PokerTek, Inc. ( PTEK)

Q4 2010 Earnings Call

February 24, 2011 11:00 am ET


Harriet C. Fried – Investor Relations – Lippert/Heilshorn & Associates

Mark Roberson – Chief Executive Officer, Chief Financial Officer and Treasurer

James Crawford – President and Board Member



Thank you for the patience and welcome to the Fourth Quarter 2010 PokerTek Incorporated. Earnings Conference Call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session after management’s remarks. (Operator instructions)

I’d now turn the presentation over to your host for today’s conference, Ms. Harriet C. Fried with LHA. Please proceed.

Harriet C. Fried

Good morning. Welcome to PokerTek's investor conference call for the fourth quarter ended December 31, 2010. The purpose of today's call is to provide PokerTek's investors and other interested parties with information about its operating results and to communicate other business developments.

Joining us from management are Mark Roberson, Chief Executive Officer and Chief Financial Officer, and James Crawford, President.

Before we begin, I'll read the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The statements that are about to be made in this call that are not historical facts are forward-looking statements and involve risks and uncertainties. These and other risks and uncertainties are described in more detail in the company's most recent Annual Report on Form 10-K and other reports filed with the SEC.

The company expressly disclaims any obligation to update or revise publicly any forward-looking statements whether as a result of new information, future events, or otherwise. The company may also discuss EBITDAS, a non-GAAP measure used internally to evaluate performance and allocate resources. The manner in which the company uses EBITDAS may differ from the manner in which other companies use the term EBITDA or EBITDAS.

With that introduction, I'd like to turn the call over to Mark Roberson. Go ahead please, Mark.

Mark Roberson

Thank you, Harriet. Good morning, everyone. Our full year operating results continued to improve with revenue growth and margin expansion. We had another quarter of positive EBITDAS and a 50% improvement in our core share results.

Our business fundamentals have responded favorably to the focussed marketing strategies and cost reductions efforts and we grew our installed base to a record level. Our bottom line per share results were by far the strongest in the company’s five-year history.

We are pleased with the recent trends and plan to build on these operating improvements as we move into 2011. Our strategic plan for the upcoming year is centered on accelerating our revenue and profit growth and encompasses the following key elements.

First, we’ll expand PokerPro’s market penetration. PokerPro is well established and it’s the dominant electronic poker table in the gaming industry. Through our sales efforts, PokerPro has evolved into a sustainable recurring revenue business, producing greater than 70% margins and driving our current bottom line results. Looking ahead, we have substantial opportunities to build on that success and grow recurring revenue and profitability in our target markets.

Second, we’re diversifying our product line to provide our customers with a more complete electronic table game offer. We chose Blackjack as our first new game, because many of our customers specifically requested a product built with a same liability intuitive game play and efficient line attributes that have made PokerPro successful. The addition of Blackjack Pro and other house-banned games to follow, will significantly enhance our revenue opportunities.

Third, as we grow our PokerPro footprint and rollout Blackjack, we will continue to control spending and stay lean. Our current performance is a direct result of operational discipline combined with a targeted sales and marketing strategy. With our focus moving from turnaround and restructuring to driving revenue growth and product diversification, we will continue to adhere to those disciplines.

We completed our first installation of Blackjack Pro last week. And so far, the initial level of game play and customer satisfaction has exceeded my expectation. (inaudible) I’m excited that we now have opportunities to grow our poker business, while opening up entirely new opportunities in electronic table game space.

James will highlight some of the specific market initiatives.

James Crawford

Thanks, Mark. Our primary focus remains on targeting opportunities in those markets with robust demand for electronic table game. We continue to concentrate on Mexico, European Canada and other markets where the environment is favorable for electronic table game.

As we noted in this morning’s press release, our PokerPro table count continues to grow and at the end of the fourth quarter, we achieved a record install base. The addition of Blackjack Pro has brought new attention to PokerTek and a result we are expanding our market opportunities as regulatory approvals are applied for and received.

In Mexico, we are the leading provider with over 60 tables installed. We believe the long-term addressable market for poker in Mexico is continuing to grow and we are focussed on increasing our placement numbers as the gaming environment in poker as market matures.

We are beginning to receive requests for delivery of Blackjack Pro to the Mexican market and we’re working on adding placements there in the second quarter of this year. In Europe, we received approval, signed a distribution contract and shipped the first of what we expect to be a significant number of tables into France.

With over 200 casinos, a large percentage of which are mostly electronic, our opportunity in France is strong for PokerPro and should increase with Blackjack Pro if and when we receive product approval.

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