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Acres Gaming Reports Revenue Down, Income Up Slightly for Q1

31 October 2002

LAS VEGAS – (Press Release) -- Acres Gaming Incorporated (Nasdaq: AGAM), the leader in Bonusing technology for the gaming industry, today announced financial results for the quarter ended September 30, 2002.

Income from operations for the first quarter of fiscal 2003 increased to $650,000 from $354,000 for the same quarter last year. Net income for the quarter totaled $420,000, or $.05 per diluted share, compared to $417,000, or $.04 per diluted share for the first quarter of fiscal 2002.

Net revenue for the first quarter of fiscal 2003 was $5.9 million compared to $6.1 million for the same quarter last year. Gross profit margin was 68% in the current quarter compared to 49% in the prior year quarter. The higher gross profit margin was primarily attributable to an increased mix of software sales in the current quarter compared to the quarter ended September 30, 2002. Software revenue for the quarter included $1.9 million from Station Casinos for its Xtra Play Cash and Random Xtra Play Cash Bonusing modules, which had previously been recorded as deferred revenue.

Net operating expenses in the current year quarter were $759,000 greater than the prior year quarter due primarily to increases in marketing and promotional, and legal expenditures and increased administrative staff.

At September 30, 2002, the Company had cash and equivalents of $10.3 million, compared to $7.3 million at June 30, 2002. The increase of $3.0 million is primarily attributed to the increase in deferred revenue of $2.6 million for deposits received on new contracts during the quarter.

The Company's order backlog at September 30, 2002 was $25.5 million, compared to $18.5 million at September 30, 2001 and $20.0 million at June 30, 2002. During the quarter the Company announced receipt of 3 new contracts totaling $8.7 million. Subsequent to quarter-end, the Company received an additional contract for $1.8 million. Backlog, however, may not be a meaningful indicator of future revenues.

"We continue to expect this year's earnings to be more than double last year's," Bud Glisson, Acres' CEO said. "Following a record fourth quarter, continued earnings momentum is evident in the first quarter's 35% increase in gross profit even though it was largely offset by higher operating expenses. These higher expenses represent either timing issues or intended investments in the business."

"Our order backlog grew from $20 million to $25 million during the quarter, and we've already announced a $1.8 million sale this quarter," Glisson continued. With an estimated gross margin of 74%, our order backlog at the end of September translates to gross profit of almost $19 million, compared to the $12 million gross profit we reported for the last nine months of our prior fiscal year. While we expect operating expenses to increase in the range of $3 to $4 million, a large portion of this estimated gross profit increase is expected to result in increased earnings."

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