Bally Technologies, Inc. (BYI) reported second quarter 2011 diluted earnings from continuing operations of 49 cents per share outdoing the Zacks Consensus Estimate of 46 cents per share.
The diluted EPS included 5 cents per share prior-period benefit from the reinstatement of the U.S. research and development tax credit to January 1, 2010. The reported EPS decreased 12.5% on year over year basis but increased 22.5% sequentially.
Management said that the recent innovations have all been accepted well in the market and the company continues to see excellent growth opportunities in Canada, Italy, Australia, Mexico, New York, and selected other U.S. and international regions.
Quarter in Detail
All time second quarter record gaming operations revenue of $77.1 million, which contributed 42% of the total revenue could not help the total revenue of $182.7 million beat the Zacks Consensus Revenue Estimate of $188.0 million. This also fell 10.9% from the year ago quarter.
Total revenue decreased apart from Gaming Operations, which increased 12.4% year over year. Gaming Equipment and Systems decreased on a yearly basis.
Gaming equipment decreased 24.9% from prior year same quarter to $59.2 million due to the sluggish North America replacement market and fewer new openings in the quarter.
Systems fell 19.4% from prior year quarter to $46.4 million due to a lower number of large go-lives during the quarter.
Management said that the lower than normal revenue levels in the first half of fiscal 2011 is not a proper reflection of the company’s backlog, pipeline and win-loss ratio levels. All of which, according to the management, continues to remain strong.
Total gross profit decreased 10.1% to $117.0 million but the gross margin remained the same at 64% when compared with the same quarter previous year.
Operating income fell 31.7% from previous year quarter to $35.7 million and operating margin declined by 6 percentage points to 20%.
Bally Tech repurchased approximately 475,000 of the company’s shares for $18 million, during the quarter, under the company’s 10b-5 plan, and since January 1, 2011 the company has purchased an additional $5 million worth of stock.
The Road Ahead
Bally Tech updated fiscal 2011 guidance for diluted EPS from continuing operations to be in the range of $2.00-$2.15 and includes a 89 cents per diluted share which was earned during the first half of the fiscal 2011.
Reportedly, the guidance range assumes a challenging North American replacement market, as well as limited new casino openings and expansions during the period.
For fiscal 2011 management expects total systems revenues to be between $205-$215 million and including of systems maintenance revenues of $63 million to $65 million.
Conclusion
Estimates for the quarter had been stable in the run-up to the earnings release, though only 1 analyst gave a negative revision in the last 30 days. The full-year estimate for next year has moved up over the past two months to $2.68 per share from $2.64, with 3 analysts giving a positive revision and 1 analyst giving a negative revision in the last 30 days.
The full-year Zacks Consensus Estimate for current year increased by a cent to $2.14 over the last thirty days.
Management stated that the competitive strength and the positioning in Systems have proven to be one of the best in past quarter. However Bally Tech faces competition from International Game Technology (IGT) and WMS Industries Inc. (WMS).
We currently have a Zacks #3 Rank for Bally Tech which translates into a Hold rating on short term basis. For long term, we have a Neutral recommendation.
BALLY TECH INC (BYI): Free Stock Analysis Report
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