Global Cash Access Announces First Quarter 2006 Financial Results;
Revenue of $129.8 million and Adjusted
Diluted Cash EPS of $0.15 in Q1 2006
LAS VEGAS--(BUSINESS WIRE)--May 2, 2006--Global Cash Access
Holdings, Inc. ("GCA" or the "Company") (NYSE:GCA) today announced
financial results for the quarter ended March 31, 2006.
Statement about Accounting Terms
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 adjusted results
on a supplemental basis. Adjusted results exclude non-cash
compensation expense in the first quarter of 2006. In addition, the
Company uses certain non-GAAP financial measures of financial
performance. Reconciliations between GAAP measures and non-GAAP
measures and between actual results and adjusted results are provided
at the end of this press release.
Beginning with the first quarter of 2006, the Company no longer
uses the line item labeled "Gross Profit" in its GAAP income
statement. Investors may still calculate gross profit by subtracting
cost of revenues from total revenues as they are presented on the
Company's consolidated income statement. Except for minor
reclassifications, the Company has not changed the basis on which it
presents cost of revenues.
Summary Non-GAAP Results
For the quarter ended March 31, 2006, revenues were $129.8
million, an increase of 18.4% over the $109.7 million in revenues
recorded in the same quarter last year. Adjusted Net Income was $8.2
million in Q1 2006, an increase of 11.8% over net income of $7.3
million in Q1 2005. Adjusted Cash Earnings, which reflect the
amortization of the acquired goodwill realized in the Company's 2004
recapitalization transactions, were $12.3 million in Q1 2006 as
compared to $11.3 million in Q1 2005, an increase of 8.9%. Adjusted
Cash Earnings per diluted share was $0.15 in Q1 2006 as compared to
$0.16 in Q1 2005. Adjusted EBITDA was $25.2 million in Q1 2006, equal
to EBITDA realized in the same period in 2005. Adjusted figures in Q1
2006 exclude $2.0 million of non-cash compensation expense ($1.2
million after taxes).
Weighted average diluted shares outstanding in the first quarter
of 2005 do not reflect the issuance of 10.1 million shares in
connection with the Company's initial public offering ("IPO") in
September 2005. If the Q1 2006 diluted share count were used in both
periods, Adjusted Cash EPS would be $0.15 and $0.14 for the quarters
ended March 31, 2006 and March 31, 2005, respectively.
"The first quarter of 2006 was very strong," commented Kirk
Sanford, President and Chief Executive Officer of GCA. "Revenues in
three of our four product categories saw double-digit year over year
growth rates, allowing us to report nearly $130 million in total
revenue. And our new product initiatives continued on track,
continuing to position GCA as the industry leader in product
innovation."
Highlights of the Quarter
-- Recorded revenue of $129.8 million, the highest quarterly
total ever recorded by the Company.
-- Significant increases in key metrics:
-- Same store surcharge revenue up 12.5%
-- Cash advance dollars disbursed volume up 19.3%
-- ATM transaction volume up 16.2%.
-- Completed MGM MIRAGE installations at all properties (except
Beau Rivage).
-- 3-in-1 Enabled QuickJack(TM) Plus Redemption Kiosk
installations reached 106 as of March 31, 2006.
-- Renewed contracts with major customers Station Casinos,
Pinnacle Entertainment and Casino Arizona
-- Received an upgraded debt rating from Moody's Investors
Service
GAAP Results
For the first quarter of 2006, total revenues were $129.8 million,
an increase of 18.4% over the first quarter of 2005. Operating Income
(including non-cash compensation expense) in the 2006 quarter was
$20.6 million, a decrease of 5.7% from the same period in 2005. Net
income in the 2006 quarter was $7.0 million, down from $7.3 million in
the first quarter of 2005. Diluted earnings per share was $0.09 in the
first quarter of 2006 as compared to $0.10 in the first quarter of
2005.
First Quarter Results of Operations
Total revenues increased 18.4% from $109.7 million in the first
quarter of 2006 to $129.8 million in the first quarter of 2006. Same
store revenues for Cash Advance and ATM surcharge revenue increased
12.5%.
The following is a comparison of selected revenue components for
the first quarter of 2006 to the same period in 2005:
-- Cash advance revenues were up 18.1%, from $56.8 million to
$67.1 million. Cash disbursed increased 19.3%, from $1.13
billion to $1.35 billion. The number of transactions increased
9.3%, from 2.3 million to 2.5 million. The average transaction
amount increased from $491.19 to $536.25. The average fee
declined from 5.02% to 4.97%. Average revenue per transaction
increased 8.1% from $24.63 to $26.63.
-- ATM revenues increased 21.4%, from $43.8 million to $53.2
million. The number of transactions increased 16.2% from 14.3
million to 16.7 million. Cash disbursed was $2.92 billion
compared to $2.35 billion, an increase of 24.3%. Average
revenue per transaction increased 4.6% from $3.05 to $3.19.
-- Check services revenues were $7.2 million, an increase of
14.8%. The face amount of checks warranted increased by 25.5%,
from $257.3 million to $322.8 million. The number of check
warranty transactions grew 12.9%, from 1.12 million to 1.26
million. The average face amount per check warranted grew from
$230.46 to $256.08, an increase of 11.1%. The average check
warranty fee declined from 2.33% to 2.12%. Average check
warranty revenue per transaction increased 0.9% from $5.37 to
$5.42.
-- Central Credit and other revenues declined 15.3%, from $2.8
million to $2.4 million.
Cost of revenues increased 26.1% in the quarter to $91.4 million
from $72.5 million in the first quarter of 2005. Commissions, the
largest component of cost of revenues, increased 26.2%. Interchange
increased 26.8%, driven by the increase in cash advance volumes as
well as higher interchange rates.
Gross margin was 29.6% in the first quarter of 2006 as compared to
33.9% in the first quarter of 2005 and 31.6% in the fourth quarter of
2005.
Operating expenses increased 27.3% from $12.0 million in the first
quarter of 2005 to $15.3 million in the current quarter. Operating
expenses excluding non-cash compensation expense was $13.3 million in
the current quarter, an increase of 11.0%. Operating expenses
(excluding non-cash compensation expense) increased 5.4% on a
sequential basis from the fourth quarter of 2005.
Depreciation and amortization expense declined 22.6% from $3.3
million in the first quarter of 2005 to $2.6 million in the first
quarter of 2006.
Interest income was $555 thousand in Q1 2006, an increase of 23.1%
from the comparable 2005 period.
Interest expense in the first quarter of 2006 was $10.2 million as
compared to $10.9 million in the first quarter of 2005. Interest
expense on the Company's borrowings declined $2.2 million due to the
lower level of outstanding indebtedness in the first quarter of 2006.
Interest expense on the Company's ATM funds increased 78.0% from $2.0
million in Q1 2005 to $3.5 million in Q1 2006, due primarily to
increases in the LIBOR rate on which those funds are priced.
Income tax expense in the first quarter of 2006 was $4.0 million
as compared to $4.1 million in the comparable quarter of 2005. The
Company's provision in the first quarter of 2006 is based on an
expected effective rate for all of 2006 of 36.65%.
Balance Sheet
At March 31, 2006, the Company had cash and cash equivalents of
$47.2 million. Settlement receivables were $24.0 million and
settlement liabilities were $24.0 million.
Total borrowings at March 31, 2006 were $319.1 million, consisting
of $166.3 million of borrowings under the Company's senior secured
credit facilities and $152.8 million face amount of 8 3/4% senior
subordinated notes. During the first quarter of 2006, the Company made
a $2.3 million mandatory repayment on the term loan component of its
senior secured credit facilities. Commencing in April 2006, the
borrowing rate on the term loan portion of senior secured credit
facilities decreased from LIBOR +225 basis points to LIBOR +175 basis
points.
The Company made investments in property, equipment and software
of $4.1 million and $2.1 million during the three months ended March
31, 2006 and 2005, respectively. Investments in the 2006 period
include ATM and other casino floor equipment as well as purchases of
computer and communications hardware and software.
Financial Guidance
For fiscal 2006, the Company currently expects revenues in a range
of $530 million to $540 million and Adjusted Diluted Cash Earnings per
Share in a range of $0.64 to $0.66. The Company currently expects Q2
2006 revenue to be in a range of $130 million to $133 million and
Adjusted Diluted Cash Earnings per Share in a range of $0.15 to $0.16.
Excluded from the Adjusted Diluted Cash Earnings per Share figures
presented above are anticipated FAS 123(R) expenses of $8.9 million
for the full year and $2.3 million for the second quarter.
This financial guidance is given as of the date hereof and is
based on factors and circumstances known to the Company at this time.
Such factors and circumstances may change, and such changes may have
an impact on the Company's financial outlook. The Company is under no
obligation to update its financial guidance.
Non-GAAP Financial Information
None of EBITDA, Adjusted EBITDA, Adjusted Net Income or Adjusted
Cash Earnings is a measure of financial performance under United
States generally accepted accounting principles ("GAAP"). Accordingly,
none of them should be considered a substitute for net income,
operating income or other income or cash flow data prepared in
accordance with GAAP. The Company believes that EBITDA, Adjusted
EBITDA, Adjusted Net Income and Adjusted Cash Earnings are
widely-referenced financial measures in the financial markets. In
addition, the Company has identified certain potential adjustments to
its financial results that address income or expenses that the Company
believes are unusual or non-recurring in nature. The Company believes
that referencing EBITDA, Adjusted EBITDA, Adjusted Net Income and
Adjusted Cash Earnings and identifying unusual or non-recurring items
is helpful to investors. Reconciliations between GAAP and non-GAAP
measures and between actual and adjusted financial results are
presented elsewhere in this press release.
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 all of
the assumptions and forecasts given in the section of this release
entitled "Financial Guidance."
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:
-- our failure to correctly predict increases in revenue due to
inaccuracies in our assumptions, our inability to execute on
business opportunities or other reasons;
-- our failure to correctly predict future gross margins and
operating expenses due to inaccuracies in our assumptions, our
inability to control expenses or other reasons;
-- our failure to correctly anticipate our capital spending in
2006, which would affect the level of depreciation expense and
the level of cash available for debt repayment;
-- our failure to anticipate other uses of our cash which could
prevent us from repaying debt as anticipated;
-- our inability to correctly predict the future levels of
interest rates;
-- changes in income tax rates in the jurisdictions in which we
operate;
-- challenges by the Internal Revenue Service to the tax step-ups
that contribute to the bulk of our deferred tax asset;
-- and unanticipated changes in the amount of our diluted common
shares outstanding.
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. 333-123514), 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 Holdings, Inc. is a holding
company whose principal asset is the stock of Global Cash Access, Inc.
("GCA"). GCA is a leading provider of cash access systems and related
marketing services to the gaming industry. For more information,
please visit the Company's Web site at www.globalcashaccess.com.
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share)
(unaudited)
- ----------------------------------------------------------------------
Three Months Ended
March 31,
-------------------
2006 2005
-------- --------
REVENUES:
Cash advance $ 67,055 $ 56,778
ATM 53,160 43,773
Check services 7,244 6,309
Central Credit and other revenues 2,376 2,806
-------- --------
Total revenues 129,835 109,666
Cost of revenues (91,351) (72,465)
Operating expenses (15,290) (12,013)
Amortization (1,502) (1,364)
Depreciation (1,065) (1,952)
-------- --------
OPERATING INCOME 20,627 21,872
-------- --------
INTEREST INCOME (EXPENSE), NET
Interest income 555 451
Interest expense (10,248) (10,932)
-------- --------
Total interest income (expense), net (9,693) (10,481)
-------- --------
INCOME BEFORE INCOME TAX PROVISION AND MINORITY
OWNERSHIP LOSS 10,934 11,391
INCOME TAX PROVISION (4,007) (4,083)
-------- --------
INCOME BEFORE MINORITY OWNERSHIP LOSS 6,927 7,308
MINORITY OWNERSHIP LOSS, NET OF TAX 36 32
-------- --------
NET INCOME $ 6,963 $ 7,340
======== ========
Earnings per share
Basic $ 0.09 $ 0.23
======== ========
Diluted $ 0.09 $ 0.10
======== ========
Weighted average number of common shares
outstanding
Basic 81,556 32,175
Diluted 81,556 71,699
GLOBAL CASH ACCESS HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of Adjusted Cash Earnings and Adjusted Net Income
to Net Income, and Adjusted EBITDA and EBITDA to Net Income
(amounts in thousands)
(unaudited)
- ----------------------------------------------------------------------
Three Months Ended
March 31,
-------------------
2006 2005
-------- --------
Adjusted EBITDA $ 25,155 $ 25,188
Minus:
Non-cash compensation expense, before tax (1,961) -
-------- --------
EBITDA $ 23,194 $ 25,188
======== ========
Minus:
Depreciation (1,065) (1,952)
Amortization (1,502) (1,364)
Interest expense (10,248) (10,932)
Income tax provision (4,007) (4,083)
Plus:
Interest income 555 451
Minority ownership loss, net of tax 36 32
-------- --------
Net Income $ 6,963 $ 7,340
======== ========
Plus:
Non-cash compensation expense, net of tax 1,243 -
-------- --------
Adjusted Net Income $ 8,206 $ 7,340
======== ========
Plus:
Deferred tax amortization related to
acquired goodwill 4,116 3,972
-------- --------
Adjusted Cash Earnings $ 12,322 $ 11,312
======== ========
CONTACT: Global Cash Access Holdings, Inc.
Harry Hagerty, 702-262-5003 (Investor Contact)
or
Katcher Vaughn & Bailey Communications
Kristi Gooden, 615-248-8202 (Media Contact)