Bally Technologies reports results

LAS VEGAS, Nevada -- (PRESS RELEASE) -- Bally Technologies, Inc. (NYSE: BYI) announced today the filing of its quarterly reports on Form 10-Q for the three-month periods ended Sept. 30, 2006 and Dec. 31, 2006. The following table summarizes the Company's operating results for the six-month periods ended Dec. 31, 2006 (the "fiscal 2007 period") and 2005 (the "fiscal 2006 period"):

                                                  Six Months Ended
                                                       Dec. 31,
                                               2006               2005
                       (dollars in millions, except ASP and per-share amounts)

    Revenues                                 $305.6              $232.9
    Gross margin                              153.1               109.5
    Operating income (loss)                    14.3               (11.3)
    Net loss                                  $(2.7)             $(17.3)

    Basic and diluted loss per share         $(0.05)             $(0.33)

    Weighted average shares outstanding:
       Basic and diluted                     52,985              52,138

    Operating Statistics:
       New gaming devices sold                8,099               6,463
       OEM units sold                         1,605                 326
       New Unit Average Selling Price
        (ASP)                               $12,363             $10,802

Revenues for the fiscal 2007 period increased 31 percent, to $305.6 million from $232.9 million in the fiscal 2006 period ended Dec. 31, 2005. Further, current deferred revenue increased by $16.4 million to $63.5 million at Dec. 31, 2006 compared with $47.1 million at June 30, 2006. The Company reported operating income of $14.3 million for the fiscal 2007 period compared with an operating loss of $11.3 million in the fiscal 2006 period. The Company reported a net loss of $2.7 million ($0.05 per share) for the fiscal 2007 period compared with a net loss in the fiscal 2006 period of $17.3 million ($0.33 per share). In the fiscal 2007 and 2006 periods, the Company recorded stock-based compensation of $5.3 million, net of tax benefit ($0.10 per share) and $3.8 million, net of tax benefit ($0.07 per share), respectively.

The Company's Gaming Equipment and Systems revenues increased 35 percent to $282.6 million for the fiscal 2007 period compared with $208.8 million in the fiscal 2006 period.

Gaming Equipment revenue increased 49 percent, to $136.6 million for the fiscal 2007 period compared with $91.4 million in the fiscal 2006 period, with unit sales of gaming devices increasing 43 percent to 9,704 units in the fiscal 2007 period compared with 6,789 units in the fiscal 2006 period.

The average selling price ("ASP") of new gaming devices (excluding OEM sales) increased 14 percent to $12,363 per unit for the fiscal 2007 period compared with $10,802 per unit in the fiscal 2006 period. The Company recorded inventory obsolescence charges of $6.2 million in the fiscal 2007 period compared with $8.0 million in the fiscal 2006 period. Gross margin on the Company's gaming equipment increased to 35 percent in the fiscal 2007 period from 27 percent in the fiscal 2006 period. The increase in margin was primarily due to lower sales discounts and lower production costs in the fiscal 2007 period compared with the fiscal 2006 period. In addition, in the fiscal 2006 period, the Company recorded higher inventory obsolescence charges in connection with the Company's introduction of ALPHA OS(TM) products.

Gaming Operations revenue increased 8 percent to $77.8 million from $71.8 million in the fiscal 2006 period. Revenue from the Company's rental and daily fee, lottery and centrally determined games improved 24 percent to $63.0 million in the fiscal 2007 period compared with $50.9 million in the fiscal 2006 period as a result of a 32 percent increase in the installed base of games at Dec. 31, 2006 to 43,044 compared with 33,127 at Dec. 31, 2005. The increase in games was driven by new placements of the Company's premium participation games, including Hot Shot Progressive(TM), as well as the placement of approximately 2,600 lottery games in New York state late in the period. The increase in Gaming Operations revenue was partially offset by a decrease in revenues from wide-area products to $13.2 million in the fiscal 2007 period from $19.4 million in the fiscal 2006 period resulting from a decrease in the number of wide-area progressive games deployed. Gross margin on Gaming Operations increased to 58 percent in the fiscal 2007 period compared with 45 percent in the fiscal 2006 period as a result of increased revenues from the Company's premium participation games and a decrease in depreciation expense. In the fiscal 2006 period, the lives of certain participation games were shortened resulting in an acceleration of depreciation over the remainder of their useful lives. Many of these games became fully depreciated in the three-month period ended Sept. 30, 2006.

The following table summarizes the installed base of the Company's Gaming Operations:

                                                Dec. 31,   June 30,
                                                  2006       2006
    End of period installed base:
       Wide-area progressive                       935      1,053
       Near-area progressive                       544        569
          Total linked progressive systems       1,479      1,622

       Rental and daily-fee games                4,636      3,422
       Lottery systems                           7,164      4,300
       Centrally determined systems             31,244     27,437

Systems revenue increased 50 percent to $68.2 million in the fiscal 2007 period compared with $45.6 million in the fiscal 2006 period. Revenues were impacted by an increase in deferred revenues during the fiscal 2007 period. Gross margins on System sales decreased to 68 percent in the fiscal 2007 period from 82 percent in the fiscal 2006 period due to the increase in the proportion of sales of lower margin hardware products versus software.

The Company's selling general and administrative expenses increased 17 percent to $101.7 million in the fiscal 2007 period compared with $87.0 million in the fiscal 2006 period. This increase was partially attributable to an increase in payroll and related costs to support the current and planned growth in the Company's business. Professional and legal fees also increased as a result of the October 2006 restatement of the Company's fiscal 2005, 2004 and 2003 financial statements as well as ongoing intellectual property litigation.

The Company's net interest expense increased to $16.8 million in the fiscal 2007 period compared with $11.7 million in the 2006 fiscal period as a result of higher interest rates as compared with the fiscal 2006 period as well as approximately $2.1 million in fees paid to amend the Company's bank agreement as a result of the delayed filing of the Company's 2006 Form 10-K.

Research and development costs increased 23 percent to $25.9 million in the fiscal 2007 period compared with $21.0 million in the fiscal 2006 period. This increase in research and development reflects the Company's focus on a continued high level of product innovation and quality for growth.

Robert C. Caller, Chief Financial Officer, said, "These two filings represent another important accomplishment as we move closer to our goal of becoming a timely filer. These are our sixth and seventh major filings in the last eight months. We are anxious to complete the filing of our fiscal 2007 Form 10-K on a timely basis."

Fiscal 2007 Business Outlook

"Our financial results for the six months ended Dec. 31, 2006 began to show the fruits of our efforts in consolidating the Company's various businesses and re-tooling the product lines," said Richard M. Haddrill, Chief Executive Officer. "All of our principle product lines showed increases, with revenues from Gaming Equipment and from Systems increasing 49 percent and 50 percent, respectively. As we continue to execute our strategy, we expect that our operating results in the second half of fiscal 2007 and fiscal 2008 will show additional improvement over our results for the first half of the fiscal year."

The Company expects it will record revenue for the six months ended June 30, 2007 in the range of $365 to $385 million, bringing total revenues for the year to an expected range of $670 to $690 million. Total gross margin is expected to increase in the second half of fiscal 2007. Excluding sales of OEM units, the Company expects to sell in excess of 13,000 gaming devices in the second half of fiscal 2007. The Company expects accelerating growth in Gaming Operations revenues in the second half of fiscal 2007 and expects to have placed in excess of 2,000 of its premium Hot Shot Progressive game by June 30, 2007. Revenue from Systems will continue to fluctuate as the Company applies complicated software revenue recognition accounting standards.

The Company expects its selling, general and administrative expenses in the second of half of fiscal 2007 will be between $107 and $112 million. Research and development costs are expected to range between $25 and $28 million.