econd quarter fiscal 2011 Diluted EPS included a prior-period benefit of us$ 0.05 per diluted share from the reinstatement of the US research and development tax credit to January 1, 2010.
“I am pleased with the acceptance of our recent innovation, including the new Alpha 2 platform, the strength of our new gaming operations products, and the interest in our iVIEW DM player-centric networked gaming system,” said Richard M. Haddrill, the company’s CEO. “We continue to see excellent growth opportunities for Bally in Canada, Italy, Australia, Mexico, New York, and selected other U.S. and international jurisdictions.”
“During the second quarter, we purchased approximately 475,000 of our shares for us$ 18 million,” said Neil Davidson, the company’s CFO. “Since January 1, 2011, under the company’s 10b-5 plan, we purchased an additional us$ 5 million worth of stock. And since November 2007, we have steadily purchased approximately 5.7 million shares of our common stock for almost us$ 200 million and continue to see a very positive future for Bally.”
“Calendar 2010 represented one of the toughest environments for replacement and new game sales,” said Gavin Isaacs, the company’s COO. “As we look towards calendar 2011 and beyond, we expect to see both an improvement in replacement demand and jurisdictional expansions. We are well positioned to take advantage of these developments with our new Alpha 2 platform and Pro Series cabinets that we launched at last November’s Global Gaming Expo, which are performing well in the initial launches. Our Gaming Operations pipeline continues to be enhanced with the recent release of Vegas Hits, Blazing Hot Tournament and most recently Cash Wizard.”
“Our lower than normal revenue levels in the first half of fiscal 2011 have not been fair indications of our backlog, pipeline, and win-loss ratio levels, all of which continue to remain strong,” said Ramesh Srinivasan, the firm’s Executive Vice President – Systems. “Our competitive strength and positioning in Systems have never been better. The commercial rollouts of iVIEW DM and Elite Bonusing Suite products are now beginning to take shape. We will be showcasing these products in action in a live production environment at our upcoming annual Systems User Conference in March.”
Highlights of certain results for the three months ended December 31 are:
ASP of new gaming devices increased by 7 % to us$ 15,244 per unit from us$ 14,289 last year, primarily as a result of product mix and sales of Pro Series cabinets with ALPHA 2 technology.
Gross margin decreased to 49 % from 53 % last year due to higher costs for the initial production runs of the Pro Series cabinets.
New gaming device sales decreased to 3,468 units as compared with 4,997 units last year due to a continued sluggish North America replacement market and fewer new openings and expansions during the quarter.
Revenues decreased to us$ 59 million as compared with us$ 79 million last year.
New unit sales to international customers were 34 % of total new-unit shipments, as compared with 33 % last year.
Revenues increased 12 % to us$ 77 million as compared with us$ 69 million last year, driven by placements of new premium games throughout the quarter.
Gross margin increased to 71 % from 70 % in the same period last year.
Revenues were us$ 46 million, up 14 % compared to first quarter fiscal 2011, and lower when compared with us$ 58 million last year, as a result of a lower number of large go-lives during the quarter.
Gross margin remained constant at 72 %.
Maintenance revenues increased to a record us$ 16 million as compared with us$ 15 million in the same period last year.
The effective tax rate for the three months ended December 31, 2010 was 20 %, which benefited from certain discrete items including the retroactive reinstatement of the U.S. research and development tax credit to January 1, 2010 and conclusion of the IRS audit for 2003 to 2005.
Highlights of certain results for the six months ended December 31:
New gaming device sales decreased to 6,291 units as compared with 8,933 units last year due to a continued sluggish North America replacement market and fewer new openings and expansions during this period.
Revenues decreased to us$ 110 million as compared with us$ 141 million last year.
New unit sales to international customers were 32 % of total new-unit shipments, as compared with 36 % last year.
Gross margin decreased slightly to 49 % from 50 % last year due to higher costs for the initial production runs of the Pro Series cabinets with ALPHA 2 technology.
Revenues increased 12 % to us$ 156 million as compared with us$ 140 million last year, driven by the placement of new premium games throughout the period.
Gross margin remained constant at 71 %.
Revenues decreased to us$ 87 million as compared with us$ 112 million last year, due primarily to the timing of Bally Technologies. Reports diluted EPS of us$ 0.49 on second quarter revenues of us$ 183 million due to certain customer decisions regarding system purchases and installations and several large system installations in Macau during the six months ended December 31, 2009.
Gross margin increased to 73 % from 69 % last year, primarily as a result of a change in the mix of products sold and higher maintenance revenue in the comparative periods.
Maintenance revenues increased to a record us$ 32 million, as compared with us$ 28 million last year.
Fiscal 2011 business update
The company updated fiscal 2011 guidance for Diluted EPS from continuing operations to us$ 2.00 to us$ 2.15, which includes us$ 0.89 per diluted share earned during the first half of fiscal 2011. This Diluted EPS guidance range continues to assume a challenging North American replacement market, as well as limited new casino openings and expansions during the period.
The company now expects fiscal 2011 total systems revenues of us$ 205 million to us$ 215 million, including systems maintenance revenues of us$ 63 million to us$ 65 million. The company has provided this updated range of earnings guidance for fiscal 2011 to give investors general information on the overall direction of its business at this time. The updated guidance provided is subject to numerous uncertainties, including, among others, overall economic and capital markets conditions, the market for gaming devices and systems, changes in gaming legislation, the timing of new jurisdictions and casino openings, competitive product introductions, complex revenue-recognition rules related to the company’s business, and assumptions about the company’s new product introductions and regulatory approvals.