In its report on second quarter earnings yesterday, WMS Industries reiterated its expectation of 10%-12% growth in fiscal 2009 total revenues to $712 million to $728 million. Second quarter highlights included a 12% increase in total revenues to a record $178.4 million and a 6% rise in global new unit shipments, also a record. 7,518 units were shipped, of which 17% were WMS new fully digital Bluebird 2 units.

“With our distinctive culture of innovation, growing gaming operations revenue, increased market penetration, pristine balance sheet and increased cash flow generation, WMS continues to strengthen its foundation for further long-term growth and enhanced stockholder value. WMS’ success, highlighted by our double-digit growth in revenues, net income and cash flow in the December 2008 quarter, reflects both continuing demand for our innovative products and the operating benefits being realized from the continuous improvement initiatives being driven by WMS’ global employee team,” said Brian R. Gamache, Chairman and Chief Executive Officer.

“Our company-wide focus on operational excellence is generating consistent margin improvement over prior-year periods, which enables the funding of future growth initiatives, including R&D spending for the development of next-generation products. In the fiscal second quarter, the Company’s operating execution resulted in a 190 basis-point increase in operating margin to 17%, even as we increased R&D spending by 48% over the prior year. The operating margin increase, combined with continued improvements in working capital efficiency, drove record second quarter cash flow from operations of $53 million, further strengthening the Company’s already solid balance sheet,” added Gamache.

While quarterly revenues from game conversion kits and parts sales increased 10% year over year, total other product sales revenues declined $2.9 million primarily due to lower sales of lower-margin used gaming machines. Approximately 600 used gaming machines at lower prices were sold in the December 2008 quarter compared with more than 900 used gaming machines at higher prices in the prior-year quarter. An increase in game conversion revenues resulted from a higher average sales price that was partially offset by a slightly lower number of conversion kits sold.

Gaming operations revenues grew 16% to $63.4 million in the December 2008 quarter compared with $54.5 million in the year-ago period, reflecting an 8% increase in the average installed base in the December 2008 quarter to 9,490 participation units and a 10% year-over-year increase in the average daily revenue to $66.57. The installed base for wide-area progressive (WAP) units continued to grow both on a quarterly sequential and year-over-year basis and totalled 2,063 gaming machines, or 21% of the total installed base, at December 31, 2008. Ongoing success with games on WMS’ Sensory Immersion and Transmissive Reels gaming platforms continued to drive both strong play levels and incremental unit placements, contributing to the significant revenue gains.

“Our innovative products and focus on operational excellence are driving consistent growth in revenues, net income and cash flow from operations, clearly differentiating WMS from other companies during these challenging economic times,” noted Gamache. “With a strong pipeline of exciting new products and a rock-solid balance sheet as our foundation, we are well positioned to support our customer-focused initiatives, achieve further operational improvements and continue to self-fund investments that will further drive industry-leading innovation and exciting new products that deliver great value to casino operators and enhance long-term value for our stockholders.” (E-01.30.09)

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