W. Bruce Turner
President & Chief Executive Officer
Jaymin B. Patel
Senior Vice President & Chief Financial Officer
Fiscal Year 2004 - Third Quarter Earnings Conference Call
December 16, 2003
Fiscal Year 2004 - Third Quarter Earnings Conference Call
Safe Harbor Act. . .
o Comments made during this presentation may contain forward-looking
statements, including, without limitation, statements relating to the
future operations and financial performance of the Company and the
Company's future strategies. Such forward-looking statements reflect
management's assessment based on information currently available, but
are not guarantees and are subject to risks and uncertainties, which
would cause the results to differ materially from those contemplated
in the forward-looking statements. These risks and uncertainties
include, but are not limited to, those set forth here and in the
Company's filings with the SEC, including our Fiscal 2003 10K, as
amended, and subsequent filings.
Fiscal Year 2004 - Third Quarter Earnings Conference Call
Agenda. . .
o W. Bruce Turner, Chief Executive Officer
o Welcome
o Q3 and YTD Performance Review
o Strategy Update
o Acquisition Update
o Jaymin B. Patel, Chief Financial Officer
o Review of Q3 and YTD Financial Results
o Updated Guidance for Fiscal Year 2004 and Q4
o Fiscal Year 2005 Guidance
Fiscal Year 2004 - Third Quarter Earnings Conference Call
FY'04 Customer Successes. . .
Base Term Contract Points of Sale Base Term
Value ($ in millions) (In thousands) [Extensions] (in years)
--------------------- -------------- -----------------------
|X| Rhode Island 700 2.9 20
- -> |X| Czech Republic 230 7.0 12
- -> ** Florida 160 12.0 6 [4]
|X| Michigan 145 3.0 2 [3]
|X| Brazil 130 22.3 2
- -> ** Tennessee 125 4.0 7
** Sri Lanka 100 1.0 10 [5]
** Trinidad & Tobago 70 0.5 5 [2]
|X| Wisconsin 50 3.2 5 [4]
** Sweden 22 -- 2
- -> ** Denmark 10 2.8 2
|X| New Zealand 5 -- 5 [3]
|X| Idaho* 5 0.5 2
- -> ** Portugal 4 -- 3
*Department of Fish & Game -> FY'04 Q3 Successes [X]New Customer Contracts
Fiscal Year 2004 - Third Quarter Earnings Conference Call
Acquisition Update. . .
o Completed acquisitions
o Polcard
- Closed on May 28
o Interlott
- Closed on September 18
o Spielo
o Acquisition announced on November 7, 2003
- Purchase price of $150 million + $35 million earnout
- Expected close date in June 2004
Fiscal Year 2004 - Third Quarter Earnings Conference Call
On-Going Developments. . .
o Q3 FY'04 developments
o Keno in Michigan
o Mega-Millions in Texas
o $250 million debt offering
o Q4 FY'04 and beyond
o US gaming expansion
- State revenue shortfalls
o International opportunities
o Commercial Services update
o FY'05 expectations
Fiscal Year 2004 - Third Quarter Earnings Conference Call
Service Revenue Analysis. . .Q3 FY'04 vs FY'03
U.S. International Commercial GTECH
Lottery Lottery Svcs & Other* Total
$M %** $M % $M % $M %**
- -------------------------------------------------------------------------------------------------------------------
FY'03 116.2 79.7 11.9 207.8
Same Store Sales 3.6 +3% 5.7 +7% 1.4 +14% 10.7 +5%
Net, All Other*** 3.7 +3% 1.0 +2% 8.0 +65% 12.7 +6%
FY'04 123.5 +6% 86.4 +9% 21.3 +79% 231.2 +11%
*Includes Transactive
**All percentage points are rounded to the nearest percent
***Reflects contract wins/losses, jackpot activity, contractual labor changes,
foreign exchange changes, impact of acquisitions
Fiscal Year 2004 - Third Quarter Earnings Conference Call
Key Financial Highlights. . .
Q3 FY'04 vs. FY'03
o Total Revenue -1%
o Service Revenues +11% Strong same store sales
o Gross Profits +24% Meaningful Impact
from Acquisitions
o Service gross profits +26% Robust margins of 43%
o Operating Income +30%
o Net Income +40%
o Excluding one-time gain +30%
o Diluted Earnings Per Share +21% Reflects impact of
convertible bond
Excluding one-time gain +12%
*Q3 FY'04 reported results include the impact of the one time gain
Fiscal Year 2004 - Third Quarter Earnings Conference Call
Key Financial Highlights. . .
YTD FY'04* vs. FY'03
o Total Revenue +9% Meaningful Impact from Acquisitions
o Service Revenues +8% Strong same store sales
o Gross Profits +29%
o Service gross profits +25% Robust margins of 43%
o Operating Income +29%
o Net Income +35%
o Excluding one-time gain +32%
o Diluted Earnings Per Share +24% Reflects impact of
convertible bond
o Excluding one-time gain +21%
*FY'04 reported results include the impact of the one-time gain
Fiscal Year 2004 - Third Quarter Earnings Conference Call
FY'04 Guidance. . .
As of December 16, 2003
FY'04
- -------------------------------------------------------------------------------
Service Revenue Growth1 8% - 9%
Product Sales(1) $105M - $110M
Service Gross Profit Margins 41% - 43%
Product Sales Gross Profit Margins 33% - 35%
Earnings per Share Excluding One-Time Gain(2) $2.70 - $2.75
Reported Earnings per Share(2) $2.75 - $2.80
--------------
Net Cash Invested $400M - $410M
(1) Includes acquisition of PolCard and Interlott
(2) Based on Diluted Share Estimate of 65.1M Shares, reflecting impact of
convertible bond dilution
Fiscal Year 2004 - Third Quarter Earnings Conference Call
FY'04 Guidance. . .
As of December 16, 2003
FY'04
- --------------------------------------------------------------------------------
Service Revenue Growth(1) 10% - 12%
Product Sales(1) $25M - $30M
Service Gross Profit Margins 41% - 43%
Product Sales Gross Profit Margins 34% - 36%
Reported Earnings per Share(2) $0.63 - $0.68
(1) Includes acquisition of PolCard and Interlott
(2) Based on Diluted Share Estimate of 66.9M Shares, reflecting impact of
convertible bond dilution
Fiscal Year 2004 - Third Quarter Earnings Conference Call
Preliminary FY'05 Guidance. . .
As of December 16, 2003
FY'05
- --------------------------------------------------------------------------------
Total Revenue Growth(1) 20% - 21%
Service Revenue Growth(1) 7% - 8%
Product Sales(1) $230M - $250M
Service Gross Profit Margins 41% - 43%
Product Sales Gross Profit Margins 36% - 38%
Reported Earnings per Share $2.95- $3.05
Net Cash Invested $420M - $440M
(1) Includes acquisition of PolCard, Interlott, and Spielo
Fiscal Year 2004 - Third Quarter Earnings Conference Call
EPS Factors. . .
o Factors affecting FY'05 EPS guidance
o Incremental Impact from Convertible Bonds
o Incremental Interest Expense
- $250M debt offering in October 2003
o Minority Interest relating to international joint ventures
Fiscal Year 2004 - Third Quarter Earnings Conference Call
FY'05 Net Cash Invested. . .
o Maintenance Capital $85M - $90M
o Growth Capital $115M - $120M
o PolCard $18M - $20M
o Interlott $17M - $20M
o Spielo* $185M - $190M
-------------
FY'05 Total Net Cash Invested $420M - $440M
*Spielo expected to close in June 2004