Executives at Global Cash Access Holdings Inc. see positive market trends ahead, but they believe the road to recovery for the provider of cash-access and related card and ATM services to casinos will be bumpy.
“No one is predicting smooth sailing yet, as we still are facing some unemployment issues for sure, flooding along the Mississippi which has closed 12 to 14 of our customers right now, and we have some lagging recovery in some Native American jurisdictions,” Scott Betts, the Las Vegas-based company’s CEO, told analysts during a conference call to discuss first quarter earnings. “But the significant sequential declines have stopped.”
For the quarter ended March 31, Global Cash Access reported revenues of $134.4 million, down 15.2%, from $158.5 million during the same period last year. Net income was down 75.4%, to $1.7 million from $6.9 million (
Some of the financial and performance declines during the quarter stemmed from the loss of the casino business of Caesars Entertainment Inc., formerly Harrah’s Entertainment Inc., which was the company’s largest customer, Betts noted during the call.
But “the trends in our same-store numbers have begun to show a solid positive trend,” he said. “Most encouragingly, we have finally seen a break in the credit card volume declines and are seeing that important segment start to rebound. Credit has been stubbornly posting year-over-year declines in the 12% to 15% per month for the better part of two and half years. Since December, we have seen these declines mitigate.”
Internationally, Global Cash Access two weeks ago relaunched its United Kingdom business, and it expects to benefit from the opening this weekend of Galaxy Entertainment Group’s mega resort in Macau, Betts said, noting business in Canada also is growing “at double digits.”
“And beyond that we feel that we have a healthy pipeline of new property openings coming online in the U.S. as we move across the year,” he said.
Global Cash Access also is monitoring the Federal Reserve Board’s proposed changes in debit card interchange pricing and network routing. The Fed, as mandated by the so-called Durbin amendment to the Dodd-Frank Act, has proposed capping debit card interchange at 12 cents per transaction, compared with today’s 44-cent average, and requiring at least two separate PIN-debit network brands on cards for transaction routing.
Though the Fed’s action could lead to lower transaction-routing costs for the company’s ATM business, the savings probably would not be substantial, Betts said.
Global Cash Access not only is the processor and the acquirer in its transactions, but it also is the merchant. So any reduction in interchange will directly benefit the company, Betts said.
“Any revision or capping of the debit interchange with the implementation of the Durbin amendment could have a material impact on our results,” he said. “And frankly, the Durbin amendment is a pure wild card, but it is not in any of our guidance.”
