PokerTek reports second quarter 2012 financial results

For the second quarter, total revenue was us$ 1 million in 2012 compared to us$ 1.5 million in 2011, a reduction of 30.6%.

"We installed 262 gaming positions at 13 new customer locations, making the second quarter one of the most productive in PokerTek's history," said Mark Roberson, Chief Executive Officer and Chief Financial Officer. "We also continued to realize improved operating results, driven primarily by cost controls and operational efficiency.

"Recently-installed gaming positions will begin contributing to recurring revenue in the third quarter. We have a busy installation schedule planned for the second half, and we expect growth in recurring revenue to drive our financial results in the third and fourth quarters. Our goal is to achieve sustainable EPS profitability by year-end."

Financial summary

Revenue from license and service fees decreased us$ 589 thousand for the first half and us$ 316 thousand for the second quarter. License and service fee comparisons for both the three and six month periods were favorably affected by increased revenue from the Canadian and cruise markets.

Those increases were offset by decreases from Mexico, where we removed leased product in September 2011 due to regulatory changes; less favorable macroeconomic conditions in Eastern Europe; and the conversion of gaming positions from lease to sale in the United States. License and service fees also follow seasonal trends which mirror the business of our customers, with the second quarter representing the seasonal trough in both 2012 and 2011. Revenues from sales of systems and equipment decreased us$ 157 thousand for the first half and us$ 143 thousand for the second quarter. In the prior year periods, sales of systems and equipment were favorably impacted by system sales in Europe which did not repeat in the current year and higher recognition of deferred revenue.

While growth in gaming positions was robust, the majority of those installations occurred near the end of the period. Accordingly, recurring revenue from those installations are expected to begin contributing more meaningfully in the second half of 2012.

Gross profit was us$ 2 million for the first half of 2012 compared to us$ 2.5 million in 2011, a reduction of us$ 0.4 million, or 17.5%. Gross profit was us$ 0.7 million for the second quarter of 2012 compared to us$ 1.1 million in 2011, a reduction of us$ 0.3 million, or 30.8%.

Gross profit margins increased to 74.7% in the first half of 2012 compared to 71.1% for the same period in 2011. Gross profit margins remained consistent between the quarterly periods, coming in at 71.1% in the second quarter of 2012 as compared to 71.3% in 2011. The changes in gross profit margin are primarily attributable to changes in revenue mix as well as reduced product costs and depreciation.

Operating expenses decreased 25.4% to us$ 2.3 million for the first half of 2012 from us$ 3.1 million in 2011. Operating expenses decreased 24.6% to us$ 1.1 million in the second quarter of 2012 from us$ 1.5 million in 2011. Cost reduction initiatives initiated in 2011 and prior years have resulted in lower spending on personnel-related costs, regulatory approvals, and professional fees in both the quarterly and year-to-date periods.

The firm is continuing to scrutinize its operating costs and recently implemented additional cost reduction initiatives intended to further streamline our organizational structure and increase our operating flexibility. Those initiatives are expected to result in further operating expense savings starting in the second half of 2012.

Net loss from continuing operations improved 53.3% to us$ 336 thousand ($0.04 per share) for the first half of 2012 from us$ 718 thousand ($0.11 per share) in 2011. Net loss from continuing operations improved 12.5% for the second quarter of 2012 to us$ 395 thousand (us$ 0.05 per share) compared to us$ 452 thousand (us$ 0.07 per share) for the comparable period of 2011.

Including results of discontinued operations, net loss improved 61.5% to us$ 281 thousand (us$ 0.04 per share) for the first half of 2012 from us$ 729 thousand (us$ 0.11 per share) in 2011. Net loss improved 22.4% to us$ 351 thousand (us$ 0.05 per share) for the second quarter of 2012 from us$ 452 thousand (us$ 0.07 per share) in 2011.

EBITDAS from continuing operations, a non-GAAP financial measure, was a profit of us$ 283 thousand for the first half of 2012, compared to a profit of us$ 357 thousand in 2011. EBITDAS was a loss of us$ 112 thousand for the second quarter of 2012, compared to a profit of us$ 57 thousand in the prior-year period.