In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance
- WORSE: Better results on the game sales side were offset by continued poor gaming operations performance. Investments in the interactive crushed margins, leading to an EPS miss. Guidance of basically flat YoY EPS, which is 23% below consensus estimates has got to be hugely disappointing.
OVERALL PERFORMANCE IN F4Q
- WORSE: Gaming operations produced yet another miss. Despite increases in the EOP install base, the average install base actually decreased. So much for the backlog.
- PREVIOUSLY: “Typically we see our Q4 ramping up to be our seasonally busiest quarter of the year. It goes Q4, Q3, Q2, Q1. And so I think April, the month of April was a little bit softer than we would like in our gaming operations business. But our order book is building dramatically, so that offsets that.”
FY4Q REVENUE AND MARGIN PERFORMANCE
- WORSE: Revenues were down 4% YoY but operating margins also decreased from 34.1% to 33.9% YoY
- PREVIOUSLY: “We expect total revenues in the June 2012 quarter to be modestly below year-ago June quarterly revenues, while our operating margin is expected to improve on a year-over-year basis, adjusting out the net impact of restructuring, impairment and other charges in the prior year.”
12-24 MONTH OUTLOOK FOR GAMING OPS
- WORSE: WMS still expects growth in the their participation install base in 2013 although given the heightened competition they're not sure of what churn will look like
- PREVIOUSLY: “We believe that WMS has turned the corner on our efforts to restore growth in our gaming operations business. Looking out over the next few quarters, we expect our normalized flow of innovative new products for our product sales and participation operations scheduled to launch during the next 12 to 24 months.”
INSTALL BASE GROWTH
- WORSE: End of period units increased but that did little to help the quarter since the average install base was still down QoQ due to high churn. Revenue per day was also down. WMS remains hopeful for growth in the install base in FY13, but the talk on the call was definitely toned down from last quarter.
- PREVIOUSLY: “With current open orders for now over 2,100 units and five new participation games expected to receive their regulatory approvals this quarter…. and with our improving product performance, we expect further growth in the installed participation base and revenue per day in the June quarter and beyond. We're confident that the unusually high number of refreshes in the last several quarters will moderate over the next several quarters and slowly return to more historical rates.
2012 NEW OPENING FLOOR SHARE
- SAME: Floor share of new casinos openings was in the high-teens as expected
- PREVIOUSLY: “Our floor share for new casino openings this year is expected to be in the high teens”
SHIP SHARE OUTLOOK
- WORSE: WMS guided to modest growth in ship share in the US & Canada which we do not believe is good enough to get to mid-20's ship share
- PREVIOUSLY: “We expect over time to recapture ship share and reestablish our fair share of the market. I would expect us to get back to more the mid-20%s here in fiscal 2013 based on the performance of our content and we're very excited”
NEW UNIT PRICING
- SAME: ASPs came in just under $16k. WMS expects continued pricing pressures into next year. They do not expect any ASP growth with VLT mix offsetting the impact of their new cabinet in late FY13.
- PREVIOUSLY: “I would think that from a modeling standpoint, you'd probably want to use the last three quarters or so as a more typical ASP price going forward. I think given the competitive pressures, you're not going see us have great pricing leverage in the next two to three quarters, but I think it will be a more normalized run rate going forward, call it the $16,000 range.”
- WORSE: Given the current market place environment coupled with the expected range of VLT pricing from ongoing market pressures, ASPs in FY13 are likely to exhibit greater variability on a quarterly sequential basis depending on the product mix in the given quarter. Their new cabinet release in 2H13 is not likely to be able to offset pricing pressures in 1H13.
- PREVIOUSLY: “I think that going forward, you're going to continue to see us be competitive with pricing. I wouldn't use the word aggressive but we're going to be competitive. We have several premium for sale products coming out in fiscal 2013 that we hope will drive ASP.”
COMMERCIALIZATION OF CPU-NXT3
- SAME: WMS launched their first 2 games in the June quarter on their new platform
- PREVIOUSLY: “I am excited by the prospects to reenergize our customer slot floors with the innovation and potential that will come with the launch of our first games, our next-generation CPU-NXT3 operating system…We are on track to commercialize this new operating system on the Sensory Immersion 2.0 platform, with initial approvals and the launch of the Aladdin & Magic Quest game in the latter part of the June quarter.”
MY POKER UPDATE
- SAME: Expect to ship a few hundred My Poker units in the December 2012 quarter
- PREVIOUSLY: “Another driver of revenue by the end of calendar 2012 will come from the expected launch of My Poker video poker platform.”
IL & ITALY UPDATE
- WORSE: IL is still expected to benefit 2013 but there was no mention of Italy
- PREVIOUSLY: “We anticipate the placements of VLTs in Illinois and Italy, which we expect to begin in fiscal 2013, may result in a greater amount of operating leases, which will require gaming operations capital.”
FY13 CAPEX GUIDANCE
- SAME: WMS expects a 20% YoY decline in aggregate capex spending- mostly on the PP&E side
- PREVIOUSLY: “Looking to fiscal 2013, we expect capital expenditures for property plant and equipment to decline as we'll complete two significant projects over the next few months.”
- WORSE: Capex was $58MM - up a lot QoQ
- PREVIOUSLY: “June quarter… it's likely that CapEx in gaming operations is going to be at or a little above what it was in Q3 as we now get to the point of … incrementing the installed base:”