PokerTek reports results

MATTHEWS, North Carolina -- (PRESS RELEASE) -- PokerTek, Inc. (NASDAQ: PTEK) today reported financial results for the second quarter ended June 30, 2008.

Highlights of recent announcements and operating results are as follows:

Second Quarter and First Half 2008 Operating Highlights

* Revenues increase 319% for the quarter and 367% for the first half on strong performance in its casino and amusement product lines

* Operating expenses decline sequentially for third consecutive quarter

* EPS improves 33% for the quarter and 32% for the first half of 2008

Recent Announcements and Events

* Secured new credit facility with Silicon Valley Bank

* Trump Plaza in Atlantic City installed 12 PokerPro tables

* Loto-Québec opened fifth 100% PokerPro room totaling 55 tables in Quebec

* Aristocrat installed 23 PokerPro tables in Bulgaria

* Heads-Up Challenge expanded distribution and placements in Europe

Revenue

Consolidated revenues for the second quarter of 2008 were $3.8 million, an increase of 319% from the comparable period of 2007 and 20% sequentially when compared to the first quarter of 2008. For the first half of 2008, consolidated revenues were $7.0 million, an increase of 367% from the comparable period of 2007. Revenue growth was driven by strong performance in both the casino and amusement product lines.

Recurring licensing and service fees from PokerPro systems totaled $1.4 million for the second quarter, an increase of 136% from the second quarter of 2007. For the first half of 2008, recurring revenues were $2.9 million, an increase of 165% from the comparable period of 2007. This growth from prior year periods was driven primarily by domestic casino placements and a significantly larger base of installed PokerPro systems.

Product sales totaled $2.4 million for the second quarter, an increase of 671% from the second quarter of 2007. For the first half of 2008, product sales were $4.1 million, an increase of 932% from the comparable period of 2007.

The growth in product sales was partially attributable to the successful launch of the new Heads-Up Challenge amusement product. Sales of Heads-Up Challenge contributed $1.4 million for the second quarter and $2.4 million for the first half of 2008. In addition, sales of Casino products, primarily to Aristocrat International Pty., grew 237% to $1.1 million on a quarterly basis and 326% to $1.7 million for the first half of 2008.

Operating Expenses

Consolidated operating expenses, including non-cash depreciation and share-based compensation, for the quarter ended June 30, 2008 were $3.9 million, an increase of 7.0% compared to the second quarter of 2007. For the first half, operating expenses were $8.1 million, an increase of 17% compared to the first half of 2007. On a sequential basis, operating expenses declined 6.4% compared to the first quarter of 2008.

As a percent of total revenue, operating expenses improved to 102% of revenue for the second quarter of 2008 and 115% for the first half of 2008. This compares to 399% in the second quarter of 2007 and 457% for the first half of 2007.

Improvements in operating expense as a percent of total revenue were directly attributable to the rapid growth in casino and amusement revenues combined with management initiatives to generate positive operating leverage by controlling costs as the business grows.

Operating Results

Net loss per common share was $(0.18) for the second quarter and $(0.37) for the first half of 2008, an improvement of 33% from $(0.27) for the second quarter of 2007 and 32% from $(0.54) for the first half of 2007.

New Credit Facility

On July 25, 2008, the Company entered into a $5.0 million credit facility with Silicon Valley Bank. The maximum availability under the facility is approximately $4.1 million, based on specified percentages of domestic and foreign accounts receivable and inventory, which will vary from time to time. This facility has a one-year term, bears interest at Prime plus 1.5% and contains restrictive covenants and other provisions customary for this type of facility.

Management Comments

"PokerTek is in growth mode," said Chris Halligan, CEO of PokerTek. "Our casino business is performing well all around the world. We're adding prestigious new customers such as Trump Plaza in Atlantic City and many customers, like Carnival and Loto-Québec, continue to expand their PokerPro installations."

"Our amusement business continues to deliver significant contributions to our top and bottom lines," added Halligan. "Heads-Up Challenge is off to a fast start. As we continue to add new distributors, new features and innovative financing programs, we hope to increase our growth rate even more."

"Financially, we're making progress in several key areas," said Mark Roberson, PokerTek's CFO. "Revenues are ramping, operating expenses are trending down, and our new credit facility positions us well for future growth."