gca investor presentation - may 2012

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Page 1: GCA Investor Presentation - May 2012

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GLOBAL CASH ACCESS Investor Presentation MAY 2012

Page 2: GCA 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.

Page 3: GCA Investor Presentation - May 2012

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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

Page 4: GCA Investor Presentation - May 2012

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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

Page 5: GCA Investor Presentation - May 2012

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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

Page 6: GCA Investor Presentation - May 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

Page 7: GCA Investor Presentation - May 2012

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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

Page 8: GCA Investor Presentation - May 2012

Competitive Landscape

Page 9: GCA Investor Presentation - May 2012

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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

Page 10: GCA Investor Presentation - May 2012

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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

Page 11: GCA Investor Presentation - May 2012

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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

Page 12: GCA Investor Presentation - May 2012

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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

Page 13: GCA Investor Presentation - May 2012

Business Trends

Page 14: GCA Investor Presentation - May 2012

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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

Page 15: GCA Investor Presentation - May 2012

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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

Page 16: GCA Investor Presentation - May 2012

Financial Overview

Page 17: GCA Investor Presentation - May 2012

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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

Page 18: GCA Investor Presentation - May 2012

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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

Page 19: GCA Investor Presentation - May 2012

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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

Page 20: GCA Investor Presentation - May 2012

2012 Guidance

Page 21: GCA Investor Presentation - May 2012

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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

Page 22: GCA Investor Presentation - May 2012

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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%

Page 23: GCA Investor Presentation - May 2012

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Key Company Highlights

Industry Leader

Superior Product/ Innovation

Revenue Visibility, Scale / Strong FCF

Significant Barriers to Entry

Prudent Leverage