Bally Investor Presentation February 2009 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 (NYSE: BYI)
2 2 What We Will Discuss Today
Overview Strategy Financial Momentum Gaming Products System Gaming Market Opportunities Why Invest in Bally
3 3 Company Overview Total = $233M
Q2 2009 Revenue in Millions
Sample Product Offerings
Sample Product Offerings
Sample Product Offerings
Technology for the Entire Casino Floor
4 Products for the Entire Floor
ts o Slo Vide
Table-Management System Systems
S tepper Slots
Netw orked Floor
5 5 5 A 75+ Year Culture of Innovation
Hot Shot Progressive, Bally releases Microsoft S9000, and Windows® version of SDS CineVision launched. Ms. Pac‐Man sells 110,000 units, making it the best‐selling game Bally Acquires Planar’s produced that year. CoolSign® digital Bally signage solutions Bally introduces “Baby Bally,” Acquires business for the gaming assets of the world’s smallest slot Company introduces indursty Sierra machine and Company’s first GameMaker, the Design slot machine. world’s first Group, Summary judgment in multigame video introduces Bally’s favor in IGT platform. new ALPHA Wheel, Bally iVIEW™ Bally introduces operating patent infringement Slot Data System system litigation (SDS), the Bally Introduces “Hi‐Boy” world’s first slot management console slot Bally Forms Lab; . system. “Ballyhoo” Pinball Bally introduces Thrillions Office of the CTO Game created. “E” Series –first wide‐area electromechanical progressive slot machines link introduced Bally Launches controlled by with new Business electrical circuitry “Betty Boop” Intelligence “Money Honey” slot . themed slots. Solutions. Bally Manufacturing with “bottomless” founded. hopper introduced.
1932 1936 1945 1963 1976 1980 1994 2004 2007 1982 1999 2006 2008 1930 1950 1970 1990 2010
6 Competitive Advantages
Systems Leader Under Represented on Casino Floors Dominant provider of systems North America (only 13% penetration) New SDS 11.0 rollout Gaming Operations (only 7.5% penetration) Robust product pipeline International (only 15% of revenue) Convergence of systems with games Video (50%+ of recent orders) Single Game Platform- Alpha Leading Stepper Products Efficient development Resurgence of stepper products Speed to market 50% more titles released in FY09 Third party development More hot, must-have products Modular Cabinets India Development Centers Customer ROI $45 Million of annual savings Supply chain cost Speed and quality Marquee Games Key Partnerships Hot Shot Cisco, Aristocrat, Acres Gaming, Teradata Quick Hit Customer Focused Wheels Work with on customers on games & systems technology innovation
7 7 Leadership Combines Experience, New Talent
NEW TALENT Richard Haddrill, CEO 3rd successful CEO position; Former E&Y Partner Dan Savage, VP-Marketing 15 Years Fortune 100 SOLID DEPTH Experience (3M)
Gavin Isaacs, COO 9 Years in Gaming; Former President of Aristocrat Bruce Rowe, SVP 30 Years in Gaming Americas Brian Pierce, VP- (Harrah’s and GTECH) Game Sales 13 Years in Gaming (WMS)
Ramesh Srinivasan, EVP Bryan Kelly, VP- Systems Technology – Innovation 13 Years of IT Leadership Lab Michael Carlotti, VP- Gaming , Internet & IR & Capital Markets Amusement Game 13 Years in Banking / Experience Buyside Research
Mike Mitchell, VP-Game Development Robert Caller, CFO 15 Years Gaming Loren Nelson, VP-Game 30-Year E&Y Veteran Experience Development Created Bally’s Modular 20-Year Gaming Veteran Cabinet Design (IGT, SDG) Class II Focus
8 Games Targeted Floor Penetration
Typical 10-20% 60-80% 10-20% Floor Mix:
Premium/Specialty Core Basic
Bally Bally Bally
Game - Revenue share - Non-licensed titles -Video poker -WAP - Games for purchase -Keno Types: - Specialty titles - Daily fee - Electronic table games - Licensed themes -Traditional steppers - Sophisticated bonusing -Video - Specialized cabinets
Sample Bally Offerings:
9 9 Fastest-Growing Major Supplier $900
($ in millions)
R G A C % 24
.2% 12
10 10 Q2 09 Success: Bally Continues to Execute
• Strong margin improvement over Q208 • Game Equipment: 49% vs. 44% • Game Operations: 68% vs. 58% • Systems: 77% vs. 73% • Operating Income: 25% vs. 20%
• 41% of Q209 revenues were recurring!
• FY09 guidance of $2.15 to $2.35 per share
• Locked in LIBOR at 1.89% for the life of our Term Loan
• Repurchased 740,000 million shares of common stock for $16 million
9% 76 th ow Gr • Total leverage ratio decreased to 0.9x from 1.1x at June 30, 2008
11 Earnings per Share
Recent Results Annual Results / 2009E Guidance
16 - 27% Growth $2.35 $2.15 363% $1.85 Growth
$0.40
12 12 FY2006-2008 North American Ship Shares
Source: SEC filings, equity analyst reports, and Bally estimates 13 13 13 N.A. Market Share Opportunity
North Recent America Bally Installed Ship-Share Base Trends
Premium 10% of installed Premium Participation Recent ship share trends indicate that base (90K games) Participation gaming operators want to increase the Mid 20’s 7.5% Bally mix of Bally product on their floors
For customers to increase their 90% of installed mix of Bally products, they must increase base (800K games) the percentage of their spend on Bally Sale Games Sale Games products
Low 20’s 13% Bally
Source: Company Estimates & Wall Street Research 14 14 Research and Development
Single game technology platform Reorganized development teams and processes Save $45M Internal and third-party developers Annually! India Centers o Bally employees o Bangalore & Chennai o Cost, speed & quality Approximately 51% of total non- e casino employees concentrate on as cre R&D in 5% 8% of revenue 8 Customer focused!
Result = Market-Share Gains!
15 15 Gaming Equipment 1H 09 Highlights 6.2% increase in new units sold Gross margin improved by 170bps New unit ASP up from $13,201 to $14,288 $MM ues ven Re ALPHA OS Platform 8% + Single platform for video & stepper Supports system-driven Class II, Class III & Video Lottery
Innovation Leader Stepper – 5 and 7 reel CineVision™ CineReels™ GameMaker™ HD Increased Titles to Market 50% increase in titles for 2009 Recent mix of 50/50 video and stepper
16 16 16 Gaming Operations
1H 2009 Highlights 10% increase in average total installed base (1H09 vs. 1H08) 69% gross margin $MM ues Sequential growth of premium game installed ven Re 4% base + 2 Fixed fees vs. daily revenue
Hot Shot - most successful title in Bally history!
Reel Money – Exceptionally strong initial performance
17 17 New Game Innovations for FY 2009 160 unique title games at G2E up 58% over 2007 Power Progressives™ Skill games Blazing 7s Multi-Slot V32 stepper
est B t DualVision Slo t duc Jumbo slots Pro 3-in-1 Multi-Game Stepper New Win Messages
3-in-1 Multi-Game Stepper won Best Slot Product for the 2009 Gaming and Technology Awards. 18 18 18 Systems
1H 09 Highlights Maintenance revenue up 23.9% to $25 million
$MM 80% of revenues from existing customers ues ven Re Rollout of SDS 11.0 3% + 1 CASINO MARKETING – State of the Art .NET application – Bally Interface Gateway SLOT MANAGEMENT – Support for Windows - Target smaller casinos – Graphical User Interface (GUI) – Multiple currencies/languages Networked Floor of the Future – iVIEW network; iVIEW DM – Bally Bonusing – Live Rewards
19 Bally Systems in 19 of 27 Casinos With Over 3,000 Slots Total Bally: 19
Aristocrat: 4
Other Vendors: 2
Multimedia Games: 1
IGT: 1 Total: 27
Source: Casino City’s’ Gaming Business Directory – 2008 Edition
20 20 20 Bally is the Systems Gaming Leader
Additional Revenue Maintenance Revenues / Services Revenues Drivers Current Products Future Products
Biometric Add-On Recognition Products Power Cool Winners Signs
Core Slot Management Systems Systems SDS 11.0 Products Casino Management Systems
21 21 iVIEW Player Communication Network
Benefits: Improved service Customized marketing at the point of play Second ways to win New transactions & experiences Inventory polling & interrogation Dynamic game configuration & revenue management Background or foreground downloading Support for responsible gaming
On Games from Every Manufacturer!
22 22 US Market Opportunities
Approximately 25% of Bally’s FY08 game equipment and operations revenue were from Bally’s focused markets.
Bally-Focused Markets Traditional Markets New Jurisdictions
• Alabama • Oklahoma • Arizona • Missouri •Kansas • California • Oregon • Colorado • Montana •Maryland •Florida • Pennsylvania • Connecticut • Nebraska •New York • Washington • Idaho • Nevada • Illinois • New Jersey • Indiana • New Mexico •Iowa • North Dakota Potential New Jurisdictions • Louisiana • Rhode Island • Michigan • South Dakota •Texas • Massachusetts • Minnesota •West Virginia •Kentucky •Ohio • Mississippi • Wisconsin •New Hampshire
4 23 Replacement Cycle Rebound?
• The current replacement cycle suggests gaming devices should last 16+ years versus an average of 9 years from 2001 – 2006. • If the replacement cycle in 2007-08 kept pace with 2001-06 levels, an additional 76,600 machines would have been replaced (8% of the installed base). • The N.A. replacement cycle should rebound due to the following: • 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 Implied Average Machine Life 18 16 16
14 13
12 11 10 10 9 9 8 8 7
6 2001 2002 2003 2004 2005 2006 2007 2008
Replacement Cycle Data Source: Company Estimates & Wall Street5 Research 24 International Market Opportunities
FYE June 30 6 Months Ended International Revenue (1) ‘05 ‘06 ‘07 ‘08 12/31/07 12/31/08
Percentage of Total Revenue 8.2% 10% 11.7% 14.9% 13.1% 14.2%
Year-Over-Year Growth 26.8% 37.9% 48.5% 60.6% 60.6% 21.1%
Existing Markets New Opportunities • Asia/Macau, China • Australia • France • Eastern Europe • Latin America •Singapore • Canada • South Africa •Mexico • South America • Western Europe
(1) International Revenues Exclude Canada 6 25 Why Invest in Bally?
Experienced Bally’s management team completed a dramatic turnaround and Management retooling of the business that has included: Successful integration of five acquisitions Team Revamping the Company’s gaming software and hardware platforms Improving infrastructure including internal controls Increasing Gross Profit at a 35% CAGR since 2005
Increasing Vastly improved product lineup Market Share Ship share for 1H 2009 averaged 22% compared to an estimated installed base market share of 12% to 13%
Strong historical growth in revenues, margins, and overall Strong Financial company performance Performance Operating margin improvements across the Company’s Gaming Equipment, Gaming Operations, and Systems divisions Efficient operation for slow economy 41% recurring revenue
26 Why Invest in Bally?
Effective R&D Alpha single game platform Game studios India R&D Centers annual cost savings of approximately $45 M
19 of 27 casinos with 3,000+ slots use Bally Systems Leading Gaming Gaining market share Systems Provider Add on products Networked floor of the future
Key Growth Attractive domestic and international market opportunities supported by: Opportunities Breadth of product offerings Systems solutions Replacement cycle and new casino openings Convergence of games and systems Video game opportunity Growing international presence Under representation on casino floors
27 Thank You For Your Time. Any Questions?
28 28 28