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POKERTEK INC (PTEK)

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POKERTEK : Reports First Quarter 2011 Financial Results

05/04/2011 | 09:40am US/Eastern
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PokerTek, Inc. (NASDAQ: PTEK) today reported financial results for the first quarter ended March 31, 2011.

Mark Roberson, Chief Executive Officer and Chief Financial Officer, commented, "Revenue growth, margin expansion and controlled spending levels combined to drive significantly improved operating results. We were EBITDAS positive for the second consecutive quarter, generated positive cash from operations, and our results from continuing operations improved by 43%.

"We launched our new Blackjack Pro product during the first quarter with initial installations going live in February and March. Player reaction and product performance has been positive, and we are excited about the opportunity to drive additional growth as we expand our electronic table games offering."

Financial Summary

Total revenue for the first quarter of 2011 was $1.7 million compared to $1.6 million for the first quarter of 2010. Revenues increased primarily due to a higher number of revenue producing PokerPro tables in our target markets, particularly in Mexico and Europe, partially offset by reductions in revenue from Canada.

Gross profit increased 28.2% to $1.2 million for the first quarter of 2011 as compared to $0.9 million for the first quarter of 2010. Gross profit margin increased to 72% compared to 60% for the prior-year period. The increase in gross profit was primarily attributable to increased revenues, improved asset utilization and reduced product costs.

Operating expenses were $1.6 million for the first quarter of 2011 compared to $1.7 million for the prior-year period. We continue to focus on controlling spending and maintaining a lean operating structure as we invest in new product development and increase our market penetration.

Net loss from continuing operations for the first quarter of 2011 improved 43% to $0.4 million ($0.07 per share) from $0.8 million ($0.14 per share) for comparable periods in 2011 and 2010. Including the results of discontinued operations, quarterly net loss improved 46% to $0.5 million ($0.07 per share) from $0.9 million ($0.15 per share).

EBITDAS from continuing operations, a non-GAAP financial measure, improved to a profit of $119 thousand for the first quarter for 2011, compared to a profit of $102 thousand in the prior-year period.

Balance Sheet and Cash Flow Information

Cash provided by operating activities improved 144% from a use of cash of $82 thousand in the prior-year quarter to positive cash from operations of $36 thousand for the current period. The improvement in operating cash flow is directly attributable to our improved profitability combined with working capital controls.

As of March 31, 2011, the Company's cash balance was $0.8 million.

Unit Count Information

Gaming positions deployed worldwide totaled 2,610 as of March 31, 2011, composed of 259 PokerPro tables and 6 Blackjack Pro tables. As of March 31, 2010, 2,164 gaming positions were deployed, composed of 218 PokerPro tables. As of December 31, 2010, gaming positions deployed worldwide totaled 2,514, composed of 253 PokerPro tables.

Conference Call

A conference call and webcast will be held on Wednesday, May 4, 2011 at 2:30 p.m. EST for management to discuss the company's first-quarter 2011 performance. Interested parties may listen to and participate in the conference call by dialing 866-203-3436 (U.S./Canada) or 617-213-8849 (Other) and entering passcode 34281370. A live webcast of the conference call will be available through a link on our website, www.pokertek.com, under the heading "Investors", as well as at www.earnings.com and www.streetevents.com. For those unable to participate in the live call, an archived replay will be made available for one year 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 617-801-6888 (Other) and entering passcode 31799044.

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
(Unaudited)
   
Three-Months Ended
March 31,
  2011     2010  
Revenue $ 1,682,626 $ 1,568,020
Cost of revenue   476,671     627,651  
Gross profit 1,205,955 940,369
Operating expenses:
Selling, general and administrative 1,185,800 1,125,187
Research and development 264,760 285,180
Share-based compensation expense 157,951 221,579
Depreciation   20,281     39,332  
Total operating expenses 1,628,792 1,671,278
Operating loss (422,837 ) (730,909 )
Interest expense, net   26,650     32,555  
Net loss from continuing operations before income taxes (449,487 ) (763,464 )
Income tax provision   4,538     28,741  
Net loss from continuing operations (454,025 ) (792,205 )
Loss from discontinued operations   (9,974 )   (64,388 )
Net loss $ (463,999 ) $ (856,593 )
 
Net loss from continuing operations per common share - basic and diluted $ (0.07 ) $ (0.14 )
Net loss from discontinued operations per common share - basic and diluted   -     (0.01 )
Net loss per common share - basic and diluted $ (0.07 ) $ (0.15 )
 
Weighted average common shares outstanding 6,210,883 5,628,059

POKERTEK, INC.
CONSOLIDATED BALANCE SHEETS
   

March 31, 2011
(Unaudited)

December 31,
2010

Assets
Current assets:
Cash and cash equivalents $ 814,125 $ 666,179
Accounts receivable, net 1,209,414 1,057,511
Inventory 1,041,134 997,064
Prepaid expenses and other assets 194,964 213,495
Net assets of discontinued operations   334,420     379,441  
Total current assets 3,594,057 3,313,690
 
Long-term assets:
Gaming systems, net 2,049,834 2,255,030
Property and equipment, net 62,508 80,755
Other assets   337,034     402,498  
Total long-term assets   2,449,376     2,738,283  
 
Total assets $ 6,043,433   $ 6,051,973  
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 389,579 $ 327,662
Accrued liabilities 707,797 648,604
Deferred revenue 1,030,590 817,789
Long-term liability - related party, current portion 44,905 21,402
Long-term debt, current portion 817,343 30,793
Current liabilities of discontinued operations   95,516     113,185  
Total current liabilities 3,085,730 1,959,435
 
Long-term liabilities:
Deferred revenue 32,833 118,436
Long-term liability - related party 323,693 368,598
Long-term debt   -     800,000  
Total long-term liabilities 356,526 1,287,034
 
Total liabilities 3,442,256 3,246,469
 
Commitments and contingencies
 
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 6,284,117 and 6,187,853 shares at
March 31, 2011 and December 31, 2010, respectively
Additional paid-in capital 47,087,294 46,827,622
Accumulated deficit   (44,486,117 )   (44,022,118 )
Total shareholders' equity   2,601,177     2,805,504  
Total liabilities and shareholders' equity $ 6,043,433   $ 6,051,973  

POKERTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
Three-Months Ended
March 31,
  2011     2010  
Cash flows from operating activities:
Net loss $ (463,999 ) $ (856,593 )
Net loss from discontinued operations 9,974 64,388
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 373,795 593,497
Share-based compensation expense 157,950 221,579
Provision for accounts and other receivables 15,580 14,682
Changes in assets and liabilities:
Accounts and other receivables (149,812 ) 237,684
Prepaid expenses and other assets 72,720 56,948
Inventory (44,070 ) 80,866
Gaming systems (150,352 ) (463,363 )
Accounts payable and accrued expenses 87,708 (128,765 )
Deferred revenue   127,581     (32,804 )
Net cash provided by (used in) operating activities from continuing operations 37,075 (211,881 )
Net cash provided by (used in) operating activities from discontinued operations   (676 )   129,427  
Net cash provided by (used in) operating activities 36,399 (82,454 )
 
Cash flows from investing activities:
Purchases of property and equipment   -     (4,265 )
Net cash used in investing activities - (4,265 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock, net of expenses 124,997 -
Repayments of capital lease   (13,450 )   (6,332 )
Net cash provided by (used in) financing activities   111,547     (6,332 )
Net increase (decrease) in cash and cash equivalents 147,946 (93,051 )
Cash and cash equivalents, beginning of year   666,179     636,374  
Cash and cash equivalents, end of period $ 814,125   $ 543,323  
 
Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest $ 14,425 $ 18,607
Income taxes 4,031 26,821
 
Non-cash transactions:
Amortization of commitment fee issued in common stock $ 11,275 $ -
Gaming inventory purchase - related party - 396,500

POKERTEK, INC.
RECONCILIATION TO EBITDAS
(Unaudited)
   
 
 
Three-Months Ended
March 31,
  2011     2010  
Net loss from continuing operations $ (454,025 ) $ (792,205 )
Interest (income) expense, net 26,650 32,555
Income tax provision 4,538 28,741
Other taxes 9,714 17,355
Depreciation and amortization 373,795 593,497
Stock-based compensation expense   157,951     221,579  
EBITDAS (1) $ 118,623   $ 101,522  
 
 
 
(1) EBITDAS is defined as net 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.

PokerTek, Inc.
Mark Roberson, 704-849-0860 ext. 101
CEO and CFO
investorrelations@pokertek.com
or
Lippert/Heilshorn & Associates
John Heilshorn, 212-838-3777
JHeilshorn@lhai.com


© Business Wire 2011
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