WMS Industries Inc. (WMS), a maker of slot machines, lottery terminals and videogame machines, on Monday reported a 9 percent decline in profit for the third quarter on lower revenues. Both earnings per share and revenue missed analysts' estimates.
Looking ahead to the fourth quarter, WMC forecasts revenue to be "modestly lower" than the year-ago period. The company's shares declined more than 14 percent in after-hours trading.
The Waukegan, Illinois-based company's net income for the third quarter was $22.1 million or $0.40 per share, down from $24.2 million or $0.41 per share in the same period last year.
On average, 17 analysts polled by Thomson Reuters expected the company to earn $0.42 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter declined 8.7 percent to $176.0 million from $192.7 million in the prior-year quarter. Analysts had a consensus revenue estimate of $190.33 million.
Total product sales revenues decreased 8 percent to $110.6 million, while gaming operations revenue declined 10 percent to $65.4 million.
The company said it recognized revenue on 5,993 new gaming machines in the latest quarter, including 759 units that shipped in the preceding fourth quarter on which WMS had not previously recognized revenue. This compares to new units of 6,058 in the year-ago period, on which revenue was recognized.
Average sales price per new unit declined 7.6 percent to $15,233 from $16,492 in the year-ago period. The decline reflects product mix as WMS shipped a greater percentage of lower-priced video lottery terminals, the impact from a higher discount related to larger-volume orders, and a lower number of premium games compared with the year-ago period. Gross margin rose to 62.6 percent from 60.7 percent in the same period last year.
Looking ahead to the fourth quarter, WMC forecasts revenue to be "modestly lower" than the year-ago period, while operating margin is expected to improve from the prior year. Analysts expect the company to earn $0.51 per share for the quarter on revenues of $202.65 million.
WMS said it believes that the challenged economic and industry environment will continue, resulting in only limited improvement in the industry replacement cycle in calendar 2012.
Brian Gamache, Chairman and Chief Executive Officer of WMS Industries said, "Our solid open orders, coupled with the expected initial jurisdictional approvals in the June 2012 quarter for the Aladdin and the Magic Quest, Monster Jackpots and GONE WITH THE WIND games and several other participation games, are expected to further increase our gaming operations installed base and contribute to ongoing quarterly sequential revenue per day growth in the June quarter."
Gamache also said, "In addition, we expect to achieve another quarter of sequential growth in new unit shipments in product sales in the June 2012 quarter."
WMS closed Monday's trading at $24.51, down $0.07 or 0.28 percent on a volume of 947,591 shares. In after-hours, the stock further declined $3.61 or 14.73 percent to $20.90.
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