PokerTek Reports Second Quarter 2013 Financial Results

PokerTek Reports Second Quarter 2013 Financial Results 
MATTHEWS, NC -- (Marketwired) -- 08/07/13 --  PokerTek, Inc. (NASDAQ:
PTEK) today reported financial results for the second quarter ended
June 30, 2013. 
Financial Highlights 


 
--  Revenue increased 54%
--  Gross Profit margin increased to 77%
--  Net loss from continuing operations improved 87%
--  EPS nearing breakeven at $(0.01)
--  EBITDAS and cash flow positive

  
"Our financial results for the second quarter were strong, with
increased market penetration in Canada, Mexico and the United States
driving 54% revenue growth and an 87% improvement in net operating
results," commented Mark Roberson, Chief Executive Officer.  
"With a strong base of high margin recurring revenue in place, we
expect to accelerate second half product placements to drive growth.
Areas of focus for the second half include expanding our installed
base in several markets, specifically including cruise ships, South
America and US markets. In addition, our ProCore platform is nearing
regulatory approvals that will allow us to begin marketing BlackJack
and Baccarat in regulated markets around the world." 
Financial Summary 
Total revenue increased by $0.6 million, or 54.0%, to $1.6 million
for the quarter and by $0.3 million, or 10.1%, to $3.0 million for
the first half of 2013. The increase in total revenue was primarily
due to increased license and service fees from Canada and Mexico,
increased sales of systems and equipment in the United States,
partially offset by lower revenues from Europe. 
Revenue from license and service fees increased by $0.3 million, or
35.1% to $1.2 million for the quarter and by $0.6 million, or 29.9%,
to $2.6 million for the first half of 2013. The increase in recurring
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.  
Revenue from systems and equipment sales increased $0.2 million, or
181.4%, to $0.4 million for the quarter and decreased by $0.3
million, or 43.9%, for the first half of 2013. The changes in sales
of systems and equipment for the quarter were primarily due to
increased product sales in the United States. For the first half,
product sales decreased due to a large product sale occurring in the
first quarter of 2012, combined with lower product sale activity in
Europe during the current year. 
Gross profit increased by $0.5 million, or 67.3%, to $1.2 million for
the quarter and by $0.2 million, or 12.0%, to $2.3 million for the
first half. Gross profit margins increased to 77.2% for the quarter
and 76.0% for the first half of 2013. 
Operating expenses increased $0.2 million or 13.8%, to $1.3 million
for the quarter and by $0.1 million or 5.9%, to $2.5 million for the
first half. Operating expenses increased primarily due to higher
spending on testing and other fees incurred to obtain regulatory
approval of new products. 
Net loss from continuing operations improved 87.0% to $51 thousand
for the quarter and by 26.5% to $247 thousand for the first half. The
improvement was primarily due to growth in recurring license and
service fees and sales of systems and equipment, partially offset by
higher product approval costs and foreign income taxes incurred in
the current year. 
Net loss from continuing operations per common share improved by
80.0% to $0.01 per common share (basic and diluted) for the quarter
and by 25.0% to $0.03 per common share (basic and diluted) for the
first half. 
EBITDAS, a non-GAAP financial measure (described below), improved to
positive $248 thousand for the quarter from a loss of $112 thousand
in the prior year. For the first half, EBITDAS improved to $370
thousand from $283 thousand in 2012.  
Balance Sheet and Cash Flow Information 
Cash provided by operating activities from continuing operations was
$0.4 million for the six months ended June 30, 2013 compared to a use
of cash of $0.1 million for the six months ended June 30, 2012. The
improvement in cash provided by operating activities was primarily
due to improved operating results and favorable working capital,
primarily from increased deferred revenue and reduced use of cash for
gaming systems when compared with the prior period. 
Cash provided by financing activities was $0.4 million for the six
months ended June 30, 2013, compared to $0.2 million for the
comparable period in 2012. Cash provided by financing activities
primarily consists of proceeds from sales of common stock in both
periods, partially offset by principal payments on long term debt in
the current year period. 
As of June 30, 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 2,456 at June 30, 2013
comprised of 2,300 PokerPro and 156 ProCore gaming positions. As of
June 30, 2012, our install base consisted of 2,294 gaming positions
deployed worldwide comprised of 2,174 PokerPro gaming positions, and
120 ProCore gaming positions.  
Conference Call 
A conference call and webcast will be held on Wednesday, August 7,
2013 at 11:00 am EDT for management to discuss the company's
second-quarter 2013 performance. Interested parties may listen to and
participate in the conference call by dialing 877-703-6104
(U.S./Canada) or +1-857-244-7303 (Other) and entering passcode
13918332. 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 79665455. 
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-lookin
g 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                    
                                (Unaudited)                                 
                                                                            
                               Three Months Ended     Six Months Ended June 
                                    June 30,                   30,          
                             ----------------------  ---------------------- 
                                2013        2012        2013        2012    
                             ----------  ----------  ----------  ---------- 
Revenue                                                                     
  License and service fees   $1,225,353  $  906,929  $2,586,022  $1,990,343 
  Sales of systems and                                                      
   equipment                    378,870     134,654     409,321     729,177 
                             ----------  ----------  ----------  ---------- 
    Total revenue             1,604,223   1,041,583   2,995,343   2,719,520 
Cost of revenue                 365,909     301,376     719,459     687,355 
                             ----------  ----------  ----------  ---------- 
    Gross profit              1,238,314     740,207   2,275,884   2,032,165 
                             ----------  ----------  ----------  ---------- 
Operating expenses:                                                         
  Selling, general and                                                      
   administrative             1,020,216     847,945   1,966,995   1,740,679 
  Research and development      169,922     174,112     338,349     373,896 
  Share-based compensation                                                  
   expense                       75,880      88,457     146,659     196,706 
  Depreciation                    2,310       4,232       4,633       8,464 
                             ----------  ----------  ----------  ---------- 
    Total operating expenses  1,268,328   1,114,746   2,456,636   2,319,745 
                             ----------  ----------  ----------  ---------- 
                                                                            
Operating loss                  (30,014)   (374,539)   (180,752)   (287,580)
                             ----------  ----------  ----------  ---------- 
                                                                            
  Interest expense, net           9,470      19,810      20,013      40,665 
                             ----------  ----------  ----------  ---------- 
                                                                            
Net loss from continuing                                                    
 operations before income                                                   
 taxes                          (39,484)   (394,349)   (200,765)   (328,245)
                             ----------  ----------  ----------  ---------- 
                                                                            
  Income tax provision           11,939         714      46,020       7,441 
                                                                            
Net (loss) from continuing                                                  
 operations                     (51,423)   (395,063)   (246,785)   (335,686)
                             ----------  ----------  ----------  ---------- 
  Income from discontinued                                                  
   operations                         -      44,345         535      54,867 
                             ----------  ----------  ----------  ---------- 
Net (loss)                   $  (51,423) $ (350,718) $ (246,250) $ (280,819)
                             ==========  ==========  ==========  ========== 
                                                                            
Net (loss) from continuing                                                  
 operations per common share                                                
 - basic and diluted         $    (0.01) $    (0.05) $    (0.03) $    (0.04)
Net income from discontinued                                                
 operations per common share                                                
 - basic and diluted                  -        0.01        0.00        0.01 
                             ----------  ----------  ----------  ---------- 
Net (loss) per common share                                                 
 - basic and diluted         $    (0.01) $    (0.05) $    (0.03) $    (0.04)
                             ==========  ==========  ==========  ========== 
Weighted average common                                                     
 shares outstanding - basic                                                 
 and diluted                  9,227,808   7,563,120   9,004,560   7,563,612 
                                                                            
                                                                            
                                                                            
                               POKERTEK, INC.                               
                        CONSOLIDATED BALANCE SHEETS                         
                                                                            
                                          June 30, 2013      December 31,   
                                            (Unaudited)          2012       
                                         ----------------  ---------------- 
Assets                                                                      
Current assets:                                                             
  Cash and cash equivalents              $      1,017,232  $        235,757 
  Accounts receivable, net                        723,705           794,769 
  Inventory                                     1,246,272         1,342,950 
  Prepaid expenses and other assets               104,673            66,988 
                                         ----------------  ---------------- 
Total current assets                            3,091,882         2,440,464 
                                         ----------------  ---------------- 
                                                                            
Long-term assets:                                                           
  Gaming systems, net                           1,621,272         1,693,051 
  Property and equipment, net                      28,204            26,967 
  Other assets                                    155,708           171,498 
                                         ----------------  ---------------- 
Total long-term assets                          1,805,184         1,891,516 
                                         ----------------  ---------------- 
                                                                            
Total assets                             $   
   4,897,066  $      4,331,980 
                                         ================  ================ 
                                                                            
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
  Accounts payable                       $        393,330  $        274,609 
  Accrued liabilities                             457,068           569,404 
  Deferred revenue                                219,528            42,266 
  Long-term debt, current portion                  66,712            59,571 
                                         ----------------  ---------------- 
Total current liabilities                       1,136,638           945,850 
                                         ----------------  ---------------- 
                                                                            
Long-term liabilities:                                                      
  Long-term liability                             187,763           219,494 
  Long-term debt                                  206,816           240,429 
                                         ----------------  ---------------- 
Total long-term liabilities                       394,579           459,923 
                                         ----------------  ---------------- 
                                                                            
Total liabilities                               1,531,217         1,405,773 
                                                                            
Commitments and contingencies                                               
                                                                            
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 9,316,164 and                                            
   8,625,498 shares at June 30, 2013 and                                    
   December 31, 2012, respectively                      -                 - 
                                                                            
  Additional paid-in capital                   50,238,995        49,481,922 
  Accumulated deficit                         (46,873,146)      (46,626,898)
                                         ----------------  ---------------- 
                                                                            
Total shareholders' equity                      3,365,849         2,855,024 
                                         ----------------  ---------------- 
Total liabilities and shareholders'                                         
 equity                                  $      4,897,066  $      4,331,980 
                                         ================  ================ 
                                                                            
                                                                            
                                                                            
                               POKERTEK, INC.                               
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                                (Unaudited)                                 
                                                                            
                                                 Six Months Ended June 30,  
                                               ---------------------------- 
                                                                            
                                                    2013           2012     
                                               -------------  ------------- 
Cash flows from operating activities:                                       
  Net loss                                     $    (246,250) $    (280,819)
  Net income from discontinued operations               (535)       (54,867)
Adjustments to reconcile net loss to net cash                               
 used in operating activities:                                              
  Depreciation and amortization                      400,258        366,386 
  Share-based compensation expense                   146,659        196,706 
  Provision for doubtful accounts and other                                 
   receivables                                       104,217          2,956 
Changes in assets and liabilities:                                          
  Accounts and other receivables                     (74,180)       111,825 
  Prepaid expenses and other assets                   19,132         36,537 
  Inventory                                           96,678         68,691 
  Gaming systems                                    (323,846)      (618,501)
  Accounts payable and accrued expenses               91,943         86,445 
  Deferred revenue                                   177,263        (46,686)
                                               -------------  ------------- 
Net cash provided by (used in) operating                                    
 activities from continuing operations               391,338       (131,327)
Net cash provided by operating activities from                              
 discontinued operations                                 535         70,502 
                                               -------------  ------------- 
Net cash provided by (used in) operating                                    
 activities                                          391,873        (60,825)
                                               -------------  ------------- 
                                                                            
  Sale of investments                                                       
  Purchase of investments                                                   
                                               -------------  ------------- 
Net cash used in investing activities                 (5,870)             - 
                                               -------------  ------------- 
                                                                            
  Repayments of long-term debt                       (26,472)             - 
  Proceeds from capital lease                                               
  Repayments of capital lease                              -              - 
                                               -------------  ------------- 
Net cash provided by financing activities            395,472        174,869 
                                               -------------  ------------- 
Net increase in cash and cash equivalents            781,475        114,044 
Cash and cash equivalents, beginning of year         235,757        606,229 
                                               -------------  ------------- 
Cash and cash equivalents, end of period       $   1,017,232  $     720,273 
                                               =============  ============= 
                                                                            
Supplemental Disclosure of Cash Flow                                        
 Information                                                                
Cash paid for:                                                              
  Interest                                     
$      23,756  $      37,911 
  Income taxes                                        43,995          8,790 
                                                                            
Non-cash transactions:                                                      
  Amortization of commitment fee issued in                                  
   common stock                                $           -  $      22,550 
  Shares of common stock issued in settlement                               
   of litigation                                     117,288              - 
  Notes receivable, net                               41,028                
                                                                            
                                                                            
                                                                            
                               POKERTEK, INC.                               
                         RECONCILIATION TO EBITDAS                          
                                (UNAUDITED)                                 
                                                                            
                                                                            
                          Three Months Ended June    Six Months Ended June  
                                    30,                       30,           
                             2013         2012         2013         2012    
                         -----------  -----------  -----------  ----------- 
Net income (loss) from                                                      
 continuing operations   $   (51,423) $  (395,063) $  (246,785) $  (335,686)
Interest expense, net          9,470       19,810       20,013  $    40,665 
Income tax provision          11,939          714       46,020  $     7,441 
Other taxes                    1,249        4,267        3,340  $     7,072 
Depreciation and                                                            
 amortization                200,840      170,200      400,258  $   366,386 
Stock-based compensation                                                    
 expense                      75,880       88,457      146,659  $   196,706 
                         -----------  -----------  -----------  ----------- 
  EBITDAS (1)            $   247,955  $  (111,615) $   369,505  $   282,584 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
(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
CEO and CFO
PokerTek, Inc.
704.849.0860, x101
investorrelations@pokertek.com