GTech Holdings Corp., the world's largest lottery systems operator, on Tuesday said quarterly earnings rose on new contracts, acquisitions and strong sales of its products.
GTech, which provides services and equipment to the lottery industry in 45 countries and 25 U.S. states, said it benefited from new contracts in Spain, Italy, Jamaica and Mexico. The company also received a new ticket-vending machine contract in Maine and an extension in Oregon.
GTech, which has a 70 percent share of the online lottery market, earlier this year acquired video lottery terminal maker Spielo and Caribbean-based operator Leeward Island Lottery Holdings company. It more recently acquired BillBird S.A., a Polish bill payment services provider.
"Acquisitions are a major part of their growth strategy," said J.P. Mark, analyst at Farmhouse Equity Research, adding that Russia, China and India pose great opportunities for growth.
The company is pursuing new opportunities in Thailand, Finland, Germany, Ireland and New Zealand, Chief Financial Officer Jaymin Patel told analysts in a conference call.
Second-quarter net income at the West Greenwich, Rhode Island-based company rose to $53.1 million, or 40 cents per share, from $48.5 million, or 37 cents, a year earlier.
Analysts, on average, expected 37 cents a share, according to Reuters Estimates.
Quarterly revenue rose to $323.5 million from $277.2 million a year earlier.
Shares of GTech have sagged recently as the U.S. Securities and Exchange Commission investigates allegations a Brazilian official asked GTech executives in Brazil to bribe Caixa Economica Federal -- which runs the Brazilian lottery -- to extend a business contract. The allegations have made uncertain GTech's contract renewals in Brazil.
"The longer it drags out, the better it is for GTech," Mark said. "It would be really hard for the Brazilian government to replace those terminals in any efficient way. So there is a strong chance they will renew it, but there is still the uncertainty."
GTech shares were off 62 cents, or 2.6 percent, at $22.85 in morning trading on the New York Stock Exchange.
GTech in June said a Brazilian judge granted an injunction ordering 30 percent of payments due from Caixa be withheld. Patel in Tuesday's conference call said GTech's appeal to that ruling is still pending.
The National Lottery of Brazil was GTech's largest customer in fiscal 2004 and the company's operations there generate about 10 percent of its revenue.
GTech said it expects full-year 2005 earnings of $1.43 to $1.48, reflecting a two-for-one stock split from July 2004. It expects service revenue growth of 5 percent to 7 percent and product sales of $210 million to $220 million.
GTech expects third-quarter earnings of 33 cents to 36 cents a share and service revenue growth of 6 percent to 8 percent.
Analysts expect full-year earnings of $1.47 a share and third-quarter earnings of 35 cents a share.