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PokerTek Reports First Quarter 2013 Financial Results


PokerTek Reports First Quarter 2013 Financial Results

MATTHEWS, NC -- (Marketwired) -- 05/08/13 -- PokerTek, Inc. (NASDAQ: PTEK) today reported financial results for the first quarter ended March 31, 2013.

Financial Highlights


 
--  Recurring license and service fees increased 26%
--  Operating expenses remain well controlled
--  Balance sheet strengthened

"During the first quarter, we entered the South American market with initial installations in Uruguay and Colombia and continued to install games in Mexico," commented Mark Roberson, Chief Executive Officer. "We are on track to grow penetration in our target markets, our costs continue to be well controlled, and our balance sheet is substantially improved.

"Looking ahead, we expect product placement activity to increase and operating results to continue to strengthen."

Financial Summary

Total revenue was $1.4 million for the first quarter of 2013 compared to $1.7 million in 2012, a decrease of $0.3 million, or 17.1%. This decrease was partially due to a change in product mix as the prior year included higher revenues from product sales, which offset the increases in recurring license and service fees in the current period.

Revenues from license and service fees increased $0.3 million, or 26%. The increase in license and service fees from the prior year resulted from growth in leased games in Canada and Mexico, partially offset by lower license and service fees from Europe.

Revenues from systems and equipment sales decreased $0.6 million as substantially all of the current period revenue was generated from recurring license and service fees. The prior year results included several product sales in Europe and a conversion of leased games to product sales in the United States.

Gross profit decreased by $0.3 million, or 19.7%, to $1.0 million for the three months ended March 31, 2013, as compared to the three months ended March 31, 2012. Gross profit margins were 75% for the three months ended March 31, 2013 compared to 77% for the three months ended March 31, 2012.

Operating expenses were unchanged at $1.2 million for both quarterly periods.

Net loss from continuing operations for the three months ended March 31, 2013 was $0.2 million compared to net income of $59 thousand for the three months ended March 31, 2012, due to the favorable impact of higher sales of systems and equipment in the prior year, offsetting the growth in recurring license and service fees in the current year. Net income (loss) from continuing operations per common share was a loss of $0.02 per common share (basic and diluted) compared to a profit of $0.01 per common share (basic and diluted).

EBITDAS, a non-GAAP financial measure (described below), was positive $0.1 million in 2013 and $0.4 million in 2012.

Balance Sheet and Cash Flow Information

Cash provided by operating activities from continuing operations improved by 40%, to $0.35 million for the three months ended March 31, 2013 compared to $0.25 million for the three months ended March 31, 2012. The improvement in cash provided by operating activities was primarily due to working capital changes with accounts receivable decreasing on more favorable collections and accounts payable increasing due to the timing of inventory payments.

Cash provided by financing activities was $0.46 million for the three months ended March 31, 2013, compared to $50 thousand for the comparable period in 2012. Cash provided by financing activities primarily consists of proceeds from sales of common stock in both periods. For the three months ended March 31, 2013, we also made principal payments on the Founders' Loan.

On March 1, 2013, we sold 460,000 shares of our common stock to ten unaffiliated accredited investors at a price of $1.05 per share, realizing gross proceeds of $0.48 million and net proceeds after paying brokers' commission of $0.47 million. The offering was exempt from the registration requirements of the Securities Act of 1933, as amended (the Act) pursuant to Section 4(5) of the Act and Rule 506 of Regulation D promulgated under the Act.

As of March 31, 2013, the Company's cash and cash equivalents totaled $1.0 million and total debt was $0.3 million.

Gaming Positions Information

Gaming positions deployed worldwide totaled 2,390 as of March 31, 2013 comprised of 2,240 PokerPro and 150 ProCore gaming positions. As of March 31, 2012, our installed base consisted of 2,032 gaming positions deployed worldwide comprised of 1,894 PokerPro gaming positions and 138 ProCore gaming positions.

Conference Call

A conference call and webcast will be held on Wednesday, May 8, 2013 at 11:00 a.m. EDT for management to discuss the company's first-quarter 2013 performance. Interested parties may listen to and participate in the conference call by dialing (866) 515-2914 (U.S./Canada) or +1 (617) 399-5128 (Other) and entering passcode 71625865. 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 48767487.

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 March 31,
                                                ----------------------------
                                                     2013           2012    
                                                -------------  -------------
Revenue                                                                     
  License and service fees                      $   1,360,670  $   1,083,414
  Sales of systems and equipment                       30,451        594,523
                                                -------------  -------------
    Total revenue                                   1,391,121      1,677,937
Cost of revenue                                       353,549        385,979
                                                -------------  -------------
    Gross profit                                    1,037,572      1,291,958
                                                -------------  -------------
Operating expenses:                                                         
  Selling, general and administrative                 946,780        892,734
  Research and development                            168,427        199,784
  Share-based compensation expense                     70,778        108,249
  Depreciation                                          2,323          4,232
                                                -------------  -------------
    Total operating expenses                        1,188,308      1,204,999
                                                -------------  -------------
Operating loss                                       (150,736)        86,959
                                                -------------  -------------
  Interest expense, net                                10,543         20,855
                                                -------------  -------------
Net income (loss) from continuing operations                                
 before income taxes                                 (161,279)        66,104
                                                -------------  -------------
  Income tax provision                                 34,081          6,727
Net income (loss) from continuing operations         (195,360)        59,377
                                                -------------  -------------
  Income (loss) from discontinued operations              535         10,522
                                                -------------  -------------
Net income (loss)                               $    (194,825) $      69,899
                                                =============  =============
                                                                            
Net income (loss) from continuing operations                                
 per common share - basic and diluted           $       (0.02) $        0.01
Net income (loss) from discontinued operations                              
 per common share - basic and diluted                    0.00           0.00
                                                -------------  -------------
Net income (loss) per common share - basic and                              
 diluted                                        $       (0.02) $        0.01
                                                =============  =============
Weighted average common shares outstanding -                                
 basic and diluted                                  8,491,315      7,564,104
                                                                            
                                                                            
                                                                        
                                                                        
                             POKERTEK, INC.                             
                      CONSOLIDATED BALANCE SHEETS                       
                                                                        
                                            March 31,     December 31,  
                                              2013            2012      
                                         --------------  -------------- 
Assets                                                                  
Current assets:                                                         
  Cash and cash equivalents              $    1,048,761  $      235,757 
  Accounts receivable, net                      549,269         794,769 
  Inventory                                   1,288,070       1,342,950 
  Prepaid expenses and other assets             132,081          66,988 
                                         --------------  -------------- 
Total current assets                          3,018,181       2,440,464 
                                         --------------  -------------- 
                                                                        
Long-term assets:                                                       
  Gaming systems, net                         1,673,211       1,693,051 
  Property and equipment, net                    24,644          26,967 
  Other assets                                  167,362         171,498 
                                         --------------  -------------- 
Total long-term assets                        1,865,217       1,891,516 
                                         --------------  -------------- 
Total assets                             $    4,883,398  $    4,331,980 
                                         ==============  ============== 
                                                                        
Liabilities and Shareholders' Equity                                    
Current liabilities:                                                    
  Accounts payable                       $      365,163  $      274,609 
  Accrued liabilities                           605,351         569,404 
  Deferred revenue                              147,500          42,266 
  Long-term debt, current portion                66,216          59,571 
                                         --------------  -------------- 
Total current liabilities                     1,184,230         945,850 
                                         --------------  -------------- 
                                                                        
Long-term liabilities:                                                  
  Long-term liability                           199,894         219,494 
  Long-term debt                                223,314         240,429 
                                         --------------  -------------- 
Total long-term liabilities                     423,208         459,923 
                                         --------------  -------------- 
Total liabilities                             1,607,438       1,405,773 
                                                                        
Commitments and contingencies                                           
                                                                        
Common stock subject to rescission               71,183          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                 50,026,500      49,481,922 
  Accumulated deficit                       (46,821,723)    (46,626,898)
                                         --------------  -------------- 
Total shareholders' equity                    3,204,777       2,855,024 
                                         --------------  -------------- 
Total liabilities and shareholders'                                     
 equity                                  $    4,883,398  $    4,331,980 
                                         --------------  -------------- 
                                                                        
                                                                        
                                                                            
                                                                            
                               POKERTEK, INC.                               
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                                (Unaudited)                                 
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------  ------------- 
Cash flows from operating activities:                                       
  Net income (loss)                            $    (194,825) $      69,899 
  Net income from discontinued operations               (535)       (10,522)
Adjustments to reconcile net loss to net cash                               
 used in operating activities:                                              
  Depreciation and amortization                      199,419        196,186 
  Share-based compensation expense                    70,778        108,249 
  Provision for doubtful accounts and other                                 
   receivables                                        49,064        (27,926)
Changes in assets and liabilities:                                          
  Accounts and other receivables                     196,435         63,582 
  Prepaid expenses and other assets                  (60,957)       (12,772)
  Inventory                                           54,879        199,753 
  Gaming systems                                    (177,255)      (331,921)
  Accounts payable and accrued expenses              106,902        (14,367)
  Deferred revenue                                   105,234          8,413 
                                               -------------  ------------- 
Net cash provided by operating activities from                              
 continuing operations                               349,139        248,574 
Net cash provided by operating activities from                              
 discontinued operations                                 535         64,945 
                                               -------------  ------------- 
Net cash provided by operating activities            349,674        313,519 
                                               -------------  ------------- 
                                                                            
Net cash used in investing activities                      -              - 
                                               -------------  ------------- 
                                                                            
Cash flows from financing activities:                                       
  Repayments of long-term debt                       (10,470)             - 
  Proceeds from issuance of common stock, net                               
   of expenses                                       473,800         49,999 
                                               -------------  ------------- 
Net cash provided by financing activities            463,330         49,999 
                                               -------------  ------------- 
Net increase in cash and cash equivalents            813,004        363,518 
Cash and cash equivalents, beginning of year         235,757        606,229 
                                               -------------  ------------- 
Cash and cash equivalents, end of period       $   1,048,761  $     969,747 
                                               =============  ============= 
                                                                            
Supplemental Disclosure of Cash Flow                                        
 Information                                                                
Cash paid for:                                                              
  Interest                                     $      17,361  $      27,382 
  Income taxes                                        33,291          7,686 
                                                                            
Non-cash transactions:                                                      
  Amortization of commitment fee issued in                                  
   common stock                                $           -  $      11,275 
                                                                            
                                                                            

 
                                                                            
                                                                            
                               POKERTEK, INC.                               
                          RECONCILIATION TO EBITDAS                         
                                 (UNAUDITED)                                
                                                                            
                                                                            
                                                                            
                                                Three Months Ended March 31,
                                                     2013           2012    
                                                -------------  -------------
Net income (loss) from continuing operations    $    (195,360) $      59,377
Interest expense, net                                  10,543         20,855
Income tax provision                                   34,081          6,727
Other taxes                                             2,088          2,805
Depreciation and amortization                         199,419        196,186
Stock-based compensation expense                       70,778        108,249
                                                -------------  -------------
  EBITDAS (1)                                   $     121,549  $     394,199
                                                =============  =============
                                                                            
                                                                            
(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 generally 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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