Gaming equipment maker Bally Technologies Inc. (BYI) posted fiscal 2010 fourth-quarter results after the closing bell on Thursday. The company’s GAAP net income grew 53.8% to $51.0 million from $33.2 million in the year-ago period. Excluding special items, adjusted EPS came in at 55 cents, which narrowly missed the Zacks Consensus Estimate by a penny.
Bally Technologies is a leading gaming systems company, which designs, manufactures, operates and distributes advanced gaming devices, systems and technology solutions worldwide. The company’s product line includes reel-spinning slot machines, video slots, wide-area progressives and class II, lottery, and central determination games and platforms. The company also offers casino management, slot accounting, bonusing, cashless and table-management solutions. During the reported quarter, the company wrapped up the sale of its Rainbow Casino in Vicksburg, MS in all-cash deal worth $80 million.
The Las Vegas, NV-based Bally Technologies recorded a marginal 0.4% decline in total revenues to $195.2 million primarily due to continued weakness in the North American gaming machine replacement market. In terms of segments, Gaming Equipment slipped 18.8% year-over-year to $63.5 million as new gaming device sales slipped 24.1% to 3,830 units, partially offset by an 8% growth in average selling price (ASP) to $15,328.
Gaming Operations logged a 9.3% growth in revenues to $77.4 million on the back of new premium games. Revenues from Systems jumped 15.7% to $54.4 million driven by growth in software, services and maintenance revenue.
Bally’s quarterly gross margin grew 2.8% year-over-year to $126.1 million, while gross margin expanded 180 basis points (bps) to 64.6%. The growth was mainly attributable to better production efficiencies and improved material costs and usage in the Gaming Equipment segment as well as favorable product mix and reduced hardware costs in Systems. However, overall gross margin was partially offset by higher jackpot expense in Gaming Operations.
Total operating income posted a modest 0.8% year-over-year growth to $48.4 million, while operating margin rose 30 bps to 24.8%. The increased operating margin was primarily attributable to higher gross margin, partially offset by a 120 bps increase in research and development costs, as a percentage of sales, to 10.7%.
Bally ended the quarter with cash and cash equivalents of $145.1 million, compared to $55.9 million in the year-ago period. During the fourth quarter, the company bought back 1.6 million shares for a total consideration of $62 million.
Moving forward, Bally expects earnings of $2.05 to $2.40 per share in fiscal 2011, assuming a continuation of challenging conditions in the second half of calendar 2010. The guidance is in line with the Zacks Consensus Estimate of $2.33 per share, which slipped 16 cents in just the past week as 2 of 6 covering analysts lowered expectations.
We currently have a short-term Zacks #3 Rank (‘Hold’) on Bally Technologies.
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