Everi Holdings Inc (EVRI) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2009 Global Cash Access earnings conference call. My name is Becky and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference

(Operator Instructions).

I would now like to turn the presentation over to your host for today's call, Ms. Lisa Yi, Treasury Manager. Please proceed.

Thank you, Becky, and welcome, everyone, to GCA's second quarter 2009 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 the second quarter. Following these comments we will be happy to take questions.

A few important items before I turn it over to Scott. First, we've posted our news release and updated financial statements to our investor website at www.GCAInc.com for anyone who needs access to that information. Also, during this call if we use any non-GAAP financial measures or references we will put up the appropriate GAAP financial reconciliation on our website.

Finally, 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 two weeks. 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 describe in our forward-looking statements, we refer you to our SEC filings and specifically to the form 10-K that we filed on March 10th, 2009 and the risk factors set forth therein.

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

Thank you, Lisa, and welcome, everyone, and thank you for joining us on today's call. Given all that has happened in the market and the continued segment trends, we're quite satisfied with this quarter's results. In fact, the second quarter has been very eventful for us.

It's not surprising our second quarter results trended with the segment as well as the majority of our customers. Revenue was $173 million, a bit below expectation, but up 3.7% versus year-ago. While we saw some stabilization in revenue trends during the first five months of the year, revenues for June were disappointing and accounted for the entire shortfall of our revenue versus our expectations.

We are watching our monthly numbers closely and still see some softness in July. Thus, based on these trends, we have revised our revenue guidance to be a little more conservative for the second half of 2009.

Cash EPS was $0.18 per share and net income was up 5.6% due to continued positive impact of the cost-savings efforts we implemented earlier in the year. We are still projecting to stay in range for EPS guidance of between $0.70 and $0.74 per share for 2009, subject to the segment trends in the second half of the year.

As always, we report exactly what we see and use a prudent set of assumptions to look forward. This represents our best view as of today as we are still seeing a lot of month-to-month variability.

While we can't control the segment trends in the geographies that we operate, we still remain extremely focused on our strategy and our plans for the future. The first is to get the fundamentals of the Company right. Our cost savings efforts have exceeded our expectations and have helped offset the incremental non-recurring costs we are experiencing due to our processor conversion and the increased legal expenses, which are due primarily to the separation efforts from our cofounders.

As you all know, the company has been taking many significant steps over the past year to separate ourselves from our founders and the various entities they own that have been involved in our business. This is necessary to allow the Company to function more effectively, as well as to address the various regulatory issues centering on these individuals and entities.

I'm pleased to say we are in the final phases of this effort. We were able to redeem approximately 5.8 million shares of the Company stock from one of the founders, and we believe the other founder has since sold all of his shares in the open market. Thus at this time, neither founder is involved in the management or affairs of the Company in any way, and we believe that neither founder is currently a shareholder.

We believe this will greatly assist us in clearing the way to resolve the regulatory issues and concerns in Arizona. We are currently involved in what we believe to be very productive negotiations with the Arizona Department of Gaming with respect to these issues raised in their recently issued notice, and hope to have this matter resolved over the next several months.

The last portion of our strategy in separating from our founders is the completion of the conversion from USA Payments to our new, non-affiliate payment processor. We are making good progress on this enormous project. While we have experienced some expected transition issues, we believe that these have been resolved as they arrive and that we are well on our way to successfully complete this project. We're about halfway through the transition of our customer base to our new processor and currently believe we will have this transition completed by the end of September.

We expect that all these steps will have a very positive impact on the company moving forward. Firstly, we believe that this will assist us in clearing the way to resolve the Company's regulatory issues. This will not only relieve the Company of dealing with these issues, but also allow us to reduce the significant legal and regulatory costs the Company has endured, which have been accruing over the last 18 months. We expect that the majority of these nonstandard costs will start to roll off in the fourth quarter of 2009. As we convert to a new payments processor, we believe we will also benefit from lower processing costs as well as the elimination of incremental expenses incurred during the transition.

For perspective, these legal and incremental processing costs and conversions have cost us about $1.5 million above what we consider our normal run rates in the second quarter. We look forward to putting this expensive and distracting episode behind us and focusing on the future for GCA.

The second major component of our strategy centers on our new product program, the future of GCA. While the previous-mentioned activities have delayed these initiatives a bit, upon the completion of the processor conversion, we will be turning our full attention to these efforts. We have continued to develop the underlying platform for these new products and believe that we are making good progress both technically as well as organizationally to accomplish these goals.

To that end we are very pleased today to announce the signing of an agreement to purchase the stock of Western Money Systems, a leader in the development of redemption kiosks and related devices. We believe that this acquisition will result in a significant advantage for our customers by our increased ability to deliver products to the market. Subject to customary and other closing conditions, we expect to close this acquisition in early 2010, as time will be needed to obtain required gaming licenses and waivers.

I will not be reporting this acquisition separately. Western Money Systems' current revenue for fiscal year '08/'09, just completed in June, is expected to be between approximately $12 million and $14 million. We fully expect with just modest synergies that this business will be accretive to GCA's margins as well as EPS.

We believe the inclusion of Western Money Systems into GCA's family is a terrific fit. They are a growing company, have significant share of the market, and share many of the same customers as GCA. Their technical capabilities will fit well with our development direction and provide a terrific platform for innovation.

We believe that this acquisition will also provide GCA with a competitive advantage by giving us the ability to provide an integrated service from a single supplier and avoid many of the service issues customers experience today with their redemption devices. We intend these devices to be fully integrated into the GCA network, allowing our customers to have constant monitoring of their performance and our being able to provide improved service levels and device up times. We firmly believe that this will further enhance our competitive position against the competition.

Our development efforts through our strategic partners, like IGT and Valley Technologies and now Western Money Systems, focuses on products and services that integrate the payment system into our customers' floor management systems. This is and will be a unique approach in the industry that we believe only GCA with its scope and network can provide. Products and development include patrons having the option to receive a slot ticket or cash from our devices; a casino being able to customize the messages, incentives and bonuses offered to casino patrons on our devices based on who the patron is and the unique use of both GCA's and the particular casino's player data; and lastly, in phase two of our development we'll be able to provide wagering and e-wallet solutions based on our casino customers' loyalty card programs. We believe that these products all have the following characteristics -- to potentially improve cost and more importantly improve marketing efficiencies by communicating with patrons on the gaming floor while they are making the critical decision of how much money they're going to get.

We believe this platform has the potential to significantly improve GCA's value to our customers in a world that is becoming increasingly wired, increasingly competitive and increasingly driven by new innovation in gaming. Whether it's new e-tables, electronic pits, handheld devices or new games that attract the digital natives, GCA's vision for how cash access is provided in the future addresses these unique new challenges.

Much effort has been put into the development of new games and systems, but we believe the missing link is how to get cash access services to be integrated into these new schemes. We think we have those solutions, as well as the ability to provide solutions property-wide, not just to the casino floor.

So to sum up our product strategy we believe GCA's cash access services should no longer be looked at as an ancillary service or a commodity that a purchasing department deals with, but instead as a strategic decision that can be customized to our customers' operational, marketing and player experience needs. In fact, this type of payment network will become mission critical for casinos in the next decade. We believe only a provider of GCA's scale can drive innovation, provide global solutions and keep the cost down. Our approach to networks and to thin client technologies will allow customers to customize without having to develop their own systems.

In short, a customer can brand the players' experience at our devices with the same passion that they do all aspects of their property. We will be a new tool at their disposal to accomplish this. Because we can build off our huge network to accomplish this, very little capital investment will be required from our customers, a very important factor in these times. In short, we want customers to seek value not in unbundling services and driving down price but in partnering with an integrated cash access provider like GCA who can be responsive to the challenges our customers face.

So let me summarize our outlook and plans for the next few quarters. We will certainly continue to be subject to the segment trends, but believe the cost savings effort that we have instituted as well as the completion of our processor conversion and the shedding of those nonrecurring costs will put us in a strong position to continue to generate strong earnings and free cash flow and to position us very well once the gaming industry does rebound. Second, we will focus on leveraging our investments in technology to both increase customer service as well as bring to market new products that we believe adds value to both GCA and our customers. This should improve margins for both of us. We expect this new technology to start rolling out in early 2010. And lastly, we'll stay focused on growing the business through both portfolio management as well as signing new accounts and we will continue to stay disciplined on pricing.

We think this is a winning strategy for the business in these times. We have been very consistent in our strategy and we believe it's paying off. So I thank you for your support for GCA, your interest in our progress, and the recognition that we have made significant progress in moving the Company forward in these tough times.

So with that now I'll turn it over to George for a more detailed discussion of our financial performance for the quarter.

Thank you, Scott. Our revenue increased in the second quarter of 2009 by 3.7% compared to last year's second quarter. This increase was driven by the acquisition of Cash Systems, which did not close until the third quarter of 2008.

You might recall that the Certegy Gaming Services acquisition closed at the beginning of the second quarter of 2008, so CGS results are now included in our same-store figures. Cash Systems contributed approximately $23 million in revenue to the quarter. These increases were offset by same-store declines of about 11% compared to the second quarter of 2008.

The same-store decline in the second quarter, particularly the decline in June, was greater than Q1 of 2009 and greater than we had anticipated. During the second quarter we continued to see a migration from cash advance transactions to ATM and other transactions, such as check. During the second quarter of 2008, cash advance revenue represented approximately 54% of combined cash advance and ATM revenue. During the second quarter of 2009 this decreased to 47%. It was about 48% in the first quarter of 2009.

Similar to prior quarters, virtually all of the same-store decline in the quarter was driven by credit card transactions, while ATM was slightly positive on a same-store basis. As a result, the decrease in cash advance revenue on a year-over-year basis was approximately 9% in the second quarter while ATM revenue increased about 19%. We continue to see a trend towards surcharge increases at the ATM as well.

Our check warranty product declined during the quarter by about 3% compared to the prior year quarter, with the impact of same-store declines being about offset by check volumes contributed by Cash Systems.

Gross margin percentage declined compared to the second quarter of 2008 by about 170 basis points. Most of this decline is due to the addition of the Cash Systems portfolio, as these acquired contracts had lower gross margins than the GCA contract portfolio. The shift from credit card cash advance transactions to ATM transactions also tends to have a negative impact on gross margins. Overall, gross margins did improve on a sequential basis compared to Q1 of 2009, primarily due to the improved margins in the check business.

Operating expenses, exclusive of depreciation and amortization, were down from the prior year by approximately $1.1 million. Legal expenses continue to be extraordinarily high as the company addressed the Arizona regulatory matter, the repurchase/redemption issues with the founders, the acquisition of WMS, and other legal matters.

These high legal expenses were partially offset by the successful resolution of a business tax dispute with the state of Nevada. We continued to see booth operating costs, ATM management costs and our headcount decrease.

In the second quarter of 2009, non-cash equity compensation expense was $2.2 million compared to $2.4 million in the second quarter of 2008 and was up from $1.8 million reported in the first quarter of 2009. We ended the quarter with 504 full-time equivalent employees, of which 277 were dedicated to booth operations. This compares with 576 total full-time equivalent employees, including 345 in booth operations at the end of the quarter ending March 31st, 2009.

Excluding site-funded devices, the average number of ATMs under management during the second quarter of 2009 was approximately 1,572. This is down from the first quarter of 2009 due to the continued migration of properties to site-funded redemption devices and a focused effort on our part to remove low-volume devices from properties.

More broadly speaking, while we are very pleased with the overall trajectory in our expense structure, we continue to incur significant legal and conversion expenses that are likely to hit us most heavily in the third quarter of 2009. We expect by the fourth quarter to have many of these event-driven costs behind us.

EBITDA was about the same as the second quarter of 2008. Depreciation and amortization increased on a year-over-year basis due to the acquisition of Cash Systems. Interest expense decreased by 38% for the second quarter of 2009 as compared to the same period in 2008, due primarily to lower interest rates.

Our effective income tax rate for the second quarter was about 38%. As many of you know, GCA is generally not in a taxpaying position due to the amortization of intangibles that are tax-deductible.

While our share count came in somewhat higher than expected due to the share price driven dilution of stock options our GAAP EPS before discontinued operations was $0.12 versus $0.11 in the second quarter of last year. Cash EPS is a non-GAAP metric we use to reflect the fact that GCA is generally not in a taxpaying position, even though the Company reports tax expense for GAAP purposes.

We define cash EPS as net income before discontinued operations plus tax-effective deferred tax intangible amortization divided by the share count. Deferred tax asset amortization in the quarter for the purpose of this calculation was approximately $5 million on an after-tax basis. Cash EPS came in at $0.18 per share for the quarter, compared to $0.17 in the prior year quarter.

We remain in compliance with all of our debt covenants and we expect to remain in compliance. Our leverage ratio is approximately 2.36 times while our excess cash flow available for restricted payments was about $33 million at the end of the quarter.

As many of you know, on June 24th we announced that we repurchased approximately 5.8 million shares of the Company stock from one of the Company's co-founders. We also announced that we delivered a redemption notice to another of the Company's co-founders to redeem all his shares of the Company's stock held by that individual at the time of redemption. As Scott said, it is our understanding that all of the shares of stock held by this individual have been sold on the open market.

We entered the quarter with approximately $44 million in cash on hand. Cash balance has decreased from Q1 due to the share repurchase. Much of this cash is in booth operations, dedicated to settlement operations, or non-US jurisdictions but not available for immediate use.

For the balance of 2009, we are revising our outlook given the uncertainties in the market and some of the recent volatility. While April and May were fairly strong and consistent with our expectations, we saw weakness develop in June and that weakness largely continued through July.

As a result, we are updating our 2009 guidance and now anticipate that revenue will come in at or slightly below our previously issued revenue guidance of approximately $700 million to $730 million, and that cash EPS will fall between $0.70 and $0.74 per share. Additionally, we expect EBITDA to be between $90 million and $94 million and EPS from continuing operations on a GAAP basis to be between $0.43 and $0.47 per share.

Assumptions included in these estimates include operating expense, investments, and product and processing platforms of between $2 million to $4 million, an effective tax rate for the full year of approximately 38%. Cash outlay for capital expenditures are expected to approximate those disbursed in 2008, and diluted shares outstanding are estimated to be approximately 76 million shares for the full year.

That concludes our prepared remarks. I'd like now to open it up for questions.

(Operator Instructions). And your first question comes from the line of David Bain of Sterne, Agee. Please proceed.

Great, thanks. Can you guys provide an update as to the timing for Ticket-Out to be out at GLI?

At this point in time we're looking for those products to start going in various jurisdictions the early part of 2010.

Okay, and that kind of coincides with the closing of WMS. Does that give kind of an instant larger addressable market for Ticket-Out with the casino exchange machines, or can you give us an idea of the volume impact there?

Well, I don't know that we can give you an idea of the volume impact, the technology and the player uptake and all those kind of things are still a little bit yet to be defined. But you hit it right on the head in terms of strategically why we're so excited about the Western Money acquisition as it really does give us a platform that we can immediately move out these new products and services without either relying on the development or the timing or whatever of other third-party providers. So it really gives us the opportunity to roll this out. It certainly increases the market opportunities for Western Money and also we think makes it a much smoother and easier transition to put the new products into properties.

Right, and outside of Ticket-Out, does it also help with the next generation, maybe interim to the power cash product that's contemplated, like a card-based solution? Is that something else -- is there intellectual property associated?

Well, there is intellectual property associated with that, and again, without getting really deep on the technical side of it if you really think about what we've talked about before, which is doing sort of a thin client kind of an arrangement where your functionality, you're driving the terminals for whatever functionality you want, not only is that extremely adaptive for the customers, it also sort of makes a device, a device, a device.

You don't have to worry about whether it's an ATM or a redemption device or a player's kiosk. We'll be able to accomplish that more in a software mode than in a hardware mode. And again, we think that has tremendous opportunities for both player branding in terms of the experience of the customer as well as the flexibility they need to manage their floor in today's environment.

Okay, great. Just last one -- in terms of gaming expansion, if we just pick Ohio as an example, there's several tracks that'll be putting up facilities to house gaming devices and some of them aren't controlled by your normal customers in the casino world. How do you reach out to those individuals? Does marketing actually block out -- I doubt these guys are putting out RFPs. How does that process work?

Well, as soon as those announcements are made and we know when new jurisdictions open up, it is part of the responsibility of our sales folks to go make those contacts and make those calls. And again, in those cases it's not that many; it could be four or five properties. So we will have our people all over those opportunities as we move forward.

And those usually get done right before the opening of the casino, like the choosing of the provider?

There's a reasonable lead time to it. It's certainly not -- if you look at a casino taking two years to develop, it's certainly nothing that we -- but certainly when you start getting down to -- six to nine months is usually when you're starting to have those conversations and decisions are picked, because equipment needs to be installed along with the services and those types of things. So there's a little bit of lead time before the property opens.

All right, great. Thanks, guys.

You bet, thank you.

And your next question comes from the line of Tim Willi of Wells Fargo. Please proceed.

Hi, good afternoon, guys.

Hi, Tim.

Question for you just on the revenue guidance. Is there any way to sort of look at the new range or the new outlook and sort of allocate a change in gaining foot traffic versus the mix shift between cash advance and ATM, just to what degree that has influenced your thoughts around the revenue guidance.

Yes, well, it has to do with both, of course, but what you see in the guidance reflects our current understanding of the mix, right? So that mix between credit and ATM has changed over the course of the year and the movement away from credit has continued.

And so our updated guidance would reflect that general state of affairs, and our presumption is that there will be some continuance of that dynamic. But it also necessarily takes account of volume trends and face dispense trends, which are also negative, although they're not as negative as pure credit issues.

Okay, that's great.

Before I give it back to you, if you look at the revenue guidance, basically what we had assumed in our original guidance was a moderation of same-store declines throughout the year.

So if you recall when we first issued the guidance we basically said that all things being equal, we expect Q4 of '09 to look something like Q4 of '08, because we're assuming that same-store declines basically stop by the end of the year. And when we have our current data in front of us, most notably June, it's clear that that hasn't moderated, which led us to the conclusion that it would be appropriate to adjust our guidance. That's the fundamental driver, is our observation of June and July.

(Inaudible -- microphone inaccessible).

Right. Yes, the primary driver is credit as opposed to other types.

Yes, and that makes a lot of sense, I think everybody can appreciate the approach you're taking given the data you've seen.

A question around the balance sheet and just thinking about cash flow and buyback, but if we could just go out into calendar '10 a little bit to think about the priorities for cash flow as it pertains to buyback. You've obviously done a small acquisition here and then your debt structure and potentially reducing the interest rate around part of your debt with those bonds that I think you can bring back in in '10.

Just any thoughts about how you will try to position the Company around those events over the next handful of quarters?

Yes. So let's just be clear on the fact base. We did do the repurchase at the end of Q2. That was done with a special authorization. We still have a $25 million share repurchase authorization that's outstanding as of today. We have not acted under that authorization because as you're well aware we have other redemption contingency. Although we think that that contingency's remote, we believe that that individual no longer holds shares, we have not deployed capital aggressively given that issue that we've been managing through.

That being said, as we move forward and we've announced this acquisition, to be clear we don't expect this to close until 2010, due to the licensing requirements that are necessary to be completed. But we would progress through the year and into 2010 primarily with a view towards deploying free cash flow towards the logical and obvious choices that we have available to us in the most efficient way we can, and that would be share repurchase probably in the near term, and as we get into 2010 as the prepayment penalties lift off of the senior sub-debt, we may consider some repurchases of that as well.

Okay, and then just a last question and I'll hop off. Just going back to product development, I want to make sure I -- can you talk to any degree about the customer interest around the strategy, Scott, that you outlined? Are you very confident based upon customer conversations that the strategy and what you're trying to do is definitely something where orders will follow? That that has given you that conviction to move along with the WMS acquisition, et cetera, that you are being pulled this direction, if you will, by your customers?

Yes, great question. Yes, we have. I've done really sort of top-to-top kind of discussions about the strategy with many, many of our customers as well as others in their operations, particularly in marketing and in the operation side, and in fact have been doing that for the last almost year. So their input has been part of the development of our strategy.

And again, I think there's been -- what we're seeing right now is a terrific time to do these and bring some new innovation to the category. You always feel like you're a little bit behind and wish you had done it six months ago, but we think that at the time right now, in terms of where the industry is, the need for ideas that not only lower cost, but also make operations more effective, that allow our customers to differentiate more, which is really where being able to use our devices to, in real time, basically market individual messages to people who are standing there.

And the fact that we're seeing so much movement in a lot of the new technologies in the gaming segment, when you think about these electronic tables or tables that don't have dealers or you think about handheld gaming devices, there really has to be a new way to deal with cash access in those devices other than dollar bills. There's no slot, there's no way to do that.

So we just think there's this confluence of those trends, and that's what management of the casinos is telling us back. Everybody's got their own little twist about how they want to do it or how they see it rolling out, which is again exactly what we want, which is not a one-size-fits-all, but this opportunity to use our services in a way that each casino can make it unique. And I think that's what excites them most.

Okay, great, thanks a lot.

You bet.

And your next question comes from the line of Tien-tsin Huang of JPMorgan. Please proceed.

Hi, thanks, just a follow-up to Tim's last question. Just Western Money -- I appreciate the message on the vertical migration, but does the combo in any way create conflict with some of the other tech vendors or providers you work with?

No. The way I think about it is we have an integrated solution and we have a platform that will deliver new products in the future for customers, but in no way causes us not to be able to continue to service the devices that are out there. Or if somebody has a device that they previously purchased, there's no reason that our services -- would in any way hinder our ability to put those services on existing kiosks.

So we think there's a lot of advantages moving forward that will both play itself out in new products and also give us the opportunity to build the Western Money business together with that organization.

Right. Can you give us a rough sense of what the mix is between hardware and non-hardware, or I guess service revenues at Western Money?

You can think of the strong majority of the revenue to be hardware. They actually have a relatively small service footprint right now, which is one of the opportunities we think that exists for a firm like GCA, since we have account management coverage around the country. So more than 80% of their revenue is hardware-related.

Okay, got it. And then just a few more quick follow-ups. The gross margins did pick up nicely sequentially, despite the mix shift, and George, I think you said the difference was all check? What happened, exactly, there?

Well, check margins, the check warranty business subsequent to the acquisition of CSI, you can think of it as an underwriting kind of data analytics learning curve that occurs. And so you expect normally somewhat depressed margins for some period of time as the database builds and transactional volumes accumulate.

And then you expect the margins to improve as your learning curve improves and that's basically what occurred, whereas in Q1 the margins were probably just a little bit off of where we normally expect them and then they came back to about where we normally except them in Q2.

Okay, so it wasn't the comps around losses or fraud or anything else, it was just --

Yes -- yes, no. It's just a normal learning curve delta over time as we integrated the acquisition.

Two more -- just card legislation's impact on the cash advance business looking ahead, have you sort of an effect on -- what that could mean for that business here in 2010? I guess the card act and some of the changes around credit, et cetera -- is that going to influence some of your customers, for one, and more importantly just the availability of credit and fees around cash advance? How could that play out in 2010?

Well, I think we're going to all have to wait and see how this finally plays out. At least in the initial proposals and stuff that I've seen, there's a lot of changes that are really focused on, if you will, cardholders' bill of rights kind of things. And none of those in and of themselves look like they would impact our business positively or negatively. I think the biggest issue for us will be just what the rebound is in consumer credit, period, okay?

Now to the extent that any of these things causes -- and I think there are maybe some more doomsday prophets out there who are probably saying gee, all these issues are going to make it so hard for the banks to make money on credit cards and they're going to restrict credit and all that other kind of stuff, well, you and I know how much money is made in the credit card industry, so I doubt that's going to happen.

And so I don't -- right now we'll watch it closely, but there's nothing that I've seen that immediately jumps out at me.

Okay, great, thanks for that. Last one, I promise -- just the win/loss rate in the quarter, did you disclose that?

We did not, but we are -- we have a positive year-over-year net win against losses in the quarter. We haven't disclosed the ratio.

Okay, great. Thanks.

I'll say that, though, with the understanding that everybody should have that we continue to work on clients with particularly low profitability, and in that regard we would be willing to lose some clients if we can't get the profitability to where we need to have it. So we should be thinking about that.

And we've been successful at that effort too, so we have customers in our portfolio who have not just low but negative margin and we're working with -- we have opportunities to do that and we're just -- as I said in my remarks, that's what I mean when I say we're going to be disciplined in our pricing.

(Operator Instructions).

And your next question comes from the line of Chris Mammone of Deutsche Bank. Please proceed.

Thanks. I guess with the WMS deal, I assume that means the impending wind-down of your JV with IGT. What was the timing of that, and also any --

I'm sorry, what was that? I don't know that I got what you're -- you connected the two and I don't understand how you did that.

Your current joint venture with IGT to develop next-generation kiosks and solutions --

Yes, let me stop you there, because I think I know what you said and I want to just correct it. Both of those things are highly synergistic, okay? The joint venture with IGT is really about the development on the systems side of the integration of our payments -- think about it as our payments network with the floor management systems that IGT develops. So it's sort of the software side of it, if you will, that really enables us to do these types of transactions.

The ability for us to have actual control and be able to develop our own point of sale device, the ATM, the box, if you will, is extremely synergistic to being able to deliver those and deliver them in the way that's the most effective from both a technology standpoint as well as a business standpoint.

So they're not competitive or they're not -- one doesn't replace the other.

Okay.

They're very much part of the same strategy.

Okay, so that joint venture continues unencumbered.

Absolutely, yes. Matter of fact, like I say, this is a positive for that effort.

Okay. And then switching gears to the gaming environment, through June and July, the accelerating declines in foot traffic, if I could read that into the changing times, is that sort of broad-based or is it confined to certain geographies more than others? Could you give us some more color there?

Yes, I'll just give you some sense, some geographies that are performing worse than the mean and some that are performing better than the mean in our data set, in any case. So Nevada, New Jersey, California, Illinois all showed same-store declines greater than our consolidated number; whereas Pennsylvania, Washington, Missouri, Michigan, Indiana, Connecticut all showed declines less, or growth, compared to our average number.

Okay.

I think it's fair to say, though, that we didn't see any major shift in those performances. Many of those geographies have consistently performed above the mean, so June's issue is pretty broad across geographies. There may be a few that it didn't impact, but it's not an isolated thing that's being driven out of one or two geographies.

Okay, got it. I guess some of the geographies that maybe you have a larger presence in order to make up a greater portion of the overall, those are the ones driving down the overall average.

Yes, right.

Okay, and I guess just one final one -- any impact from the Station Casino's bankruptcy going forward or currently?

No, their properties are continuing to operate, and so just as we saw in the situation with Trump, we expect to have a normal, ongoing relationship with them. Remember, we don't have balance sheet exposure, generally, to our client base. Only in the central credit business, which as you know is a very small element of our business. So no, it continues business as usual.

Okay, great. Thanks, guys.

Yes, thanks, Chris.

There are no further questions at this time. This concludes the question-and-answer portion of our presentation and we would like to thank all participants for joining in today's conference. This concludes your presentation. You may now disconnect. Have a great day.