Global Cash Access Reports Third Quarter 2012 Results, Raises 2012 Guidance And Announces The Authorization Of A New $40.0 Million Share Repurchase Program

Global Cash Access Holdings, Inc. (the "Company") (NYSE:GCA) announced today financial results for the third quarter ended September 30, 2012, raised its 2012 earnings guidance and announced a new $40.0 million share repurchase program.

Third Quarter 2012 Highlights
  • Operating income increased 92% year-over-year to $14.6 million
  • EBITDA increased 67% year-over-year to $19.0 million
  • Net income per share, on a diluted basis, increased 233% year-over-year to $0.10
  • Cash EPS increased 109% year-over-year to $0.23

“We are extremely pleased with the Company’s performance in the third quarter with Adjusted EBITDA up 56% and Cash EPS up 109% year over year. We continue to remain focused on enhancing our product pipeline, continuously improving execution and sales focus in all facets of our business, building the foundation for international growth and find, foster and execute technology partnerships and acquisitions to grow and expand the company,” said Scott Betts, CEO of Global Cash Access. “We are also pleased to announce today the authorization of a share repurchase program of $40.0 million over the next two years. Over the past few quarters we have been very focused on strengthening our balance sheet and believe share repurchases provide another lever to drive long-term shareholder value.”

Third Quarter 2012 Results

Revenues were $149.8 million for the third quarter 2012, as compared to revenues of $136.9 million for the same period in 2011. The overall increase in revenues was primarily due to the MCA asset acquisition. Operating income was $14.6 million for the third quarter 2012, an increase of 92%, as compared to $7.6 million for the same period in 2011. Earnings before interest, taxes, depreciation and amortization ("EBITDA") (see Non-GAAP Financial Information below) were $19.0 million for the third quarter 2012, an increase of 67%, as compared to $11.4 million for the same period in 2011. The increase in EBITDA for the third quarter 2012 was primarily a result of both the October 1, 2011 enactment of the Durbin Amendment and its impact on the interchange rates paid by the Company on its debit card transactions, as well as the MCA asset purchase. Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") (see Non-GAAP Financial Information below) were $20.8 million for the third quarter 2012, an increase of 56%, as compared to $13.3 million for the same period in 2011.

Income before income tax provision was $11.1 million for the third quarter 2012, an increase of 247%, as compared to $3.2 million for the same period in 2011. Diluted earnings per share from continuing operations were $0.10 for the third quarter 2012 (on 67.6 million diluted shares), as compared to $0.03 for the same period in 2011 (on 64.8 million diluted shares). Cash EPS (see Non-GAAP Financial Information below) was $0.23 for the third quarter 2012, an increase of 109%, from the $0.11 for the same period in 2011.

2012 Outlook

The Company increases its prior outlook for the fiscal year ending December 31, 2012, as Cash EPS is expected to be between approximately $0.81 and $0.84 (on diluted shares of approximately 67.5 million), up from its previous guidance of between $0.76 and $0.82, and Adjusted EBITDA is expected to be between approximately $77.0 million and $80.0 million, up from its previous guidance of between $73.0 million and $77.0 million. The Company’s estimate for expected capital expenditures remains unchanged at between $9.0 million and $12.0 million.

Share Repurchase Program

The Board of Directors has authorized and approved a new share repurchase program granting the Company the authority to repurchase up to $40.0 million of outstanding Company common stock over a two year period, which is expected to commence in the first quarter of 2013. The Company intends to finance the share repurchases with cash on hand. The repurchase program authorizes the Company to buy its common stock from time to time through open market, privately negotiated or other transactions, including pursuant to trading plans established in accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended, or by a combination of such methods. The share repurchase program is subject to prevailing market conditions and other considerations and may be suspended or discontinued at any time, and supersedes all other outstanding share repurchase programs of the Company.

Investor Conference Call and Webcast

The Company will host an investor conference call to discuss its results for the three and nine months ended September 30, 2012 today at 5:00 p.m. ET. The conference call can be accessed live over the phone by dialing (877) 941-4774 or for international callers by dialing (480) 629-9760. A replay will be available at 8:00 p.m. ET and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the PIN is 4570843. The replay will be available until November 14, 2012. The call will be webcast live from the Company’s website at www.gcainc.com under the Investor Relations section.

Non-GAAP Financial Information

In order to enhance investor understanding of the underlying trends in our business and to provide for better comparability between periods in different years, the Company is providing EBITDA, Adjusted EBITDA, Cash Earnings and Cash EPS on a supplemental basis. Reconciliations between GAAP measures and Non-GAAP measures and between actual results and adjusted results are provided at the end of this press release. EBITDA, Adjusted EBITDA, Cash Earnings and Cash EPS are not measures of financial performance under United States Generally Accepted Accounting Principles ("GAAP"). Accordingly, they should not be considered a substitute for net income, operating income, basic or diluted earnings per share or cash flow data prepared in accordance with GAAP.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this press release, 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 press release include, without limitation: (a) our estimates of 2012 Cash EPS, diluted shares and Adjusted EBITDA and the assumptions upon which they are based; (b) our assumption that there will continue to be a modest improvement in the gaming industry for remainder of 2012; (c) our assumption for 2012 that cash outlays for capital expenditures are expected to be between approximately $9.0 million to $12.0 million; and (d) 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; our ability to enter into a definitive and binding agreement with Live Gamer on commercially reasonable terms, or at all; 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. 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 press release 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, 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 press release.

About Global Cash Access Holdings, Inc.

Las Vegas-based Global Cash Access, Inc. ("GCA"), a wholly owned subsidiary of Global Cash Access Holdings, Inc., is a leading provider of cash access products and related services to over 1,000 casinos and other gaming properties in the United States, Europe, Canada, the Caribbean, Central America and Asia. GCA's products and services provide gaming patrons access to cash through a variety of methods, including ATM cash withdrawals, point-of-sale debit card transactions, credit card transactions, check verification and warranty services, and Western Union money transfers. Through Western Money Systems, a wholly owned subsidiary, GCA is a leading manufacturer and distributor of cash handling devices and related software. GCA also provides products and services that improve credit decision-making, automate cashier operations and enhance patron marketing activities for gaming establishments. With its proprietary database of gaming patron credit history and transaction data on millions of gaming patrons worldwide, GCA is recognized for successfully developing and deploying technological innovations that increase client profitability, operational efficiency and customer loyalty. More information is available at GCA's website at www.gcainc.com.
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except par value)
(unaudited)
       
September 30, December 31,
2012 2011
ASSETS
 
Cash and cash equivalents $ 46,940 $ 55,535
Restricted cash and cash equivalents 200 455
Settlement receivables 113,989 80,246
Other receivables, net 10,076 16,885
Inventory 7,266 7,087
Prepaid expenses and other assets 16,564 15,406
Property, equipment and leasehold improvements, net 14,357 15,577
Goodwill, net 180,152 180,122
Other intangible assets, net 33,327 38,216
Deferred income taxes, net 106,484 119,538
   
Total assets $ 529,355   $ 529,067  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Liabilities:
Settlement liabilities $ 158,438 $ 141,827
Accounts payable 34,809 32,223
Accrued expenses 18,608 21,159
Borrowings 126,500 174,000
   
Total liabilities   338,355     369,209  
 
COMMITMENTS AND CONTINGENCIES
 
Stockholders' Equity:
Common stock, $0.001 par value, 500,000 shares authorized and 87,375 and 85,651 shares issued at September 30, 2012 and December 31, 2011, respectively 87 86
Convertible preferred stock, $0.001 par value, 50,000 shares authorized and 0 shares outstanding at September 30, 2012 and December 31, 2011, respectively - -
Additional paid-in capital 214,612 204,735
Retained earnings 119,216 97,925
Accumulated other comprehensive income 2,504 2,340
Treasury stock, at cost, 20,714 and 20,686 shares at September 30, 2012 and December 31, 2011, respectively (145,419 ) (145,228 )
   
Total stockholders' equity   191,000     159,858  
 
Total liabilities and stockholders' equity $ 529,355   $ 529,067  
 
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(amounts in thousands, except per share)
(unaudited)
   
Three Months Ended September 30, Nine Months Ended September 30,
2012   2011 2012   2011
Revenues
 
Cash advance $ 57,520 $ 50,913 $ 172,557 $ 152,036
ATM 76,411 71,044 233,361 213,450
Check services 6,611 6,479 19,731 19,813
Other revenues   9,282     8,452     22,705     21,031  
 
Total revenues 149,824 136,888 448,354 406,330
 
Cost of revenues 111,373 106,953 333,566 317,900
Operating expenses 19,463 18,529 55,910 51,922
Amortization 2,650 1,929 7,317 6,250
Depreciation   1,695     1,867     5,260     6,201  
 
Operating income 14,643 7,610 46,301 24,057
 
Interest expense, net of interest income 3,586 4,414 12,133 14,167
Loss on early extinguishment of debt   -     -     -     943  
 
Interest expense, net   3,586     4,414     12,133     15,110  
 
Income before income tax provision 11,057 3,196 34,168 8,947
 
Income tax provision   3,977     1,356     12,878     4,356  
 
Net income   7,080     1,840     21,290     4,591  
 
Foreign currency translation   236     (218 )   164     (191 )
 
Comprehensive income $ 7,316   $ 1,622   $ 21,454   $ 4,400  
 
Basic earnings per share:
Net income per share - basic $ 0.11   $ 0.03   $ 0.32   $ 0.07  
 
Diluted earnings per share:
Net income per share - diluted $ 0.10   $ 0.03   $ 0.32   $ 0.07  
 
Weighted average number of common shares outstanding:
Basic   66,108     64,712     65,673     64,597  
Diluted   67,601     64,751     67,031     64,708  
 
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(amounts in thousands)
(unaudited)
 
    Nine Months Ended September 30,
2012     2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,290 $ 4,591

Adjustments to reconcile net income to cash provided by operating activities:
Amortization of financing costs 1,081 988
Amortization of intangibles 7,317 6,250
Depreciation 5,260 6,201
Loss on sale or disposal of assets 112 216
Provision for bad debts 2,586 4,016
Loss on early extinguishment of debt - 943
Stock-based compensation 3,951 5,238
Changes in operating assets and liabilities:
Settlement receivables (33,676 ) 10,266
Other receivables, net 5,682 (829 )
Inventory (6 ) (2,575 )
Prepaid and other assets (1,329 ) (3,477 )
Deferred income taxes 12,556 4,092
Settlement liabilities 16,509 (12,221 )
Accounts payable 2,582 505
Accrued expenses (2,496 ) (4,030 )
   
Net cash provided by operating activities   41,419     20,174  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, equipment, leasehold improvements and other intangibles (7,353 ) (6,227 )
Proceeds from sale of fixed assets 448 -
Changes in restricted cash and cash equivalents 255 (14 )
   
Net cash used in investing activities   (6,650 )   (6,241 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments against old credit facility - (208,750 )
Securing of new credit facility - 214,000
Issuance costs of new credit facility (676 ) (7,099 )
Repayments against new credit facility (47,500 ) (35,000 )
Proceeds from exercise of stock options 5,946 591
Purchase of treasury stock (191 ) (156 )
   
Net cash used in financing activities   (42,421 )   (36,414 )
 

NET EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
  (943 )   191  
 
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,595 ) (22,290 )
 
CASH AND CASH EQUIVALENTS - Beginning of Period   55,535     60,636  
 
CASH AND CASH EQUIVALENTS - End of Period $ 46,940   $ 38,346  
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
Cash paid for interest $ 11,402   $ 15,202  
Cash paid for taxes, net of refunds $ 267   $ 336  
 
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO CASH EARNINGS
AND OPERATING INCOME TO EBITDA AND ADJUSTED EBITDA
(unaudited)
   
Three months ended Nine months ended
September 30, September 30,
2012   2011 2012   2011
Reconciliation of net income to cash earnings (amounts in thousands, except earnings per share amounts)
 
Net income $ 7,080 $ 1,840 $ 21,290 $ 4,591
Equity compensation expense 1,842 1,902 3,951 5,238
Deferred income tax 3,878 1,337 12,556 4,092
Amortization 2,650 1,929 7,317 6,250
       
Cash earnings $ 15,450 $ 7,008 $ 45,114 $ 20,171
 
Diluted weighted average number of common shares outstanding 67,601 64,751 67,031 64,708
 
Diluted cash earnings per share ("Cash EPS")1 $ 0.23 $ 0.11 $ 0.67 $ 0.31
 
Reconciliation of operating income to EBITDA and Adjusted EBITDA
Operating income $ 14,643 $ 7,610 $ 46,301 $ 24,057
Plus: depreciation and amortization 4,345 3,796 12,577 12,451
       
EBITDA $ 18,988 $ 11,406 $ 58,878 $ 36,508
 
Equity compensation expense 1,842 1,902 3,951 5,238
       
Adjusted EBITDA $ 20,830 $ 13,308 $ 62,829 $ 41,746
 

Notes:

1. For the nine months ended September 30, 2011, there were approximately $4.2 million of non-recurring expenses that impacted Cash EPS by approximately $0.06.
 
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
SELECTED SEGMENT INFORMATION AND OTHER DATA
(unaudited)
(amounts in thousands, unless otherwise noted)
                       
Cash Check
Advance ATM Services Other Corporate Total
 
Three Months Ended September 30, 2012
Revenues $ 57,520 $ 76,411 $ 6,611 $ 9,282 $ - $ 149,824
Operating income 15,785 7,951 3,822 4,673 (17,588 ) 14,643
 
Three Months Ended September 30, 2011
Revenues $ 50,913 $ 71,044 $ 6,479 $ 8,452 $ - $ 136,888
Operating income 7,789 8,659 3,579 4,393 (16,810 ) 7,610
 
Nine Months Ended September 30, 2012
Revenues $ 172,557 $ 233,361 $ 19,731 $ 22,705 $ - $ 448,354
Operating income 48,388 25,620 11,017 11,563 (50,287 ) 46,301
 
Nine Months Ended September 30, 2011
Revenues $ 152,036 $ 213,450 $ 19,813 $ 21,031 $ - $ 406,330
Operating income 23,375 27,157 11,168 10,029 (47,672 ) 24,057
 
Three Months Ended     Nine Months Ended
September 30, 2012   September 30, 2011 September 30, 2012   September 30, 2011
$ $ $ $
Other data (unaudited):
Aggregate dollar amount processed (in billions):
Cash advance $ 1.2 $ 1.1 $ 3.6 $ 3.2
ATM $ 3.4 $ 3.0 $ 10.5 $ 9.2
Check warranty $ 0.3 $ 0.3 $ 0.9 $ 0.9
Number of transactions completed (in millions):
Cash advance 2.3 2.1 6.9 6.3
ATM 18.1 17.0 56.0 52.0
Check warranty 1.1 1.1 3.3 3.3
 

Copyright Business Wire 2010

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