Everi Holdings Inc (EVRI) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the Global Cash Access first quarter 2010 earnings conference call. My name is Jen and I will be your coordinator for today. (Operator Instructions). As a reminder, this conference is being record for replay purposes. I would now like to turn the presentation over to Ms. Lisa Yi, Treasury Manager. Please proceed, ma'am.

Thank you, Jen and welcome everyone to GCA's first quarter 2010 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 first quarter. Following these comments we will be happy to take questions. A few important items before I turn it over to Scott. First we have 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 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, 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 10th, 2010 and in our Form 10-Q filed with the SEC and the risk factors set forth therein. With that, let me now hand it over to Scott.

Thank you, Lisa. I want to thank everyone for joining us on our call today. Our results in the first quarter were solidly on plan. Revenue and cash EPS were both in line with our internal expectations. As such we are reconfirming our revenue guidance for the year and are increasing our cash EPS guidance to $0.75 to $0.78 per share, reflecting the recently announced $25 million partial redemption of our senior subordinated notes that was completed this week, and a lower than expected share count due to the efficient execution of our $25 million share repurchase that was accomplished in a privately negotiated transaction with entities affiliated with Summit Partners on April 8th.

As we always do, I will start with our opinion and view on the industry trends in general. We are seeing some stabilization sequentially on a few of our metrics, but not across the board. So we are clearly not out of the woods yet, and we remain cautious regarding any declaration of recovery at this time.

Year over year trends in same-store volumes, average face amounts, and the shift from credit card cash advance to ATM still continue to negatively affect our numbers. However, sequential trends suggest the rate of decline is mitigating. Specifically, we see transaction volume holding and the face on ATM and check also holding on a sequential basis. However, the shift of credit to debit is continuing, and the face amount of credit continues to decline. So it is a bit of a mixed bag at this juncture.

Recall that we saw a significant downturn in the industry at the end of the second quarter last year. So at this point we are happy to reconfirm our 2010 revenue estimates and we'll certainly be watching the next three to six months carefully.

If these sequential trends hold we should see more favorable year over year comparatives as 2010 progresses. We continue to make great progress against our strategic initiatives in the first four months of this year. We closed the Western Money acquisition today and are now engaged in the integration and sales efforts. Our first priority will be to drive sales of Western Money products and services through our combined sales force. We are receiving strong interest from our client base and we are learning the business quickly.

Our second priority will be to push the integration of our platforms to support the new product programs and refresh some of the product offerings. We have already done much of the development work for our QuikTicket product which we will discuss more in more detail in a moment. We believe this acquisition is an important building block in realizing our strategic intent of delivering a true end to end platform for the products that we have discussed.

On the product front we went live and are broadly marketing our new Casino Share Intelligence product this week which we call CSI. We feel we are receiving very positive response from our customer base. To refresh everyone's memory on CSI it is a powerful web-based diagnostic tool for casinos to determine the effectiveness of their marketing efforts. CSI allows them to measure and track weekly their gaming share, loyalty share and patron share in any number of ways. They can slice and dice the data by time periods, age, geography, time of day, et cetera.

CSI uses GCA's extensive transaction database as a surrogate for the gaming revenue, an assumption that turns out to be a very good one as we have shown very high correlations. We have developed this product in partnership with a talented analytics house, DiamondStream. This service will be on an annual subscription basis determined on the level of service and the size of the client. We are excited by the response of our initial sales and marketing efforts.

We believe that we are working with a very exciting product here. We are also pleased to see this product capturing the industry of the industry press and anticipate several articles coming out shortly that will highlight this and other developments at GCA.

We are on track and continue to execute against our milestones on the QuikTicket product also. We remain convinced that the direction of this product which is helping casino operators reduce the cost and operational issues associated with cash on the casino floors is the right next evolution for our industry. Again we feel we are receiving very positive response from our customers on this product.

We believe we are on schedule to be in beta testing in California by midsummer, and we are in user acceptance testing and have successfully been through GLI testing on several important IGT systems and are in testing currently on Bally's.

Parallel to these efforts, we are moving ahead to gain approval of QuikTicket in Nevada. While this is typically a longer process, we believe we are on solid ground and are addressing many of the issues raised. Our intention is to have this product approved by the Nevada gaming regulators this year. We'll continue to update you on both of these initiatives in the next call.

Like everyone we are hopeful for a recovery in this segment, but we are staying focused on our product plan to drive our business. We believe that Western Money will extend our product portfolio and revenue in an important way. We are increasing our investment and innovation and are almost complete with our buildout of our internal development organization. This is a bit of a change for the company. However, our development efforts on these initial products as well as the market response have given us confidence to be more aggressive on this front.

The decision to develop internal capability gives us several important advantages. First this gives us more control in the ability to keep the developments proprietary. Secondly, we will be able to be more responsive to customers' needs as well as the market opportunities. We anticipate that by mid-year, we will have a dedicated development team, testing facilities and development systems up and running. We believe this is the right direction for GCA. We have been building to this and are at a point where we have the talent and management to do it well. All the costs associated with this change are in our current plan and guidance.

On the customer front we are pleased to announce that the Seminole tribe and our tribal partner, NACSF, have reached an agreement with the Seminole tribe for GCA to be the exclusive cash access provider for all Seminole casinos for the next three years. So we continue to do well on the top customer renewals. Across the market, pricing and competitive pressures continues to be stiff, as you might expect. While our overall portfolio margins are stable, these competitive pressures have resulted in modestly higher account losses than we would like. We continue to believe the only winning strategy long-term is to push as hard as we can on our innovation plan. This further supports our increased investment in our development efforts and staffing.

On a personnel front, everyone is aware that George will be leaving us shortly. I would like to take this opportunity to publicly acknowledge that he has been a great partner in the work we have achieved over the last two years, and we wish him and his family well. We have commenced our search and hope to have his replacement in place as soon as possible. We have also announced the addition of Dave Lucchese to our leadership team as EVP of sales. Dave comes to us from Bally's and has a strong background in gaming. He has a great track record of success and sales management and a deep understanding of the casino systems as well as games. We believe his knowledge as well as his customer contacts will serve us very well. It's very easy to see how Dave's skill set fits with our product strategy to integrate our payments and data services into casino systems.

So in summary, we delivered a solid quarter that was on plan. We will continue to be focused on our new product strategy and very pleased with the initial positive feedback and early market acceptance. We are fully committed to our product development program. We also anticipate using our strong cash position to drive equity value through potential repurchase of stock, retirement of debt, strategic acquisitions and investment in our product program.

With that overview I will turn it over to George, to review our financial metrics, and then we'll open up the call for questions. Thank you.

Thank you, Scott. Revenue decreased 12.8% compared to last year's first quarter and about 9% 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. Similar to prior quarters, virtually the entire same store decline was driven by a decline in both credit transactions and the average transaction size of credit transactions. Cash advance revenue was down 18.9% in the first quarter of 2010 to $6 million.

The segment we report as cash advance includes both credit card cash advance transactions as well as POS debit transactions. If you look at just credit transactions in this category, revenue was down 23% year over year driven by both the decrease in transactions of about 20% and a decrease in the average face per transaction on a year over year basis of about 3%. These declines were offset by growth in POS debit of just under 2% driven by an increase in transactions of about 5%. POS debit represents about 20% of total cash advance segment.

On a sequential basis, compared to the fourth quarter of 2009, total cash advance was up about 4% driven by a modest increase in credit transactions of about 2% and an increase in POS debit transactions of approximately 13%. ATM revenue decreased 5.4% in the first quarter of 2010 to $81.8 million dollars due largely to decreased year over year transactions of about 8% offset by an increase in the average revenue per transaction of about 3%.

On a sequential basis, compared to the fourth quarter of 2009, ATM was up about 11% driven mostly by an increase in transactions. Our check warranty product declined during the quarter by about 29% compared to the prior year's first quarter resulting from decreases in the number of check services transactions compounded by a decrease in the check services revenue per transaction. Gross margins as a percentage of revenues were 24.5%, flat from the first quarter of 2009 and down from the 25.3% recorded in the fourth quarter of 2009. This decline in margin on a sequential basis is due primarily to the decline in revenue included in the other category which is episodic in nature and varies from quarter to quarter.

Operating expenses exclusive of depreciation and amortization were down a little over 7% driven largely by a reduction in the number of employees and lower costs associated with ATM management and servicing. On a sequential basis, operating expenses increased by about 10% from Q4 of the prior year. However, it is important to recall that Q4 operating expenses included a benefit of $2.75 million related to the receipt of settlement proceeds from the Visa/MasterMoney litigation. These proceeds were recorded as a reduction in operating expenses in the fourth quarter of 2009. Excluding this item from the Q4 results, operating expenses decreased 5.4% on a sequential basis.

In the first quarter of 2010, non-cash equity compensation expense was $2.1 million compared to $1.8 million in the first quarter of 2009. We ended the quarter with just about 450 full-time equivalent employees compared to about 455 at the end of 2009. We had about 2,900 floor devices processing devices on our network on March 31st, 2010. This includes about 1090 redemption devices, the remainder largely consisting of ATMs. This compares to 2,900 floor devices at the end of the year of which 1040 were redemption devices.

Depreciation and amortization decreased by about 8% compared to the prior year quarter due to certain assets becoming fully depreciated. Net interest expense decreased by about 7%, primarily due to lower average outstanding balances under the vault cash agreement in the first quarter of 2010 compared to 2009. Our effective income tax rate for the first quarter was 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 but not expensed for book purposes. Our GAAP EPS before discontinued operations was $0.10 compared to $0.12 in the first quarter of last year. We use and illustrate cash EPS, a non-GAAP metric to reflect the fact that GCA is generally not in a tax paying position, as I just mentioned, even though the company reports tax expense for GAAP purposes.

A simple way to think about this adjustment is that we add back income tax expense to net income for the purposes of cash EPS. We do not make any adjustments for depreciation and amortization in arriving at cash EPS. GCA generated over $21.3 million in cash flow from operations during the first quarter of 2010 and $20 million in free cash flow. We remain in compliance with all of our debt covenants and our leverage ratio is approximately 2.6 times trailing adjusted EBITDA at March 31st.

With that summary I will now turn it back over to Scott.

Thanks, George. In summary, as I mentioned earlier, our revenue guidance remains unchanged, and we continue to see revenue in 2010 as flat to slightly down versus 2009. GAAP EPS is expected to be between $0.46 to $0.49 and cash earnings per share is expected to be between $0.75 and $0.78. This assumes that the gaming market in which we operate remains somewhat challenged in the first half of 2010 and begins to recover modestly in the second half of 2010. These expectations assume an effective tax rate for the full year of approximately 38%. Cash outlays for capital expenditures are approximately $7 million to $9 million and fully diluted shares outstanding for the full year will be approximately 67.5 million to 68.5 million shares. So with that, operator, please open the call to questions. Thank you.

Thank you, sir. (Operator Instructions) And your first question comes from David Bain with Sterne, Agee.

Thank you. Guys, could we get a sense as to how much of your guidance contemplates hardware sales from WMS?

What we said in the past about WMS is that the annual revenue from that acquisition is about the same as the purchase price which was $50 million. That estimate remains unchanged.

Okay. And have there been discussions or thoughts on how you or the beta sites intend to market QuikTickets technology to the consumer?

We will be working those details out as we get into beta testing. Obviously, we will use the fact that you can drive the screens on the kiosks themselves as a primary vehicle. And we will be working with the beta site or sites to further hone our marketing strategy to drive acceptance.

And if an operator wants to utilize some of the functionality with the new products or even CSI, do they need to be a customer of your core products as well?

Yes, they do. Certainly for CSI that makes sense. We have to be collecting the data for that property to be able to run those calculations for them. And QuikTicket is really an extension of the services we provide. So it is an integrated transaction-type. So yes, they would have to be.

And then last one for me, I may have missed it, did you give kind of an estimate as to when the first beta would take place for QuikTickets at this point?

Yeah, we still are targeting for midsummer.

Okay. Great, thanks, guys.

You bet.

Your next question is from Tien-Tsin Huang with JPMorgan.

Hi, thanks a lot. I just wanted to ask on the outlook front, was there any change in the outlook beyond the buyback and debt reduction? I couldn't remember if WMS was already contemplated in your outlook.

It was. The basic change to the outlook is those two capital transactions. One was partially contemplated, but it just went much more efficiently than we originally expected the share repurchase. So the count came in a little lower than expected and of course the debt repurchase was not in the guidance.

Got it. Just wanted to make sure. And then Western Money, just to make sure as we sort of recast the quarterly forecast, should we consider anything unique to the gross margin line, et cetera, that we might see from Western Money? I know it is relatively small in the grand scheme of things, but just wanted to make sure that we are modeling it properly as we layer it in.

Western Money will be in the other segment due to its relatively small size to the overall enterprise. Generally, on a gross margin basis we would expect Western Money to have higher margins on a gross margin basis than GCA as an overall enterprise.

Got it.

And we stated that before that those margins will be accretive. Realize that there is always integration costs and so forth that you incur in the first couple quarters or so.

No, that makes sense. The same store, I think you said was minus 9%?

Right.

Is there -- the obligatory question about sort of the month to month, if there is anything that is worth sharing there on the month to month side? And I was also curious about whether or not you started to see a change in behavior between the cash advance on the ATM side as well on a month to month basis?

No, I think the answer is, you know, implicit in Scott's comments about the sequential -- the relative sequential stability that we have seen. And as we mentioned in our last call, the metrics like average face per credit card transaction was actually relatively stable through Q4. In fact, through January. It has weakened a little bit in the back half of Q1, very modestly, or maybe not even statistically in a meaningful way. So it has been kind of flat and bumping along for four, five, six months.

Okay, just wanted to make sure particularly between the ATM and the cash advance side that there wasn't anything new there. Doesn't sound like it though.

No, there's not.

Last two for me, it sounded like you talked about the competitiveness and some attrition there. Any change in who you are competing with and what exactly is the sort of change in behavior from some of the peers? Anything new there?

I don't think there has been anything new to what we have talked about and have indicated in the past calls. The main competitors are still our main competitors out there. I think it has been an incredibly tough market situation both from a segment standpoint over the last couple of years, and we are just continuing to see very aggressive pricing in the market place.

Okay. Last one, the Master Card, I guess had implemented some changes to their ATM fees. I know they've got a relatively small share, but I'm curious what kind of impact that might have, and if you are hearing anything from some of the other EFT networks as to whether or not they might match that.

I think at this point in time, we don't foresee any material changes in our business due to those changes. We continually monitor all of the interchange costs on all networks. We have seen some association fees increase on the credit -- on the signature side of the business. We continue to manage those and in many cases have the ability to pass those through to customers and we make those adjustments from time to time.

Perfect. That's all very helpful. Thanks a lot. And good luck, George, by the way.

Thank you, Tien-Tsin.

The next question is from David Parker with Lazard Capital Markets.

Good afternoon. Thank you. Just was hoping you could provide some more color around this decision to create an internal development organization. Sounds like it was included in your guidance, but the size of the team you are looking at, exactly what you were doing beforehand, who you were outsourcing it to, and what type of testing facilities are you talking about?

Yeah, we have historically outsourced much of -- all of our, really, development effort from when you think about coding and testing and development of new products to a various number of different entities that we have had associated with the company in the past. As we continue to both build a stronger technical management team within the company which has really been in progress over the last year and a half, two years, as well as looking forward to what we have on our plates, you know, we made the decision and, again obviously, it was contemplated because it has been within our plan and guidance.

But we made the decision to start -- to assess whether or not it was more beneficial to us to do that internally than it is to outsource it. And again, I think for us, the major issue -- or the major opportunities for us is certainly you get to control sort of the speed and the sequence and the priorities of your development effort. It is also easier to maintain the proprietary nature of that as well as to develop the very specific technical knowledge you need in our industry.

And we feel that we're at a point now where those advantages and our ability to manage something like that, and the talent that we are able to find in today's market place, it is a good time for us to do that. We think it is all positive both in terms of our ability to move forward as a company and also to stay focused on the product program that we have been very clear about and have laid out for the last 12 to 18 months.

Okay. Great, thank you for that, Scott. And just a follow-up to one of the questions that Tien-Tsin asked. On attrition, you mentioned in your comments that you are seeing modestly higher account losses. Can you just elaborate on that? Is that on the regional side, the destination spots, or if you could just provide some color?

We continue to do very good at the top tier of customers as they have come up. As we stated, last year we signed all of the top 20s that were up last year. We announced the signing for Seminole and so we are -- obviously it's very tough and competitive in all segments, but we continue to be seeing some success there.

In fact, we are quite successful at re-signing across the segments. I think there is a combination of just increased competitiveness out there just as there is -- some of it's customer driven because of the situation they are in. Some of it is just because it is a very tough environment out there for all companies.

And the last part is, typically on acquired portfolios, you tend to have some attrition on those as they lap. And we are about halfway through both the acquired portfolios. So we are seeing a bit of a modest increase in losses and call it the mid-tier to the mid-upper tier. I don't really know how to segment these, but it is a bit to be expected. We hold ourselves to pretty high standards and are pushing hard on the innovation. As we have said, that's the best anecdote we know to both pricing in the market place as well as retention.

Okay. Any update that you can provide on the MGM contract?

No. We continue to answer that the same way we have all the time. We don't provide any information on individual contracts as they are in negotiation.

Okay. Thanks, guys.

Thanks.

(Operator Instructions) The next question comes from Matthew Kempler with Sidoti & Company.

Good evening.

Hi, Matthew.

A follow-up on the customer renewals question from earlier. The fact that GCA is renewing virtually all of their top clients but losing some of the smaller ones due to competitive pricing, does that mean that GCA is more amenable on the pricing side with their larger clients, or is it easier to keep them because of the long term relationships and the broader offering that they have engaged with?

You know, I don't know that there is necessarily a pattern that jumps out at me in terms of what those situations are. We just want to make sure that we are clear in what's involved in our guidance as we look forward. Like I said, I don't think the competitive pressure is any less or greater in any particular segment. We compete across all those segments, and we have very aggressive competitors in all those segments. We just had an opportunity to close the very top accounts, and we are happy for that, and we are continuing to compete on the renewals there.

If there is any kind of underlying trend in that, you know, we are seeing that happening disproportionately in our acquired portfolios. Some of that is because of cost gaps that as we try to bring pricing up in the category, some of it is because we have customers who frankly have chosen not to use GCA before. So it is very -- it is sort of a typical dynamic you see in acquired portfolios.

Okay. And along those lines with the check cashing segment, the sequential decreases that we're seeing there, is that -- there's underlying trends in the check industry itself do you think or is that more about the client attrition that you were just discussing?

It's both. I mean, it is the underling check trends which have been pervasive for quite some time that we all know about and client attrition.

Okay. And then we've seen a number of announcements from GCA regarding client wins in Canada. I'm wondering if you have any improved outlook for other international markets.

We're continuing to push in Canada. We see some opportunities there that remain. And we're coming around to a cycle in Macau and again we are going to be pushing hard with our -- with the ability to take Western Money into those markets as well as the opportunity to have some other products. But we continue to be conservative about how we see the international markets at least in the short to mid-term.

Okay. And then final question, between the debt paydown, the stock repurchase and the WMS acquisition, $65 million of cash use, are you tapping your revolver at all or is this all coming from cash in hand?

All cash in hand. We may conceivably tap our revolver from time to time for relatively small draws if needed, but as we sit today, we could handle those three transactions you inventoried with the cash on hand.

Okay. Thank you.

The next question comes from Greg Smith with Duncan-Williams.

Hi, guys. Last quarter you noted that there were a couple of kind of -- some development you needed to do to better maximize your interchange both from a revenue and an expense perspective. Has that been done at this point?

Yeah, those are substantially completed and the transition across the platform will be happening over the next couple of weeks.

Okay. And are you changing your pricing at all? It seems like on the ATM side it is creeping up a little bit. We noticed ourselves seemed like some of the fees were higher in at least one of the markets. Is there anything going on there from a pricing strategy?

The surcharge element of the ATM fees has trended up over the last 18 months or so.

But nothing where in the past couple of months you in conjunction with your customers have made --

No, no.

Okay. Perfect. And then we've talked before about heightened legal expenses and the potential benefit from moving the process thing over to [TSEF]. But now we have got Western Money in the mix. How can we think about what level of expenses there are running through the P&L right now that may go away over the next couple of quarters?

Well, I think George gave you some indications of what the trends were on operating expenses both sequentially and year over year. We continue to manage those down effectively. We certainly have had increased costs for Western Money licensing. I think we are well over 100 licenses we have applied for or are in the process of getting and so forth as we move forward. So we expect that is probably going to continue for a little while longer, but that's really the only major change that's possibly out there in the future.

Okay. Great, thanks, guys.

Your next question comes from Chris Mammone with Deutsche Bank.

Hi, this is (inaudible) in for Chris. Just a question, maybe could you comment on what you think would be the lag between people coming back to the gaming floor versus actually using credit on the game floor -- to on the machines?

Yeah, I think honestly I have no way to predict that. I think if you ask me my personal point of view, we're encouraged by seeing the transaction volume starting to at least sequentially maintain which would suggest something about the traffic in the casinos which I think would be the first thing you would look at and you'd expect to happen. We're encouraged by that.

I think credit is much more driven on a macro basis both in terms of how consumers feel about credit and available credit. So I would expect that to probably be one of the last things that will happen as the -- as we see -- hopefully see a recovery over the next 12 months or so. But I really have no way of telling you how long that's going to be or what that kind of lag would be. I think we have sort of been in uncharted territory for the last couple of years, and I think we remain in uncharted territories.

All right. Thank you.

The next question is from Chris Lafayette with The Clark Estates.

Hi, guys.

Hi, Chris.

I guess my question is somewhat similar to the last one, but I was hoping you could just expand upon it. What do you feel is the best proxy that you look at from a data point perspective that correlates with your top line and would signify a turn in the industry?

I think again what we look at and what we talk about are the metrics that we share with all of you guys which is really about our expectation to see transaction volumes firm and start to grow. I think we have continued to see a decline in face, at least across a longer period of time, call it 12 months or so. We continue to see declines in the faces of all types of transactions. We hope to see those start to move up.

You know, I think the last one -- the last question that was asked was when are we going to see some recovery in credit. I think that is very much a macro trend, and until consumer -- you know, the situation from consumers broadly changes significantly both in terms of unemployment and some of the other kind of things. I would expect that to be the last to change significantly and we'll have to see what happens. I don't -- like I say, there is not a lot of predictors out there that would -- that we're seeing in the general financial or economic or economy that I really point to. We watch these. We see these numbers on a daily basis, so I think we are really focused on looking at our numbers and hopefully we will start seeing some face values start to come up and continue to see transaction volume.

The publicly available data that is most correlated is slot revenue. Or data that the analyst community can obtain. Other sorts of gaming revenue can be distorting if you are trying to draw a correlation. That being said, our portfolio includes many properties that do not publicly report their information. So it creates inefficiency in the metric.

But as far as an early indicator we'd probably look to the average face per transaction. So in this quarter on a sequential basis, our actual average face per transaction on ATM transactions is up modestly on a sequential basis which it is not significant enough to declare victory, but as people start withdrawing amounts that are larger than last month's, it gives some sense that they are becoming more confident and have more discretionary funds available for this sort of activity. And that should lead into a higher face on POS debit, and then ultimately back into credit. Those are the primary drivers we look to to give us some sort of sense as to consumer behavior.

And George, could you just remind us why slot revenue is more accurate than overall gaming revenue as an indicator?

Well, because if you just look at -- well, the easiest thing to do is to go look at some analyst data around U.S. gaming and reported gaming revenue in any given jurisdiction, which includes gaming revenue from all sorts of game games, whether it is baccarat or sports book, different types of consumers that go into a casino play different games have different behaviors with respect to our sorts of transactions that we offer them.

So a baccarat player is not going to do a $100 ATM transaction. That's not what they are at a casino to do. But their play, they have very high amounts of face that gets played in a casino at relatively low margin for the casino. So it distorts gaming revenue. But if you just focused on a slot player, somebody who is going to go into a casino from time to time and withdraw $100 or $200 and play that in a slot, that has a pretty high relationship to what they need from us. And that's average transaction sizes of $100 to $500.

Okay, Thank you.

And that effect has been well documented both in the fourth quarter and the first quarter of this year, particularly in Nevada, about the high end baccarat players who are really driving that number significantly. And that really isn't our player.

Thanks, guys.

Yep.

Our next question comes from Jeff Kauffman with Sterne, Agee.

I'm just wondering if you guys would be willing to volunteer anything about trends in the California markets if they are following the same trends as the rest of the United States, if you are seeing any changes there?

No changes since Q4, California as was the case in Q4, was quite a bit weaker than the mean if you are looking at it from a geographic perspective.

Thank you very much.

Ladies and gentlemen, this now concludes our question and answer session for today. We would like to thank you for your participation in today's conference. This does conclude your presentation, and you may now disconnect. Have a good day.