GCA Investor Presentation - May 2012
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GLOBAL CASH ACCESS Investor Presentation MAY 2012
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Safe Harbor Disclosure
This presentation contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this presentation, other than statements that are purely historical, are forward-looking statements. Words such as "going forward," "believes," "intends," "expects," "forecasts," "anticipate," "plan," "seek," "estimate" and similar expressions also identify forward-looking statements. Forward-looking statements in this presentation include, without limitation: (a) our 2012 guidance and estimates of 2012 cash EPS and Adjusted EBITDA and the assumptions upon which they are based; (c) our assumption that there will be a modest improvement in the gaming industry for 2012; (d) our assumption for 2012 capital expenditures; (e) our assumption for 2012 that there will be approximately 66.0-67.0 million diluted shares outstanding; and (f) our belief that EBITDA, Adjusted EBITDA and Cash EPS are widely-referenced financial measures in the financial markets and our belief that references to the foregoing are helpful to investors. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or assumed, including but not limited to the following: the timing and the extent of a recovery in the gaming industry, if any; gaming establishment and patron preferences; national and international economic conditions; changes in gaming regulatory, card association and statutory requirements; regulatory and licensing difficulties; competitive pressures; operational limitations; gaming market contraction; changes to tax laws; uncertainty of litigation outcomes; interest rate fluctuations; inaccuracies in underlying operating assumptions; unanticipated expenses or capital needs; technological obsolescence; and employee turnover. In addition, our belief that our projected results of operations for calendar year 2012 will begin to improve are based on many assumptions, including, without limitation, the following: the anticipated positive impact on our results of operations from the recent implementation of the Durbin Amendment in October 2011; the anticipated opening of several new casinos in 2012 in new gaming jurisdictions; and our belief that the overall gaming market in the United States, in general, has stabilized and may improve modestly in 2012. If any of these assumptions prove to be incorrect, the results contemplated by the forward-looking statements regarding our future results of operations are unlikely to be realized. The forward-looking statements in this presentation are subject to additional risks and uncertainties set forth under the heading "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report filed on Form 10-K on March 12, 2012, our subsequent Quarterly Reports filed on Form 10-Q and are based on information available to us on the date hereof. We do not intend, and assume no obligation, to update any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this presentation.
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Business Segments
Cash Advance- Cash access at a casino through the use of debit and credit Cards
ATM- cash access at a casino through the use of ATM cards
Check Services- cash access at a casino through the use of a check cashing system
provided by GCA
Other includes Central Credit, Western Money Systems and Marketing Services – Central Credit is an industry-wide centralized credit bureau data base
– Western Money Systems (acquired in 2010) manufactures, sells and services slot ticket redemption devices
– Quik-marketing and Casino Share Intelligence (CSI) are data base marketing products offered to our patrons
based on all GCA compiled transaction data bases
Cash advance Revenue: $203.9
Segment Op profit : $38.5
Check services Revenue: $26.3
Segment Op profit: $14.2
Central Credit, WMS and Other
Revenue: $30.2 Segment Op profit: $14.8
2011 Revenue: $544.1
Adjusted EBITDA1 $61.7
CORPORATE EXPENSE ($64.0)
ATM Revenue: $283.7
Segment Op profit: $34.8
($ in millions)
(1) Adjusted EBITDA defined as Operating Income plus depreciation and amortization plus non cash stock comp
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Key Company Highlights
Significant Market dominance-Market share estimated at 75% Weathered difficult recession based on Gaming industry correlation Industry Leader
Superior Product/ Innovation
GCA maintains proprietary gaming technology: “3-in-1”and CSI marketing database Market adoption of cashless gaming only a matter of time “ ie Quik Ticket” Purchase of Western Money Systems highly strategic with respect to competitive positioning
Revenue Visibility, Scale / Strong FCF
Significant Barriers to Entry
Prudent Leverage
Revenue base is stable and committed; 80% through end of 2012 Conservative financial projections with low single digit base growth Cost structure allows “flow through” of revenue and volume increases to the bottom line Sizeable deferred tax asset shields $52 million in pre-tax income annually
History of low leverage facilitating financial flexibility High free cash flow due to low capital requirements allows for significant debt repayment 2011 leverage of 2.6x and decreasing to under 2.0x by the end 2012 Highly regulated, due to both financial services and gaming focus (200+ licenses in gaming) Challenge to obtain gaming licenses increases with new payment technologies and the
continuing shift towards cashless gaming Licensing increasingly important as payment systems link to casino management systems IP and product innovation - highly specialized gaming specific product needs Access to capital and specialized sales-force further heighten barriers to entry
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Key Company Highlights for 2011-2012
Regained approximately half of Caesars business lost at year end 2010 Strong competitive implications regarding size and service levels from different providers
MCA Acquisition
New Casino Openings
Signed and installed a full suite of GCA products in three new casinos over the past 12 months Two biggest properties were opened in 2011 and are contributing to GCA bottom line Two to three additional new gaming properties are expected in 2012
Deleveraging
Barriers to Entry
Technology and Innovation
Debt repaid from $200 million March 2011 to Q1 2012 level of $139 million Anticipate being under 2x leverage during 2012
In 2011, Nevada passed SB 218 which requires that cash access providers to casinos maintain a non restricted gaming license- GCA obtained the first cash access provider license from Nevada in March 2012
We believe substantial I-Gaming regulation may likely be coming via the payments processors
We are focused on creating new technology partnerships We are recognized as the technology leader and de-facto partner for others to follow I-Gaming momentum positions GCA as strong option for payments partner
Durbin and Industry
Stabilization
Significant reduction in expenses from Durbin began in October 2011 Gaming sector trends have shown improvement in 2011-2012 for the first time since 2007 GCA same store cash to the floor is actually up during the 4th quarter of 2011 and Q1 2012 Industry growth is projected in the low-to-mid single digits for 2012
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Cash Access is Critical to Success of Casinos
Currently almost all U.S. gaming transactions are completed in cash 60%+ of all wagering funds come from on-floor cash access services Without services like those provided by GCA, casino revenues would be
limited to the cash that patrons bring into the casino Quick, efficient access to cash is critical to casinos’ growth and profitability Patrons increasing use of credit and bank cards requires casinos to offer a
broad mix of cash access end points Redemption devices and other hardware delivery systems are becoming
critical components of casino floor GCA dispenses approximately $19 Billion to the casino floor through about
90 million transactions annually GCA Drives Casino Profits, Efficiency and Customer Loyalty
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Diverse Skill-Set of Management Team
GCA Revenue Benefits From These Funds
Proven and complete management team with deep industry experience
Competitive Landscape
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GCA’s Strategy is to Grow through Innovation
Innovation is the best antidote to price compression and competition Market has experienced a commoditization of services
Price compression is a significant issue if trends continue
Product Plan
Focus on four broad strategies
Cashless Gaming Products - Removing the cost of cash on the casino
floor, making process more efficient
Information Services – Casino Share Intelligence
Point of Service Innovation - Engineering patron experience at Western
Money kiosk to match other casino floor innovation
Internet Gaming – develop and refine the payments interface for IGaming
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GCA Strength, Breadth and Proprietary Nature of its Product Portfolio
Cash Access Services Kiosks Information Services Cashless Gaming
Standard ATM
3-in-1 ATM/ACM
Cash advance
Check warranty
Full Service Kiosks Reporting Marketing
Central Credit
CSI Marketing
QCP Web QuikTicket
Global Payments
US Bank
MCA (purchased substantially all assets in Nov 2011)
NRT
All Others
Proprietary
GCA’s comprehensive and technologically superior product suite makes it the one-stop vendor for uptime and efficiency focused customers
Pricing is not the only criteria as cash access is critical for casinos and their patrons This is why GCA believes it will continue to retain its customers, enjoy better margins and win new business
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Competitive Landscape – Recent Events
Purchase of Assets of MCA Processing LLC:
Recently purchased substantially all of the assets of MCA (reacquired all Nevada, Atlantic City and
Pennsylvania Caesars locations)
Sends a message to the larger casino operators that choosing only on price is risky, and that there
is a difference between service levels among competitiors
Licensing:
Nevada Legislature passed SB 218 which requires cash access providers to casinos in Nevada to
carry full Non-Restricted Gaming Licenses
GCA was granted license number 1 for cash access providers by Nevada in March 2012
Internet Gaming:
We believe on line gaming is likely to be monitored in part through the licensing of the payments
providers
New Locations
GCA has been selected as the cash access provider in the vast majority of all recent casino
openings
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Continued trend of strong contract renewals and new signings
GCA contract renewals and new contract signings remain very strong. Customers see great value in the product differentiation GCA continues to outpace competitors in winning contracts for new casino openings, with 12 of 16
in 2009 - 2011 • Pennsylvania 6 of 8 casinos Delaware 1 of 1 casinos • Nevada 1 of 2 casinos Maryland 1 of 2 casinos • Michigan 1 of 2 casinos Resorts World NY expansion in New York • Rivers - Des Plaines in Illinois Mississippi 1 of 1 casinos
Expected new casino openings in 2012 - 2014 • 3 - 4 in Ohio 1 in Mississippi • 2 - 3 in Massachusetts 1 in Louisiana • 2 in Kansas
Business Trends
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Same Store Trends 2010-2012
Trends by Transaction Type
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012
ATM trans -4.9% -4.3% 0.4% -2.9% 1.3% 2.5% 1.0% 1.5% 2.2%
CASH ADVANCE $ to floor -12.2% -10.1% -7.3% -9.7% -3.8% 0.0% 2.8% 4.6% 4.8%
Combined $ -7.6% -7.2% -2.6% -3.2% 1.7% 4.6% 3.7% 4.6% 4.6%
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Per C
ent
Chan
ge
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8-10 new casinos slated to open in next 3 years
Historically, GCA has won 70%-80% on new openings
GCA has second largest operator in Macau – Galaxy, representing an estimated 10% of Macau gaming market; Venetian is also a GCA customer (~10% of Macau)
New products have received positive response in Asia market
Western Money kiosks sold in Asia Thailand, Singapore, and South Korea
considering liberalization of gaming regulation
Re entered UK “soft” mid 2011 Rebuilding base GCA’s UK revenue in 2007 was $7 million - $8 million
U.S. U.K. and Continental Europe Macau and Southeast Asia
Source: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates
Trends in Worldwide Gaming
57.5 60.4 59.4 57.4 57.5 59.5 62.3 65.5 69.1 73.3
20.8 20.9 20.0 17.6 16.3 16.2 16.3 16.8 17.4 18.313.7 17.7 21.4 22.9 34.3 47.0 58.1 67.0 73.4 79.3
$0
$50
$100
$150
$200
2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E 2015E
US
$ b
illio
ns
United States EMEA Asia-Pacific Latin America Canada
5.6%
4.1%
10.9%
8.7%3.5%
Revenue CAGR:
'12E - '15E
GCA Will Benefit from International Gaming Growth
Financial Overview
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Historical Financial Overview
Adjusted EBITDA
$ in millions
$62
$77
$98$104
$112
$73-$77
$0.0
$50.0
$100.0
$150.0
'07 '08 '09 '10 '11 '12E
Cumulative Free Cash Flow Generation
$66
$139
$191
$226
$276- $280
$-
$50
$100
$150
$200
$250
$300
2008 2009 2010 2011 2012E
Adjusted EBITDA defined as Operating Income plus depreciation and amortization plus non cash stock comp Free cash Flow defined as Adjusted EBITDA less cash used for Capex and interest
17 17 17 17 17
Historical Financial Overview
Adjusted EBITDA
$ in millions
$14.1
$20.6
$0.0
$10.0
$20.0
$30.0
Q1 11 Q1 12
CASH EPS
Adjusted EBITDA defined as Operating Income plus depreciation and amortization plus non cash stock comp Cash EPS defined as Net Income plus deferred income tax, non cash stock comp and amortization divided by diluted outstanding shares
$0.110
$0.215
$0.0Q1 11 (adj for non recurring) Q1 12
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Continued Benefit of Sizeable Deferred Tax Assets
As of December 31, 2011, GCA had net deferred income tax assets of $119.5 million The deferred tax assets are principally the result of our conversion from a limited
liability company, a balance of acquired and pre-existing goodwill, and NOLs; provides a significant cash-based tax shield for IRS purposes but not GAAP earnings
The assets are generally amortized over a 15 year life and began amortizing in 2004. This has resulted in a cash-based shielding of pre-tax income of approximately $52.3 million annually for tax accounting purposes, with a direct positive impact on cash earnings relative to GAAP earnings
Allows for capital structure optimization
Has helped GCA weather difficult gaming industry landscape and supports ability to service future debt
2012 Guidance
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Guidance 2012
ADJ EBITDA RANGE (in thousands) $ 73,000 $ 77,000
CASH EPS RANGE $ 0.76 $ 0.82
Guidance definitions ADJ EBITDA = Operating Income plus depreciation and amortization plus non cash stock comp Cash EPS =Cash earnings (defined as; Net Income plus deferred income tax plus non cash stock compensation plus amortization), divided by our average number of diluted shares outstanding
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2012 Assumptions
Durbin interchange rate changes that began October 1, 2011 will continue for 2012
Full year of acquired MCA contracts revenues realized; approximately $40-45 million
Credit transactions are expected to grow slightly over 2011
ATM Revenue will be negatively impacted in Q2 by the network decrease of Interchange ; Offsetting these declines will be substantially corresponding commission reductions from GCA pass-through of the reductions
Operating costs will be higher than 2011 with a full year of MCA operating costs, additional payroll costs
from headcount increases and payment of annual bonuses and additional spending/roll-out of planned improvements on Base Products
Average diluted shares 66-67 million
Tax rate 42-45%
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Key Company Highlights
Industry Leader
Superior Product/ Innovation
Revenue Visibility, Scale / Strong FCF
Significant Barriers to Entry
Prudent Leverage