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“WMS’ fiscal third quarter results reflect lower-than-expected global new unit demand, unit shipments expected to be fulfilled in the March quarter not shipping until early April, and delays in the commercialization of certain new products. We’ve already begun to implement the appropriate solutions to address the root causes for the fulfillment issues and we are revising our processes for regulatory submissions to try to shorten the time frames from-concept-to-launch for our advanced technology-based new products."

- Brian R. Gamache, Chairman and Chief Executive Officer


  • “Despite the continued impact of customers’ constrained capital budgets, our strategic direction remains laser focused. We made progress on several fronts in the third quarter including further increases in sales of new units into international markets, a year-over-year increase in average selling prices and progress towards lowering the cost structure and improving the profit margin for our popular Bluebird xD™ units. We also successfully introduced several new games for our participation business that are improving the average revenue per day performance of our installed base."
  • Product sales:
    • New  units sold: 6,058
      • New units to NA: 3,720 (replacements: 3,000)
      • International: 2,338
      • "Growth in Mexico and Australia, and modest growth in Asia and Latin America more than offset lower shipments to Europe. Mechanical reel products were 21% of global new unit shipments in the March 2011 quarter"
    • ASP: $16,492
      • ASPs "rose 3%... , primarily reflecting a product sales mix that benefited from Bluebird2 and Bluebird xD premium-featured units representing 92% of total global new unit sales in the March 2011 quarter, compared to 89% in the March 2010 quarter and 96% in the December 2010 quarter. The average selling price was essentially flat on a quarterly sequential basis, representing a slightly more favorable mix of premium products offset by a greater portion of international shipments of original, lower-priced Bluebird cabinets in the March 2011 quarter."
    • Used machine sales: 2,500 (vs. 2,200 in March 2010)
    • Hardware & conversion kit sales: 2,200 (vs. 3,000 in March 2010)
      • "Other product sales revenues rose ... 12%... driven by higher revenues from low-margin used gaming machines sales, while revenues from higher-margin hardware and game conversion kit sales declined modestly year over year."
    • GM: 48.6%
      • "Reflecting the impact from the introduction this year of the Bluebird xD cabinet, more low-margin used gaming machine revenues and a declining margin achieved on the sale of such units, lower new unit sales revenue, added costs associated with customer changes to existing orders and new orders received late in the quarter, and lower revenues from high-margin conversion kit sales."
      • "Additional cost structure reductions and supply chain improvements are expected to drive higher Bluebird xD and overall product sales gross margins in the June 2011 quarter."
  • Game ops:
    • Install Base (End of period): 10,002 (average: 10,021)
      • Coin in: 3,829
      • % net win:  3,107
      • Daily lease: 3,066
      • "Installed base ... reflects a greater-than-anticipated number of conversions of existing games to newly launched participation games, which reduced the opportunity to grow the installed base. In the March 2011 quarter, WMS launched the new video THE PRICE IS RIGHT- The Ultimate Show, YAHTZEE and Attack from Mars/Revenge from Mars games, and continued the rollout of THE GODFATHER and THE WIZARD OF OZ™- THE GREAT AND POWERFUL OZ games that launched in the December 2010 quarter."
    • Average win per day: $76.14
      • Sequential 2% increase "reflecting the successful introduction of new participation games and historical seasonal influences"
    • "Other gaming operations revenues increased modestly, reflecting revenues from the start-up of the Company’s UK-based online gaming site, partially offset by a decline in royalty income as a result of WMS’ direct entry into markets previously addressed through content licenses to third parties"
    • GM: 60.7%


  • Fulfillment issues: The $8MM delay in fulfillment was due to orders received in the quarter after the cut off date as well as changes to orders late in the quarter. 
  • Believe that customers do not have the increased confidence to increase their budgets to spend on slots
  • Growth in used machine sales continues to depress their margins. 50% of these sales were WMS games. Sales of used gaming machines reduced their margins by 180 bps in the quarter.
  • Deployed 700 new units to their install base, however, most of these games replaced their existing install base games rather than grow the base, but did contribute growth in daily win per day.
  • Invested $30MM in stock repurchases
  • Collection rates remain high and default rates were 1/2 of 1%. Only 2.3% of total receivables were aged more than 90 days - more favorable than their competitors
  • Will provide more color on their F2012 on their next call
  • Portal apps were delayed from original guidance of October to April
  • Adoption of enhanced technologies can experience an extended adoption period - and so they expect the same for portal applications. Plan to maintain pricing flexibility with their earlier adopters.
  • During the last 90 days they have launched multiple games in their G+ Deluxe series - which are amongst their best performing games
  • 400,000 unique log ins have been created to date in Players Life
    • vs 250,000 on their last call 
  • Will continue to opportunistically repurchase WMS shares
  • Began marketing efforts for their UK online site


  • Sense of NA ship share?
    • 26-28% range in the quarter but wallet share was more like 30% given their higher ASP. Expect to get back to 30% ship share with their new product launches. Assume high 20s-30ish% ship share in their FY2012 guidance
      • Based on IGT's and Konami's NA units, we estimate that WMS's ship share was closer to 20%- however this is a preliminary #
  • Haven't bought any more stock since April since they have been in a quiet period
  • Pricing didn't enter into their issues in F3Q
  • Their 2012 guidance includes no new markets aside from some Italy units
  • Not giving up on their 30% operating margin goal - they just need more volume
  • Have 107k BB1's out in the field today
  • xD was just over 20% this quarter and it is still at a bit of a lower margin than the BB2 product although they closed the gap a lot. Expect to reach parity in FQ1.
  • Italy - made their initial submissions and hoping for field trial in June, which once completed will allow them to begin sales
  • R&D- they are just below the 15% mark of revenues. They are trying to manage expenses with their revenues.
  • D&A looked a little higher because they have been investing more in their install base to BB2 from BB1. So D&A will continue to be at that higher level going forward.
  • Felt that they were punished for keeping their game ops games out there too long which is why many of the new games are just replacing old games in their base. Expect a nice uptick in win per day over the next two quarters as well as some uptick in their install base.
  • Have an industry leading delivery time of just 2 weeks - which is part of the reason that they had some issues this quarter - which lead to them taking orders too late in the quarter
  • Expect growth to come from game operations, higher ship share penetration - especially internationally, and new business like portal applications and UK casino
  • Is the deployment of the Italy units contingent on a successful trial? - Yes
  • 700 new NA units include shipments to a Ocean Downs, Grand Falls, and a variety of expansions in Canada and the US
  • 25% of their game operations install base is BB2 or xD and plan to change out the rest over the next few years
  • Did not recognize Galaxy Macau in the quarter
  • Had an obsolescence plan for BB1's out there for the next few quarter. Other than that no new marketing initiatives.
  • Great and Power Oz - is doing very well for them - #s close to the original peaks they reached
  • Doesn't believe that their pricing had anything to do with what happened in the quarter