WMS Industries Inc. (NYSE:WMS) today reported revenue of $157.5 million and net income of $4.3 million, or $0.08 per diluted share, for the quarter ended December 31, 2012, inclusive of a $2.0 million after-tax impact, or $0.04 per diluted share, for a discrete non-U.S. tax item and $2.5 million of pre-tax expense, or $0.03 per diluted share, for costs incurred in the process leading to the recently announced definitive merger agreement with Scientific Games Corporation (NASDAQ:SGMS). These results compare to revenue of $162.2 million and net income of $16.1 million, or $0.29 per diluted share, in the December 2011 quarter, which included a benefit of $2.1 million pre-tax, or $0.02 per diluted share, related to the settlement of litigation.
Net income and diluted earnings per share in the December 2012 quarter reflect a year-over-year increase in research and development and online marketing expenses to support growth in the Company’s interactive products and services initiatives, as well as the impact of the two interactive acquisitions completed in the June 2012 quarter. In addition, December results reflect the ongoing development and commercialization of a greater number of new participation and for-sale games and cabinets, including the new Blade™ and Gamefield xD™ cabinets with WMS’ CPU-NXT®3 operating system, both of which are on schedule to launch in the March 2013 quarter.
- Gaming operations revenues increased $8.0 million on a year-over-year basis and $1.6 million on a quarterly sequential basis to $72.7 million, primarily reflecting continued interactive products and services revenue growth, as well as growth in the installed participation base, which was 342 gaming machines higher at December 31, 2012 than at December 31, 2011.
- Cash flow provided by operating activities for the six months ended December 31, 2012, was $71.2 million, a year-over-year increase of $5.5 million or 8%.
- During the quarter, Jackpot Party® Social Casino, the fourth most-popular casino game on Facebook® as measured by number of daily active users, generated continued revenue growth, averaging more than $100,000 a day in revenues after the Facebook payment processing fee, primarily due to higher monetization rates and higher average daily payments by paying players.
- Jackpot Party Social Casino was launched on the Apple® iOS on the iPhone® during December. As a native application on iOS available in the Apple iTunes Store®, the app quickly became among the top ten largest grossing casino game apps on the iPhone from Apple.
- WMS was selected by the Western Canada Lotteries Corporation to replace existing VLT units throughout the province of Saskatchewan, adding to its previous selection by the Alberta Liquor and Gaming Commission and Manitoba Lotteries Corporation to participate in their VLT replacement initiatives.
- In the December quarter, WMS agreed to make its library of classic slot gaming content available to the British Columbia Lottery Corporation for its online casino.
- In the December 2012 quarter, WMS’ innovative new My Poker® video poker dedicated gaming machines were introduced at casinos in several regional locations.
“WMS’ progress with the commercialization of new innovative game content and products is evident in the sequential quarterly growth of domestic replacement units shipped and solid demand for our Canadian and Illinois VLT units,” said Brian R. Gamache, Chairman and Chief Executive Officer. “Importantly, in the current quarter we have installed our new unique Gamefield xD participation gaming machines at casinos in New Jersey and expect initial installations in more jurisdictions throughout the quarter. Further, following the December 2012 launch of our My Poker® video poker platform in select regional locations, we have now launched the product at Station Casinos’ properties in the Las Vegas area and continue to roll it out in additional casinos in various jurisdictions. We also recently shipped our first units of the sleek, new Blade cabinet to a casino in Detroit. Customer demand for the Blade cabinet is running at record levels for a WMS product launch and in the March and June quarters we expect to ship more than twice the units we shipped in the first two quarters after launching our Bluebird2 cabinet almost five years ago. We also have very high customer demand for the Gamefield xD product. In its first four weeks of being orderable, we have booked more than 500 unit placements. The early performance of our new video poker product is also very encouraging and we have more than 750 My Poker gaming machines shipped to-date or on order. Reflecting the commercialization of these multiple new cabinet launches, in the current quarter WMS will go from having the oldest set of gaming machines amongst our competitive set to offering the freshest group of new cabinets.“In addition, with the revenue growth achieved to date for interactive products and services, our investment in this attractive new product distribution channel is proving to be very prudent,” continued Gamache. “The early success of Jackpot Party Social Casino contributed to the $12 million in year-over-year revenue growth from interactive products and services.” Fiscal 2013 Second Quarter Financial Review The following table summarizes key components related to revenue generation for the three months ended December 31, 2012, and 2011 (dollars in millions, except unit, per unit and per day data):
| Three Months Ended
|Product Sales Revenues:|
|New gaming machine sales revenues||$||75.6||$||79.1||$||(3.5||)||(4.4||)|
|Other product sales revenues||9.2||18.4||(9.2||)||(50.0||)|
|Total product sales revenues||$||84.8||$||97.5||$||(12.7||)||(13.0||)|
|Average sales price per new unit||$||15,558||$||16,325||$||(767||)||(4.7||)|
|New unit shipments to the U.S. and Canada||2,778||2,759||19||0.7|
|New unit shipments to International markets||2,080||2,087||(7||)||(0.3||)|
|Total new units on which revenue was recognized||4,858||4,846||12||0.2|
|Used unit shipments||924||1,575||(651||)||(41.3||)|
|Total unit shipments||5,782||6,421||(639||)||(10.0||)|
|Conversion kit unit sales||1,390||5,000||(3,610||)||(72.2||)|
|Cost of product sales||$||43.2||$||48.7||$||(5.5||)||(11.3||)|
|Gaming Operations Revenues:|
|Interactive products and services revenues||13.0||1.2||11.8||nm|
|Other gaming operations revenues||5.1||5.1||—||—|
|Total gaming operations revenues||$||72.7||$||64.7||$||8.0||12.4|
|Installed base of participation units at period end||9,624||9,282||342||3.7|
|Average installed participation units||9,281||9,376||(95||)||(1.0||)|
|Average daily revenue per participation unit||$||63.89||$||67.62||$||(3.73||)||(5.5||)|
|Cost of gaming operations||$||13.7||$||14.4||$||(0.7||)||(4.9||)|