Everi Holdings Inc (EVRI) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter Access earnings conference call. My name is Latrice. I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this call. (OPERATOR INSTRUCTIONS)

At this time, I would like to hand the presentation over to your host for today, Ms. Lisa Yi, Treasury Manager. Please proceed, ma'am.

Thank you, and welcome, everyone, to GCA's third quarter 2008 earnings conference call. Joining me on today's call are Chief Executive Officer, Scott Betts, and Chief Financial Officer, George Gresham.

On today's call, Scott will give an overview of the Company's progress, and George will provide more details on our financial performance in Q3. Scott will close with an update to our outlook for the remainder of the year. Following Scott's concluding comments, we'll be happy to take questions.

A few important items before I turn it over to Scott. First, we posted our earnings release and updated financial statements to our investor website, at www.gcainc.com, for anyone who still needs access to that information.

Also, if during this call we use any non-GAAP financial measures or references, we will put up the appropriate GAAP financial reconciliation on our website.

And last, a replay of today's call will be posted on our website around 3:00 p.m. Pacific Time, and will remain there for approximately one month.

As we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it and, as such, it does include risks and uncertainties. For factors that could cause actual results to differ materially from those described in our forward-looking statements, we refer you to our SEC filings and, specifically, to the Form 10-K that we filed on March 17, 2008 and the risk factors set forth therein.

With that, let me now hand it over to Scott.

Thank you, Lisa, and welcome, everyone. We are very pleased with GCA's strong results in the third quarter. Revenue was up 19%, to $185 million. EBITDA was up 19%, to $26.1 million. And cash earnings per share from continuing--continued operations were up $0.04, to $0.17 per share.

These results were driven by two months of cash systems revenue, as well as full quarter revenues from Certegy Gaming Services. These were partially offset by the continued downward trend in the gaming segment. This does reaffirm our strategy of continued growth in these turbulent markets through aggressive integration of the acquisition, as well as cost savings. This contributed to strong earnings growth, despite significant one-time integration costs in the quarter.

A quick word on the integration activities. As of this call, substantially all of the integration activities are completed for both GCS and CSI acquisitions. We will continue to deliver growth momentum by staying focused on three main strategies -- first, customer retention and new signings; second, cost savings effort; and third, product innovation.

First, we remain focused on customer retention and new signings. Our customer win/loss ratio year to date on a dollar value basis is a healthy 163 index. In other words, we signed $1.63 of new revenue for each dollar we've lost, so we are continuing to build share. Resigns are strong, and we have had no significant customer losses in the last two quarters.

There are certainly no guarantees in this business, but we are continually providing customers value, we are strengthening our relationships, and we feel confident in the strength of our franchise on a going basis.

Internationally, we're making modest but steady progress. We've signed 20 new international customers, and are finalizing the commencement of the UK pilot of our new casino direct services. We've installed our system in 15 casinos in the UK, and expect to start transactions very soon.

Second, we are aggressively pursuing a cost reduction program. This has been a common theme in most companies, and we have received our share of questions on this issue. First, as I address this, it's important to note that we're operating in an environment where we are growing the Company. Our major focus has been achieving systemic, sustainable cost savings across the entire enterprise during the integration of the two acquisitions. In short, achieving scale both in our base as well as from the acquisitions.

Given that we are only midway through this process, perhaps the best illustration of our progress is to look at the impact we have already had on total operating expenses by adding up the total operating costs of the three companies on December 31 of '07 as a base, and then compare that to where we are today.

The total operating expenses for the three companies was approximately $103 million during 2007, excluding non-cash expenses. On a run rate basis, exiting the quarter, we've eliminated approximately $20 million of operating cost already, so we're making significant progress. We intend to achieve more as we fine-tune the operations post-integration and benefit from the one-time integration costs rolling off, as well as full impact of employee reductions and CSI.

I'd like to highlight a few concrete examples of these interim results achieved already. Again, we're only partway through these efforts. One of our biggest costs we have is the maintenance and service cost of our ATM fleet. The best way to look at this cost is on a cost-per-unit basis. Through September, we have lowered the cost per unit per month by 16% versus our '07 base, while our fleet size has grown by 31%. So, clearly, we're scaling this business very, very nicely.

Similarly, the single biggest cost we have, which also accounts for the majority of the people in the Company, is our booth operations. When we started the year, we had 11 booth operations staffed with about 106 employees. With the inclusion of Certegy Gaming Services, as well as Cash Systems, this has grown to 49 booth locations staffed with about 423 employees, about a four-fold increase.

We've been able to significantly reduce these costs through better standards and operations. We can--you can see that the average full-time equivalent employee per booth has been reduced from 9.6 to 8.6 already, and the average operating cost per booth has declined 13% compared to prior year's average. Again, we expect to lower this further in '09 as we get more experience.

This does bring up an important point on the cost of booth operations. This service is very important to a segment of the market, and provides a unique service differentiator for GCA, so clearly it's a strategic advantage for the Company. It's also important to understand that we have several pricing mechanisms to recover the booth operating costs.

Because these costs show up on the OpEx line, they will have a systemic impact of increasing our operating expense numbers you see on a go-forward basis. This impact is significant. It's about $9 million on an annualized basis. But because these costs are recovered, they should be taken into consideration when comparing historical expense numbers on an apples-to-apples basis.

Finally, it should be noted that we have delivered on the cost savings project that we identified way back in February. We are expecting to achieve our '08 as well as our '09 targets from these efforts. They're coming from investment in our back office infrastructure, capturing scale in our vendor contracts, as well as general belt tightening.

Our third strategy is our continued investment in innovation. A question could be asked why we would invest in a down market. The answer is straightforward. We're not investing in spite of the market, but we're investing in response to the market. We are focusing on three main areas of innovation--cashless transactions, including ticket-out, wagering accounts and PowerCash, which systemically remove the cost of cash, dynamic messaging and bonusing on our devices, which allow our devices to be seamlessly integrated into the casino, and dynamic currency conversion.

What makes these products relevant is that they all share some very important traits. First, they lower both our costs as well as our customers' costs. They improve players' experience. They deliver more targeted and, hence, more efficient marketing and incentive programs. Importantly, they use existing GCA network and devices, so there is a minimal to no capital requirement for implementation by customers. They allow better support for responsible gaming initiatives, addressing some important issues that we've had previously with EDITH and TODD. And they have a positive impact on the entire casino property.

Most importantly, they are unique and proprietary to GCA, important as we face competition in re-signings, and they also share a common development and integration into the casino systems, so we can maximize our return on the investment.

In today's environment, where our customers are seeking efficiencies, opportunities to drive play, and strategies to attract and retain customers, we think there couldn't be a better time to bring these products to market. Innovation drives value. It differentiates our brand and solidifies our category leadership. It also stimulates growth, and it's the best anecdote I know for commoditization.

So let me take one example. Wagering accounts have been around and part of most slot operating systems for some time now. Their utilization has been inhibited by the lack of a simple, intuitive way for players to enroll and use them on the casino floor. We can utilize our self-service kiosks and our QCP cage systems to provide a player-friendly enrollment system.

Once the account is established, it can be easily loaded and redeemed on any of our current ATMs or first--full-service kiosks, and these accounts can then easily be used at both tables as well as slot machines.

Additionally, we've learned how important messaging and incentive is to drive adoption within the player base. Our new systems will facilitate dynamic, real-time message flow and incentive to encourage players to use the wagering accounts. What more impactful way to do this but at the moment of truth, when a player is in a casino, standing at one of our devices, and deciding how much money to get and how to play.

While these all are in various phases of development, we're targeting to be in the marketplace within the next 6 to 18 months from now, depending on the product and the jurisdiction. We will be demonstrating these at the G2E show in a few weeks, and invite discussion from customers, regulators and operators.

Lastly, I'll point out that the financial investment that we're committing to launch these products is quite modest. You can see how the pieces of EDITH, PowerCash and our relationship with strategic partners such as IGT and Bally Technologies, as well as other equipment suppliers, puts GCA in a unique proprietary position to offer these types of integrated products.

We have all seen the tremendous uncertainty and volatility in both the gaming market as well as the stock market, and this compels me to make an additional comment about GCA's business model. It's worth reiterating that we are a payments processing business and, as such, we do not have a high fixed-cost model, and we are not overly leveraged. Because we can and are able to control our costs, we are not subject to substantial swings in profitability or liquidity when we are faced with the type of segment trends that we are dealing with today. This is a significant advantage, and should be recognized by those who may see us as a gaming company.

We believe we have a strong strategy moving forward. We are encouraged by the advanced booking news recent--stated recently by several of our larger Las Vegas customers, as well as yesterday's ballot measures that passed in Colorado, Missouri and Maryland. It has always been our thesis that this market will return to growth. The important question is, what are we doing in the meantime?

We expect to sustain growth and grow profitability through the acquisitions and cost reduction efforts. We'll invest wisely in new product opportunities that have true market impact and continue to focus on signing customers.

So, with that, let me turn it over to George, and we'll go through the performance--the financial performance in more detail. And then, I'll wrap up and we'll have some Q&A. George?

Thanks, Scott. Our revenue was up in the third quarter of 2008 by 19% compared to last year's third quarter. During the quarter, we saw same-store declines of about 8% compared to the third quarter of 2007. This decline was more than offset by the revenue contributions from Certegy Gaming Services and Cash Systems. These two acquisitions, on a combined basis, contributed approximately $45 million in revenue to the quarter.

I should clarify that when I make reference to same-store figures, I'm only speaking to the performance of the cash advance and ATM product lines.

Also, like other quarters, the loss of the UK cash access business in the prior year had a negative impact on the quarter. This business represented about $1.5 million in revenue in the third quarter of 2007.

Our check warranty product grew during the quarter by about 59% compared to the prior year quarter due to the acquisitions, but also due to the addition of new accounts acquired and added to the platform largely in the last quarter of 2007.

Recall that, in the first quarter, we reclassified Arriva to discontinued operations and, as a result, reclassified prior and current year revenue to that category on the income statement. Previously, those revenues had been included in "other revenue."

Gross margin came in slightly better than we expected, at about 26.1%, given the integration of Cash Systems. Absent Cash Systems, there was no material change in margins in our base business.

As Scott reviewed, we have made significant progress in our integration efforts. During the third quarter of 2008, our operating expenses, excluding depreciation and amortization, increased by about $1.6 million from the prior year quarter. Included in the operating expenses was about $2.4 million in non-cash equity compensation expense in the current quarter, versus about $6.3 million in the prior year quarter. The increase in operating expenses is primarily due to the integration of CGS and Cash Systems, as the expenses associated with these acquisitions were not included in the prior year period.

Three categories of expenses--payroll, ATM servicing, and professional services--have driven the increase in operating expenses, so let me comment on each of these.

Payroll represented more than 40% of our total operating expenses in Q3. As Scott mentioned in his comments, as a result of the acquisitions, we now run 49 booths for our customers, an increase of 38 booths over the prior year quarter. This labor-intensive activity has increased our employee count and associated payroll.

Providing booth outsourcing to our clients enhances our product differentiation and establishes barriers to entry. Our deep experience in managing this sort of operation allows us to manage those booths acquired in the acquisitions in a much more effective manner than our competitors. And as we complete our integration of Cash Systems in particular, we expect to achieve additional efficiencies.

ATM operations represents the cost of managing the ATM portfolio, and accounts for about 15% of total operating expenses in the third quarter. ATM operating costs per month per device, our primary management metric related to these costs, has decreased 16% compared to 2007. This decrease is due to increased scale in process and cost optimization. It does include the optimizations we believe we can bring to the Cash Systems portfolio, as those devices came under our management only recently.

Additionally, as a result of the acquisitions, we have renegotiated two of our largest vendor agreements in order to enhance our per unit cost structure further. We expect the benefits of these changes will be seen in Q4 of 2008 and beyond.

Excluding site-funded devices, the average number of ATMs under management during the third quarter of 2008 was approximately 1,560. This is up from the third quarter of 2007 by about 31%.

Professional services includes external legal fees, audit services and licensing costs, amongst other costs. While not as significant as the two cost categories I just discussed, these costs have increased on a year-to-date basis by about $2.3 million and, on a quarterly basis, by approximately $400,000.

These increases are primarily due to the residual impacts of the investigation that occurred in 2007, increased licensing costs, increased audit fees, and increases due to the derivative action and securities class action suits filed against the Company. We are highly focused on this category of costs and expect to manage them down over time.

More broadly speaking, operating expenses have increased, as expected, due to the acquisitions of CGS and Cash Systems. We continue to incur costs related to both acquisitions, which will cease once the integrations are complete. The quarterly operating expenses do not reflect the impact of employee reductions at Cash Systems, optimization of booth operations, or the renegotiation of vendor contracts to reflect scale. Our integration efforts are proceeding as planned, and we have met all of our planning objectives associated with these acquisitions.

EBITDA increased 19%, to $26.1 million, compared to the third quarter of 2007 and increased 10% compared to the second quarter of 2008. The decrease in non-cash compensation expense of approximately $3.9 million is due to vesting acceleration in the prior year due to management departures.

Depreciation and amortization increased on a year-over-year basis due to the acquisition of CGS and Cash Systems. Our consideration of the appropriate fair values assignable to the Cash Systems acquisition continues, and could impact depreciation and amortization in future periods.

During the third quarter of 2008, as compared to the third quarter of 2007, our average outstanding debt increased by approximately $32 million, while the average outstanding balance on the vault cash agreement remained about flat in spite of the acquisitions. This increase in overall average interest-bearing obligations was offset by decreases in interest rates, resulting in a lower net interest expense in this quarter compared to the prior year quarter.

Our effective income tax rate was about 39%. As many of you know, GCA is generally not in a tax-paying position due to the amortization of intangibles that are tax-deductible. This is true in 2008, as it was in 2007.

Our GAAP EPS before discontinued operations of $0.11 is the same as in the prior year quarter. Cash EPS is a non-GAAP metric we use to reflect the fact that GCA generally is not in a tax paying position, even though the Company reports tax expense for GAAP purposes. We define cash EPS as net income before discontinued operations plus the tax-affected deferred tax intangible amortization divided by the share count.

The Company's pre-tax amortization deduction, for the purpose of this calculation, is $45.7 million per year, and we tax-affect, or multiply, that figure at the current quarter's effective tax rate in order to determine the add-back. Cash EPS was $0.17 in the third quarter of 2008, up $0.04, or 31%, compared to the prior year. Cash EPS has not been adjusted for depreciation, amortization or other tax attributes, such as NOLs, that may serve to shelter income in the future.

For example--and I want to emphasize and highlight this--the Company's actual available deferred tax amortization that is tax deductible on an annual basis is about $52 million per year, as disclosed in our Form 10-Q. The difference between the $45.7 million you're all familiar with and the $52 million relates to another tranche of goodwill, and this $6 million increment has not historically been included in the cash EPS calculation, as the Company's pre-tax income has not exceeded $45.7 million. In the future, cash EPS will reflect the full tax benefit from this amortization up to the level of the benefit.

Before I leave the subject of taxes, you will see in the guidance that Scott will summarize for you that our estimated provision for income taxes is increasing in the fourth quarter due to the anticipated expiration of options that will need to be recognized for tax purposes at the time of expiration.

I want to take a few moments to discuss our liquidity in some greater detail than typical due to the unprecedented market turmoil we have all been observing. Let me start by saying GCA generates ample free cash flow sufficient to run day-to-day operations and is not dependent on the credit markets to fund operational activities on any given day. Additionally, given the maturities of our various credit facilities, we have no need to go to market to either expand or adjust our facilities in the near future. We are in compliance with our various debt covenants, and expect to remain so under any plausible scenario.

So, with that said, let's start with the fact that we have generated year-to-date EBITDA of about $71.4 million. That includes $6.7 million of non-cash equity compensation expense. And if we add that back, we get adjusted EBITDA of about $78 million for the nine-month period. We have incurred $21 million of net interest expense and have invested $6.9 million in capital assets during this period, leaving about $50 million to fund working capital needs and operations before taxes. Since we pay no material income tax, this full amount is available for such purposes.

We do have working capital requirements that impact our cash balances that I will expand on in a few moments. But, before I do, let's discuss our capital structure in the context of this cash flow.

At September 30, 2008, we had $296 million of debt on our balance sheet. Included in this debt is $45 million outstanding on our $100 million revolver, of which $55 million was available at the end of the quarter. This revolver terminates in December of 2010. It is a syndicated facility led by Bank of America. It has 12 participants, with participations ranging from 2.5% to 12.5%. This facility provides for overdraft protection should any particular participant become unable to meet its obligations to us.

We also have a term loan outstanding at September 30, 2008, in the amount of $98.3 million. This loan amortizes $1 million in principal per year, and is due November 2011. Lastly, we have a non-amortizing senior-subordinated note outstanding of $152.7 million, which are due March 2012. Both the revolver and the term loans are tied to 30-day LIBOR, while the senior-subordinated notes carry an 8.75% fixed rate.

Additionally, we maintain a $410 million facility with Bank of America, whereby they provide cash funding for ATMs that we manage. As I mentioned, approximately $300 million was outstanding at September 30 under this facility. This is an off-balance sheet facility, as the underlying cash that is being used to fund ATMs is not the property of GCA. Repayment of this facility comes specifically from the cash deployed in the equipment, not from the general cash flows of GCA. The pricing of this facility is also tied to LIBOR.

Given the nature and maturities of our debt facilities, we believe our liquidity risk in the current market is very manageable under any number of reasonably possible market changes.

Let me turn back for a moment to working capital. For the most part, our working capital needs are stable and predictable. The most significant balances, as they relate to working capital, are settlement receivables and settlement liabilities. If you look at the balance sheets of most payment companies, you will see that these assets and liabilities often are comparable amounts. This is true of GCA, as well, over a long period of time.

However, as the Company has transitioned a large minority of ATMs to a site-funded model over the last two years, the settlement liability has grown larger than the settlement asset. This is due to the fact that site-funded devices result in GCA's receipt of cash that is then remitted at a later date to the property that is funding the site. In other words, we have a positive flow.

At the end of June, the net settlement liability was about $29 million. Since the last day of June was a Monday, GCA was holding site-funded cash representing principally three days of funding--Friday, Saturday and Sunday. At September 30, the net settlement liability had decreased to $7 million, a $22 million decline. The site-funded liability represented only a single day of funding at September 30.

This decline in the site-funded liability resulted in a negative impact on operating cash flow in the quarter. This single item can result in some volatility to our GAAP operating cash flows from time to time, depending on the day of the week and accounting period ends relative to the timing of our remittance to our site-funded customers.

We ended the quarter with $59 million in cash on hand on a GAAP basis. As I have in past quarters, I will point out that a substantial majority of this cash is in booth operations, dedicated to settlement operations, or in non-US jurisdictions.

In summary, we believe we have a very attractive capital position given these turbulent times. Let me now turn it back to Scott for an overview of our 2008 guidance and wrap-up.

Thanks, George. I know we have had a lot of moving parts over the past year. But, as I said earlier, given that, we couldn't be more pleased with the position we find ourselves in. While we all eagerly await the segment's recovery, we have an incredibly strong franchise and strategies that will deliver real growth opportunities until that happens.

We now expect that in 2008 revenue will range from $670 million to $673 million. We are holding EBITDA targets and tightening up the bottom range to $94 million, so guidance is now $94 million to $96 million. GAAP EPS, before discontinued operations, will fall towards the low end of the range of our previously issued guidance of $0.39 per share to $0.42.

This guidance is based on the following assumptions--that our capital expenditures will approximate those amounts recognized in 2007; the effective tax rate for the full year of approximately 42%; and fully diluted shares outstanding of 77 million.

So, with that, that concludes our prepared remarks, and I'd like to now open it up to questions. Operator?

(OPERATOR INSTRUCTIONS) And our first question comes from the line of Moshe Katari with Cowen & Company. Please proceed.

Okay, thanks. Can you comment on free cash flow expectations for the year? That's number one. And number two, if you're looking at your operating expenses, where you're doing an exceptional job in bringing it down, can you talk about which part of it, in your view, is discretionary by basis points? Thanks.

The first part of your question, free cash flow by year, if you go with the traditional definition of operating cash flows less CapEx, as I explained in the script, there's a lot of variants that can happen in operating cash flow just depending on the day of the week that the particular close is on. If you think of free cash flow in the contex,, adjusted EBITDA less interest expense and less CapEx--you know, I took you through the nine months, and you can infer from our guidance what we would expect that number to be for the fourth quarter I think pretty readily.

The latter part of your question, about--yeah.

Let me just talk a little bit about, you know, what--discretionary certainly is subject to anybody's definition of what that is. I guess the couple of comments I'll make on our cost structure is, you know, we happen to be hitting at this time right now sort of midway or partway through the integration of the two acquisitions. We're very encouraged about the progress we're making on our--on the per--on a per unit operating standpoint in an environment where we're growing the number of customers 30-some percent. We're growing the amount of our devices out there 30-some percent.

What I will tell you is when we sit down and review the year's performance as well as give guidance and talk about next year, we'll have a much firmer grip on exactly where we are on the cost pieces of it.

So, sort of given that environment that we're growing the Company, I would tell you that the discretionary, depending on whether you're draconian or you're just asking me what is--what are reasonable business decisions to make, would be a relatively small portion of the total expenses.

Okay. And then, you said you're in the midway of that integration process. Can you kind of remind us, in number of quarters, when do you expect the integration process to kind of get completed?

We expect that to be totally completed in the fourth quarter. We have already--like I said, as of this date, okay, today, we have ostensibly converted all of our customers onto our platforms. We have firmly got our arms around a lot of the operating costs, including the example I gave you around booth operations.

However, for the Cash Systems, we've only owned that portfolio for three months now as of today, so we're still getting the experience and we're still optimizing a lot of those pieces. A fair chunk of the people costs that were synergies on Cash Systems did not happen until the first part of October, so they're not in those numbers. So, again, we're-- if you think about it as predominantly over those two quarters, we should be almost entirely completed by the time we sit down and look at the end of the year.

And just a final question on pricing.

Yes.

Anything in terms of churn on pricing on some of the new signings that you had? Thanks.

You know, nothing material. I mean, you know, we continue to price to market. Some of them come in a--with some compression on them. Some of them, we've been actually able to get some pricing. I guess the biggest thing for me, because I look at it on a portfolio basis, is the comment George made that ex the dilution of the portfolios, which we--you know, which we talked about in great detail, that the underlying gross margins have not changed in our business--on our base business.

Thanks.

Yes.

And our next question comes from the line of Tien-Tsin Huang with J.P. Morgan. Please proceed.

Thank you. Can you hear me?

Yes, I can.

Yes.

Thanks. If you look on the expenses, in follow up to Moshe's question on pricing, how about opportunities to raise pricing on surcharges? Have you seen any opportunities there?

On--you mean, on the fees that--.

That GCA charges.

That customers are charged?

Correct. I'm just curious to know if there are any opportunities for you--for GCA to optimize the pricing that you have.

Yes, we continue to work on that with the customers on a property basis by two ways. One is as, you know, what we see across the market, and also sharing with them competitively what's going on in their markets. So that is always a topic that we work with our customers, you know, and that's--and in some cases, that's what's helping us maintain our gross margins.

Okay, good. Then, on the--just a question about cash advance. Have you seen any increase in turndown rates with banks tightening their credit standards in the aggregate? I'm curious if that's had any impact on the cash advance side beyond the macro traffic issue.

You know, we are seeing a disproportionate decline in the credit card cash advance, and we're seeing a--we think we're seeing some increase in our check cashing that offsets that, as well as a rise in ATM volume. So whether that's being self-regulated by the customers or whether that's happening at a bank level, a little hard to say right yet.

But, in terms of that--the implications of that trend persisting on the margins and the outlook, what are your just general thoughts about that, Scott?

It does not--as we've looked at it, it does not have a material impact on our margins when you look at the costs of credit card transactions and the--you look at the margins on ATM transactions.

Okay. That's terrific. That's great to hear. And then, on the--just two more quick ones. I guess we didn't get some of the metrics around transaction growth, (inaudible) volume, et cetera.

We're going to be--actually, the Q may be filed right now. If it's not filed right now, it'll be filed by the end of the call, and--

Okay.

-those metrics will be in there. Ex the check-cashing metrics -- we're not publishing those metrics, but credit card--.

All right.

-- cash advance and ATM will be in the Q.

Great. We'll keep our eye out for that. Last thing, just glad to see, obviously, you're preserving the earnings outlook despite the lower revenues.

Yes.

You know, I think that's great. Just curious on, I guess, confidence level in achieving the EPS. You know, and I guess--I know--I heard a lot about the expenses, but to the extent that revenues fall a little bit further, are there some other levers to pull on the [deal] synergy side or just in the aggregate?

You know, we are--.

Trying to look at --.

Yeah. What I'll tell you is we've, obviously, been very aggressive at the integration of both of these acquisitions. I mean, you know, most of the time people talk about nine or twelve-month integration periods. So, you know, we'll--we're continuing to, obviously, push on those.

We think there's potentially some upside, so if we have to, we'll obviously look at all of our costs and see anyplace that we can gain some leverage if the top line falls below that. But we're quite confident in the range that we've given right now, looking at any kind of projection that we see. And we obviously already have October in the bag, so--

Very good. Thank you so much.

You bet.

And our next question comes from the line of Chris Mammone from Deutsche Bank. Please proceed, sir.

Hi, thanks. This is [Asu Baru] filling in for Chris. I just had a couple of questions. Can you comment on what you are seeing in terms of geographic trends in transaction volumes? Do you think the downturn has hit all the geographies equally across the board, or are there pockets that are worse hit and others that are acting more resilient?

You know, I can't get into a lot of granular detail on that, but what I will say is there is significant variation between same-store trends by geography. There are some geographies--Pennsylvania, Florida, Oklahoma--who are actually increasing right now, and that's due to customer expansion and new opportunities that customers have.

There are-- beyond that it's sort of plus and minuses. There are geographies like Colorado, where smoking bans and things like that have hurt them more significantly than other local markets. The Las Vegas jurisdiction is down significantly as travel and destination kind of things impact that. But, many of our customers in Southern California are doing better from a--from sort of a locals market, so it varies quite significantly from geography to geography.

Great, thanks. And also, could you comment what you are seeing in terms of international gaming trends? Is the slowdown impacting some of the international markets where GCA has a presence?

You know, we're--we see some slight decline in the Macau business as visas have been tightened up a little bit, but it's not significant. We are maintaining our business there. And we've got--we're involved in several current RFP processes there, so we hope to be signing some new business there.

We've recently signed new customers in Europe that should keep that business going, and we're very pleased to actually be starting our pilot up back in the UK in the fourth quarter. So, those will all be positive growth opportunities for us.

Great. Thank you.

Thank you.

And our next question comes from the line of [Rishi Parret] with KBC Financial. Please proceed, sir.

Hi. You guys were teasing us a little bit mentioning EDITH and TODD. Could you talk a little bit about what's happening with that? Are the regulators warming up to the product, or--?

I think we--what a--let me make a couple of points on EDITH and TODD, okay? We certainly learned a lot in that--in the process of developing those two products. As they were originally conceived, we are not going to be going to market with either EDITH or TODD. When we talk about ticket-out, we think we're taking a more intuitive approach to that and are going to be--I don't know how familiar you were with EDITH or TODD, but they were essentially standalone devices that were in close proximity to the slot machines or the slot bank.

We think the better approach to take nowadays is to do ticket-out on our--either on our ATMs or our full-service kiosks. One is it's very intuitive, because those machines--a large percentage of those machines are doing ticket redemption, so ticket-out is very intuitive from a player's standpoint.

We think, importantly, it also gives us some advantage in the fact that it provides some physical separation, and also provides an important choice for the consumer as to whether they want to get a ticket or to get cash. And we think in our initial conversations--and we believe that that's going to help out on some of the issues that we had from a regulatory and the responsible gaming that came up with the old EDITH and TODD products.

What would you say the advantages are, then, because--I mean, so it's not quite as close, but you're still using debit technology, so you've got the higher limits, the daily limits, and I guess you feed it directly into the machine, but what are the other benefits over--?

Well, I mean, it maintains all the benefits that we had before, which is taking cash transaction off the floor, okay, which lowers both our cash handling costs as well as our customers', okay? It also offers the opportunity to do it without any incremental cost of equipment or wiring or networking that we would have had to do as a standalone. We're going to drive these through our current devices and our current infrastructure, so that's going to both lower the capital requirement for our customers and our operating costs.

And we think that that combined with the ability now to also dynamically message and incent consumers on our screens, okay, it will be a huge advantage to driving adoption from a player standpoint, okay? I mean, we did not have that capability with either the EDITH or the TODD products.

You said some trials going on at some facilities. Are they still happening, or--?

On TODD or EDITH?

Yes.

No, they're not.

I see. Okay. Well, thank you very much.

Yeah.

And there are no further questions in queue at this time. I would like to send the call back over to Management for closing remarks.

All right. Well, we thank you all for listening to the call. We're very encouraged about the future of the Company, and we appreciate your support. We'll talk to you in about a quarter. Thanks.

Thank you for your participation in today's conference. This concludes the presentation. Have a great day.