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AGEM releases February 2016 index

11 March 2016

(PRESS RELEASE) -- The AGEM Index reported positive growth in February 2016 after falling 8.86 points in January 2016. The composite index stood at 197.00 at the close of the month, which represents an increase of 8.54 points, or 4.5%, when compared to January 2016. The AGEM Index reported a year-over-year increase for the fifth consecutive month, rising 4.29 points, or 2.2%, when compared to February 2015.

During the latest period, eight of the 14 global gaming equipment manufacturers reported month-to-month gains in stock price, with two up by more than 50% and another up by more than 40%. Of the six manufacturers reporting declines in stock price during the month, only one was down by more than 10%.

The broader stock markets experienced continued volatility and lackluster performances in February. The Dow Jones Industrial Average reported a modest increase month-to-month, rising 0.3% to 16,516.50. Meanwhile, the S&P 500 and NASDAQ both reported month-to-month declines in February. The S&P 500 fell 0.4% to 1,932.23, while NASDAQ declined 1.2% to 4,557.95.

Selected positive contributors to the February 2016 AGEM Index included the following:
— With a stock price of $8.51 (+43.8%), Scientific Games Corporation (SGMS) contributed 3.69 points.
— Konami Corp. (9766) reported a stock price of ¥2,739 (-1.0%) and contributed 1.47 points (changes in foreign currency exchange rates between periods impacted the composite score).
— Astro Corp. (3064) contributed 1.16 points, due to a 109.2% increase in stock price to NT$41.00.

Selected negative contributors included the following:
— With a stock price of $7.07 (-12.0%), Daktronics, Inc. (DAKT) contributed negative 0.43 points.
—INTRALOT S.A. (INLOT) contributed negative 0.13 points, due to a 5.0% decline in stock price to EUR 1.13.

In the past month, a number of gaming equipment manufacturers released their financial results for the period ending December 31, 2015. Additional releases are expected in the coming weeks. Selected company highlights are noted below.

Ainsworth Game Technology (AGI) reported revenue of AU$141.9 million for the six months ending December 31, 2015. The latest period represents a 26.8% increase when compared to the six months ending December 31, 2014. Domestic revenue (Australia), which accounts for 35.4% of total revenue was AU$50.3 million, representing a decline of 6.0% from a year ago. Meanwhile, international revenue, which accounts for the remaining 64.6% of total revenue reported an annual gain of 56.8%, rising to AU$91.6 million. Gains in international revenue were attributable to a 42% increase in North America to AU$43.0 million, which was driven by strong performances in California and new markets in Idaho, Louisiana, Kansas, Missouri, Maryland and West Virginia.

Scientific Games Corporation (SGMS) completed its merger with Bally Technologies in November 2014. The following represents the company's actual results for 2015 and pro forma results for the prior year. In the fourth quarter of 2015, Scientific Games reported revenues of $737.0 million, which represents a gain of 4.2% compared to the prior year. The product sales segment reported the greatest annual increase in revenues during the period, rising 8.5% to $252.0 million. Services followed with a gain of 2.5% to $343.0 million, while the instant games segment reported revenue growth of 1.0% and increased to $142.0 million.

Despite the gain in fourth quarter revenue, Scientific Games' revenue fell 6.4% in 2015 to $2.8 billion. Services revenue increased 7.4% during the year to $1.4 billion, while instant games revenue rose 2.1% to $544.0 million. However, these gains were offset by a 25.3% decline in product sales revenue to $863.0 million.

Agilysys (AGYS) reported revenue of $31.3 million in the company's fiscal third quarter of 2016, representing a 26.5% increase over the same period of the previous year. Product revenue was a key driver of the revenue gains, increasing 64.5% year-over-year to $11.9 million. Hardware replacement sales as well as increased new logo hardware sales were important facets in product revenue escalation. With a gain in customer installation and implementation projects, professional services revenue increased 25.5% to $4.5 million. Support, maintenance and subscription services revenue increased 7.0% year-over-year in the latest period, rising to $14.9 million.

While selected gaming suppliers reported positive results in a number of areas, it will be important to monitor the balance of the sector to provide additional insight.

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