The casino industry is turning a corner, but the long-term impact of the so-called Durbin amendment on Global Cash Access Holdings Inc.’s revenues remains unclear, executives from the company told analysts during a Nov. 9 conference call to discuss third-quarter earnings.
The Las Vegas-based company, which provides cash access and related products to casinos through ATMs, point-of-sale debit card transactions, credit card cash advances and check-warranty services, initially estimated the impact from reduced debit card interchange rates could generate approximately 100 basis points in improved 2011 total gross profit margins and in excess of 400 basis points of improvement next year (
Mary Beth Higgins, Global Cash Access chief financial officer, told analysts during the call the company was reducing the 2012 estimate to 350 basis points because of uncertainty regarding additional fees and surcharges that the networks and associations may assess.
Higgins noted Visa Inc.’s decision to alter its interchange-reimbursement structure for Visa purchase and Plus ATM transactions that will become effective in April (
“This change will materially reduce the net reimbursement that [Global] receives from ATM transactions processed by Visa,” Higgins said. “We fully anticipate other networks will take similar changes.”
Higgins said she expects Global Cash Access will pass along the difference to its customers but that the changes potentially would have a negative impact on the company.
Despite the interchange issues, CEO Scott Betts anticipates Global Cash Access will experience growth next year. “We are seeing increasing evidence that the [industry] has not only stabilized but is experiencing modest growth,” he told analysts during the call.
As for Global Cash Access’ earnings, revenue and net income continued to decline in the third quarter as a result of losing its largest customer, Harrah’s Entertainment, late in 2010, the company announced Nov. 9.
For the three months ended Sept. 30, revenues totaled $136.9 million, down 10%, from $152.1 million during the same period last year. Net income attributable to the company and its subsidiaries was down 63.3%, to $1.8 million from $4.9 million.
ATM revenues during the quarter totaled $71 million, down 10.9% from $79.7 million. Check services increased 0.47%, to $6.47 million from $6.44 million. Cash-advance revenues totaled $50.9 million, down 15.9% from $60.5 million.
ATM transactions totaled 17 million, down 14.1% from 19.8 million. Check-warranty transactions dropped 8.3%, to 1.1 million from 1.2 million. Cash-advance transactions totaled 2.1 million, down 16% from 2.5 million.
In terms of aggregate dollar amounts processed, ATM volume totaled $3 billion, down 11.8% from $3.4 billion. Check warranties stayed even at $300 million. Cash advances totaled $1.1 billion, down 8.3% from $1.2 billion.
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