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In preparation for WMS's FQ3 2011 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from its preliminary guidance on April 11, FQ2 2011 earnings call, and other releases.


Preliminary FQ3 Results:

  • Revenue $191-193MM (previously $209-215MM)
  • Diluted EPS: $0.40-0.42
  • “Our third quarter results are clearly a disappointment and reflect several factors including lower-than-anticipated new unit demand in the March 2011 quarter, WMS’ execution challenges that resulted in approximately $8 million in product sales revenue from customers’ orders that shipped in April instead of the March 2011 quarter, and continued challenges in commercializing new products, including a slower rate of initial regulatory process approvals arising from the increased complexity of our newest gaming features and networked-technology enablers.” 
  • Cash: $144MM; no debt
  • Repurchased $30MM (750k shares) of WMS stock; for FY2011, have repurchased $80MM (2.1MM shares) of WMS stock.
  • "Following the introduction of several new successful participation themes during the March 2011 quarter, WMS expects gaming operations revenue to have stabilized and be approximately in-line with the December 2010 quarter [$72.7MM], partially reflecting a quarterly sequential increase in average daily revenue per gaming machine."
  • "The Company expects total gross profit margin to be in-line with the December 2010 quarter total gross profit margin reflecting an improvement in gaming operations gross margin with gaming operations being a slightly higher percentage of total revenues, and a decline in product sales gross margin primarily due to higher revenues and lower margin from used gaming machines. The Company’s operating margin for the March 2011 quarter is also expected to be relatively flat on a quarterly sequential basis reflecting lower gross profit due to lower revenues offset by lower operating costs related to expense containment initiatives."
  • “Casino operators’ capital budgets for replacing slot machines have been at historically low levels for several years, and new casino openings and expansions are now at their lowest level in many years.”
  • “Based on recent customer capital budgets and unit demand trends, we don’t expect meaningful improvements in the industry environment over the remainder of CY 2011 or, at this point, for CY 2012 and today we issued revenue guidance accordingly. Until we begin to see consistent economic recovery, growth in consumer spending and improvements in industry replacement and new unit demand, we believe WMS’ annual revenue will continue to grow at a mid-to-high single-digit percentage rate consistent with the growth achieved in FY 2009 and FY 2010, and now in FY 2011.”

Revised FQ4 and FY2012 Outlook

  • F4Q revenues: $210-$220MM
  • FY2011 revenues: $790-800MM
  • FY20112 revenues: $810-850MM
    • "The expected revenue growth is based on continued market penetration, especially in international markets, new market openings domestically and internationally, growing revenues from new networked gaming and online gaming products and increased participation revenues."
  • “Operating margin guidance for the June 2011 quarter of 22.0%-to-23.5% reflects expected quarterly sequential improvements in product sales gross margin and operating costs declining as a percentage of revenues compared to the March 2011 quarter.”
  • FY 2012 operating margin: 21-22%


  • Gaming Laboratories International (GLI) approved the commercial version of WAGE-NET networked gaming system solution and Jackpot Explosion, the first themed application in the Ultra Hit Progressive (“UHP”) Portal application family.
    • “Our initial beta placements have clearly demonstrated the incremental value of a Portal application interoperating with a base game, with coin-in premiums averaging 35%-to-40% across more than 270 Bluebird2, Bluebird xD and upgraded Bluebird gaming machines at 12 casinos.”
    • Anticipates initial installations of WAGE-NET and Jackpot Explosion in Native American casinos in California that are currently running beta-tests of the products, followed by other tribal and commercial casinos among the 12 casinos presently acting as beta-test sites.
    • Recently began a WAGE-NET/Jackpot Explosion field trial in Nevada at a popular Las Vegas casino


  • “We remain on track to further improve Bluebird xD gross margins on a quarterly sequential basis throughout fiscal 2011...We continue to expect that the Bluebird xD gross margin will attain parity with Bluebird2 gross margin in the June 2011 quarter.”
  •  “With the growth anticipated in the installed base during the next two quarters, we believe that the average installed base for the full year will be a couple hundred units higher than fiscal 2010 but will be somewhat below the low end of our original guidance range we provided in August 2010.”
  • “With ... new participation products launching in the current quarter such as YAHTZEE, Revenge From Mars/Attack From Mars and the new PRICE IS RIGHT video game and additional new participation products in the June quarter, we expect further growth in the installed footprint throughout the remainder of fiscal 2011, helping to continue our strong momentum as we head into fiscal 2012.”
  • ”We expect to see further incremental increases in depreciation in the March and June quarters as we continue this transition in our installed-participation base and selectively invest in other high return lease opportunities.”
  • “In the March and June 2011 quarters, we expect our effective consolidated income tax rate to be in a range of 35% to 36%, inclusive of the ongoing R&D tax credit benefit and the small impact from the increase in the Illinois state corporate income tax rate.”
  • “With respect to international markets in general, our recent discussions with casino operators here suggest that the environment in Europe is stabilizing and could translate in a more positive sentiment for capital spending much later this calendar year. In the interim, we continue to see strength in Latin America, Asia and Australia.”
  • “We now expect to place our first units on a lease basis in Italy early in the September quarter after we complete the certification process.”
  • “In Illinois, we expect to hear shortly who’s been awarded the central system contract for the VLTs following a resubmission of bids back in early December. Following the announcement and signing of that contract and the awarding of licenses, we expect to generate our first sales in the second half of calendar 2011.”
  • “Our accelerating launch schedule throughout calendar 2011 followed in early calendar 2012 by the expected launch of the highly anticipated first games based on a next generation CPU-NXT3 operating system along with having the highest daily revenue amongst our competitive set provides WMS with the opportunity to generate enhance value from the meaningful opportunities to expand our share of the participation business.”
  • “I’m very confident that the participation business will get back on track in Q3. We will have a significant ramp up in Q4 based on the product launches and particularly in the WAP area.”
    • “We’ve got 12 new G Plus deluxe games for sale that are coming out over the next few months. Those games, we’ve already got four approved and there’s eight more coming. They’re doing spectacularly well for the additional placement so that gives us great confidence.”
  • “Used games, as Scott mentioned, is about 240 basis points off of our product margin and it’s about 100 points more than we had anticipated. So that the strong demand for our Bluebird1 trade-ins is actually a good thing because we’re starting to harvest our own market share replacement cycle.”
  • [UK online wagering marketing] “We’ve started initially rolling out some of the marketing programs as of last week, I believe, and we’ll start to ramp that up more aggressively in February, March and April. So we will get more aggressive as the year goes on but, again, as we guided before, those revenues for fiscal ‘11 will be deminimus.”