PokerTek reports 4Q and full year 2011 financial results

Mark Roberson, CEO and CFO, commented, "Operating results for 2011 strengthened significantly as we increased penetration in our target markets, expanded our gross margins and continued to focus on reducing expenses. For the quarter, results from continuing operations improved as contribution from our target markets and reductions in our operating expenses offset the removal of games in Mexico where we await regulatory clarification.”
 
"Entering 2012, we are focused on executing our growth strategy. PokerPro continues to have a dominant position in electronic poker and we are well positioned to accelerate growth in the United States, Europe, Canada and several other markets. Initial installations of ProCore, which expands our product line to include blackjack and other house-banked games, are performing exceptionally. We are expanding our cruise ship footprint and initiating placements in land-based markets. We expect the first quarter of 2012 to generate positive cash flow and reflect improved operating results."

Financial summary
Annual revenue increased 10% to us$ 6.5 million in 2011 compared to us$ 5.9 million in 2010 as growth in the United States, Europe and other international markets was partially offset by a reduction in Mexico where we removed games in September due to changes in the regulatory environment. Fourth quarter revenue decreased 16% to us$ 1.3 million in 2011 compared to us$ 1.6 million in 2010 due primarily to Mexico.

Revenue comparisons were also affected by changes in mix as sales of systems and equipment increased to us$ 1.5 million from us$ 760 thousand on an annual basis and decreased to us$ 200 thousand from us$ 300 thousand on a quarterly basis. Revenues from license and services fee declined by us$ 170 thousand for the full year and us$ 160 thousand for the quarter as reductions from Mexico were offset by increased licensing and service revenues from other markets. Excluding Mexico, total revenue increased 21% on an annual basis and 7% on a quarterly basis due to growth in the United States, Europe, and other international markets.

Gross profit increased 18% to us$ 4.6 million for the full year 2011 from us$ 3.9 million in 2010. Gross profit margin increased to 70.1% from 65.6% on an annual basis. On a quarterly basis, gross profit decreased 16% to us$ 0.9 million in 2011 from us$ 1.1 million in 2010 on lower revenue. Gross profit margin increased to 70.2% in 2011 from 69.7% in 2010 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. Gross profit margin contribution is also considerably higher in other markets than in Mexico.

For the year, operating expenses declined 7% to us$ 6.1 million in 2011 from us$ 6.5 million in 2010. On a quarterly basis, operating expenses declined 14% to us$ 1.3 million in 2011 from us$ 1.5 million in 2010. The reduction in operating expense is primarily due to lower selling, general and administrative expenses.

Net loss from continuing operations improved 42% to us$ 1.6 million in 2011 from us$ 2.8 million in 2010 on an annual basis. Net loss from continuing operations improved 6% to us$ 0.4 million in from us$ 0.5 million in 2010 on a quarterly basis. On a per common share basis, net loss from continuing operations improved 50% to us$ 0.24 from us$ 0.48 for the year and improved 14% to us$ 0.06 from us$ 0.07 for the quarter.

EBITDAS, a non-GAAP financial measure, was positive us$ 456,000 in 2011 compared to negative us$ 126,000 in 2010 on an annual basis. EBTIDAS was negative us$ 45,000 for the fourth quarter for 2011, compared to a positive EBITDAS of us$ 71,000 for the fourth quarter of 2010.

Balance Sheet and Cash Flow Information
Cash used in operating activities from continuing operations was us$ 882,000 for 2011, compared to us$ 634,000 for 2010. We used more cash operating activities during 2011 than in 2010 as cash from improved profitability was offset by investments in inventory, reductions in current liabilities and reductions in deferred revenue. As of December 31, the company's cash balance was us$ 0.6 million and total debt was us$ 0.7 million.

Gaming Positions Information
Gaming positions deployed worldwide totaled 2,028 of December 31, 2011 comprised of 1,944 PokerPro and 84 ProCore gaming positions. As of December 31, 2010, 2,514 gaming positions were deployed comprised entirely of PokerPro gaming positions. Excluding Mexico, gaming positions increased by 10% from December 2010 to December 2011. The increase in gaming positions resulted from net increased placements of PokerPro and ProCore in theirtarget markets, including US, Europe and other international markets.