September 30, 2014
Overall
- Total revenue increased 29 percent to a first quarter record of $321 million as compared with $249 million last year.
- Adjusted EBITDA increased 34 percent to a first quarter record of $116 million as compared with $87 million last year.
- Selling, general and administrative expenses (“SG&A”) remained constant at 29 percent of total revenues and includes $8 million of one-time acquisition-related costs. After adjusting for these one-time costs, SG&A was 26 percent of total revenues in the current period, down from 27 percent when adjusted for $5 million of one-time acquisition-related costs last year.
- Research and development expenses (“R&D”) decreased to 11 percent of total revenue versus 12 percent last year.
- Operating income increased to $62 million as compared with $57 million last year. Adjusted Operating Income increased by 40 percent to a first quarter record of $87 million. Adjusted operating margin increased to 27 percent from 25 percent last year.
- GAAP Diluted EPS was $0.75 as compared with $0.97 last year. Adjusted EPS increased 22 percent to a first quarter record of $1.17.
Electronic Gaming Machines
- Revenues increased 32 percent to $94 million as compared with $71 million last year, primarily driven by the increase in unit sales in Australia coupled with an increase in ASP.
- ASP of new electronic gaming devices increased 9 percent to $17,767 per unit from $16,307 last year, primarily due to the increase in Australia sales volume and an increase in the sale of the Pro Wave premium cabinet.
- New-unit sales to international customers were 44 percent of total new-unit shipments as compared to 20 percent in the prior year period.
- Gross margin increased to 52 percent from 50 percent last year, primarily due to the sale of higher margin Pro Wave cabinets and geographic mix.
Gaming Operations
- Revenues increased to a record $106 million as compared with $102 million last year, driven by continued placement of premium games, record wide-area progressive (“WAP”) revenue, and the inclusion of 2,242 leased ETS seats.
- Gross margin decreased to 68 percent from 70 percent last year, primarily due to the inclusion of lower margin leased ETS seats.
Systems
- Revenues were $74 million as compared with $76 million last year, decreasing primarily due to a large system installation recognized in the prior period offset by the inclusion of revenues from the acquisition of Dragonplay during the current period.
- Maintenance revenues decreased 8 percent to $23 million as compared with $25 million last year.
- Gross margin decreased to 72 percent from 75 percent last year, primarily as a result of the change in mix of products. Specifically, hardware sales were 33 percent of systems revenues, and software and service sales were 36 percent, as compared to 30 percent for hardware sales and 37 percent for software and services sales in the same period last year.
Table Products
- Revenues were $46 million, with Utility products revenue of $31 million and PTG revenue of $15 million.
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 | |||||||||||
September 30, | |||||||||||
2014 | 2013 | ||||||||||
(in millions) | |||||||||||
Net income attributable to Bally Technologies, Inc. | $ | 28.8 | $ | 37.8 | |||||||
Interest expense, net | 16.7 | 2.0 | |||||||||
Income tax expense | 16.2 | 16.2 | |||||||||
Depreciation and amortization | 41.7 | 22.0 | |||||||||
Share-based compensation | 3.9 | 3.5 | |||||||||
Restructuring and acquisition-related costs | 9.0 | 5.2 | |||||||||
Adjusted EBITDA | $ | 116.3 | $ | 86.7 | |||||||
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 components of restructuring charges are related primarily to executive transition costs, inventory, and fixed assets write-offs and non-cancelable lease costs related to excess facilities. Acquisition-related costs include financial advisory, legal, and debt fees; accounting, consulting, and professional fees associated with due diligence, valuation and integration; severance; and adjustments related to step-up in inventory basis and amortization of purchased intangible assets.
The following tables reconcile the Company’s GAAP to Non-GAAP Financial Measures:
Three Months Ended September 30, 2014 | |||||||||||||||||||||||||||||
Revenues | Gross | SG&A | D&A | Operating | Net Income (2) | EPS | |||||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||||||||
GAAP Measures | $ | 320.8 | $ | 211.8 | $ | 93.2 | $ | 21.8 | $ | 62.4 | $ | 28.8 | $ | 0.75 | |||||||||||||||
GAAP % | 66% | 29% | 19% | ||||||||||||||||||||||||||
Amortization of purchased | — | — | — | (15.8) | 15.8 | 10.2 | 0.27 | ||||||||||||||||||||||
Restructuring and acquisition- | — | 0.7 | (8.3) | — | 9.0 | 5.8 | 0.15 | ||||||||||||||||||||||
Total adjustments | — | 0.7 | (8.3) | (15.8) | 24.8 | 16.0 | 0.42 | ||||||||||||||||||||||
Adjusted Non-GAAP Measures | $ | 320.8 | $ | 212.5 | $ | 84.9 | $ | 6.0 | $ | 87.2 | $ | 44.8 | $ | 1.17 | |||||||||||||||
Adjusted % | 66% | 26% | 27% | ||||||||||||||||||||||||||
(1) | Gross Margin excludes amortization related to intangible assets which are included in depreciation and amortization. | |
(2) | Adjustments are tax affected at 35.5%. | |
Three Months Ended September 30, 2013 | |||||||||||||||||||||||||||||||||
Revenues | Gross Margin | SG&A Expenses | D&A | Operating Income | Net Income (1) | EPS | |||||||||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||||||||||||
GAAP Measures | $ | 249.3 | $ | 164.2 | $ | 72.4 | $ | 5.3 | $ | 57.0 | $ | 37.8 | $ | 0.97 | |||||||||||||||||||
GAAP % | 66% | 29% | 23% | ||||||||||||||||||||||||||||||
Acquisition-related costs | — | — | (5.2) | — | 5.2 | 3.4 | 0.08 | ||||||||||||||||||||||||||
One-time tax benefit | — | — | — | — | — | (3.6) | (0.09) | ||||||||||||||||||||||||||
Total adjustments | — | — | (5.2) | — | 5.2 | (0.2) | (0.01) | ||||||||||||||||||||||||||
Adjusted Non-GAAP Measures | $ | 249.3 | $ | 164.2 | $ | 67.2 | $ | 5.3 | $ | 62.2 | $ | 37.6 | $ | 0.96 | |||||||||||||||||||
Adjusted % | 66% | 27% | 25% | ||||||||||||||||||||||||||||||
(1) | Adjustments are tax affected at 35.5%. | |
Adjusted EPS and other such adjusted measures are supplemental Non-GAAP financial measures that the Company’s management believes more accurately reflects the Company’s operating results for the periods presented. Adjusted measures should not be considered an alternative to GAAP measures as determined in accordance with GAAP.
About Bally Technologies, Inc.
Founded in 1932, Bally Technologies, Inc. (NYSE: BYI) provides the global gaming industry with innovative games, table game products, systems, mobile, and iGaming solutions that drive revenue and provide operating efficiencies for gaming operators. For more information, please contact Mike Trask, Senior Manager, Marketing & Corporate Communications, at 702-532-7451, or visit http://www.ballytech.com. Connect with Bally on Facebook, Twitter, YouTube, LinkedIn and Pinterest.
This press 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 may be typically identified by such words as “may,” “will,” “should,” “would,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,” “intend,” and other similar expressions among others. Although we believe the expectations reflected in any forward looking statements are reasonable, they involve known and unknown risks and uncertainties, are not guarantees of future performance, and actual results, performance or achievements may differ materially from any future results, performance or achievements expressed or implied by such forward looking statements and any or all of our forward looking statements may prove to be incorrect. Consequently, no forward looking statements may be guaranteed and there can be no assurance that the actual results or developments anticipated by such forward looking statements will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company or its business or operations. Factors which could cause our actual results to differ from those projected or contemplated in any such forward looking statements include, but are not limited to, the following factors: (1) the risk that the conditions to the closing of the merger (the “Merger”) contemplated by the Agreement and Plan of Merger, dated as of August 1, 2014, by and among the Company, Scientific Games Corporation (“Scientific Games”), Scientific Games Nevada, Inc. and Scientific Games International, Inc. (the “Merger Agreement”) are not satisfied (including a failure of the stockholders of the Company to approve, on a timely basis or otherwise, the Merger and the risk that regulatory approvals required for the Merger are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated); (2) litigation relating to the Merger; (3) uncertainties as to the timing of the consummation of the Merger and the ability of each of the Company and Scientific Games to consummate the Merger; (4) risks that the proposed transaction disrupts the current plans and operations of the Company; (5) the ability of the Company to retain and hire key personnel; (6) competitive responses to the proposed Merger; (7) unexpected costs, charges or expenses resulting from the Merger; (8) the failure by Scientific Games to obtain the necessary debt financing arrangements set forth in the commitment letter received in connection with the Merger; (9) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Merger; and (10) legislative, regulatory and economic developments. The foregoing review of important factors that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in the Company’s most recent Annual Report on Form 10-K for the year ended June 30, 2014, and our more recent reports filed with the Securities and Exchange Commission. The Company can give no assurance that the conditions to the Merger will be satisfied. Except as required by applicable law, the Company undertakes no obligation to revise or update the information in this press release, or to make any other forward looking statements, whether as a result of new information, future events or otherwise, except as required by law and represents that the information speaks only as of today’s date.
— BALLY TECHNOLOGIES, INC. —
Duck Dynasty ━ © 2014 A&E Television Networks, LLC. All rights reserved. Duck Dynasty, A&E and their associated logos are the trademarks of A&E Television Networks, LLC. All rights reserved. Friends ━ TM & © Warner Bros. Entertainment Inc. (s14)
BALLY TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013 | ||||||||||||
Three Months Ended | ||||||||||||
September 30, | ||||||||||||
2014 | 2013 | |||||||||||
(in 000s, except per share amounts) | ||||||||||||
Revenues: | ||||||||||||
Gaming equipment and systems | $ | 186,228 | $ | 147,387 | ||||||||
Product lease, operation and royalty | 134,577 | 101,902 | ||||||||||
320,805 | 249,289 | |||||||||||
Costs and expenses: | ||||||||||||
Cost of gaming equipment and systems (1) | 71,257 | 54,506 | ||||||||||
Cost of product lease, operation and royalty (1) | 37,718 | 30,619 | ||||||||||
Selling, general and administrative | 93,170 | 72,427 | ||||||||||
Research and development costs | 34,425 | 29,504 | ||||||||||
Depreciation and amortization | 21,793 | 5,265 | ||||||||||
258,363 | 192,321 | |||||||||||
Operating income | 62,442 | 56,968 | ||||||||||
Other income (expense): | ||||||||||||
Interest income | 1,588 | 2,481 | ||||||||||
Interest expense | (18,338 | ) | (4,427 | ) | ||||||||
Other, net | (400 | ) | (900 | ) | ||||||||
Income from operations before income taxes | 45,292 | 54,122 | ||||||||||
Income tax expense | (16,248 | ) | (16,172 | ) | ||||||||
Net income | 29,044 | 37,950 | ||||||||||
Less net income attributable to noncontrolling interests | 199 | 166 | ||||||||||
Net income attributable to Bally Technologies, Inc. | $ | 28,845 | $ | 37,784 | ||||||||
Basic and Diluted earnings per share attributable to Bally Technologies, Inc.: | ||||||||||||
Basic earnings per share | $ | 0.76 | $ | 0.98 | ||||||||
Diluted earnings per share | $ | 0.75 | $ | 0.97 | ||||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 37,796 | 38,381 | ||||||||||
Diluted | 38,266 | 39,091 | ||||||||||
(1) | Cost of gaming equipment and systems and product lease, operation and royalty exclude amortization related to intangible assets which are included in depreciation and amortization. | |
BALLY TECHNOLOGIES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2014 AND JUNE 30, 2014 | ||||||||||
September 30, | June 30, | |||||||||
(in 000s, except par value amount) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 74,417 | $ | 77,439 | ||||||
Restricted cash | 14,069 | 17,179 | ||||||||
Accounts and notes receivable, net of allowances for doubtful accounts of $16,541 and $14,806 | 289,851 | 314,119 | ||||||||
Inventories | 96,938 | 82,289 | ||||||||
Prepaid and refundable income tax | 19,105 | 21,938 | ||||||||
Deferred income tax assets | 37,504 | 36,934 | ||||||||
Deferred cost of revenue | 12,541 | 15,723 | ||||||||
Prepaid assets | 23,568 | 21,800 | ||||||||
Other current assets | 14,885 | 6,013 | ||||||||
Total current assets | 582,878 | 593,434 | ||||||||
Restricted long-term investments | 19,247 | 93,977 | ||||||||
Long-term accounts and notes receivables, net of allowances for doubtful accounts of $909 and $929 | 43,579 | 50,329 | ||||||||
Property, plant and equipment, net of accumulated depreciation of $76,996 and $74,158 | 70,104 | 70,218 | ||||||||
Leased gaming equipment, net of accumulated depreciation of $240,447 and $248,086 | 121,980 | 131,504 | ||||||||
Goodwill | 1,016,675 | 1,003,377 | ||||||||
Intangible assets, net | 515,942 | 508,245 | ||||||||
Deferred income tax assets | 2,072 | 3,892 | ||||||||
Income tax receivable | — | 457 | ||||||||
Deferred cost of revenue | 2,716 | 6,989 | ||||||||
Other assets, net | 59,135 | 56,389 | ||||||||
Total assets | $ | 2,434,328 | $ | 2,518,811 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 41,555 | 37,651 | |||||||
Accrued and other liabilities | 95,285 | 115,010 | ||||||||
Jackpot liabilities | 10,579 | 11,726 | ||||||||
Deferred revenue | 37,141 | 43,161 | ||||||||
Income tax payable | 8,475 | 5,554 | ||||||||
Current maturities of long-term debt | 38,399 | 38,465 | ||||||||
Total current liabilities | 231,434 | 251,567 | ||||||||
Long-term debt, net of current maturities | 1,842,671 | 1,886,953 | ||||||||
Deferred revenue | 6,404 | 20,209 | ||||||||
Other income tax liability | 10,218 | 10,355 | ||||||||
Deferred income tax liabilities | 113,700 | 110,899 | ||||||||
Other liabilities | 40,467 | 32,907 | ||||||||
Total liabilities | 2,244,894 | 2,312,890 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders’ equity: | ||||||||||
Common stock, $.10 par value; 100,000 shares authorized; 66,145 and 66,047 shares issued and 38,345 and 38,694 outstanding | 6,607 | 6,595 | ||||||||
Treasury stock at cost, 27,800 and 27,353 shares | (1,161,893 | ) | (1,134,407 | ) | ||||||
Additional paid-in capital | 604,188 | 593,427 | ||||||||
Accumulated other comprehensive loss | (34,241 | ) | (5,423 | ) | ||||||
Retained earnings | 773,784 | 744,939 | ||||||||
Total Bally Technologies, Inc. stockholders’ equity | 188,445 | 205,131 | ||||||||
Noncontrolling interests | 989 | 790 | ||||||||
Total stockholders’ equity | 189,434 | 205,921 | ||||||||
Total liabilities and stockholders’ equity | $ | 2,434,328 | $ | 2,518,811 |
Photos/Multimedia Gallery Available: http://www.businesswire.com/multimedia/home/20141030006583/en/
Contacts:
Laura Olson-Reyes, 702-532-7742
Senior
Director, Marketing & Corporate Communications
Lolson-reyes@ballytech.com
Michael
Carlotti, 702-532-7995
Vice President of Treasury and Investor
Relations
mcarlotti@ballytech.com
Mike
Trask, 702-532-7451
Mobile: 702-330-6679
Sr. Manager,
Corporate Communications
MTrask@ballytech.com