PokerTek Reports First Quarter 2012 Financial Results
Positive Quarterly Net Income – First EPS Positive Quarter in Company History
Strong EBITDAS and Cash Flow Performance
Poised for growth in 2012
Financial Highlights:
Quarterly results turned profitable with margin expansion and expense reduction
| ● | First quarter of positive GAAP results - Net Income increased 125% |
| ● | Cash From Operations increased 761% |
| ● | Gross profit margins increased to 77% |
| ● | Operating expenses decreased 26% |
MATTHEWS, NC – May 1, 2012—PokerTek, Inc. (NASDAQ: PTEK) today reported financial results for the first quarter ended March 31, 2012.
“We are pleased to start 2012 with strong results, achieving our first quarter of GAAP profitability,” said Mark Roberson, Chief Executive Officer and Chief Financial Officer. “Reaching profitability is a significant milestone and represents the culmination of initiatives to expand our margins, streamline our operations and provide exceptional value to our customers.
“Looking ahead, we see our pipeline of new opportunities strengthening and expect increased penetration in several key markets. We are excited about the prospects to grow our installed base in 2012.”
Financial Summary
Total revenue was $1.7 million for the first quarter of 2012 compared to $2.0 million in 2011. Revenues from license and service fees decreased $273 thousand as reductions in revenue from Mexico were only partially offset by revenues generated in other markets. Revenues from sales of systems and equipment were relatively unchanged from prior year, decreasing by $14 thousand. Domestic system and equipment sales favorably impacted the current period and European sales favorably impacted the prior year period. Excluding revenue from Mexico in the prior year, total revenue increased 5.7% on a comparable basis.
Gross profit was $1.3 million for the first quarter of 2012 compared to $1.4 million in 2011. Gross profit margin increased to 77% from 71% on a quarterly basis. The increase in gross profit margin is primarily due to a combination of changes in revenue mix, improved asset utilization and lower product costs and depreciation.
Operating expenses decreased 26% to $1.2 million in the first quarter of 2012 from $1.6 million in 2011. The reduction in operating expense is due to continued cost reduction initiatives which resulted in lower spending on personnel-related costs, regulatory approvals, and professional fees.
Net income from continuing operations improved 122% to $59 thousand in 2012 from a loss of $(267) thousand in 2011. Net income (loss) from continuing operations per common share improved 125% to a profit of $0.01 per common share (basic and diluted) from a loss of $0.04 per common share (basic and diluted).
EBITDAS, a non-GAAP financial measure (described below), was positive $394 thousand in 2012 and $ 300 thousand in 2011.
Balance Sheet and Cash Flow Information
Cash provided by operating activities from continuing operations improved to $249 thousand for 2012, compared to $37 thousand for 2011. Cash from operating activities strengthened as improved earnings and favorable collections were partially offset by reductions in accounts payable and accrued liabilities.
As of March 31, 2012, the Company’s cash and cash equivalents totaled $ 970 thousand and total debt was $700 thousand.
Gaming Positions Information
Gaming positions deployed worldwide totaled 2,032 of March 31, 2012 comprised of 1,894 PokerPro and 138 ProCore gaming positions. As of March 31, 2011, 2,610 gaming positions were deployed worldwide comprised of 2,574 PokerPro gaming positions and 36 ProCore gaming positions. Excluding Mexico, gaming positions increased by 132 from March 2011 to March 2012. The increase in gaming positions resulted from net increased placements of PokerPro and ProCore in our target markets.
Conference Call
Interested parties may listen to and participate in the conference call by dialing 866.770.7129 (U.S./Canada) or +1 617.213.8067 (Other) and entering passcode 48241207. 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 37896038.
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.
Contacts:
Mark Roberson
CEO and CFO
PokerTek, Inc.
704.849.0860, x101
investorrelations@pokertek.com
| POKERTEK, INC. | |
| CONSOLIDATED STATEMENTS OF OPERATIONS | |
| (Unaudited) | |
| | | | | | | |
| | | Three Months Ended March 31, | |
| | | 2012 | | | 2011 Restated | |
| Revenue | | | | | | |
| License and service fees | | $ | 1,083,414 | | | $ | 1,355,959 | |
| Sales of systems and equipment | | | 594,523 | | | | 608,403 | |
| Total revenue | | | 1,677,937 | | | | 1,964,362 | |
| Cost of revenue | | | 385,979 | | | | 571,100 | |
| Gross profit | | | 1,291,958 | | | | 1,393,262 | |
| Operating expenses: | | | | | | | | |
| Selling, general and administrative | | | 892,734 | | | | 1,186,168 | |
| Research and development | | | 199,784 | | | | 264,760 | |
| Share-based compensation expense | | | 108,249 | | | | 157,951 | |
| Depreciation | | | 4,232 | | | | 20,281 | |
| Total operating expenses | | | 1,204,999 | | | | 1,629,160 | |
| Operating profit (loss) | | | 86,959 | | | | (235,898 | ) |
| Interest expense, net | | | 20,855 | | | | 26,282 | |
| Net income (loss) from continuing operations before income taxes | | | 66,104 | | | | (262,180 | ) |
| Income tax provision | | | 6,727 | | | | 4,538 | |
| Net income (loss) from continuing operations | | | 59,377 | | | | (266,718 | ) |
| Income (loss) from discontinued operations | | | 10,522 | | | | (9,974 | ) |
| Net income (loss) | | $ | 69,899 | | | $ | (276,692 | ) |
| | | | | | | | | |
| Net income (loss) from continuing operations per common share - basic and diluted | | $ | 0.01 | | | $ | (0.04 | ) |
| 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 | | $ | 0.01 | | | $ | (0.04 | ) |
| Weighted average common shares outstanding - basic and diluted | | | 7,564,104 | | | | 6,284,117 | |
| POKERTEK, INC. | |
| CONSOLIDATED BALANCE SHEETS | |
| | | | | | | |
| | | March 31, 2012 (Unaudited) | | | December 31, 2011 | |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 969,747 | | | $ | 606,229 | |
| Accounts receivable, net | | | 690,836 | | | | 726,520 | |
| Inventory | | | 1,563,053 | | | | 1,762,806 | |
| Prepaid expenses and other assets | | | 162,066 | | | | 147,487 | |
| Net assets of discontinued operations | | | 11,788 | | | | 92,310 | |
| Total current assets | | | 3,397,490 | | | | 3,335,352 | |
| | | | | | | | | |
| Long-term assets: | | | | | | | | |
| Gaming systems, net | | | 1,244,300 | | | | 1,104,333 | |
| Property and equipment, net | | | 34,624 | | | | 38,855 | |
| Other assets | | | 210,251 | | | | 223,333 | |
| Total long-term assets | | | 1,489,175 | | | | 1,366,521 | |
| Total assets | | $ | 4,886,665 | | | $ | 4,701,873 | |
| | | | | | | | | |
| Liabilities and Shareholders' Equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 319,432 | | | $ | 321,955 | |
| Accrued liabilities | | | 385,114 | | | | 468,958 | |
| Deferred revenue | | | 289,497 | | | | 281,466 | |
| Long-term liability - related party, current portion | | | 70,342 | | | | 54,952 | |
| Current liabilities of discontinued operations | | | 44,639 | | | | 70,383 | |
| Total current liabilities | | | 1,109,024 | | | | 1,197,714 | |
| | | | | | | | | |
| Long-term liabilities: | | | | | | | | |
| Long-term liability - related party | | | 253,256 | | | | 268,646 | |
| Long-term debt | | | 700,000 | | | | 700,000 | |
| Total long-term liabilities | | | 953,256 | | | | 968,646 | |
| Total liabilities | | | 2,062,280 | | | | 2,166,360 | |
| | | | | | | | | |
| 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 7,553,388 and 7,490,120 shares at | | | | | | | | |
| March 31, 2012 and December 31, 2011, respectively | | | | | | | | |
| Additional paid-in capital | | | 48,587,256 | | | | 48,368,283 | |
| Accumulated deficit | | | (45,762,871 | ) | | | (45,832,770 | ) |
| Total shareholders' equity | | | 2,824,385 | | | | 2,535,513 | |
| Total liabilities and shareholders' equity | | $ | 4,886,665 | | | $ | 4,701,873 | |
| POKERTEK, INC. | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| (Unaudited) | |
| | | | | | | |
| | | Three Months Ended March 31, | |
| | | 2012 | | | 2011 Restated | |
| Cash flows from operating activities: | | | | | | |
| Net income (loss) | | $ | 69,899 | | | $ | (276,692 | ) |
| Net (income) loss from discontinued operations | | | (10,522 | ) | | | 9,974 | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Depreciation and amortization | | | 196,186 | | | | 368,249 | |
| Share-based compensation expense | | | 108,249 | | | | 157,950 | |
| Provision for doubtful accounts and other receivables | | | (27,926 | ) | | | 15,580 | |
| Changes in assets and liabilities: | | | | | | | | |
| Accounts and other receivables | | | 63,582 | | | | (149,812 | ) |
| Prepaid expenses and other assets | | | (12,772 | ) | | | 72,720 | |
| Inventory | | | 199,753 | | | | (46,100 | ) |
| Gaming systems | | | (331,921 | ) | | | (52,842 | ) |
| Accounts payable and accrued liabilities | | | (14,367 | ) | | | 92,204 | |
| Deferred revenue | | | 8,413 | | | | (154,156 | ) |
| Net cash provided by (used in) operating activities from continuing operations | | | 248,574 | | | | 37,075 | |
| Net cash provided by (used in) operating activities from discontinued operations | | | 64,945 | | | | (676 | ) |
| Net cash provided by (used in) operating activities | | | 313,519 | | | | 36,399 | |
| | | | | | | | | |
| Net cash used in investing activities | | | - | | | | - | |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Proceeds from issuance of common stock, net of expenses | | | 49,999 | | | | 124,997 | |
| Repayments of capital lease | | | - | | | | (13,450 | ) |
| Net cash provided by (used in) financing activities | | | 49,999 | | | | 111,547 | |
| Net increase (decrease) in cash and cash equivalents | | | 363,518 | | | | 147,946 | |
| Cash and cash equivalents, beginning of year | | | 606,229 | | | | 666,179 | |
| Cash and cash equivalents, end of period | | $ | 969,747 | | | $ | 814,125 | |
| | | | | | | | | |
| Supplemental Disclosure of Cash Flow Information | | | | | | | | |
| Cash paid for: | | | | | | | | |
| Interest | | $ | 27,382 | | | $ | 14,425 | |
| Income taxes | | | 7,686 | | | | 4,031 | |
| | | | | | | | | |
| Non-cash transactions: | | | | | | | | |
| Amortization of commitment fee issued in common stock | | $ | 11,275 | | | $ | 11,275 | |
| POKERTEK, INC. | |
| RECONCILIATION TO EBITDAS | |
| (UNAUDITED) | |
| | | | | | | |
| | | Three Months Ended March 31, | |
| | | | | | 2011 | |
| | | 2012 | | | Restated | |
| Net income (loss) from continuing operations | | $ | 59,377 | | | $ | (266,718 | ) |
| Interest expense, net | | | 20,855 | | | | 26,282 | |
| Income tax provision | | | 6,727 | | | | 4,538 | |
| Other taxes | | | 2,805 | | | | 9,714 | |
| Depreciation and amortization | | | 196,186 | | | | 368,249 | |
| Stock-based compensation expense | | | 108,249 | | | | 157,951 | |
EBITDAS (1) | | $ | 394,199 | | | $ | 300,016 | |
(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.
