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PokerTek's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Stocks in this article: PTEK

Now, I’ll turn the call over to Mark.

Mark Roberson

Thanks, Tracy. Thank you all for joining us today. On today’s call, we will review the quarterly operating results, and also provide you with an update on the state of the business, and our growth plans. I know many of you will be interested in hearing about the situation in Mexico; we will discuss the current status and our future expectations for that market, and also update you on market opportunities in other markets that will drive placements and operating results going forward.

Overall, Q3 marked another quarter of solid financial performance. On an annualized basis we stand at approximately 6.5 million in recurring revenue, producing strong margins and stable operating expenses. Q3 also marked our fourth consecutive quarter of EBITDAS profitability.

As we look ahead, there are several key drivers that will impact our trajectory over the next several quarters. First, as previously announced, we have moved the tables in Mexico following a determination that all electronic roulette incurred gains are not permitted. Based on the information we are receiving from our customers and advisers in the market, we believe this to be a temporary situation.

The government is currently focused on inspecting casino operators and tightening up enforcement, which has resulted in the closure of numerous properties operating without proper permits, import documents and other paperwork. Once that phase is complete, the expectation in the market is that those remaining properties will be allowed to reinstall electronic roulette and card games in early 2012.

Prior to removal, the tables in Mexico generated approximately 70,000 of monthly revenue at approximately 45% gross margins. The table performance and margins were significantly below what we see in other markets, where our margins traditionally run at approximately 70%. We are proactively bringing a small number of tables back to the US to meet anticipated demand in other markets, but our plan is to leave the majority of the Mexico tables in country, while the regulatory process runs its course.

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