he report said that the firm is well positioned due to its talented and creative workforce that is backed by a strong investment in intellectual property and advanced technology capabilities.
Gamache credited WMS’ passionate global team for consistently innovating products and technologies that deliver enhanced value to the company’s customers and highly engaging entertainment experiences for slot players. He also cited the company’s track record in developing and producing a broad and growing array of innovative and imaginative products by marrying advances in technology and new media with creative and differentiated gaming content.
Looking forward, Brian Gamache indicated, “The company’s increased spending for internal organic research and development initiatives, which were announced in August, are expected to build upon WMS’ extensive and successful record for introducing player-appealing products and applications to benefit from an increasing array of worldwide growth opportunities. WMS management has built a company culture focused on innovation and a fanatical attention to employee and customer satisfaction, which engenders employees’ passion for improvement and active pursuit of new opportunities. By leveraging our focus on Innovation and Continuous Improvement to enhance business processes and margins, we have succeeded in a challenging industry and economic environment, and we expect WMS to drive higher volumes and revenues from our new products, as well as higher margins, earnings and operating cash flow over the long-term.”
Scott D. Schweinfurth, Executive VP, CFO and Treasurer highlighted the wide array of future growth opportunities in WMS’ existing business, as well as several new products, markets and distribution channels that have the potential to provide incremental growth.
According to Schweinfurth, “With the strength of our balance sheet and solid cash flow, we are well-positioned to pursue growth initiatives that enhance shareholder value. We expect to maintain our growth in the future by further increasing our worldwide ship share, expanding our participation and leased gaming machine business, launching new products, growing our presence in established markets and leveraging our capabilities into new markets and distribution channels. New casino openings and expansions, the potential for new gaming jurisdictions worldwide and a future anticipated uptick in the gaming industry’s replacement cycle will further complement our organic growth initiatives and enhance our growth potential.”
“Higher new unit production and shipments, coupled with our Lean Sigma and Supply Chain improvement initiatives, are anticipated to continue to drive component costs lower during the next several years and increase WMS’ product sales gross margin. Near-term, we continue to target an annual level of 55% product sales gross margin, which compares to 53% achieved in fiscal 2010; and once we achieve that level, we would expect to continue stretching towards a longer-term goal of 60% product sales gross margin. Ongoing growth in our higher-margin participation business, along with incremental revenues from new higher-margin products and new businesses, such as our networked gaming applications and systems, during the next several years will further the upward bias in our total gross margin.”
The WMS CFO also indicated that with substantial opportunities to increase revenues and enhance margins, WMS expects to realize improvements in cash flow from operating activities in the next five years.
At the Analyst Day, Schweinfurth reiterated the company’s fiscal 2011 revenue guidance of $830-to-$850 million, which represents 8%-to-11% growth over fiscal 2010. WMS expects its operating margin to increase to 22.5%-to-23.0% for fiscal 2011. The fiscal 2011 annual guidance and new share repurchase authorization were first announced on August 3, 2010.