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Acres Gaming Releases Q1 Results

2 November 2000

LAS VEGAS, Nevada--(Press Release)--Nov. 2, 2000--Acres Gaming Incorporated (Nasdaq: AGAM) reported its results of operations for the quarter ended Sept. 30, 2000.

Revenues for the current quarter were $2.7 million, compared to the $6.2 million recorded in the prior year quarter and resulted in current quarter net loss of $1.6 million ($.18 per share) versus net income of $394,000 ($.04 per share) in the prior year quarter.

``This quarter's results do not reflect the strength of our business,'' explained Bud Glisson, chairman and CEO. ``New orders have been exceptionally strong, but completed installations have lagged. Our backlog for Acres Advantage(TM) systems sales is now a record $17.9 million, and actually exceeds last year's total sales. We expect our momentum on new orders to continue and expect revenue from completed installations to dramatically improve in the second quarter and for the balance of the fiscal year.''

The current quarter revenues were primarily generated from Acres Advantage hardware deliveries to MonteCasino in South Africa and two casinos in California. In the prior year quarter, revenues were primarily comprised of Acres Advantage hardware deliveries to MotorCity Casino in Detroit, Mich., and bonusing software to Star City Casino in Sydney, Australia.

Gross profit margin decreased to 23 percent in the current quarter from 51 percent in the prior year quarter. Hardware sales, which made up the majority of the current quarter sales, carry a lower gross profit margin than the hardware and software sales recorded in the quarter ended Sept. 30, 1999.

Net operating expenses in the current year quarter were $554,000 less than the prior year quarter due primarily to reductions in staffing, redirection of certain employee efforts from development activities to customer support activities, decreases in the costs of defending the company's intellectual property rights and the timing of certain trade show expenses. These expense reductions were partially offset by a reduction in amounts capitalized as software development costs.

At Sept. 30, 2000, the company had $2.4 million in cash and equivalents and no debt. The company had collected $2.4 million of advance deposits against its order backlog as of Sept. 30, 2000. Backlog, however, may not be a meaningful indicator of future revenues and the company's revenues fluctuate significantly based on the timing of the delivery of any large order.

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