Bally Technologies, Inc. Reports Record First Quarter Diluted EPS of $0.53 on Revenues of $196 Million

• Press Release
• Source: Bally Technologies, Inc.
• On 4:02 pm EDT, Thursday October 29, 2009

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

• GAMING OPERATIONS REVENUES INCREASED TO A RECORD $71 MILLION
• SYSTEMS REVENUES INCREASED 15 PERCENT FROM LAST QUARTER TO $54 MILLION
• OPERATING MARGIN IMPROVED TO A RECORD 26 PERCENT FROM 23 PERCENT LAST YEAR
• CASH FLOW FROM OPERATIONS INCREASED 59 PERCENT OVER LAST YEAR TO A FIRST QUARTER RECORD $40 MILLION
• COMPANY RAISES FISCAL 2010 DILUTED EPS GUIDANCE TO RANGE OF $2.30 TO $2.55
• COMPANY INITIATES FISCAL 2010 SYSTEMS REVENUE GUIDANCE OF $220 MILLION TO $230 MILLION

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Bally Technologies, Inc. (NYSE: BYI - News), a leading global gaming technology supplier, today announced record first quarter diluted earnings per share (“Diluted EPS”) of $0.53 on revenue of $196 million for the three months ended September 30, 2009.

“Despite the challenging economy, our strong product portfolio and diversified business model drove yet another very profitable quarter,” said Richard M. Haddrill, the Company’s Chief Executive Officer. “We also continued to build our recurring revenues to 51 percent of total revenues in the first quarter versus 40 percent in the same period last year.”

“We continued to strengthen our balance sheet in the first quarter as we further reduced debt by $6 million, while repurchasing $15 million of our stock and increasing our cash balance by $20 million,” added Robert C. Caller, the Company’s Chief Financial Officer. “Improved gaming equipment and gaming operations gross margins, and control of expenses, allowed us to drive our first quarter operating margin to a record 26 percent during the quarter from 23 percent in the same period last year.”

Three Months Ended September 30, 2009 Compared with Three Months Ended September 30, 2008

• Diluted EPS increased to a first quarter record of $0.53 as compared with $0.52 last year.
• Net income attributable to Bally Technologies, Inc. increased to a first quarter record $31 million as compared with $30 million last year.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including asset charges and share-based compensation), a non-GAAP financial measure, increased to a first-quarter record $73 million.
• Free Cash Flow, a non-GAAP financial measure, increased by 72 percent to $36 million as compared with $21 million last year.
• Operating margin increased to a record 26 percent as compared with 23 percent last year.
• Total revenues decreased to $196 million as compared with $237 million last year.
• Operating income decreased to $51 million as compared with $53 million last year.
• Selling, general, and administrative (“SG&A”) expenses remained constant at 24 percent of total revenues in both periods.
• Research and development (“R&D”) expenses increased to 10 percent of total revenue as compared with 8 percent last year.

During the first quarter of fiscal 2010, the Company repurchased 392,000 shares of its common stock for approximately $15 million. Since October 1, 2009, under the Company’s 10b-5 plan, an additional approximately 204,000 shares were purchased for approximately $8 million, leaving approximately $39 million remaining under its current share-repurchase authorization.

Unaudited summary financial information for Bally Gaming Equipment and Systems for the three months ended September 30, 2009 and 2008 is presented below:

“Our Gaming Operations business generated record revenues during the first quarter resulting from recent new product introductions, including our Digital Tower Series games,” Bally’s Chief Operating Officer Gavin Isaacs said. “During the second quarter, we will release additional content, including spinning-wheel games and our DualVision™ two-player cabinet. We are also excited about our innovative new game content based on customer feedback leading into this year’s Global Gaming Expo (“G2E”), where we will have 30 percent more space than in 2008. We will offer our customers twice as many titles in calendar 2010 versus 2009, many of which will be showcased at G2E.”

“We are very positive about the current state of our systems business, our competitive position, and our expanding backlog and sales pipeline,” said Ramesh Srinivasan, the Company’s Executive Vice President – Systems. “Over the past few months, we signed several new systems contracts with marquee customers, including multiple competitive replacements and new casino additions, and a change by a major Macau organization to Bally as their systems standard. The industry seems to find our re-engineered core products to be well ahead of the competition. I believe that our systems leadership will continue to expand. Our new suite of iVIEW DM™, CoolSign™ Media Management, Bally Command Center™, and Bally Business Intelligence™ is key to the future of gaming, and is being well received by top casino executives.”

Highlights of Certain Results for the Three Months Ended September 30, 2009

Gaming Equipment

• Revenues decreased to $62 million as compared with $107 million in the same period last year.
• New gaming device sales decreased to 3,936 units, as compared with 6,598 units in the same period last year, due to a continued sluggish North America replacement market. In addition, there were also fewer new openings and expansions this quarter as compared to the prior year period.
• New unit sales to international customers were 1,518 units, or 39 percent of total new-unit shipments, as compared with 1,399 units in the same period last year.
• ASP of new gaming devices increased to $14,115 per unit, primarily as a result of product mix.
• Gross margin increased to 48 percent from 44 percent in the same period last year, primarily due to the increase in ASP, lower material costs, and a decrease in inventory write-downs.

Gaming Operations

• Revenues increased to a record $71 million as compared with $68 million in the same period last year, primarily driven by an increase in premium revenue units and an increase in revenue per unit.
• Gross margin increased to a record 73 percent from 70 percent in the same period last year, primarily as a result of an increase in participation, rental, and license revenue which had little associated variable costs.

Systems

• Revenues increased to $54 million as compared with $52 million in the same period last year as a result of higher maintenance and services revenue, as well as the continued acceptance of the Company’s products, including the Company’s iVIEW™ player-communication network, Business Intelligence, SDS® for Windows® and suite of bonusing products.
• Gross margin decreased to 67 percent from 68 percent in the same period last year, primarily as a result of an increase in parts and freight expense associated with several large go-lives in the quarter.
• Maintenance revenues increased to $14 million as compared with $12 million in the same period last year.

Fiscal 2010 Business Update

The Company raised its fiscal 2010 guidance for Diluted EPS to $2.30 to $2.55 from an earlier range of $2.25 to $2.50. The Company also expects that its fiscal 2010 Systems revenues will range from $220 million to $230 million. While this guidance is still based upon less than optimal visibility into the fiscal year due to the current weak global economy and sluggish North American gaming machine replacement market, it is offset by the Company’s new product introductions and an expected improvement in customer spending beginning in calendar 2010. This guidance does not consider any significant benefit from recently announced or potential new jurisdictions in North America or international markets. As a result of normal seasonal trends and the expectation of an improvement in customer spending in calendar year 2010, the Company continues to expect that its Diluted EPS in the second half of fiscal 2010 will exceed the first half.

The Company has provided this updated range of earnings guidance and initial Systems revenue guidance for fiscal 2010 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, competitive product introductions, and assumptions about the Company’s new product introductions and regulatory approvals.

Non-GAAP Financial Measures

The following table reconciles the Company’s net income attributable to Bally Technologies, Inc., as determined in accordance with accounting principles generally accepted in the United States (“GAAP”), to Adjusted EBITDA:

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 Cash Flows from Operating Activities, as determined in accordance with GAAP, to Free Cash Flow:

Free Cash Flow, as calculated by Cash Flows from Operating Activities less Capital Expenditures, is a supplemental non-GAAP financial measure used by the Company’s management to evaluate the Company’s ability to generate excess cash that can be used for investments, debt repayment, stock repurchases, and other activities. Free Cash Flow should not be considered in isolation or as an alternative to Cash Flows from Operating Activities as determined in accordance with GAAP. Not all companies calculate Free Cash Flow the same way, and the Company’s presentation may be different from those presented by other companies.

Earnings Conference Call and Webcast

As previously announced, the Company is hosting a conference call and webcast today at 4:30 p.m. EDT (1:30 p.m. PDT). The conference-call dial-in numbers are 866-543-6408 or 617-213-8899 (International); passcode “Bally.” The webcast can be accessed by visiting BallyTech.com and selecting “Investor Relations.” Interested parties should initiate the call and webcast process at least five minutes prior to the beginning of the presentation. For those who miss this event, an archived version will be available at BallyTech.com until November 28, 2009.

About Bally Technologies, Inc.

With a history dating back to 1932, Las Vegas-based Bally Technologies designs, manufactures, operates and distributes advanced gaming devices, systems and technology solutions worldwide. Bally’s product line includes reel-spinning slot machines, video slots, wide-area progressives and Class II, lottery and central determination games and platforms. As the world’s No. 1 gaming systems company, Bally also offers an array of casino management, slot accounting, bonusing, cashless and table-management solutions. The Company also owns and operates Rainbow Casino in Vicksburg, Miss. Additional Company information, including the Company’s investor presentations, can be found at BallyTech.com.

This news 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 are subject to change and involve risks and uncertainties that could significantly affect future results, including those risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. Although the Company believes any expectations expressed in any forward-looking statements are reasonable, future results may differ materially from those expressed in any forward-looking statements. The Company undertakes no obligation to update the information in this press release except as required by law and represents that the information speaks only as of today’s date.

— BALLY TECHNOLOGIES, INC. —

Bally Technologies, Inc., Las Vegas
Laura Olson-Reyes, 702-584-7742
Director of Corporate Communications
Lolson-reyes@ballytech.com
Michael Carlotti, 702-584-7995
Vice President of Investor Relations and Capital Markets
mcarlotti@ballytech.com