PokerTek, Inc. (NASDAQ: PTEK) today reported financial results for
the period ended September 30, 2012.
Financial Highlights (compared to prior year):
Year-to-Date Highlights:
- Gross Margin increased to 74% from
70%
- Operating Expenses decreased 29%
- Operating loss improved 45%
- 25% growth in gaming positions
Quarterly Highlights:
- Gross Margin increased to 71% from
68%
- Operating expenses decreased 35%
- Operating loss improved 34%
"We made solid progress towards the goal of sustainable EPS
profitability, with operational execution driving improved
financial results," commented Mark Roberson, Chief Executive
Officer. "Business momentum is accelerating with recurring revenue
increasing 21%, gross margins in excess of 70%, operating expenses
declining 6% and pre-tax income improving 31% from June to
September. In addition, recurring revenue represented over 98% of
total revenue for the third quarter, providing a solid foundation
to support profitable growth for the balance of 2012 and 2013.
"I am encouraged by the opportunity to leverage our dominant
position in electronic poker and accelerate growth. Gaming
positions grew by 25% over the past 12 months and we expect
momentum to continue as we expand in North America while also
entering several new international markets with significant
potential. In addition, we are developing Baccarat as the next new
game on our ProCore platform, which will expand our market reach
and placement opportunities. With continued growth, we should reach
record installation levels in the near future.
"Looking ahead, we are increasingly confident that our positive
momentum will continue into Q4 and 2013 as we grow our recurring
revenue and are nearing EPS profitability."
Financial Summary Total revenue was $3.8
million for the first nine months of 2012 compared to $5.2 million
in 2011, a reduction of 25.7%.For the third quarter, total revenue
was $1.1 million in 2012 compared to $1.7 million in 2011, a
reduction of 34.2%.
Revenues increased in North America where we are expanding in
Ontario, Canada and the state of Ohio. Those increases were offset
by reduced revenue from Mexico, reductions in revenue from Europe
where macroeconomic conditions continue to impact discretionary
spending on gaming activities, and changes in sales mix.
Recurring revenue from license and service fees decreased $748
thousand for the first nine months of 2012 and $159 thousand for
the third quarter. On a sequential basis, revenue from license and
service fees increased 21% from the second quarter of 2012 as
recent installations began contributing to quarterly results.
Revenues from sales of systems and equipment decreased $577
thousand for the first nine months of 2012 and $420 thousand for
the third quarter. In the current year, product mix has been more
heavily weighted towards recurring revenue which makes for
unfavorable prior year comparisons, but provides a healthier base
for future growth.
Gross profit was $2.8 million for the first nine months of 2012
compared to $3.6 million in 2011, a reduction of $0.8 million, or
22.0%. Gross profit was $0.8 million for the third quarter of 2012
compared to $1.2 million in 2011, a reduction of $0.4 million, or
31.5%.
Gross profit margins increased to 73.6% in the first nine months
of 2012 compared to 70.1% for the same period in 2011. Gross profit
margins increased to 70.8% in the third quarter of 2012 compared to
68.1% in 2011. The changes in gross profit margin are attributable
to changes in sales mix which are more heavily weighted to high
margin recurring revenue in the current periods, as well as reduced
product costs and depreciation.
Operating expenses decreased 28.8% to $3.4 million for the first
nine months of 2012 from $4.7 million in 2011. Operating expenses
decreased 35.3% to $1.0 million in the third quarter of 2012 from
$1.6 million in 2011. We have implemented cost reduction
initiatives which have streamlined our overhead and reduced
spending on personnel, regulatory approvals, and professional fees
in both the quarterly and year-to-date periods.
Net loss from continuing operations improved 45.4% to $662
thousand ($0.09 per share) for the first nine months of 2012 from
$1.2 million ($0.18 per share) in 2011. Net loss from continuing
operations improved 34.1% for the third quarter of 2012 to $326
thousand ($0.04 per share) compared to $495 thousand ($0.07 per
share) for the comparable period of 2011.
Including results of discontinued operations, net loss improved
50.0% to $612 thousand ($0.08 per share) for the first nine months
of 2012 from $1.2 million ($0.19 per share) in 2011. Net loss
improved 33.0% to $331 thousand ($0.04 per share) for the third
quarter of 2012 from $494 thousand ($0.07 per share) in 2011.
EBITDAS from continuing operations, a non-GAAP financial measure
(described below), was a profit of $290 thousand for the first nine
months of 2012, compared to a profit of $501 thousand in 2011.
EBITDAS was a profit of $8 thousand for the third quarter of 2012,
compared to a profit of $144 thousand in the prior-year period.
Balance Sheet and Cash Flow Information
The Company's cash used in continuing operations improved 28% to
$472 thousand for the first nine months of 2012, from $659 thousand
for 2011. The improvement in operating cash flow was primarily due
to improved profitability.
Total debt was $300 thousand as of the September 30, 2012.
During the year, we have reduced debt by $400 thousand or 57%. In
addition, we completed a private placement transaction in the third
quarter for net proceeds of $240 thousand, further strengthening
our balance sheet.
Gaming Positions Information Gaming
positions deployed worldwide totaled 2,442 as of September 30, 2012
composed of 2,304 PokerPro and 138 ProCore gaming positions. As of
September 30, 2011, 1,958 gaming positions were deployed worldwide
composed of 1,874 PokerPro and 84 ProCore gaming positions.
Conference Call Interested parties may
listen to and participate in the conference call by dialing
866.383.8003 (U.S./Canada) or +1 617.597.5330 (Other) and entering
passcode 77061043. 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 23304666.
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 Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2011 2011
2012 Restated 2012 Restated
----------- ----------- ----------- -----------
Revenue
License and service
fees $ 1,097,641 $ 1,257,107 $ 3,087,984 $ 3,835,999
Sales of systems and
equipment 16,537 436,710 745,714 1,322,494
----------- ----------- ----------- -----------
Total revenue 1,114,178 1,693,817 3,833,698 5,158,493
Cost of revenue 324,816 540,690 1,012,172 1,542,756
----------- ----------- ----------- -----------
Gross profit 789,362 1,153,127 2,821,526 3,615,737
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and
administrative 801,320 1,082,393 2,541,998 3,377,634
Research and
development 163,754 240,812 537,650 746,628
Share-based
compensation expense 77,943 274,846 274,649 541,484
Depreciation 2,480 18,991 10,943 59,750
----------- ----------- ----------- -----------
Total operating
expenses 1,045,497 1,617,042 3,365,240 4,725,496
----------- ----------- ----------- -----------
Operating loss (256,135) (463,915) (543,714) (1,109,759)
----------- ----------- ----------- -----------
Interest expense, net 17,752 20,637 58,417 73,646
----------- ----------- ----------- -----------
Net loss from continuing
operations before
income taxes (273,887) (484,552) (602,131) (1,183,405)
----------- ----------- ----------- -----------
Income tax provision 52,353 10,417 59,794 29,958
Net loss from continuing
operations (326,240) (494,969) (661,925) (1,213,363)
----------- ----------- ----------- -----------
Income (loss) from
discontinued
operations (4,754) 1,216 50,113 (9,187)
----------- ----------- ----------- -----------
Net loss $ (330,994) $ (493,753) $ (611,812) $(1,222,550)
=========== =========== =========== ===========
Net loss from continuing
operations per common
share - basic and
diluted $ (0.04) $ (0.07) $ (0.09) $ (0.18)
Net income (loss) from
discontinued operations
per common share -
basic and diluted (0.00) 0.00 0.01 (0.00)
----------- ----------- ----------- -----------
Net loss per common
share - basic and
diluted $ (0.04) $ (0.07) $ (0.08) $ (0.19)
=========== =========== =========== ===========
Weighted average common
shares outstanding -
basic and diluted 8,130,413 6,939,750 7,753,925 6,589,456
POKERTEK, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
2012 December 31,
(Unaudited) 2011
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 614,196 $ 606,229
Accounts receivable, net 636,773 726,520
Inventory 1,556,218 1,762,806
Prepaid expenses and other assets 91,283 147,487
Net assets of discontinued operations - 92,310
------------- -------------
Total current assets 2,898,470 3,335,352
------------- -------------
Long-term assets:
Gaming systems, net 1,490,609 1,104,333
Property and equipment, net 29,291 38,855
Other assets 165,954 223,333
------------- -------------
Total long-term assets 1,685,854 1,366,521
------------- -------------
Total assets $ 4,584,324 $ 4,701,873
============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 319,403 $ 321,955
Accrued liabilities 352,973 468,958
Deferred revenue 236,957 281,466
Long-term liability - related party, current
portion 91,420 54,952
Long-term debt, current portion 42,836 -
Current liabilities of discontinued
operations - 70,383
------------- -------------
Total current liabilities 1,043,589 1,197,714
------------- -------------
Long-term liabilities:
Long-term liability - related party 232,178 268,646
Long-term debt 257,164 700,000
------------- -------------
Total long-term liabilities 489,342 968,646
------------- -------------
Total liabilities 1,532,931 2,166,360
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 8,638,419 and 7,490,124 shares
at September 30, 2012 and December 31,
2011, respectively - -
Additional paid-in capital 49,424,793 48,368,283
Accumulated deficit (46,444,583) (45,832,770)
------------- -------------
Total shareholders' equity 2,980,210 2,535,513
------------- -------------
Total liabilities and shareholders' equity $ 4,584,324 $ 4,701,873
============= =============
POKERTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
------------------------
2011
2012 Restated
----------- -----------
Cash flows from operating activities:
Net loss $ (611,812) $(1,222,550)
Net (income) loss from discontinued operations (50,113) 9,187
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 550,117 1,051,187
Share-based compensation expense 274,649 541,484
Provision for doubtful accounts and other
receivables 37,333 294,500
Changes in assets and liabilities:
Accounts and other receivables 57,494 (254,653)
Prepaid expenses and other assets 79,757 163,811
Inventory 206,588 (438,839)
Gaming systems (925,449) (358,224)
Accounts payable and accrued expenses (46,538) 6,683
Deferred revenue (44,127) (451,328)
----------- -----------
Net cash used in operating activities from
continuing operations (472,101) (658,742)
Net cash provided by (used in) operating
activities from discontinued operations 66,577 (19,155)
----------- -----------
Net cash used in operating activities (405,524) (677,897)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (1,378) -
----------- -----------
Net cash used in investing activities (1,378) -
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of
expenses 414,869 823,431
Repayments of capital lease - (30,793)
----------- -----------
Net cash provided by financing activities 414,869 792,638
----------- -----------
Net increase in cash and cash equivalents 7,967 114,741
Cash and cash equivalents, beginning of year 606,229 666,179
----------- -----------
Cash and cash equivalents, end of period $ 614,196 $ 780,920
=========== ===========
Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest $ 58,179 $ 53,959
Income taxes 22,272 27,881
Non-cash transactions:
Amortization of commitment fee issued in common
stock $ 33,825 $ 33,825
Issuance of common stock for debt cancellation 400,000 100,000
Transfers from inventory to property and
equipment - 9,319
POKERTEK, INC.
RECONCILIATION TO EBITDAS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2011 2011
2012 (restated) 2012 (restated)
----------- ----------- ----------- -----------
Net income (loss) from
continuing operations $ (326,240) $ (494,969) $ (661,925) $(1,213,363)
Interest expense, net 17,752 20,637 58,417 73,646
Income tax provision 52,353 10,417 59,794 29,958
Other taxes 1,977 2,296 9,049 18,386
Depreciation and
amortization 183,732 330,731 550,117 1,051,188
Stock-based compensation
expense 77,943 274,846 274,649 541,484
----------- ----------- ----------- -----------
EBITDAS (1) $ 7,517 $ 143,958 $ 290,101 $ 501,299
=========== =========== =========== ===========
(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
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