PokerTek Reports Fourth Quarter And Full Year 2013 Financial Results

MATTHEWS, N.C., March 12, 2014 /PRNewswire/ -- PokerTek, Inc. (NASDAQ: PTEK) today reported financial results for the fourth quarter and full year ended December 31, 2013.

Full Year Operational Highlights:

  • Total revenue increased 7%
  • Recurring revenue increased 11%
  • Gross profit margin exceeds 70%
  • Net loss from continuing operations improved 25%
  • Net cash used in operating activities improved 84%
  • EBITDAS positive for third consecutive year

Fourth Quarter Operational Highlights:

  • Total revenue increased 5%
  • Recurring revenue decreased 11%
  • Gross profit margin exceeds 60%
  • Net loss from continuing operations improved 35%

"Financially, 2013 was a solid year posting recurring revenue growth, strong gross margins and significant improvements in net operating results and cash flow. Our operations and technical teams deserve tremendous credit for the turnaround in our financial performance in recent years," commented Mark Roberson, Chief Executive Officer.

"We also achieved several important marketing and product development milestones during the year, entering new gaming markets in Macau and South America, growing our cruise ship penetration, achieving regulatory approvals for our ProCore product line, and initiating our expansion into mobile gaming."

Financial Summary:

Revenue. Total revenue increased 7.1% to $5.5 million for the year ended December 31, 2013, with revenues from license and service fees increasing 11.1% and revenue from sales of systems and equipment decreasing 14.1%. For the quarterly periods, total revenue increased 4.8% with revenue from license and service fees decreasing 11.3% and revenue from sales of systems and equipment increasing 324.3%.

Revenue from license and service fees increased 11.1% to $4.9 million for the year ended December 31, 2013 compared to $4.4 million for the year ended December 31, 2012. For the quarterly periods, revenue from license and service fees decreased 11.3% to $1.1 million from $1.3 million. License and service fees from Canada, Mexico and cruise ships increased with new placements generating revenue in the current year period. Increases in those markets were offset, however, by reductions in revenue from Ohio, Europe and other international markets.

Revenue from sales of systems and equipment decreased 14.1% to $0.7 million for the year ended December 31, 2013 compared to $0.8 million for the year ended December 31, 2012. Sales of systems and equipment decreased on an annual basis due to lower equipment sales in Europe and lower current year contribution from the lease conversions, partially offset by increased equipment sales in Asia. On a quarterly basis, revenue from sales of systems and equipment increased 324.3% to $273 thousand from $64 thousand due primarily to increased sales in Asia and France.

Over the past several years, our revenue mix has become more heavily weighted towards recurring license and service fees and less towards sales of systems and equipment. In 2013, license and service fees represented 87% of total revenue, compared to 84% in 2012.

Gross profit. Gross profit was $4.0 million for year ended December 31, 2013 compared to $3.8 million for the year ended December 31, 2012, an increase of 6.9%. Gross profit as a percent of revenue was relatively unchanged at 72.5% and 72.6% for the years ended December 31, 2013 and 2012, respectively. For the quarterly periods, gross profit relatively unchanged at $0.9 million in both periods, however, as a percent of revenue gross profit declined from 69.7% to 64.8% due primarily to higher costs of revenue associated with sales activity in Asia.

Operating expenses. Operating expenses increased by $0.1 million (2.8%) to $4.6 million for the year ended December 31, 2013 compared to $4.5 million for the year ended December 31, 2012. For the quarterly periods, operating expenses decreased to $1.0 million from $1.1 million. The modest increase in operating expenses on an annual basis was attributable to higher spending on regulatory approvals and increased bad debt expense, partially offset by lower employee compensation expense and professional fees.

Interest expense, net. Interest expense decreased 44.9% to $38,191 for the year ended December 31, 2013 from $69,351 for the year ended December 31, 2012. On a quarterly basis, interest expense decreased 17.9% to $8,974 from $10,934. The decrease is due to lower long term debt outstanding and lower fees associated with our credit facility.

Income tax provision. Income tax provision decreased 51.3% to $42,310 for the year ended December 31, 2013 from $86,908 for the year ended December 31, 2012. On a quarterly basis, income tax provision was a benefit of $3,710 from an expense of $27,114. The change in income tax provision was primarily attributable to lower withholdings in foreign jurisdictions.

Net loss from continuing operations. Net loss from continuing operations improved 25.1% to $0.6 million, $(0.07) per share, for the year ended December 31, 2013 compared to $0.8 million, $(0.11) per share, for the year ended December 31, 2012. Net loss from continuing operations improved 34.5% to $0.1 million, $(0.1) per share, for the quarterly period ended December 31, 2013 from $0.2 million, $(0.2) per share, for the quarterly period ended December 31, 2012. The improvements in net loss from continuing operations resulted primarily from growth in revenue combined with reductions in interest and income taxes.

Net income from discontinued operations. Net income from discontinued operations for the year ended December 31, 2013 was $535 ($0.00 per share) compared to $52,263 ($0.01 per share) for the year ended December 31, 2012. We completed the disposition of these operations and do not expect to realize additional income or loss from discontinued operations in future periods.

Net loss. Net loss improved 20.3% to $0.6 million, $(0.07) per share, for the year ended December 31, 2013 compared to $0.8 million, $(0.11) per share, for the year ended December 31, 2012. Net loss improved 33.8% to $0.1 million, $(0.1) per share for the quarterly period ended December 31, 2013, from $0.2 million, $(0.2) per share for the quarterly period ended December 31, 2012. The improvements in net loss from continuing operations resulted primarily from growth in revenue combined with reductions in interest and income taxes.

EBITDAS, a non-GAAP financial measure (described below), improved 38.4% to $585 thousand for the year ended December 31, 2013 from $423 thousand for the year ended December 31, 2012. On a quarterly basis, EBITDAS improved 16.4% to $155 thousand from $133 thousand. 2013 represents the Company's third consecutive year of positive EBITDAS operating performance.

Balance Sheet and Cash Flow Information

Net cash used in operating activities from continuing operations was $0.1 million for the year ended December 31, 2013 compared to a use of cash of $0.8 million for the year ended December 31, 2012. The improvement in cash used in operating activities was primarily due to improved operating results and favorable working capital comparisons, primarily gaming equipment and deferred revenue, partially offset by reductions in accounts payable and accrued liabilities.

Net cash used in investing activities was $10 thousand for the year ended December 31, 2013 compared to $1 thousand for the year ended December 31, 2012. Investing activities in both periods are composed of minor capital expenditures for leasehold improvements, office and manufacturing equipment

Net cash provided by financing activities was $0.3 million for the year ended December 31, 2013 and $0.4 million for the year ended December 31, 2012. Net cash provided by financing activities primarily consist of proceeds from sales of common stock in both periods. Principal payments on long-term debt totaled $60 thousand for the year ended December 31, 2013 and $0 for the year ended December 31, 2012.

As of December 31, 2013, the Company's cash and cash equivalents totaled $0.4 million and total debt was $0.3 million. As of December 31, 2013 $0.5 million was available under our Credit Facility, based on our accounts receivable and inventory levels, and there were no amounts outstanding under the facility.

Gaming Positions Information

Gaming positions deployed worldwide totaled 2,272 gaming positions, composed of 2,170 PokerPro and 102 ProCore positions. As of December 31, 2012, gaming positions consisted of 2,310 gaming positions, composed of 2,160 PokerPro and 150 ProCore positions.

Conference Call

A conference call and webcast will be held on March 12, 2014 at 11:00 am EDT for management to discuss the Company's operating results. Interested parties may listen to and participate in the conference call by dialing (877) 703-6103 (U.S./Canada) or +1 (857) 244-7302 (Other) and entering passcode 48599806. 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 58748311.

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) 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.

Contact:
Mark Roberson
CEO and CFO
PokerTek, Inc.
704.849.0860, x101
investorrelations@pokertek.com

POKERTEK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 AND OTHER COMPREHENSIVE LOSS












Three Months Ended December 31,


Year Ended December 31,



2013


2012


2013


2012

Revenue









   License and service fees


$         1,135,106


$         1,279,148


$         4,850,375


$         4,367,132

   Sales of systems and equipment


273,364


64,433


696,320


810,147

      Total revenue


1,408,470


1,343,581


5,546,695


5,177,279

Cost of revenue


495,133


407,180


1,527,740


1,419,351

      Gross profit


913,337


936,401


4,018,955


3,757,928

Operating expenses:









   Selling, general and administrative


806,566


861,366


3,583,332


3,403,366

   Research and development


165,716


141,781


678,817


679,431

   Share-based compensation expense


53,919


77,347


300,615


351,996

   Depreciation


2,611


2,324


9,432


13,267

      Total operating expenses


1,028,812


1,082,818


4,572,196


4,448,060

Operating loss


(115,475)


(146,417)


(553,241)


(690,132)

   Interest expense, net


8,974


10,934


38,191


69,351

Net loss from continuing operations before income taxes


(124,449)


(157,351)


(591,432)


(759,483)

   Income tax provision


(3,710)


27,114


42,310


86,908

Net (loss) from continuing operations


(120,739)


(184,465)


(633,742)


(846,391)

   Income from discontinued operations 


-


2,150


535


52,263

Net (loss)


$          (120,739)


$          (182,315)


$          (633,207)


$          (794,128)










Other comprehensive loss:









   Adjustments to net loss


-


-


-


-

   Comprehensive loss


$       (120,739)


$       (182,315)


$       (633,207)


$       (794,128)










Net (loss) from continuing operations per common share - basic and diluted


$                (0.01)


$                (0.02)


$                (0.07)


$                (0.11)

Net income from discontinued operations per common share - basic and diluted


-


-


0.00


0.01

Net (loss) per common share - basic and diluted


$                (0.01)


$                (0.02)


$                (0.07)


$                (0.10)

Weighted average common shares outstanding - basic and diluted 


9,333,559


8,627,770


9,113,965


7,973,609

 

POKERTEK, INC.

CONSOLIDATED BALANCE SHEETS




December 31, 2013


December 31, 2012


Assets






Current assets:






   Cash and cash equivalents


$                 415,533


$                 235,757


   Accounts receivable, net


793,949


794,769


   Inventory


869,631


1,177,127


   Prepaid expenses and other assets


90,314


66,988


Total current assets


2,169,427


2,274,641








Long-term assets:






   Inventory


545,070


165,823


   Gaming systems, net


1,224,931


1,693,051


   Property and equipment, net


27,724


26,967


   Other assets


110,740


171,498


Total long-term assets


1,908,465


2,057,339


Total assets


$              4,077,892


$              4,331,980








Liabilities and Shareholders' Equity






Current liabilities:






   Accounts payable


$                 243,960


$                 274,609


   Accrued liabilities


310,126


569,404


   Deferred revenue


20,051


42,266


   Long-term debt, current portion


70,822


59,571


Total current liabilities


644,959


945,850








Long-term liabilities:






   Long-term liability


167,523


219,494


   Long-term debt


169,607


240,429


Total long-term liabilities


337,130


459,923


Total liabilities


982,089


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 9,363,434 and 8,625,498 shares at 






December 31, 2013 and December 31, 2012, respectively






   Additional paid-in capital


50,355,908


49,481,922


   Accumulated deficit


(47,260,105)


(46,626,898)


   Accumulated other comprehensive loss, net


-


-


Total shareholders' equity


3,095,803


2,855,024


Total liabilities and shareholders' equity


$              4,077,892


$              4,331,980


 

 POKERTEK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS







Year Ended December 31,


2013


2012

Cash flows from operating activities:




Net loss

$       (633,207)


$    (794,128)

Net income from discontinued operations

(535)


(52,263)

Adjustments to reconcile net loss to net cash used in operating activities:




Depreciation and amortization

771,724


751,832

Share-based compensation expense

300,615


351,996

Provision for doubtful accounts and other receivables

201,687


123,214

Changes in assets and liabilities:




Accounts and other receivables

(200,867)


(186,382)

Prepaid expenses and other assets

37,433


88,111

Inventory

(71,750)


419,856

Gaming systems

(294,172)


(1,327,283)

Accounts payable and accrued expenses

(224,611)


20,994

Deferred revenue

(22,215)


(238,817)

Net cash provided by (used in) operating activities from continuing operations

(135,898)


(842,870)

Net cash provided by operating activities from discontinued operations

535


68,727

Net cash provided by (used in) operating activities

(135,363)


(774,143)





Cash flows from investing activities:




Purchase of property and equipment

(10,190)


(1,378)

Net cash used in investing activities

(10,190)


(1,378)





Cash flows from financing activities:




Proceeds from issuance of common stock, net of expenses

384,900


405,049

Repayments of long-term debt

(59,571)


-

Net cash provided by financing activities

325,329


405,049

Net increase in cash and cash equivalents

179,776


7,967

Cash and cash equivalents, beginning of year

235,757


606,229

Cash and cash equivalents, end of period

$        415,533


$      614,196





Supplemental Disclosure of Cash Flow Information




Cash paid for:




 Interest

$          35,450


$        66,587

    Income taxes

46,412


49,645





Non-cash transactions:




    Amortization of commitment fee issued in common stock

$                  -


$        44,223

Issuance of common stock for debt cancellation

-


400,000

    Shares of Common Stock issued in settlement of litigation

117,288


-

 

POKERTEK, INC.

RECONCILIATION TO EBITDAS































Three Months Ended December 31,


Years Ended December 31,



2013


2012


2013


2012

   Net loss from continuing operations


$          (120,739)


$          (184,466)


$          (633,742)


$          (846,391)

   Interest expense, net


8,974


10,934


38,191


69,351

   Income tax provision


(3,710)


27,114


42,310


86,908

   Other taxes


45,579


425


66,713


9,474

   Depreciation and amortization


170,827


201,715


771,724


751,832

   Stock-based compensation expense


53,919


77,347


300,615


351,996

      EBITDAS (1)


$           154,850


$           133,069


$           585,811


$           423,170



















(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.

 

SOURCE PokerTek, Inc.



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