Bally Technologies increases full year guidance following record Q1

US gaming supplier Bally Technologies said Wednesday that it expects to complete the acquisition of SHFL entertainment before the end of the year, as the company reported record revenue of $249.3m for its first quarter ended September 30th.

Total revenue increased by 6 per cent to $249.3m, with growth in the company’s gaming operations and systems divisions offsetting a decline in gaming equipment.

Q1 2013/14 Revenue

Revenue from gaming operations rose marginally by 0.7 per cent to a record $101.9m, driven primarily by a 12 per cent improvement in the installed base of WAP games, as well as record Q1 revenue for lottery systems.

Systems revenue increased by 48 per cent to a record $76.1m, offsetting a 14 per cent drop in revenue from gaming equipment to $71.3m which was impacted by the expected absence of sales of Canadian video lottery terminal units in the current period compared to 670 units last year.

Bally’s president & CEO Ramesh Srinivasan said: “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.”

Total costs and expenses rose 6 per cent to $192.3m, with selling, general and administrative expenses up by 12 per cent to $72.4m, primarily driven by $5.2m of costs associated with the planned acquisition of SHFL. Research and development costs climbed 18 per cent to $29.5m.

Operating income increased by 6 per cent to a Q1 record $57.0m, with net income for the period rising 23 per cent year-on-year to $38.0m and diluted EPS amounting to $0.97 per share.

Q1 2013/14 Results

“Operating margins increased to 25 per cent when excluding costs related to the planned acquisition of SHFL entertainment, which marks our highest quarterly level in more than three years,” said Bally’s chief financial officer Neil Davidson. “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.”

In an earnings call following the release of the company’s Q1 results, Bally said that its interactive division continues to make progress by expanding its presence with operators in Europe, while the company has also improved its remote gaming server technology since its initial launch a few months ago.

“Both as a content provider and as a technology provider, we are very well positioned to capitalize on online opportunities in the US and look forward to our first wager-based customers going live, utilizing our iGaming platform in the US, in New Jersey and Nevada, later this fiscal year,” said Srinivasan.

“We continue to make very good progress with the integration of our iGaming and mobile platforms, with our back-end core systems, getting ourselves ready for the future where a single view of the player across all channels is going to be a crucial differentiating factor for many of our customers.”

Bally said that it has made significant progress toward completing the planned acquisition of SHFL, with key executives from both companies leading detailed integration planning efforts to ensure a seamless transition plan for customers and employees.

As a result, the acquisition is expected to close prior to the end of this calendar year. The completion remains subject to SHFL shareholder approval, the approval of certain gaming regulatory authorities, and other customary closing conditions.

Bally has increased its guidance for its fiscal 2014 year to a range of $3.80 to $4.10 per share and now expects quarterly diluted EPS to be fairly equally weighted during the year.

As at September 30th the company held cash and cash equivalents of $66.2m compared to $63.2m a year ago.

Shares in Bally Technologies Inc (Co. Data) (NYSE:BYI) closed yesterday in New York at $73.22 per share.