Slot maker warns of revenue loss

Vegas-based Progressive Gaming International Corp. told Wall Street it was updating its third-quarter estimates to reflect a loss of 9 cents per share rather than earnings of 9 cents. Online slots players understand that this in basically a difference of 18 cents per share.

The news, announced in a filing with the Securities and Exchange Commission, sent shares of the equipment provider tumbling downward almost 30 percent on the Nasdaq National Market over two days of trading.

Progressive Gaming said its estimated results for the quarter ended Sept. 30 would be revenue of $17.8 million, down from the previous prediction of $23.8 million, and cash flow of $1 million, down from the previously predicted $5.5 million.

Cash flow is generally defined as earnings before interest, taxes, depreciation and amortization.

The company plans to announces its official third-quarter results next week.

Early Monday morning, Progressive Gaming executives worked to repair investor confidence in the company. They held a conference call before markets opened to further explain the revision of the earnings estimate. However, the call was conducted without the usual question-and-answer session.

Progressive Gaming Chairman Russ McMeekin said the company's growing dependence on fees from licensing products and intellectual property has changed its accounting procedures and practices.

Nearly  60% of the Progressive's overall revenue comes from licensing. The other 40% comes from sales.

The slot maker's shares kept sliding Monday, closing at $9.22, down 63 cents or 6.4 percent. Last week, Progressive's stock price dropped $3.75 on Thursday and ended the week at $9.85.

On an average day, about 450,000 shares of Progressive Gaming are traded. On Thursday, more than 6.67 million shares changed hands. On Friday, 2.49 million shares were traded. A more back-to-earth 825,000 shares were traded Monday.

The SEC filing by the company, which manufactures gaming management systems and slot machines, surprised some Wall Street analysts.

The 18-cent earnings each share waffling was based on Progressive Gaming not being able to recognize approximately $6 million in revenue and $1.5 million in costs related to two software licensing transactions that came near the end of the quarter. Company auditors caught the accounting error.