Everi Holdings Inc (EVRI) 2009 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter 2009 Global Cash Access Earnings Conference Call. My name is Jennifer, and I will be your operator for today.

(Operator Instructions).

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Lisa Yi, Treasury Manager.

Please proceed.

Thank you, Jennifer, and welcome, everyone, to GCA's Third 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 third 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 5:00 PM 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 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 10, 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.

By this time, you are all familiar with the macroeconomic and segment trends, which continue to be challenging to all of us in this industry. While we are all waiting for this to rebound, my comments today will primarily focus on the important areas where we have more control over our results.

Specifically, managing our EPS -- our cash EPS, performance and operating costs, bringing key issues to resolution, the completion of our platform conversion, the development of new products, and the resigning of key customers.

We have been able to hold our cash EPS performance at previously announced guidance, with this quarter's cash EPS of $0.18 up 6% versus year ago. This despite decreases in revenue, driven by the continuing decline in segment trends, the lower face value on transactions, and the shift from credit to debit. We were able to deliver the cash EPS results through operating cost controls, our share buyback and, of course, we are still benefiting from low interest rates.

The organization continues to do a terrific job at managing our costs, despite all the various events we've been through. Our operating costs continue to be well below last year and continues trend below our internal plan levels.

We expect this to continue on a year-over-year basis, as we leverage our new platform and back office systems over the next several quarters. The one-time costs associated with the platform conversion and outside legal expenses should also roll off by year-end.

During the third quarter, we initiated the $25 million share buyback program previously authorized. And about two-thirds of it is completed as of today. The completion of this plan, combined with our previous purchase of one of our founder's shares, we believe, will result in the repurchase of an aggregate 9.5 million shares before the end of the year. We believe this is very good use of our capital, given the market conditions; it is very accretive to our shareholders.

Importantly, in this quarter, we've made substantial progress at resolving many of the legal issues that have been overhanging our business over the last year. Of primary importance, we have reached an agreement in principle with the Arizona Department of Gaming.

The agreement affirms that GCA has sufficiently addressed the concerns raised in their original notice, GCA had demonstrated to ADOG that our current management, controls and policies address these issues sufficiently to allow the Department to conclude that GCA, as currently structured and managed, is suitable for the privileged gaming license in Arizona. As part of this settlement, Arizona will issue a renewal of our license upon the final execution of this agreement and we expect this to be completed in the next few weeks.

This has been a significant event for the company and its ultimate resolution puts a final punctuation on the last two years. The company believes it should remove any uncertainty in regards to GCA moving forward with the Western Money acquisition and should expedite our customary jurisdictional approvals and allow us to focus on moving the business forward.

We have also settled the Electronics Fund Transfer Act class action litigation as well as the litigation with the USAP. The USAP settlement included a payment to GCA, which has been fully offset by the reserve to settle all the other matters, including Arizona.

All of these actions are fully reflected in this quarter's numbers and do not impact our operating results. George will provide more detail, but the main point here is that they are resolved and they are accounted for in the third quarter's numbers.

We've also completed our platform conversion in early September. This has been a huge effort, consuming a large portion of our organization over the last year. With this now complete, we can leverage the new platform to focus on improving customer service as well as bringing forward new products.

As always, we continue to focus on resigning our top customers. This is always a question we get due to the concentration in our top 15 -- 10 to 15 customers. Year-to-date, we've had four of our top ten customers' cash advance contracts come up for renewal and we've resigned or extended each one of them and are optimistic that we will close the last one before the year-end. Significant signings in this group in 2009 include Stations, Pechanga, Mohegan Sun and Foxwoods.

We are continuing our effort to bring new products to market. The first two, what we call QCP Express and Ticket Out, will be in market testing in the first quarter of next year. The QCP Express product will be a significant upgrade to our current QCP product for cash advance services in the cage. This will cut the time for a typical transaction in about half. It will eliminate errors in keying customer information and allow for a faster, more cost-effective method of completing the transactions.

Our second product, Ticket Out, is in development and it is also proceeding with initial Western Money applications already through GLI and in Nevada Labs as we speak. We hope to be in a beta test at several customers in the first quarter of next year.

Finally, we are also in the final phases of developing our first new business information product that will provide a deeper share analysis at the property level using GCA's unique data and partnering with Diamond Stream, who will be providing the enhanced analytics.

All three of these products will be shown at the upcoming G2E show later this month. So we feel very good about the progress in all of these areas and continue to focus on the areas that we can influence.

Overall, we should finish 2009 with good cash EPS growth and very modest revenue growth. We continue to deploy our capital in ways we believe are very accretive to our shareholders and we'll continue to do so. We are now 100% focused on leveraging our platform and organization to improve costs, improving customer satisfaction, and developing new products and services.

A few comments about segment trends and our overall revenue picture. While the same-store trends of minus 13% continues to be well below year ago, we are also seeing some stabilization on an absolute run rate basis. Since the step down the industry saw in June of this year, we have, on a seasonally adjusted basis, seen the actual monthly run rate being roughly flat through October. So we share everyone's hope that we've seen the bottom of the market, but I'll leave that for your predictions.

To round out our discussion on revenue, this is the first quarter reflecting the full-year impact of the acquired portfolios. As we mentioned in the past, we've been deliberately working over the past year to reprice contracts that were at break even or, in fact, losing money. Some of these we fixed and some of these we've lost to low-cost entrants. Most of the accounts that we've lost were in the acquired portfolio and over half were either known losses at the time of the acquisition or are the result of our deliberate weeding of customers that are unprofitable.

This contributed to a slightly lower than expected volume comparison with year-ago levels. While these losses do not significantly impact our profit profile, they have resulted in a net client attrition during the quarter that represents a little more than 2% on revenue.

This is not totally unexpected for acquired portfolios and the experience has been mixed. We have in fact had some success at resigning acquired accounts at improved margins.

This experience reinforces our belief that product differentiation and superior service, in other words, value, is the key to maintaining our strong position in the market and driving our earnings long term.

Net, we're holding our cash EPS targets at $0.70 to $0.72 for the year, but we'll be lowering our revenue targets to $677 million to $681 million, still modest growth versus last year in the face of a very challenging year.

So with that, I'll now turn it over to George, who will provide some more detail on the financial performance.

Thank you, Scott.

As Scott indicated, this was a challenging top-line quarter. Our revenue decreased 11% compared to last year's third quarter and 13% on a same-store basis. This decrease was driven by the national and regional economic slowdown, which has adversely impacted many of the gaming markets we operate in. Our performance also reflects the annualization of the Cash Systems acquisition, which closed during the third quarter of 2008.

The same-store decline in the third quarter, particularly the decline in August, was greater than Q2 of 2009 and greater than we had anticipated.

During the third quarter, we continued to see a migration from cash advance transactions to ATM transactions. During the third quarter of 2008, cash advance revenue represented approximately 53% of the combined cash advance and ATM revenue. During the third quarter of 2009, this decreased to 46%; it was about 47% in the second quarter of 2009.

Similar to prior quarters, virtually the entire same-store decline was driven by a decline in credit usage. As a result, the decrease in cash advance revenue on a year-over-year basis was approximately 22% in the third quarter, while ATM revenue increased about 2%. We continue to see a trend towards surcharge increases at the ATM as well.

Our check warranty product declined during the quarter by about 27% compared to the prior year quarter as a result of the decreases in the number of check services transactions, compounded by a decrease in the check services revenue per transaction.

Gross margin percentage declined compared to the third quarter of 2008 by about 160 basis points. A portion of this decline is due to the inclusion of Cash Systems to the full quarter in 2009 and the fact that Cash Systems had lower margins than the GCA portfolio. Additionally, the shift from credit card cash advance transactions to ATM transactions also had a negative impact on gross margins.

Operating expenses, exclusive of depreciation and amortization, were down 16% from the prior year. The Company continued to incur significant legal expenses in connection with the Arizona Department of Gaming regulatory matter, litigation with the USAP, the acquisition of Western Money, class action suits and other legal matters. Also, as our operating results have been below our own expectations for the year, we have lowered our estimated pay-out under our management incentive program, which reduced operating expenses in the quarter as well.

As Scott mentioned, we brought our various disputes with USAP to a conclusion and received $1.75 million in connection with the resolution of these matters. This amount is included in operating expenses as a reduction in expense, however, we also reserved about the same amount related to our settlement with the Arizona Department of Gaming and the EFTA class action suit. So, on a net basis, the resolution of these various issues did not impact the financial results in the quarter.

In the third quarter of 2009, non-cash equity compensation expense was $2.2 million compared to $2.4 million in the third quarter of 2008. We ended the quarter with just less than 500 full-time equivalent employees, of which about 270 were dedicated to booth operations. This compares with 504 total full-time equivalent employees, including 277 in booth operations, at the end of the quarter ending June 30th, 2009.

Excluding site-funded devices, the average number of ATMs under management during the third quarter of 2009 was approximately 1,540. This is down from the second 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.

While we are very pleased with the overall trajectory in our expense structure this quarter, we continue to incur significant legal and conversion expenses. Depreciation and amortization decreased by 12% on a year-over-year basis, due to certain assets reaching the end of their depreciation schedules. Net interest expense decreased by 42% for the third quarter of 2009 as compared to the same period in 2008, due primarily to lower interest rates.

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

Our GAAP EPS before discontinued operations was $0.11 versus $0.11 in the third quarter last year. Cash EPS is a non-GAAP metric we use to reflect the fact that GCA is generally 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 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. Our leverage ratio is approximately 2.5 times, while our excess cash flow, available for restricted payments, is in excess of $50 million at the end of the quarter.

During the quarter, we repurchased approximately 800,000 shares for about $5.9 million. As of October 1st, we had approximately $19.9 million remaining under our standing share repurchase authorization.

We ended the quarter with approximately $74 million of cash on hand. Much of this cash is in booth operations, dedicated to settlement operations for non-US jurisdictions, but not available for immediate use.

You might recall that when we initially issued guidance for 2009, we were assuming that the back half of the year would reflect year-over-year, same-store decline moderation, such that by Q4 of 2009, we would be about flat to the prior year on a same store basis. Given the trends we have seen through October, we do not see any evidence that in the short term, the same-store declines that we have been seeing will moderate.

For the balance of 2009, we are revising our outlook, given the uncertainties in the market, and some of the recent volatility we've seen. We now believe that revenue will be between $677 million and $681 million for the year ended December 31st, 2009. Diluted earnings per share from continuing operations are expected to be between $0.43 and $0.45 per share, cash earnings per share is expected to be between $0.70 and $0.72 per share. EBITDA is now expected to be between $88 million and $90 million.

The foregoing expectations reflect the following assumptions, [events] investments in product and processing platforms of between $2 million and $4 million, an effective tax rate for the full year of approximately 38%, cash outlays for capital expenditures of approximately $7 million and fully diluted shares outstanding for the full year of approximately $75 million.

This concludes our prepared remarks. We'd now like to open it up for questions.

(Operator Instructions)

And your first question comes from the line of David Bain.

Please proceed.

Hi. Thank you.

Just a couple of questions, mostly on products, guys. So are we still looking for the first rollout of, say, Ticket Out in the first quarter of next year?

We expect to be in beta test in the first quarter of next year. And we'll take a few months to assess and make sure that we've got things right and that it's been fully vetted out before we start to roll it out.

And when you say beta test, it'll be at one location and then upon the --.

We'd like to do it in a couple of locations, David.

Okay. Okay.

And then upon the roll out of a few, like 60 days from there, or what have you, can you give us an idea of scale? I mean, in terms of your discussions, I mean, how -- is that something that you do more towards the end of the fourth quarter and beginning of the first quarter with casinos in terms of getting an idea of how the rollout will occur?

And technology wise, can you give us an idea of how that's going? What's your relationship with Western Money?

Sure. Let me answer a couple -- the questions in order.

The -- as far as what our expected impact in 2010, it's a little bit early to predict that. That will be part of our planning process, obviously, when we give guidance for the year at the -- at our next call.

Yes.

The development, from a technology standpoint, continues to move on. We're obviously much more able to focus on that now that we've got a lot of these other matters cleared up. But we have been working hand-in-hand with Western Money up to this point in time.

And the first application is actually on a Western Money device and that has been through GLI. So we are able to look forward with some confidence to say we should be in beta test in a few customers in the first quarter of 2010.

Yes.

We are currently, as we speak, entering the Nevada labs and then we've got some other regulatory approvals to get in Nevada. And then we'll move on to other jurisdictions from there.

Okay. And then following that product, I know there's been talk about a card-based solution at a point of access device. Not Power Cash directly at the slot machine, but something in the interim.

And I guess what I'm curious about, is that still -- would that be available under even an IGT system? Or is that under the same roof of Power Cash with the Bally Tech?

We are -- we certainly continue to share that vision and believe that ultimately that's going to be a component of the product suite that we have. I think at this point in time, it's a little bit premature to talk about exactly which systems it will work on and what the rollout is.

Okay. And then just final one, just housekeeping. I missed the stop -- stock-based comp, George.

$2.2 million.

$2.2 million. So -- and that's not included in your -- in the EBITDA on the press release, correct, so I'd --?

That's correct.

Okay.

The EBITDA in the press release is just traditionally defined.

Okay. Thanks, guys.

You bet.

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

Please proceed.

Thanks. Good afternoon.

Just going back, Scott, to your comments about sort of foot traffic patterns you're seeing within your franchise, could you -- is there any way to sort of delineate, maybe, between the two big gaming markets of Atlantic City and Vegas versus what you see in a lot of the -- what you call, the non-destination markets? Any visible changes throughout the quarter between the two?

Go ahead.

Yes, Tim, if you think about our negative same-store number that we have discussed today of negative 13, two of the important jurisdictions within our portfolio that would have a greater negative same store would be both New -- Nevada and New Jersey. And then in addition to those jurisdictions, it would also include some very large Native American jurisdictions, such as California and Arizona, would have, in our portfolio, the same-store declines in excess of our average same-store number.

On the positive side, geographically, jurisdictions that would have not necessarily growth on a same-store basis, but same-store declines or growth better than our mean number, would include Indiana, Louisiana, Michigan and Pennsylvania, to name a few.

Obviously, I'm not being comprehensive in that discussion, but that will give you a sense as to how it kind of lays out.

Did you see -- in terms of the commentary about sort of seasonally adjusted stability, I guess, if I remember the comments and their color correctly, did that happen across the entire portfolio? Because I remember, last call, you really talked about it's --if I remember correctly, Vegas sort of dropped more than you would have thought, probably more than most of us would have thought, in the second quarter as sort of the impetus for the lower guidance, I believe, more than anything else.

So, did you see throughout the quarter that Jersey, Nevada stabilization more show than the other markets?

Well, let me step back and briefly take us through the year.

Our original guidance was predicated on the assumptions that there would be some modest recovery in the second half of the year in gaming across the US. And, of course, since we had very low comps in the latter half of last year, we expected that same store to basically approach zero by the end of the year.

And we, in fact, saw that pattern in the first five months. We saw a rebound from Q4 of '08 into Q1 of '09. That rebound seemed to hold through April and May, and then at the beginning of June, we saw a pretty obvious decline, primarily in destination locations, but not exclusively. And that decline had been pervasive up until the date of our last call.

And so based on that information, we reassessed where we're at in the year and we assumed that although the recovery -- although there would be a moderation of same door decline, it wouldn't be to the extent that we had previously thought. So we updated our models then and moved forward.

And then what we have seen, in fact, August, so the date of our last call, it's the beginning of August, in August, was, on a same-store basis, perhaps the worst month of the year. And what Scott was making reference to in his comments earlier in this call was that in September and insofar as we understand our results for October so far, at least transactionally based, there seems to be some stability, not only across total transaction counts, but the relationship between credits and total transaction counts.

So another way to put it is, we're not expecting to see an incremental -- or we're not continuing to see the volatility we saw, I guess, in middle of the year.

So let me pause there and see if you have a follow-up.

No, yes, I've just got two quick ones.

Number one was that the first follow-up was, you have no real buyback assumption, I think, in the remaining guidance. And given there's just a quarter left, it probably wouldn't hit '09 that much anyway, but thinking about M&A, where you've done a little bit, thinking about the stability in cash flow, what is your sort of appetite as you think over the next, call it, two years? Just to be longer term versus near term, around the buyback and the cash generation of the Company, do you see other avenues strategically where you need to hold onto that cash for M&A or some kind of R&D effort? Or do you really think about it as much more of deleveraging and buyback going forward?

Well, first let me clarify on the $75 million I mentioned in our guidance. That number is a full year number, of course, and what that would assume is that the buyback resolution in place continues. So you would have a modest impact in Q4 related to the completion of that buyback, but it's not going to be significant. To your point, that's true.

So given where we are from a cash basis, on a GAAP basis, $74 million or so, we have two activities that are underway relative to deployment of cash in Q4 and Q1. The first is the completion of that share repurchase program that we've just discussed, and the second is the eventual closing of the Western Money acquisition.

So I think our perspective is, is we're going to complete our 2010 planning here. We're going to get these two capital transactions behind us. Early next year, we'll sit back and reassess, as we always do, the appropriate use of our cash, excess cash. And that could involve further share repurchase programs. It could involve deleveraging, as you suggested, or other investments. But we'll wait until we get through our short-term issues to finalize that decision.

Okay. Thank you.

And your next question comes from the line of Tien-Tsin Huang from JPMorgan.

Please proceed.

Hi, thanks, this is Tien-Tsin. Glad to see some of those renewals.

I wanted to ask about your pricing and the margin profile of some of the renewals and if you've seen anything unusual there?

I would -- here's what I'd say about it. I don't think we see anything unusual. It certainly continues to be a very competitive market. I think the protracted extent to which we're just seeing segment trends have just made pricing that much more of a top-of-mind issue with folks.

So we're still seeing a pretty competitive market and we're still seeing some price compression on the renewals.

Any kind of material impact that we should consider as we sort of recast our gross margin assumptions for 2010 that you can share?

No, I mean we're not -- we can't give any guidance or indication around 2010 right now. Next time we're on the call, we'll be doing that. I think that these transactions we made reference to earlier, as far as renewals, are largely reflected in Q3.

Are largely reflected in Q3. That's good to know. Helpful.

How about the City Center business? Any update on that?

Yes. City Center is a -- because the JV is a stand-alone event, it's not part of the -- our MGM contract, which does not come up for awhile yet. We -- again, it's a very competitive environment, we are disappointed to learn that we were not selected for City Center.

So not selected on City Center. Can you elaborate on that? I mean, was the difference in pricing? And -- just to get a better of appreciation of what took place there?

I think pricing was a significant component of it. And I -- it's just a -- we're still, obviously, working with there -- our central credit product is -- we're working on finalizing that contract in City Center. So we'll live to fight another day.

Understood. Good to know. Thank you.

And then last one, I guess, Arizona, happy to hear the resolution there. I was just curious, really, has there been any measurable impact on your business from the ongoing dispute, especially towards the last several weeks or months?

Tien-Tsin, I'd answer that in three ways. Certain -- I mean, there's the obvious one, which has just been the enormous drain of resources, not only from a management level, but also dollars expended and outside legal fees and so forth. So that's one that we've talked quite extensively about over the last couple of calls.

Right.

I think it -- we certainly are very much looking forward to moving ahead now with all the issues that we've had to deal with over the last year and a half or so behind us.

I can't tell you that any -- that we've lost a customer because of it or what -- anything else. I know it has slowed down our ability to get products out. The -- when -- how we originally had hoped, entering this year.

So it has those kind of other impacts on you that are sort of hard to quantify, but you know, at least at my level, you know they're happening, you just don't know how to deal with it other than to just get through it as best we can, as quick as we can and get resolution, which is what we've got now.

So nothing specific, other than I know it's just been a big drain on the organization and on our resources. And like I say, we're now really, between that and having the conversion done, getting all the other litigation out of the way, it really allows us now to really focus on the -- our strategy that we've -- that we continue to believe is the right strategy and we're looking forward to start to execute with 100% of the organization moving forward.

Understood. Nice work in getting through those issues. Appreciate it.

And your next question comes from the line of Greg Smith from Duncan Williams.

Please proceed.

Hello? Greg?

Can you guys hear me?

Yes, we can hear you now.

What does the renewal schedule look like for next year? You renewed five, I guess, your top -- or four of your top ten. You expect to renew one more this year.

Right.

What do things look like for next year, among the other -- are any of the other five coming up?

Yes, I mean in any given year you're going to have some percentage. And there's no -- we said this kind of time and again, there's not particular period that's overweighted one way or the other, okay? So, yes, you would expect to have a handful of the top 15 accounts having to come up for renewal next year also.

Okay. And then on Arizona, you said you did reserve something related to a settlement. So what were the concessions you had to make related to moving past that issue?

At this point in time, we're not disclosing the -- all of the components of the agreement. I think the key takeaway is that as part of the -- as George went through his comments, part of the USAP settlement was we received a payment from them of $1.75 million. We have reserved both Arizona, the electronic funds transfer litigation -- class action litigation and a couple of other minor items that we either have concluded or believe will conclude shortly against that. So you can look at the whole basket being at or slightly below that number.

Okay. And then we can -- from a modeling perspective, there's nothing related to that settlement that should impact your financials on a go-forward basis?

No, there would be no impact on an operating basis in Q3 or on a go-forward basis. That's correct.

Okay. And then of your cash, I guess, George, of your cash, how much of that is freely available for corporate uses, buybacks, acquisitions, et cetera?

At September 30, it would have been between $30 million and $40 million.

$30 million and $40 million.

Okay. Great. Thanks, guys.

Yes.

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

Please proceed.

Hi, this is [Asa Govial] for Chris.

I guess most of the questions have already been answered, but just back on the same-store trends, you mentioned that August was the worst month. Does that mean that you saw some sort of recovery in September and October, or they sort of stabilized at the August level?

Well, let me -- I was trying to be precise with Tim's question. And so, let me just point out that it was the worst on a same-store basis, but Q3 was a very tough quarter on a same-store basis. And the movements between July and September and August aren't really significant, with respect to this discussion, I'd say.

So the Q looked more or less, in all material senses, pretty much equivalent across the quarter.

Okay. Thank you.

(Operator Instructions)

And your next question comes from the line of Josh Elving.

Please proceed.

Hey, good afternoon.

Hello.

Hello.

Not to harp too much on the same-store sales number, but you had mentioned that previously you had anticipated getting back to a flattish number, exiting '09. What's that number now in your expectations, exiting '09?

Well, you'd see -- I won't give you a precise same-store number in our assumption, I mean, our guidance is our guidance. But certainly you -- when you have an opportunity after the call and you unwind this, you'll see that there is an assumption of a same-store decline on a year-over-year basis in Q4 that's not inconsequential.

Okay. A question, and this is kind of a higher level question, I don't know if there's an easy way to answer this or not, but with regards to the decline in cash advance, do you get the sense that those declines are driven by patrons not having access to credit? Or is it a price sensitivity issue? Have you kind of toyed around with pricing? Do you give any color on that?

I'll give you just -- again, this is nothing we have hard proof of, but as we look at it, sort of empirically across it, I think the biggest factor, particularly on credit card cash advance, is consumers self regulating, if you will, the use of credit and also spending less, just in terms of their overall visit.

Okay, so you have two -- and that really reflects the macroeconomic issues, right?

Sure.

We don't see appreciable -- if you thought it was just about access to credit, you would think we'd see a spike in our declines, okay? Or transactions not authorized because of lack of credit and so forth. We don't see that, okay.

So I think it's much more of a self-regulated phenomenon in terms of the consumer themselves, both in terms of moving from credit to debit. And you see that in VISA and MasterCard's announcements and so forth in the general market as well as what we're hearing from our customers and we see, which are if people do visit, they're just spending much less than they would have before.

So both of those are, I think, the controlling factors now in terms of both the reduction in face, the precipitous decline in credit card transactions. And you're seeing that in the, obviously, the debit side of the business, which is predominantly the ATM transactions.

Okay. And then, I guess, just one other kind of higher level question. And I think you guys have done a very nice job getting through all the challenges you've faced in the past year or two.

But with regards to Arizona, I seem to have come across -- I think I had read somewhere that other states may have voiced some concerns at some point in time and in the not too recent past, or not too distant past I should say. Do you -- are there any other issues with any other states that you're concerned about in the near term? Or does this pretty much clean up some of the legal issues?

It -- I think this pretty much cleans up some of the legal issues. We've obviously spent a lot of time over the last year with all the jurisdictions. This was something that had to get resolved and most of the concerns, if there were any, to the extent there were any out there, was just kind of get Arizona settled.

Yes.

So as we, as I said in my comments, we think this will -- obviously takes away a lot of the risk in terms of getting licensed for Western Money and also, we think, gets us more down to normal course of business in terms of the customary jurisdictional approvals that we go through on an annual basis.

Great. Thank you very much.

You bet. Thank you.

Thank you.

There are no more further questions at this time.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.