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 fourth 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® and 150 ProCore™ gaming positions. As
of December 31, 2011, 2,028 gaming positions were deployed
comprised of 1,944 PokerPro and 84 ProCore™ 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™ and EZ Baccarat™.
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 call 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 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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