Bally Investor Presentation. March 2011

Transcription

1 Bally Investor Presentation March 2011

2 Safe Harbor Statement Certain statements that may be made today will be considered forward looking as that term is defined under the rules of the Securities and Exchange Commission ( SEC ), and are therefore subject to the safe harbor created by such rules. Although the Company believes the expectations reflected in any forward looking information and statements are reasonable, such forward looking information and statements involve risks and uncertainties that could lead actual results to differ from those contained in today s presentation materials and discussion. The general factors impacting future results are discussed in detail in the Company s SEC filings. The forward looking information and statements in this presentation speak only as of the date hereof and the Company undertakes no obligation to update the information contained in this report unless required by law. Bally Technologies, Inc. (NYSE: BYI) 2

3 What We Will Discuss Today Overview Strategy Financial Momentum Gaming Products Casino Systems Market Opportunities Why Invest in Bally? 3

4 Company Overview % LTM Gross Profit 25% 45% 30% 4

5 North American Gaming Industry Overview Equipment Suppliers Significant barriers to entry Slots are the highest ROI investments for casinos Spend on slot machines is insignificant compared to casino infrastructure costs Only three large competitors Strong free cash flow Large installed base of recurring revenue units Depreciable life: 5-7 years Replacement cycle created by obsolescence, technology improvements & competition and pent-up demand Sample Product Offerings Ability to increase prices annually Continued raw material input price declines Sample Product Offerings Casino Operators Systems 27% More than 900 casinos in North America with 960,000+ gaming devices, including over 425 tribal casinos Legal in 40 states in the continental U.S. Las Vegas Strip represents only 6% of the installed base of slot machines in North America Jurisdictional expansions typically result from a weak economy and rising budget deficits Fragmented industry top five operators control only 18% of slots Deemed an acceptable form of entertainment by more than 80% of Americans Favorable demographics median income 15% above Sample Product Offerings national average and average age of 47 Highly regulated industry with significant barriers to entry U.S. market is not saturated when compared to many other countries 5

6 Bally Competitive Advantages Systems Leader Dominant provider of systems Share gains with new Windows-based system Convergence of systems with games Hardware Innovation ideck New Pro Series Cabinets V32 Cabinet Global Success Marquee Games Cash Spin Hot Shot Cash Wizard Vegas Hits Quick Hit Blazing 7s Under-Represented on Casino Floors North America ( 13% penetration) Underpenetrated in gaming operations International (only 19% of LTM revenue) Video (70%+ of recent orders) Accelerating Innovation 135 new titles released at 2010 G2E Won more Gaming & Technology awards than anyone else at G2E 2 years running Won Best Gaming Technology Manufacturer Award at 2010 IGE London show Robust systems product pipeline India Development Centers $45 million of annual savings Speed, quality, 24x7 Strong Balance Sheet and Cash Flow 0.7x gross leverage Ample liquidity to drive shareholder value Increasing cash flow Stable, Experienced Management Team 6

7 Research and Development Added 50% more game studios in the past 18 months! Single game technology platform Reorganized development teams and processes India Centers o Bally employees o Bangalore and Chennai o Cost, speed, and quality Approximately half of total employees concentrate on R&D 11% of LTM revenue Customer focused! Save $45M+ Annually! Employees dedicated to R&D Result = Innovation Explosion! 7

8 2010 G2E Innovation Acceleration! New Game Titles at 2010 G2E 2. Pro Series Cabinets & ALPHA 2 3. Wheels Hot Spin with U-Spin Vegas Hits Cash Wizard 4. WAPS Betty Boop s Love Meter Golden Pharaoh and Money Vault 5. ideck 6. Elite Bonusing Suite DM Wheel iview Wizard Tournaments 7. Bally App 8. Bally TV 9. Bally Command Center 10. Private Innovation Lab Bally Leads G2E Innovation Awards AGAIN! Please visit BallyTech.com for video clips on several new Bally games and systems innovations 8

9 Award-Winning Innovation Industry Experts and Independent Judges Vote for Bally s Innovation 2011 Gaming & Technology Awards: 1 st Place: ideck 1 st Place: Elite Bonusing Suite with iview DM 3 rd Place: Hot Spin 2010 Hospitality Operations Technology Awards: 1 st Place: Elite Bonusing Suite with iview DM 9

10 Gaming Equipment Sales Market Share vs. Recent New Opening Ship Share Trends 13% Bally Market Share 16-22% Bally Ship Share 1H 11 Highlights New unit ASP increased by 7% to $15,244 International units represented 32% of total units Innovation Leader New Pro Series cabinets New ALPHA 2 operating system and games 135 new titles for 2010 G2E V32 video slots Spinning reel 5 and 7-reel, 3-in-1 stepper Future Opportunities Rebound in the replacement market; ship-share gains Gross margin expansion Incremental conversion kit sales International growth penetrate more markets Classics replacements 50 new titles to target 50,000 units in the field 10

11 Gaming Equipment Innovation During 2011, Bally will release 125 new titles for its new Pro Series Cabinets video and spinning reel and its highly successful V32 cabinets. V32 Cabinets Pro Series Video Slots Spinning Reel Slots 11

12 ALPHA 2 OS, Pro Series Cabinets & ideck TM Upright Slant Spinning Reel ALPHA 2 Operating System Dual-core processor ; 4GB RAM; & 1GB Video Card Enhanced multimedia experience streaming video 10x as fast as ALPHA Four screen full HD graphics Backwards compatible with ALPHA games ideck TM New Pro Series Cabinets Audiophile-quality, 4 speaker custom sound Vivid dual hi-def widescreen displays Better accessibility for on-floor servicing Combo bill acceptor & ticket printer Modular design Network and server-based gaming ready Backwards compatible with ALPHA games ideck TM Fully downloadable multi-touch screen button deck Synchronized touch features, multi-touch Skill based gaming apps 12

13 Fixed vs. Variable Fee Games 42% 58% Gaming Operations 1H 11 Highlights First-half record revenues of $156 million Gross margin of 71% Increased in the average win per day in linked progressives, rental & daily-fee and video lottery Fixed Fee Variable Fee Future Opportunities Grow installed base of recent releases: Cash Spin, Spinning Wheels, Dual Vision, Digital Tower Series, Vegas Hits New upcoming releases: Blazing Hot Tournament, Cash Wizard, Blazing Hot Double Jackpot, Hot Spin New WAPs: Betty Boop s Love Meter, Money Vault Continued market share gains New markets 13

14 Gaming Operations Innovation In 2011, Bally will release several new gaming operations games including WAP s, games with U-Spin Feature, Wheels and additional Digital Tower Series TM. New Games with U-Spin New Wheels New WAPS New Digital Tower Series TM 14

15 Systems Maintenance Revenues 1H 11 Highlights ($ in millions) $70 $65 $60 $55 $50 $45 $40 $35 $30 $34.3 $41.8 $51.2 $58.0 $65.0 $63.0 Grew gross margin to 73% from 69% Grew maintenance revenues by 13% to a record $32 million New systems contracts with marquee customers competitive replacements and new casinos Win / loss ratio continues to improve FY07 FY08 FY09 FY10 FY11E Future Opportunities Gross Margin 73% Elite Bonusing Suite iview DM, CoolSign Media Management, Bally Command Center & other server-based initiatives 69% SDS for Windows newer market segment Further penetrate existing customer base with new products such as Business Intelligence Higher maintenance and service revenues 1H10 1H11 15

16 Overview of Bally s Systems Business Core Slot-Monitoring Systems New Products Maintenance and Services Real-time monitoring of slots and tools to collect and manage data $2,000 per machine Works in Windows, Linux and UNIX environments Target market is new casinos and competitive replacements at existing casinos Suite of products designed to improve the players experience, player marketing and the casinos data intelligence Products include iview, iview DM, Business Intelligence, CoolSign, Elite Bonusing Suite, Bally TV, Biometrics, Bally App Sell to Bally s existing systems customers and new installs Maintenance revenues approximate 20% of the initial cost of all software sold payable annually Bally also offers services to customers which includes basic product servicing and customization of software to fit specific needs 5-7 YEAR FUTURE REVENUE DRIVERS # OF GAMES $ PER GAME $ POTENTIAL OVER 5-7 YEARS Current Customers to Sell New Products 420K ~ $2,500 $1,050M Market Share Gains (competitive replacements) 120K ~ 3, M New Casinos (50% share) 70K ~ 3, M PER ANNUM Increased Maintenance Increased Services $5-10M $5-10M 16

17 Systems Leadership 28 of the 46 largest casinos in the World (3,000+ slots) select Bally Systems! 17

18 Server-Based Gaming Bally has a full suite of products designed to take advantage of all aspects of server-based gaming on today s floors and on the floors of the future. 18

19 iview Player Communication Network Bally s Player Communication Network provides server based gaming benefits without requiring customers to replace their existing floors. Picture in picture Multiple screens or separate screen Backward compatible Customized marketing at the point of play Second ways to win New transactions & experiences Improved service Inventory polling & interrogation Integration with CoolSign and top boxes GLI approved to work on five different manufacturers existing games! Progressives Tournaments Celebrations Advertising Rewards Services Banking 2 nd chances to win Mapping Bonusing 19

20 Floor-Wide Elite Bonusing Suite TM Bally s floor-wide Elite Bonusing Suite TM delivers truly remarkable and new ways to excite and reward players across the casino floor on iview TM, iview DM TM and CoolSign. Automated, strengthened and personalized promotions for players Real-time marketing Floor-wide bonusing Second chance to win Slot tournaments Instant rewards 20

21 Systems Products and Apps Core to Cool Bally Apps lets casinos stay connected with players 24/7 through web based apps designed for smart phones to communicate promotions and events and download sample games such as Cash Spin Allows casinos to personalize their promotions on iview & DM and Cool Sign including floor-wide bonusing with U-Spin bonusing, power winners, flex rewards, and tournaments etc. to target key players Infrared scanning technology which can identify players and employees at the slot for anonymous comping, responsible gaming, employee monitoring and other functions Allows casinos to take control of all digital media outlets, in-room TV s, interactive kiosk s and signage throughout the casino for promotions, advertising, employee communication & training Enables casinos to update multiple devices and download and configure content on a slot machine from a central location for yield management and other tools for floor optimization, tournaments etc. Functions as a universal translator amongst multiple different system interfaces slot, hotel management, F&B etc and allows for open and scalable universal translation and communication Applications for casinos to analyze and visualize the extensive data gathered on the floor to improve game performance and floor layout, player interaction, behavior, loyalty and value Backward compatible player communication technology for the entire floor giving casinos an effective method of reaching out to players for account access, bonusing, promotions, media content & specials Table management solutions to replace manual player rating process with electronic automation, eliminating delays and errors and reducing costs of manual entering of player ratings Scalable and easy to use solutions to handle casino accounting, financial audits, credit lines, regulatory reporting, compliance, player ratings, loyalty programs, multi-property support, player cards Cool! Core Scalable and easy to use solutions to handle slot monitoring, accounting, operations, bonusing, sweepstakes, promotions, ticketing, jackpots, promotional coupons and redemptions 21

22 North America Replacement Cycle Rebound The North American replacement cycle is poised for a rebound Aging floors and technology obsolescence Need for customers to reinvest in existing assets to drive profits Pressure from new competition with fresh floors Investments in slot floors have a proven and immediate ROI Under-investment in existing floors since 2006 Annual Replacement Cycle 120, , ,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, K 110K 90K 40-45K Last 2 Years Upside Normal Cycle Replacement Cycle Data Source: Company Estimates & Wall Street Research 5 22

23 United States Market Opportunities Several new markets and potential new markets exist within the United States. New & Expansion Market Opportunities Legislation enacted markets Potential new markets Existing market expansions Potential existing market growth Upside Potential 20-30K units 15-75K units 40-55K units 5-10K units K units Potential New Markets Massachusetts North Carolina Kentucky Texas Potential Existing Market Growth Rhode Island Michigan Iowa Alabama Arizona Colorado Connecticut Idaho Indiana Iowa Louisiana Existing Markets Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Jersey New Mexico North Dakota Oklahoma Oregon Rhode Island South Dakota West Virginia Wisconsin Washington States in bold represent Bally-focused markets Legislation Enacted Markets Kansas Ohio land based Existing Market Expansions California New York Florida Maryland Illinois Pennsylvania Ohio tracks 4 23

24 International Market Opportunities Since FY04, Bally has grown its international revenues at a 29% CAGR and yet only 19% of its LTM revenues from continuing operations were from international markets. International Revenue as % of Total (1) 22.0% 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 20.2% 16.8% 15.8% 12.6% 11.0% 9.2% Existing Markets FY05 FY06 FY07 FY08 FY09 FY10 Existing Markets Macau / Singapore France Latin America / Caribbean Canada Mexico South America Western Europe South Africa New Opportunities Australia New Opportunities Eastern Europe Italy Potential New Jurisdictions Brazil Taiwan Greece Japan New & Expansion Market Opportunities Italy Mexico Canada Greece Upside Potential (1) International revenues exclude Canada. 57K units 15-30K units 10 25K units 25 30K units New Opportunities K units 6 24

25 Long-Term EPS Growth Potential Bally has a number of opportunities to generate long-term EPS growth. Organic Growth Replacement cycle rebound Ship share improvement New market openings International expansion New products New technologies + Margin Expansion Scale efficiencies More conversion-kit sales Higher software sales Lower raw material costs Pricing power Free Cash Flow Strategic acquisitions Share repurchases Investments in customers Customer financings Debt repayment + = Long-Term EPS Growth Potential 25

26 Significant Operating Leverage* Through incremental sales, margin expansion, cost controls, and de-leveraging, Bally s business model has a significant amount of operating leverage to drive future earnings per share growth. Incremental Unit Sales and Placements of Games and Systems Continued Margin Expansion Cost Controls and De-Leveraging Each incremental 1,000 units sold Each incremental 500 premium units placed on participation Each new 2,000 unit system: Installation $0.08 $0.10 $0.07 Each incremental 100bp increase in Gaming Equipment margin Each incremental 100bp increase in Gaming Operations margin Each incremental 100bp increase in Systems margin $0.03 $0.03 $0.02 Each incremental 25bp decline in SG&A Each $20M of Debt repaid $0.02 $0.01 Recurring maintenance revenue $0.01 * Analysis based on Bally LTM results and analysts consensus revenue guidance. 26

27 Future Earnings Growth Opportunities Bally has several future opportunities to drive earnings per share growth. Premium pipeline: Cash Spin, Wheels, Towers New WAPS: Betty Boop s Love Meter, Money Vault Pro Series Cabinets & ALPHA 2 iview DM & Elite Bonusing Suite Strong systems pipeline Italy VLT s (57,000-unit market) Mexico, South Africa, Australia Replacement cycle improvement Aqueduct Canada RFPs Ohio $ $ $ $ $ $ $ $ $ $ $ 27

28 Why Invest in Bally? Growth Opportunities New domestic & international markets New product offerings Replacement cycle uptick Convergence of games and systems Entering more existing international markets Technology Leader ALPHA single game platform Effective game studios India Centers = $45M+ savings Strong product pipeline Market Share Opportunities 13% game equipment install base Underpenetrated in gaming operations Underpenetrated internationally Gaining systems market share Leading Systems Provider Biggest casinos use Bally Systems SDS for Windows expands market opportunities Gaining market share New Apps Server-based initiatives Experienced Management Team Completed dramatic turnaround Integrated five acquisitions Retooled software & hardware platforms Improved infrastructure & internal controls Stable Revenues & Growing Margins 51% LTM recurring revenue Focus on regional / tribal markets Pricing power Additional margin expansion opportunities 28