Huge growth in net income
reported by GTECH for 3Q

Dec 23, 2003 3:58 AM

GTECH Holdings Corporation (GTK), the 2003 darling of the financial community’s gaming investors, reported huge growth in net income for the third quarter of fiscal 2004 that ended on Nov. 22.

Working on revenues of $254.9 million compared to last year’s $256.5 million, the company reported net income of $45.9 million or $0.69 a share, an increase of 39.7% over last year’s net of $32.8 million or $0.57 per diluted share.

Revenues for the first nine months of fiscal 2004 were $771.8 million, an increase of 8.9% over revenues of $708.8 million in fiscal 2003. Net income was $135.4 million, or $2.12 per share versus last year’s $100.1 million of $1.71 per share.

"GTECH’s third quarter results reflect continued strength in the core business with service revenues up by a healthy 11 percent," said W. Bruce Turner, president and CEO of the company.

"A substantial amount of that growth was driven by stronger same store sales and new customers in the core business. In fact, same store lottery sales, on a global basis, have grown by approximately five percent or more every quarter for the last six consecutive quarters. Our recent PolCard and Interlott acquisitions also played a part, contributing a total of $11 million of service revenues in the quarter," he said.

While reporting on the third 2004 quarter, the company also updated guidance for the fiscal year ending Feb. 28, 2004. The company said it expects service revenue growth in the range of 8% to 9% and product sales to be in the range of $105 million to $110 million. As for its service margins, the company said it expected them to be in the range of 41% to 43% with product margins in the range of 33% to 35%.

The company added that based on the current outlook, GTECH expects earnings per share for fiscal 2004 to be in the range of $2.75 to $2.80 including $0.05 per share associated with the $3.3 million after tax non-cash gain from the consolidation of the partnership that owns the company’s corporate headquarters in West Greenwich, Rhode Island.

Earnings per diluted share for the fourth quarter are expected to be in the range of $0.63 to $0.68.

During the third quarter, the company was awarded a seven-year integrated services contract with the Tennessee Lottery and a six-year contract to provide a new online and instant ticket lottery system for the Florida Lottery. Both contracts were won through competitive bidding, the company said.

"In the third quarter alone, we won five contracts," said Turner. "There were two new contracts, in Tennessee and Florida, and contract extensions in Denmark, the Czech Republic, and Portugal. We expect that these contracts will result in more than $500 million in aggregate revenue to the company over the respective contract terms."

The company’s share price has risen steadily since Turner, a West Point graduate who spent several years on Wall Street with investment firms including Salomon Brothers, took the helm, at a time when the company was emerging from a troubled past. Since April of this year, the share price has risen from the low $30’s to the high $40’s.