PokerTek Reports Fourth Quarter and Full Year 2012 Financial Results

PokerTek Reports Fourth Quarter and Full Year 2012 Financial Results 
Recurring Revenue Growth Accelerated in the Second Half of 2012;
Second Consecutive Year of Positive EBITDAS; Nearing EPS
Profitability 
MATTHEWS, NC -- (Marketwire) -- 03/07/13 --  PokerTek, Inc. (NASDAQ:
PTEK) today reported financial results for the fourth quarter and
full year ended December 31, 2012. 
Financial Highlights: 
Results strengthening on second-half revenue growth and expense
management 


 
--  Recurring revenue increased 41% sequentially from Q2 2012 to Q4 2012
--  Gross Margins at 70%
--  Operating expenses decreased 26% for the year and 18% for the quarter
--  Net loss from continuing operations improved 48% for the year and 57%
    for the quarter
--  Positive EBITDAS for second consecutive year

  
"Business momentum and recurring revenue trends strengthened
significantly in the second half of the year," commented Mark
Roberson, Chief Executive Officer. "We increased our penetration in
the United States and Canada and also began our re-entry into Mexico,
driving a 41% sequential increase in recurring revenue over the past
six months. Compared to prior year, fourth quarter operating results
improved 57%, bringing PokerTek to within 2 cents of EPS
profitability in the fourth quarter. 
"Entering 2013, our growth plans include entering several new markets
including Macau, Colombia, Uruguay and Peru, while also expanding our
current presence in the United States, Canada and Mexico. Building on
our momentum from 2012, we are well positioned to deliver recurring
revenue and earnings growth in 2013." 
Financial Summary
 Revenue from North America increased with new
installations in Canada and the United States in the second half of
2012. However, revenue comparisons to prior year were impacted by
several factors, including the timing of our reentry in Mexico, a
trend of declining economic conditions in Eastern Europe, and a shift
in our revenue mix from hardware sales to more recurring revenue in
2012. As a result, total annual revenue was $5.2 million in 2012
compared to $6.5 million in 2011, a reduction of 20.3%. For the
fourth quarter, total revenue was $1.3 million for both 2012 and
2011. 
Revenue from license and service fees increased $0.2 million for the
fo
urth quarter and decreased $0.6 million on an annual basis,
compared to the respective periods in 2011 for the reasons noted
above. On a sequential basis, revenue from license and service fees
increased 41% from June 2012 as recent installations began
contributing recurring revenue. 
Revenue from sales of systems and equipment decreased $0.1 million
for the fourth quarter and $0.7 million on an annual basis, compared
to the respective periods in 2011. In 2012, our revenue was more
heavily weighted towards recurring revenue license and service fees,
whereas the prior year was more heavily weighted towards sales of
systems and equipment. The change in sales mix creates unfavorable
total revenue comparisons to prior year, but also represents an
increase in the base of recurring revenue carrying forward to 2013. 
Gross profit was $0.9 million for the both fourth quarter of 2012 and
2011. Gross profit margins were essentially flat in the fourth
quarter of 2012 compared to 2011 at approximately 70%. Gross profit
was $3.8 million in 2012 compared to $4.6 million in 2011, a
reduction of $0.8 million, or 17.5%. Gross profit margins increased
to 72.6% in 2012 compared to 70.1% in 2011. On an annual basis, gross
profit margins improved primarily due to changes in sales mix which
are more heavily weighted to higher margin recurring revenue, as well
as reduced product costs and depreciation.  
Operating expenses decreased 18.4% to $1.1 million in the fourth
quarter of 2012 from $1.3 million in the same period in 2011.
Operating expenses decreased 26.5% to $4.5 million in 2012 from $6.1
million in 2011. We implemented cost reduction initiatives which have
streamlined our overhead and reduced spending on personnel,
regulatory approvals, and professional fees in both the quarterly and
full year periods.  
Net loss from continuing operations improved 56.9% to $0.2 million
($0.02 per share) in the fourth quarter of 2012 from $0.4 million
($0.06 per share) in the same period in 2011. Net loss from
continuing operations improved 48.4% to $0.8 million ($0.11 per
share) in 2012 from $1.6 million ($0.24 per share) in 2011. The
improvement in net loss from continuing operations resulted primarily
from reductions in operating expenses.  
Including the results of discontinued operations, net loss improved
69.0% to $0.2 million ($0.02 per share) for the fourth quarter of
2012 from $0.6 million ($0.08 per share) in the same period in 2011.
Net loss improved 56.1% to $0.8 million ($0.10 per share) in 2012
from $1.8 million ($0.27 per share) in 2011.  
EBITDAS, a non-GAAP financial measure (described below), was positive
$133 thousand for the fourth quarter of 2012, compared to a negative
EBITDAS of $45 thousand for the fourth quarter of 2011. EBTIDAS was
positive $423 thousand in 2012 compared to positive $456 thousand in
2011 on an annual basis.  
Balance Sheet and Cash Flow Information
 The Company's cash used in
continuing operations was $0.8 million for 2012 compared to $0.9
million for 2011.  
As of December 31, 2012, the Company's cash balance was $0.2 million
and total debt was $0.3 million. During 2012, total debt was reduced
by $0.4 million, or 57%.  
Subsequent to the end of year, the Company completed a $0.5 million
private placement transaction to provide additional working capital
to execute the Company's growth plans in 2013. The Company also
renewed its line of credit with Silicon Valley Bank on March 1, 2013. 
Gaming Positions Information
 Gaming positions deployed worldwide
totaled 2,310 of December 31, 2012 comprised of 2,160 PokerPro(R) and
150 ProCore(TM) gaming positions. As of December 31, 2011, 2,028
gaming positions were deployed comprised of 1,944 PokerPro and 84
ProCore(TM) gaming positions.  
During 2012, total gaming positions increased in North America and
Mexico and decreased in other international markets. During the
fourth quarter, the Company removed underperforming leased gaming
positions, primarily from Eastern Europe, and also repurchased
certain gaming positions which had previously been sold. These
activities increase the Company's available inventory and the Company
expects to redeploy those positions in other regions during 2013 to
meet anticipated demand and to increase recurring revenue. 
Annual Business Outlook
 The Company plans to enter several new
markets, expand penetration in existing markets and obtain additional
regulatory approvals for its products during 2013. Those plans
specifically include increasing penetration in the United States,
Canada and Mexico, while entering several new markets in South
America and Asia with PokerPro, Blackjack Pro(TM) and EZ
Baccarat(TM). 
By executing those plans, the Company expects to build on the
momentum from the second half of 2012, increase recurring revenue
while maintaining gross margins in the high 60% to low 70% range and
controlling expense growth to leverage its operations. As a result,
the Company expects its financial results to continue to improve in
2013. 
Conference Call
 A conference call and webcast will be held on
Thursday, March 7, 2013 at 11:00 am EST, for management to discuss
the company's fourth-quarter 2012 performance. Interested parties may
listen to and participate in the conference ca
ll by dialing
866.202.3048 (U.S./Canada) or +1 617.213.8843 (Other) and entering
passcode 30018032. A live webcast of the conference call will be
available through a link on our website, www.pokertek.com, under the
heading "Investors." For those unable to participate in the live
call, an archived replay will be made available on our website. A
replay of the conference call will also be available approximately
two hours after the conclusion of the call for approximately one week
by dialing 888.286.8010 (U.S./Canada) or +1 617.801.6888 (Other) and
entering passcode 45593688. 
Use of Non-GAAP Measures
 PokerTek, Inc. prepares its consolidated
financial statements in accordance with United States generally
accepted accounting principles ("GAAP"). In addition to disclosing
financial results prepared in accordance with GAAP, the company
discloses information regarding EBITDAS, which differs from the term
EBITDA as it is commonly used. In addition to adjusting net income
(loss) from continuing operations to exclude taxes, interest, and
depreciation and amortization, EBITDAS also excludes noncash charges,
certain non-recurring charges and share-based compensation expense.
EBITDA and EBITDAS are not measures of performance defined in
accordance with GAAP. However, EBITDAS is used internally in planning
and evaluating the company's operating performance. Accordingly,
management believes that disclosure of this metric offers investors,
bankers and other stakeholders an additional view of the company's
operations that, when coupled with the GAAP results, provides a more
complete understanding of the company's financial results. 
EBITDAS should not be considered as an alternative to net loss or to
net cash used in operating activities as a measure of operating
results or of liquidity. It may not be comparable to similarly titled
measures used by other companies, and it excludes financial
information that some may consider important in evaluating the
company's performance. A reconciliation of GAAP net loss from
continuing operations to EBITDAS is included in the accompanying
financial schedules.  
About PokerTek, Inc.
 PokerTek, Inc. (NASDAQ: PTEK)
(www.pokertek.com) is a licensed gaming company headquartered in
Matthews, NC that develops and distributes electronic table games
solutions for the gaming industry. The company's products are
installed worldwide, and include PokerPro and Blackjack Pro. For more
information, visit: www.pokertek.com. 
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which
are made in accordance with the Private Securities Litigation Reform
Act of 1995. The forward-looking statements herein include, but are
not limited to, the expected adoption of our gaming systems by
casinos and other customers, and the expected acceptance of our
gaming systems by players. Our actual results may differ materially
from those implied in these forward-looking statements as a result of
many factors, including, but not limited to, the impact of global
macroeconomic and credit conditions on our business and the business
of our suppliers and customers, overall industry environment,
customer acceptance of our products, delay in the introduction of new
products, further approvals of regulatory authorities, adverse court
rulings, production and/or quality control problems, the denial,
suspension or revocation of permits or licenses by regulatory or
governmental authorities, termination or non-renewal of customer
contracts, competitive pressures, and our financial condition,
including our ability to maintain sufficient liquidity to operate our
business. These and other risks and uncertainties are described in
more detail in our most recent annual report on Form 10-K and other
reports filed with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date they are made.
We undertake no obligation to update or revise such statements to
reflect new circumstances or unanticipated events as they occur,
except as required by applicable laws, and you are urged to review
and consider disclosures that we make in the reports that we file
with the Securities and Exchange Commission that discuss other
factors germane to our business. 


 
                                                                            
                                                                            
                               POKERTEK, INC.                               
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
                                                                            
                            Three Months Ended                              
                               December 31,        Years Ended December 31, 
                         ------------------------  ------------------------ 
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
Revenue                                                                     
  License and service                                                       
   fees                  $ 1,279,148  $ 1,128,233  $ 4,367,132  $ 4,964,232 
  Sales of systems and                                                      
   equipment                  64,433      209,697      810,147    1,532,191 
                         -----------  -----------  -----------  ----------- 
    Total revenue          1,343,581    1,337,930    5,177,279    6,496,423 
Cost of revenue              407,180      398,908    1,419,351    1,941,664 
                         -----------  -----------  -----------  ----------- 
    Gross profit             936,401      939,022    3,757,928    4,554,759 
                         -----------  -----------  -----------  ----------- 
Operating expenses:                                                         
  Selling, general and                                                      
   administrative            861,366      935,699    3,403,366    4,313,333 
  Research and                                                              
   development               141,781      236,154      679,431      982,782 
  Share-based                                                               
   compensation expense       77,347      144,224      351,996      685,708 
  Depreciation                 2,324       10,393       13,267       70,143 
                         -----------  -----------  -----------  ----------- 
    Total operating                                                         
     expenses              1,082,818    1,326,470    4,448,060    6,051,966 
                         -----------  -----------  -----------  ----------- 
Operating loss              (146,417)    (387,448)    (690,132)  (1,497,207)
                         -----------  -----------  -----------  ----------- 
  Interest expense, net       10,934       20,198       69,351       93,844 
                         -----------  -----------  -----------  ----------- 
Net loss from continuing                                                    
 operations before                                                          
 income taxes             
  (157,351)    (407,646)    (759,483)  (1,591,051)
                         -----------  -----------  -----------  ----------- 
  Income tax provision        27,114       20,611       86,908       50,569 
Net loss from continuing                                                    
 operations                 (184,465)    (428,257)    (846,391)  (1,641,620)
                         -----------  -----------  -----------  ----------- 
  Income (loss) from                                                        
   discontinued                                                             
   operations                  2,150     (159,845)      52,263     (169,032)
                         -----------  -----------  -----------  ----------- 
Net loss                 $  (182,315) $  (588,102) $  (794,128) $(1,810,652)
                         ===========  ===========  ===========  =========== 
                                                                            
Net loss from continuing            
                                        
 operations per common                                                      
 share - basic and                                                          
 diluted                 $     (0.02) $     (0.06) $     (0.11) $     (0.24)
Net income (loss) from                                                      
 discontinued operations                                                    
 per common share -                                                         
 basic and diluted              0.00        (0.02)        0.01        (0.03)
                         -----------  -----------  -----------  ----------- 
Net loss per common                                                         
 share - basic and                                                          
 diluted                 $     (0.02) $     (0.08) $     (0.10) $     (0.27)
                         ===========  ===========  ===========  =========== 
Weighted average common                                                     
 shares outstanding -                                                       
 basic and diluted         8,627,770    7,360,194    7,973,609    6,783,724 
                                                                            
The accompanying notes are an integral part of these consolidated financial 
 statements.                                                                
                                                                            
                                                                            

 
                                                                            
                                                                            
                               POKERTEK, INC.                               
                        CONSOLIDATED BALANCE SHEETS                         
                                                                            
                                       December 31, 2012  December 31, 2011 
                                       -----------------  ----------------- 
Assets                                                                      
Current assets:                                                             
  Cash and cash equivalents            $         235,757  $         606,229 
  Accounts receivable, net                       794,769            726,520 
  Inventory                                    1,342,950          1,762,806 
  Prepaid expenses and other assets               66,988            147,487 
  Discontinued operations                              -             92,310 
                                       -----------------  ----------------- 
Total current assets                           2,440,464          3,335,352 
                                       -----------------  ----------------- 
                                                                            
Long-term assets:                                                           
  Gaming systems, net                          1,693,051          1,104,333 
  Property and equipment, net                     26,967             38,855 
  Other assets                                   171,498            223,333 
                                       -----------------  ----------------- 
Total long-term assets                         1,891,516          1,366,521 
                                       -----------------  ----------------- 
Total assets                           $       4,331,980  $       4,701,873 
                                       =================  ================= 
                                                                            
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
  Accounts payable                     $         274,609  $         321,955 
  Accrued liabilities                            465,300            468,958 
  Deferred revenue                                42,266            281,466 
  Long-term liability - related party,                                      
   current portion                               104,104             54,952 
  Long-term debt, current portion                 59,571                  - 
  Discontinued operations                              -             70,383 
                                       -----------------  ----------------- 
Total current liabilities                        945,850          1,197,714 
                                       -----------------  ----------------- 
                                                                            
Long-term liabilities:                                                      
  Long-term liability - related party            219,494            268,646 
  Long-term debt                                 240,429            700,000 
                                       -----------------  ----------------- 
Total long-term liabilities                      459,923            968,646 
                                       -----------------  ----------------- 
Total liabilities                              1,405,773          2,166,360 
Commitments and contingencies - see                                         
 note 16                                                                    
Common stock subject to rescission                71,183                  - 
Shareholders' equity                                                        
  Preferred stock, no par value per                                         
   share; authorized 5,000,000 none                    -                  - 
   issued and outstanding                                                   
                                                                            
  Common stock, no par value per                                            
   share; authorized 40,000,000                                             
   shares, issued and outstanding                                           
   8,625,498 and 7,490,124 shares at                   -                  - 
   December 31, 2012 and December 31,                                       
   2011, respectively                                                       
                                                                            
  Additional paid-in capital                  49,481,922         48,368,283 
  Accumulated deficit                        (46,626,898)       (45,832,770)
                                       -----------------  ----------------- 
Total shareholders' equity                     2,855,024          2,535,513 
                                       -----------------  ----------------- 
Total liabilities and shareholders'                                         
 equity                                $       4,331,980  $       4,701,873 
                                       =================  ================= 
                
                                                            
The accompanying notes are an integral part of these consolidated financial 
 statements.                                                                
                                                                            
                                                                            
                                                                            
                                                                            
                               POKERTEK, INC.                               
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                                                                            
                                                  Years Ended December 31,  
                                                 -------------------------- 
                                                     2012          2011     
                                                 ------------  ------------ 
Cash flows from operating activities:                                       
  Net loss                                       $   (794,128) $ (1,810,652)
  Net income (loss) from discontinued operations      (52,263)      169,032 
Adjustments to reconcile net loss to net cash                               
 used in operating activities:                                              
  Depreciation and amortization                       751,832     1,245,100 
  Share-based compensation expense                    351,996       685,708 
  Provision for doubtful accounts and other                                 
   receivables                                        123,214       308,094 
Changes in assets and liabilities:                                          
  Accounts and other receivables                     (186,382)       73,869 
  Prepaid expenses and other assets                    88,111       200,073 
  Inventory                                           419,856      (775,061)
  Gaming systems                                   (1,327,283)      (24,260)
  Accounts payable and accrued expenses                20,994      (299,756)
  Deferred revenue                                   (238,817)     (654,377)
                                                 ------------  ------------ 
Net cash used in operating activities from                                  
 continuing operations                               (842,870)     (882,230)
Net cash provided by operating activities from                              
 discontinued operations                               68,727        23,944 
                                                 ------------  ------------ 
Net cash used in operating activities                (774,143)     (858,286)
                                                 ------------  ------------ 
                                                                            
Cash flows from investing activities:                                       
  Purchases of property and equipment                  (1,378)      (18,925)
                                                 ------------  ------------ 
Net cash used in investing activities                  (1,378)      (18,925)
                                                 ------------  ------------ 
                                                                            
Cash flows from financing activities:                                       
  Proceeds from issuance of common stock, net of                            
   expenses                                           405,049       848,054 
  Repayments of capital lease                               -       (30,793)
                                                 ------------  ------------ 
Net cash provided by financing activities             405,049       817,261 
                                                 ------------  ------------ 
Net increase (decrease) in cash and cash                
                    
 equivalents                                         (370,472)      (59,950)
Cash and cash equivalents, beginning of year          606,229       666,179 
                                                 ------------  ------------ 
Cash and cash equivalents, end of period         $    235,757  $    606,229 
                                                 ============  ============ 
                                                                            
Supplemental Disclosure of Cash Flow Information                            
Cash paid for:                                                              
  Interest                                       $     66,587  $     82,581 
  Income taxes                                         49,645        48,750 
                                                                            
Non-cash transactions:                                                      
  Amortization of commitment fee issued in                                  
   common stock                                  $     44,223  $     45,100 
  Issuance of common stock for debt cancellation      400,000       100,000 
  Transfers from inventory to property and                                  
   equipment                                                -         9,319 
                                                                            
The accompanying notes are an integral part of these consolidated financial 
 statements.                                                                
                                                                            
                                                                            
                                                                            
                                                                            
                               POKERTEK, INC.                               
                         RECONCILIATION TO EBITDAS                          
                                (UNAUDITED)                                 
                                                                            
                                                                            
                                                                            
                            Three Months Ended                              
                               December 31,         Year Ended December 31, 
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
Net income (loss) from                                                      
 continuing operations   $  (184,465) $  (428,257) $  (846,391) $(1,641,620)
Interest expense, net         10,934       20,198       69,351       93,844 
Income tax provision          27,114       20,611       86,908       50,569 
Other taxes                      424        4,228        9,474       22,614 
Depreciation and                                                            
 amortization                201,715      193,912      751,832    1,245,100 
Stock-based compensation                                                    
 expense                      77,347      144,224      351,996      685,708 
                         -----------  -----------  -----------  ----------- 
 EBITDAS (1)             $   133,069  $   (45,084) $   423,170  $   456,215 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
(1) EBITDAS is defined as net income (loss) from continuing operations      
 before interest, taxes, depreciation, amortization, share-based            
 compensation, and non-cash charges. EBITDAS does not purport to represent  
 net earnings or net cash used in operating activities, as those terms are  
 defined under gen
erally accepted accounting principles, and should not be  
 considered as an alternative to such measurements or as indicators of the  
 Company's performance. The Company's definition of EBITDAS may not be      
 comparable with similarly titled measures used by other companies.         

  
Contact:
Mark Roberson
Chief Executive Officer
PokerTek, Inc.
704.849.0860, x101
investorrelations@pokertek.com 
 
 
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