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Gaming Guru

Howard Stutz

Progressive's Earnings Still Improving

3 August 2005

Was it the name change?

Late last year, Progressive Gaming shed its previous designation and several business units to concentrate on becoming a gaming technology and content provider.

Late Monday, the Las Vegas-based company reported a fourth straight quarter of positive net income, earning 7 cents a share on $1.9 million for the period that ended June 30. Last year for the same time period, the company, then known as Mikohn, had a net loss of $900,000, or 4 cents per share.

Progressive Gaming said its total revenues jumped 7 percent in the quarter to $18.6 million, compared with $17.3 million for the same quarter last year. Cash flow, described as earnings before interest, taxes, depreciation and amortization, jumped 23 percent to $5.1 million, compared with $4.1 million a year ago.

The sale of the company's interior sign division and slot machine hardware constituted a net gain of $2.5 million, but was offset by the same amount related to the expenses incurred in transforming into Progressive Gaming.

"We have a solid platform for growth as evidenced by the 9 percent increase in our core revenues during the first half of this fiscal year," said Progressive Gaming President and Chief Executive Officer Russel McMeekin. "This is the real foundation that will provide our team with the operating capital to invest strategically in the future of our business."

McMeekin said the company has focused on high margin technology items and gaming content offerings while eliminating businesses that ate into profits.

One gaming analyst said Progressive Gaming historically has had the rights to interesting game content but lost money trying to distribute its own slot machines. Now, the company sells the content to other equipment vendors.

"They truly are a software company and even though they are placing their content with other companies, that's become less of a focus," said Amiee Marcel, who follows equipment manufacturers for Jefferies & Co.

She added the company is heavily focused on implementing radio frequency identification technology within the industry, such as Progressive Gaming's contribution to a table game management system it is jointly producing with international Game Technology and Shuffle Master.

"The company is really trying to get a handle on RFID and they are also working on a central server based software and they have a product for wireless gaming devices," Marcel said. "The quarter wasn't impressive, but we know they are a long-term story."

In trading Tuesday, Progressive Gaming closed at $13.99, down 30 cents or 2.07 percent. More than 770,000 shares were traded, almost double the company's average daily volume.

Progressive Gaming said one of its table game products, Texas Hold 'Em Bonus Poker, continues to gain a foothold in the market.

"Our installed base for this new table game is accelerating virtually every month and continues to have strong performance," McMeekin said.

Progressive Gaming Chief Financial Officer Michael Sicuro said he estimates the company's earning per share will increase to the 27 cents to 32 cents per share range this year.

"Our operating results are beginning to reflect the graceful exit of lower margin businesses providing our team the ability to focus solely on developing and distributing higher margin products." Sicuro said. "Our pipeline of contracts for table games and integrated casino management systems continues to be solid."