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PokerTek Posts Q2 Losses; Adopts Operator-Direct Sales Model

Posted On: 8/12/2009

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PokerTek Inc., PokerPro, Aristocrat Leisure Ltd., Heads-Up Challenge, coin-op, coin-operated game, automated poker tables, Texas Hold 'Em poker, poker games, arcade games, amusement games, coin-op news, arcade game facts, Mark Roberson, Raul Bouchot, jukebox, pinball machine, videogames

MATTHEWS, NC -- PokerTek Inc.'s second-quarter revenue decreased 60% to $1.5 million from the same quarter in 2008. The company's revenue for the first half of 2009 was $3.7 million, a 48% decline compared with 2008's first half. For the recent quarter, ended June 30, the company posted a net loss of $1.64 million.


The software development company, which specializes in electronic Texas Hold 'Em table games, attributed declines to lower product sales of its PokerPro systems, sold to the casino market through Sydney, Australia-based Aristocrat Leisure Ltd., and Heads-Up Challenge, a coin-operated amusement device.

"Our bottom line results and operating cashflow improved as we continued to streamline the business and reduce overhead," said Mark Roberson, PokerTek's acting chief executive and chief financial officer. "Our revenues reflect lower international PokerPro hardware sales and lower sales to the traditional coin-op distribution channel."

PokerTek posted $300,000 in total sales for the second quarter of 2009, down $2.1 million, or 87%, from the same period of 2008. For the first half of 2009, product sales totaled $1.1 million, a decrease of $3 million, or 74%, from the first half of 2008. Sales of Heads-Up Challenge accounted for all sales during the quarter, but were down from $1.4 million in the second quarter of 2008. No new PokerPro systems were sold during the recent quarter.

Roberson reported that weak economic conditions hurt demand for Heads-Up-Challenge through traditional distribution. He added that PokerTek is transitioning to a new distribution model that sells direct to operators on a recurring revenue basis; this is expected to result in lower upfront product sales and a longer-term recurring revenue stream.

During the first half of 2008, sales to Aristocrat accounted for $1.6 million. During 2008, the global gaming company purchased hardware for deployment in several Eastern European markets, which have since been impaired by the economic slowdown. As a result, Aristocrat has been dealt tough cards: declines in new placement and increases in product returns, which has significantly increased its inventory position and reduced its near-term demand for PokerTek products.

"While economic conditions continue to present challenges, we are excited about the growth potential for both PokerPro and Heads-Up Challenge," Roberson said. "For PokerPro, new markets are opening up that are ideal for our product and present significant growth potential. For Heads-Up Challenge, we recently changed the distribution model from a traditional distributor sales model to an operator-direct business model with long-term recurring revenue. Our streamlining efforts also reduced operating expenses for the seventh quarter in a row, providing a solid foundation for growth."

Separately, PokerTek renewed its credit facility with Silicon Valley Bank in July. The loan has a one-year term, a limit of $2.5 million and provides for advances based on the composition of the company's eligible accounts receivable and inventory balances.

Also in July, the maker of automated poker tables announced the appointment of Raul Bouchot as director of sales. Bouchot has more than 20 years' experience in domestic and international gaming markets. He was most recently business development director in IGT's electronic table-games division, and was previously chief operating officer and executive vice-president for the Americas at TCS John Huxley, and sales vice-president at Shuffle Master Gaming. Bouchot resides in Las Vegas.

PokerTek was founded in 2003 by Lou White, James Crawford, Lee Lomax and Lyle Berman. It held a public offering in October 2005 and rolled out a coin-op amusement table in July 2007. Roberson, who joined the company in 2007, became acting chief executive after Chris Halligan resigned as chief executive on May 29.