Global Cash Access Reports Fourth Quarter and Fiscal Year 2008 Results

02/26/09

LAS VEGAS--(BUSINESS WIRE)--Feb. 26, 2009-- Global Cash Access Holdings, Inc. (NYSE:GCA) (the “Company”) today announced preliminary, unaudited financial results for the quarter and fiscal year ended December 31, 2008.

Fiscal Fourth Quarter 2008 Results

For the quarter ended December 31, 2008, revenues were $176.3 million, an increase of 23.1% over the $143.2 million in revenues recorded in the same quarter last year. Operating income was $18.5 million, an increase of 40.6% over the $13.1 million recognized in the prior year. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) (see Non-GAAP Financial Information below) increased to $23.2 million from $16.2 million, a 43.2% increase. Net income in the fourth quarter of 2008 was $4.6 million, up 140.0% from the fourth quarter of 2007. Diluted earnings per share from Continuing Operations were $0.06 in the fourth quarter of 2008 (on 76.8 million diluted shares) as compared to $0.04 in the fourth quarter of 2007 (on 79.5 million diluted shares). Cash Earnings Per Share from Continuing Operations (“Cash EPS”) (see Non-GAAP Financial Information below) were $0.19 in the fourth quarter of 2008, a 109% increase from the $0.09 reported in the prior year.

The Company’s results for the quarter include the operations of Certegy Gaming Services, Inc., which was acquired in April of 2008, and Cash Systems, Inc., which was acquired in August of 2008.

Fiscal Year 2008 Results

For the year ended December 31, 2008, revenues were $671.6 million, an increase of 12.3% over the $597.9 million in revenues recorded in fiscal year 2007. Operating income was $78.6 million, an increase of 0.5% over the $78.2 million recognized in the prior year. Earnings before interest, taxes, depreciation and amortization (see Non-GAAP Financial Information below) increased to $94.7 million from $89.8 million, a 5.4% increase. Net income was $23.6 million, down 0.6% from the year ended December 31, 2007. Cash EPS (see Non-GAAP Financial Information below) were $0.66 in 2008, a 21% increase from the $0.55 reported in the prior year.

All 2007 financial information has been adjusted to reflect the classification of Arriva Card, Inc., a subsidiary of the Company, as a discontinued operation.

“Despite the turbulence in the gaming sector and the economy in 2008, it was a year of growth for our company as we capitalized on our ability to scale with the acquisition opportunities,” said Scott Betts, President and Chief Executive Officer of the Company. “We completed two important acquisitions that we believe have added strong customer bases, additional revenue and cash flow, and further enhanced our product portfolio. In 2009, we expect to benefit from additional operational improvements and cost savings combined with our intention to aggressively seek to deliver innovative products and enhanced customer service to our clients. We are optimistic about the future of our company and feel that we’re well positioned when the macroeconomic environment improves and the gaming industry rebounds.”

2009 Outlook

The Company expects 2009 revenue to be between $700 and $730 million. EBITDA are expected to be between $95 and $101 million. Diluted earnings per share from continuing operations are expected to be between $0.44 and $0.50 per share. Cash earnings per share are expected to be between $0.70 and $0.76.

The foregoing expectations reflect the following assumptions:

  • Expense investments in product and processing platforms of between $2 million and $4 million;
  • Average 30-day LIBOR of 1.3% in effect during the period and average outstanding balances subject to 30-day LIBOR, including off-balance sheet amounts outstanding under the Company’s Treasury Services Agreement, of $430 million;
  • An effective tax rate for the full year of approximately 38%;
  • Cash outlays for capital expenditures to approximate those amounts disbursed in 2008; and
  • Diluted issued shares of approximately 77 million.

Investor Conference Call and Webcast

GCA will host an investor conference call to discuss its fourth quarter and fiscal year 2008 results today at 5:00 p.m. ET. The conference call can be accessed live over the phone by dialing (866) 804-6920 or for international callers (857) 350-1666; the conference ID is 74177323. A replay will be available one hour after the call and can be accessed by dialing (888) 286-8010 or (617) 801-6888 for international callers; the conference ID is 98029568. 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 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 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 or other income 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 belief that our recent acquisitions will drive growth, enhance the Company’s product portfolio and provide additional operational improvements and cost savings; (b) our 2009 revenue, EBITDA, diluted earnings per share and cash earnings per share expectations; (c) our intention that our expense investment in platforms will be between $2 million and $4 million; (d) our expectation that average 30-day LIBOR for the period will be 1.3% and our average outstanding balances subject to 30-day LIBOR will be $430 million; (e) our expectation that our effective tax rate for the full year 2009 will be approximately 38%; (f) our expectation that cash outlays for capital expenditures to approximate those amounts disbursed in 2008; (g) our assumption that there are approximately 77 million diluted shares issued; and (h) 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 is helpful to investors.

Our beliefs, expectations, forecasts, objectives, anticipations, intentions and strategies regarding the future, including without limitation those concerning expected operating results, revenues and earnings are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements, including but not limited to: (a) unexpected events that may impact our ability to drive growth, develop our product portfolio or achieve operational improvements or cost savings; (b) reduced demand for or increased competition with our products and services that affects our 2009 revenue, EBITDA, diluted earnings per share and cash earnings per share; (c) unexpected events that may require us to incur additional expense investment in our platforms; (d) unexpected adjustments to average 30-day LIBOR or the amount of outstanding balances subject to 30-day LIBOR; (e) with respect to our expectation that our effective tax rate will be approximately 38% for the full year 2009 (i) incurrence of expenses that are not deductible for tax purposes, and (ii) the entry into business lines or foreign countries with tax structures different from the ones we are currently subject to; (f) unexpected events that may require capital expenditures to materially differ from those amounts disbursed in 2008; and (g) inaccuracies in our assumptions as to the financial measures that investors use or the manner in which such financial measures may be used by such investors.

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 registration statement on Form S-1 (No. 333-133996), our Annual Report filed on Form 10-K (No. 001-32622) and our quarterly reports 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 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 1,100 casinos and other gaming properties in the United States, Europe, Canada, the Caribbean 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 cash advances, check verification and warranty services, and Western Union money transfers. GCA 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 Web site at www.gcainc.com.

GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except par value)
(unaudited)
       
12/31/2008 12/31/2007
ASSETS
Cash $ 77,148 $ 71,063
Restricted cash and cash equivalents 388 1,380
Settlement receivables 51,604 61,066
Other receivables, net 16,629 14,424
Prepaid and other assets 11,867 7,618
Assets held for sale 1,540 12,180
Property, equipment and leasehold improvements, net 24,419 22,803
Goodwill, net 183,929 156,889
Other intangibles, net 34,982 13,652
Deferred income taxes, net   156,679     177,227  
 
Total assets $ 559,185   $ 538,302  
 
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
Settlement liabilities $ 79,150 $ 93,727
Accounts payable 35,561 22,485
Accrued expenses 17,845 20,178
Borrowings   265,750     263,480  
 
Total liabilities 398,306 399,870
 
COMMITMENTS AND CONTINGENCIES - -
MINORITY INTEREST - 135
STOCKHOLDERS' EQUITY

Common stock, $0.001 par value, 500,000 shares authorized and 82,961 and 82,981 shares issued at December 31, 2008 and 2007, respectively

83 83

Preferred stock, $0.001 par value, 50,000 shares authorized and 0 shares outstanding at December 31, 2008 and 2007, respectively.

- -
Additional paid in capital 172,119 163,070
Retained earnings 37,660 14,103
Accumulated other comprehensive income 1,243 2,709

Treasury stock, at cost, 6,017 and 4,563 shares at December 31, 2008 and 2007, respectively.

  (50,226 )   (41,668 )
 
Total stockholders' equity 160,879 138,297
 
Total liabilities and stockholders' equity $ 559,185   $ 538,302  
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share)
(unaudited)
         
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
 
REVENUES:
Cash advance $ 82,156 $ 76,082 $ 326,476 $ 316,094
ATM 78,452 56,479

289,122

240,575
Check services 10,887 8,130 42,366 31,126
Central Credit and other revenues   4,761     2,513     13,644     10,145  
 
Total revenues 176,256 143,204 671,608 597,940
 
Cost of revenue 130,748 101,834 492,974 428,508
Operating expenses 22,281 25,150 83,962 79,614
Amortization 2,605 1,356 7,151 5,301
Depreciation   2,173     1,741     8,875     6,299  
 
OPERATING INCOME 18,449 13,123 78,646 78,218
INTEREST INCOME (EXPENSE), NET
Interest income 494 726 2,229 3,631
Interest expense   (7,083 )   (9,262 )   (30,117 )   (38,146 )
Total interest income (expense), net   (6,589 )   (8,536 )   (27,888 )   (34,515 )

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION AND MINORITY OWNERSHIP LOSS

11,860 4,587 50,758 43,703

INCOME TAX PROVISION

  7,373     1,792     23,349     16,709  

INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY OWNERSHIP LOSS

4,487 2,795 27,409 26,994

MINORITY OWNERSHIP LOSS, NET OF TAX

  -     48     86     236  
INCOME FROM CONTINUING OPERATIONS 4,487 2,843 27,495 27,230

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX

67 (944 ) (3,939 ) (3,526 )
       

NET INCOME

  4,554     1,899     23,556     23,704  
Foreign currency translation, net of tax   (1,058 )   (493 )   (1,465 )   547  
COMPREHENSIVE INCOME $ 3,496   $ 1,406   $ 22,091   $ 24,251  
 
Basic net income per share of common stock
Continuing operations $ 0.06   $ 0.04   $ 0.36   $ 0.34  
Discontinued operations $ -   $ (0.02 ) $ (0.05 ) $ (0.05 )
Basic net income per share of common stock $ 0.06   $ 0.02   $ 0.31   $ 0.29  
 
Diluted net income per share of common stock
Continuing operations $ 0.06   $ 0.04   $ 0.36   $ 0.33  
Discontinued operations $ -   $ (0.02 ) $ (0.05 ) $ (0.04 )
Diluted net income per share of common stock $ 0.06   $ 0.02   $ 0.31   $ 0.29  
 
Weighted average number of common shares outstanding
Basic   76,745     79,450     76,787     81,108  
Diluted   76,755     79,466     76,796     81,377  
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands, except per share)
(unaudited)
               

Three months ended December 31,

Twelve months ended December 31,

2008   2007 2008   2007
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,554 $ 1,899 $ 23,556 $ 23,704

Adjustments to reconcile net income to cash provided by operating activities:

Amortization of financing costs 244 244 973 973
Amortization of intangibles 2,796 1,403 7,342 5,487
Depreciation 2,176 1,741 8,878 6,302
Loss on sale of or disposal of assets - - 139
Provision for bad debt 3,367 5,378 17,565 11,184
Deferred income taxes 7,078 2,032 20,561 14,514
Minority ownership loss - (74 ) (135 ) (368 )
Stock-based compensation 2,360 9,802 9,050 22,269
Changes in operating assets and liabilities: - -
Settlement receivables (9,884 ) 55,365 19,318 76,737
Receivables other, net 15,633 (10,230 ) 6,399 (22,827 )
Prepaid and other assets (474 ) 442 (1,400 ) 1,071
Settlement liabilities 30,176 (32,361 ) (30,426 ) (44,797 )
Accounts payable (4,668 ) (3,108 ) 3,992 (3,855 )
Accrued expenses   (3,001 )   1,076     (10,259 )   1,341  
 

Net cash provided by operating activities

  50,357     33,609     75,414     91,874  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Certegy Gaming Services acquisition, net of cash 135 - (24,684 ) -
Cash Systems, Inc. acquisition, net of cash (322 ) - (30,238 ) -
Purchase of property, equipment and leasehold

improvements and other

(1,283 ) (1,293 ) (8,819 ) (10,930 )
Change in restricted cash and cash equivalents   (3 )   (4 )   991     (30 )
 
Net cash used in investing activities   (1,473 )   (1,297 )   (62,750 )   (10,960 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facility - - 121,000 -
Repayments under credit facility (30,250 ) (250 ) (118,730 ) (11,000 )
Debt issuance costs - - (23 )
Proceeds from exercise of stock options - 86 1,287
Purchase of treasury stock - (23,536 ) (9,486 ) (40,379 )
Other   (24 )   -       400  
Cash flow from financing activities   (30,274 )   (23,700 )   (7,216 )   (49,715 )
 
Exchange rate impact 1,046 (313 ) 637 (1,055 )
 
Change in cash 19,656 8,299 6,085 30,144
Cash beginning of period   57,492     62,764     71,063     40,919  
Cash end of period $ 77,148   $ 71,063   $ 77,148   $ 71,063  
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Diluted Cash Earnings Per Share from Continuing Operations to Diluted Earnings Per Share
from Continuing Operations, and Operating Income to EBITDA
(amounts in thousands)
(unaudited)
       
Three months ended Twelve months ended
December 31, December 31,
2008 2007 2008 2007

Reconciliation of income from continuing operations to diluted cash earnings

 
Income from continuing operations $ 4,487 $ 2,843 $ 27,495 $ 27,230

Plus: deferred tax amortization related to acquired goodwill

  10,246   4,463   23,349   17,472
Cash earnings $ 14,733 $ 7,306 $ 50,844 $ 44,702
Diluted cash earnings per share from continuing operations $ 0.19 $ 0.09 $ 0.66 $ 0.55
 
Reconciliation of operating income to EBITDA
Operating income $ 18,449 $ 13,123 $ 78,646 $ 78,218
Plus: amortization 2,605 1,356 7,151 5,301
depreciation   2,173   1,741   8,875   6,299
EBITDA $ 23,227 $ 16,220 $ 94,672 $ 89,818
Equity compensation expense   2,360   9,802   9,050   22,269
ADJ EBITDA $ 25,587 $ 26,022 $ 103,722 $ 112,087
 
Weighted average number of common shares outstanding
Diluted   76,755   79,466   76,796   81,377
 
 
Other Data (unaudited)
Aggregate dollar amount processed (in billions)
Cash advance $ 1.6 $ 1.6 $ 6.5 $ 6.4
ATM $ 3.9 $ 3.2 $ 15.2 $ 13.6
Check warranty $ 0.5 $ 0.4 $ 1.8 $ 1.4
 

Number of transactions completed (in millions)

Cash advance

3.1

2.7 12.2 11.3
ATM 22.3 17.3 84.7 73.5
Check warranty 1.7 1.3 6.5 5.3

 

Source: Global Cash Access Holdings, Inc.

Global Cash Access, Inc.
George Gresham, CFO, 702-855-3005
IR@gcamail.com

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