PGIC reports Q3 results

7 November 2006

LAS VEGAS, Nevada -- (PRESS RELEASE) -- Progressive Gaming International Corporation® (NASDAQ:PGIC ), a leading provider of diversified technology and content products and services used in the gaming industry worldwide, announced today that it reported a net loss of $3.3 million, or $0.09 per share, for the quarter ended September 30, 2006, including charges of stock compensation expense of $0.9 million or $0.03 per share.

Revenues in the third quarter of 2006 were $20.6 million, representing an increase of 35% over the second quarter of 2006 and 22% over the third quarter of 2005. The increase was primarily a result of continued growth in the Company's systems business and higher licensing revenues.

Systems revenues in the third quarter of 2006 were $13.6 million, representing an increase of 19% over the second quarter of 2006 and 41% over the third quarter of 2005. This marks the highest level of systems revenues in the Company's history. Systems revenues increased as a result of growth in product installations and ongoing daily fees as well as higher licensing revenues. In September 2006, the Company installed its CasinoLink® systems and the new 13.56MHz RFID systems for fraud detection in key Macau properties. These installations were the first tranche of planned multi-phase projects that utilize RFID gaming chips within a complex system. As a result, revenue growth is expected to continue in Macau and other key international jurisdictions. In September 2006, the Company commenced its planned North America installations of CasinoLink® Jackpot System (CJS(TM)) and Table iD(TM) (a product of the Intelligent Table System(TM) initiative). These scheduled installations are expected to drive systems revenues in the fourth quarter of 2006.

Slot and Tables revenues were $7.0 million in the third quarter of 2006 compared to $3.8 million in the second quarter of 2006. Excluding the $3.5 million table patent license agreement with Shuffle Master, Inc., slot and table revenues were relatively consistent with revenues in the first and second quarter of 2006. The Company's table games installed base increased by approximately 50 games over the second quarter of 2006. Table games revenue is expected to increase in 2007 with the roll-out of the progressive version of Texas Hold'em Bonus®/World Series of Poker® in major North American jurisdictions and Progressive Baccarat(TM) and Caribbean Stud Poker® in international jurisdictions, namely Macau.

Gross margins in the third quarter of 2006 were 63%, compared to 48% in the third quarter of 2005. Gross margins improved as a result of higher licensing, an increase in higher margin systems sales and a larger recurring revenue base resulting from systems installations.

Excluding non-cash stock compensation expense of $0.9 million, earnings before interest, taxes, depreciation and amortization (EBITDA) was $2.1 million in the third quarter of 2006 compared to $1.1 million in the third quarter of 2005. EBITDA improved in the third quarter of 2006 primarily as a result of increased revenues and higher margins.

The net loss for the quarter ended September 30, 2006 was $3.3 million or $0.09 per share. On a comparative basis excluding stock compensation expense, the net loss for the third quarter of 2006 was $0.07 per share compared to a net loss of $0.08 per share in the third quarter of 2005.

Revenues for the nine months ended September 30, 2006 were $52.8 million compared to $53.8 million in the same period in 2005. Systems revenues for the nine months ended September 30, 2006 increased by approximately $10.1 million, or 35% compared to the same period in 2005. However, this increase was offset by lower slot and table revenues resulting from the transition of our legacy slot route and lower average daily fees from our table games route due primarily to a higher mix of our non-progressive table games leases. This transition is in line with the Company's previously stated plan to become a systems and technology company. We anticipate the daily fees from table games leases to increase once the progressive version of Texas Hold'em Bonus®/World Series of Poker® table game is approved in major gaming jurisdictions, such as Nevada, which is expected prior to the end of the year.

EBITDA for the nine months ended September 30, 2006 was approximately ($14.0) million and includes charges of $6.4 million related to severance, relocation, legal, tax and inventory reserves in the first half of 2006 and cumulative stock compensation expense of $4.8 million for the first nine months of fiscal 2006.

President and Chief Executive Officer Russel McMeekin stated: "Our systems business continues to grow quarter on quarter and year on year, as evidenced by our record quarter of systems revenues. Customer interest in our new products is stronger than ever and we plan to install our CJS(TM) product in over 15 locations with a major casino operator. Additionally, the installation of 13.56MHz RFID systems at two of the largest international casinos in the world is a testament to the commercial demand and success of these products. We believe we are on track to meet our planned installation schedule of approximately 3,000 CJS(TM) systems (not including installations in Pennsylvania where the Company recently was licensed as a manufacturer) and 1,000 table management systems and expect these products to drive incremental revenue growth in 2007 and beyond. Our international business continues to experience double digit growth as a result of our recent acquisitions of EndX and PitTrack and our long-standing experience and presence in the key gaming markets in Europe, the Baltics and Asia. We believe we are well positioned to be a market leader for key components of casino management systems in these rapidly growing markets. We also expect solid growth in our table games business with the roll-out of the progressive version of Texas Hold'em Bonus®/World Series of Poker® and Progressive Baccarat(TM) leveraging our CJS technology." McMeekin continued: "Our pipeline of new central server products is progressing well. We began our live field trial of the wireless version of Rapid Bet Live(TM) product at the Palms earlier this month. This product is the first of its kind and could be approved for commercialization in less than 30 days. Additionally, we announced a key license agreement with Harrah's for the World Series of Poker® for our "Peer to Peer" Texas Hold'em System for wired and wireless formats in all regulated gaming jurisdictions worldwide. These exciting products as well as others will be showcased at the upcoming G2E event later this month." Financial Outlook Chief Financial Officer Heather A. Rollo stated: "With better visibility to our installation activities, we are providing an update regarding our fiscal 2006 revenue estimates. We believe we are on track with our planned installations and expect these installations combined with our existing baseline business to provide approximately $21 - $23 million of revenues in the fourth quarter of 2006. This would result in the achievement of fiscal 2006 revenue levels at the lower end of the range of our previously issued estimates. Our planned revenues for the fourth quarter of 2006 include a minimal amount of license revenues." Rollo continued: "As anticipated, we again began generating positive EBITDA in this fiscal quarter. We expect our cash from operations to provide the Company with the flexibility to operate the business and achieve our anticipated strategic initiatives. As a result, we expect to reserve a portion of our new debt facility to invest in future business opportunities if such initiatives arise. On November 1, we paid our semi annual interest of $2.7 million related to our senior notes and have maintained our cash position consistent with previous levels."