Everi Holdings Inc (EVRI) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Global Cash Access Holdings Inc second quarter 2011 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today, Tuesday, August 9, 2011 and I would now like to turn the conference over to Julie [Yusgart], Treasury Manager. Please go ahead ma'am.

Thank you, Brittany, and welcome everyone to GCA's second quarter 2011 earnings conference call. Joining me on today's conference call is Chief Executive Officer Scott Betts, and Chief Financial Officer Mary Beth Higgins. On today's call, Scott will give an overview on the Company's progress, and then Mary Beth will provide a brief update on our financial performance in the second quarter and go over our guidance for 2011. 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 earnings release and our un-audited financial statements to the Investor Relations section of our 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 for 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 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 are subject to a number of risks and uncertainties. These include, without limitation, statements regarding market conditions, the stability and predictability of our business, the timing and extent of a recovery in the gaming sector, consumer habits, projected revenue, projected earnings, expiration and renewal of existing business, addition of new business, the competitive landscape and pricing environment for cash access services in the gaming industry, product upgrades, new product and any regulatory (inaudible) products, the cost and timing of the Durbin amendment on our business, cost-saving measures and possible uses of free cash flow, including early debt repayment and debt retirement. 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 the risk factors set forth therein.

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

Thank you, Julie. And I'd like to welcome everyone to our second quarter earnings call. Today, we are going to change the order of the call a bit. I want to start by providing what I think are the important themes that have emerged from the first two quarters of the year. Then Mary Beth will provide a more detailed look at the supporting data, and I will conclude with a discussion of how we are moving forward from here.

We think there are three main themes that are clearly emerging from the first two quarters, as well as some clarity that the potential opportunities now certainly outweigh the headwinds that we've been fighting for the last three years. First and perhaps most important, we are seeing a growing level of stability and predictability in our base business, as well as the underlying segment trends, that we have not enjoyed for several years. Second, we are now -- we now have greater visibility into the impact of certain trends and events that we believe will have a positive impact on our business, specifically the Durbin Amendment, increased stabilization in the pricing of our customer contract portfolio, and new business opportunities. We believe each of these will have a positive impact on our financial performance for the remainder of 2011 and into 2012. Lastly, we remain committed to innovation, new product and new markets. We believe these investments should continue to pay off in increased revenue growth, independent of any recovery of the segment. So, with that, I will turn it over to Mary Beth.

Thanks, Scott. Good afternoon, everyone. I wanted to take a few minutes to discuss the quarter end results and try and give some insight into the rest of the year, especially in light of the recent legislative changes. The stability and predictability that Scott discussed is one our main themes for this call and is evident in our results compared to Q1.

EBITDA, adjusted for non-cash stock comp, was $14.3 million for the second quarter of 2011, very close to the results from the first quarter of 2011, when the same number was $14.1 million. Similarly, our gross margin for the first of quarter 2011 was $29.2 million or 21.7% and $29.3 million or 21.7% for Q2. Operating expenses were $15 million for Q1 and $15.1 million for Q2. We feel that this is about the right run rate for the business in that allows us to continue to invest in innovation and new business, as well as maintain best in class service to our customers. Cash EPS plus non-cash stock comps was $0.095 before one-time refinancing costs in the first quarter of 2011 and was $0.10 for this quarter, if we add back approximately $1.2 million in one-time charges, due to Western Money System's purchase price finalization and approximately $400,000 in severance costs. Again, we believe this probably represents a base run rate for the business.

Looking at same-store dollars dispensed, which is our best measure of industry stability, we have now seen five months of stable, positive, year-over-year comparisons. Although we have not seen any signs of significant underlying growth in the first two quarters, we are seeing quite a bit more stability and a lot more predictability. Turning to specifics again -- the decline in the year-to-year comparisons for all metrics was driven by the loss of the Caesar's contracts. Year-over-year revenue declined $22.1 million in Q2, of which, Caesar's accounted for over 95% of that decline. Of note, on a same-store basis, cash access and ATM revenue actually increased about 1.9%. This is the first overall increase we have seen in our same-store numbers in several years.

From a mix standpoint, the majority of the revenue improvement came from the ATM segment. Our credit and debit products were both down approximately 1.9% from the same-store number in 2010, much improved over the 5.5% decline in same-store revenues we saw in credit card cash advance products during the first quarter of 2011. And, similar to prior quarters, the majority of the same-store decline was driven by declining credit card usage. ATM revenue ex-Harrah's increased 2% as Harrah's 2010 revenue for this quarter was $10.8 million, and ATM revenue declined only by $9.4 million.

Our check warranty product continued to decline during the quarter by about 12.5%, compared to the prior year results. Caesar's, however, represents only approximately 11.8% of this decline. The remainder was due to the closure of a number of our booth operations, many of which were unprofitable. Revenues for Western Money Systems were $4.2 million, an increase of $2.7 million from the second quarter of 2010. As a reminder, we acquired Western Money in May 2010, so the quarterly comparison is not against the full quarter. The revenue from Western Money Systems in Q1 was $3.5 million.

As I noted earlier, our overall gross margin for the second quarter was 21.7%, in line with Q1 but a decrease from the second quarter of 2010, when it was 23.6%. We have seen a significant impact on our margins throughout the last three or four quarters due to some significant repricing in our contract renewals. As we look forward, it is important to note the very high level of visibility into the stability of our contract portfolio. We now have over 80% of our revenue signed through the end of 2012, with very few significant contracts that will be repricing or renewing during the remainder of '11 and in through 2012. While the margin decline is certainly not welcome, the removal of the uncertainty is. The largest decline in margins came from our credit card cash advance segment, where our margins have been under significant pressure from competitive repricing. The credit card cash advance margins have declined from 21.2% in the second quarter of 2010 to 17.4% in the second quarter of 2011. Keep this in mind for our discussion regarding Durbin later in this call.

In the ATM segment, margins declined from 17.3% in the second quarter of 2010 to 16.8% in the second quarter of 2011. Operating expenses, exclusive of depreciation and amortization, decreased by 12%, or approximately $2 million from the second quarter of 2010 and down approximately $3.9 million or 11.5% for the 6 month period ending June 30. We ended the quarter with 376 full-time equivalent employees compared to 466 at the end of the second quarter of 2010. Two quick points here -- this is a representation of our cost containment effort while still maintaining the necessary investments for our business, and we believe this is probably a good run rate looking forward. During the quarter, depreciation and amortization increased by approximately $1.2 million. This was due to the final purchase price allocation of the Western Money acquisition. This was a one-time increase to the previous estimated purchase price allocation. Additionally during the quarter, we had approximately $400,000 in expenses due to one-time executive severance.

As we have stated before, it is our intention to continue to focus our free cash flow on debt reduction throughout the year. From January through June 2011, we have had net debt repayments of approximately $22 million, and, as of August 9, 2011, we have repaid another $7 million. Total debt is currently at $180 million, down from $208 million in the early part of Q1 2011. As we stated previously, our cash EPS for the second quarter 2011, which includes non-cash taxes and non-cash stock comp, was $0.08 per share, and, if adjusted for the approximately $0.02 a share for the one-time costs associated with the final non-cash depreciation and amortization of Western Money's purchase price allocation, and $400,000 severance expenses, cash EPS for the quarter would've been approximately $0.10.

Our GAAP EPS was $0.02 a share for the second quarter of '11, again, adjusted for the refinancing cost, GAAP EPS would've been approximately $0.04. For the six months ended June 30, cash EPS, adjusted for one-time charges was $0.195 and GAAP EPS, adjusted for one-time charges, is approximately $0.10. Total borrowings at June 30 were $187 million, and we remain in compliance with all of our debt covenants. Using the 12 month trailing adjusted EBITDA as of June 30, our leverage ratio is approximately 3.07 times. At June 30, our cash was approximately $25.3 million.

Looking to guidance for the remainder of the year, we need to take a few minutes to discuss impact of the Durbin amendment on our debit interchange cost. On June 29, 2011, the Federal Reserve Board issued a final rule establishing standards for debit card interchange fees, among other things, which is scheduled to take effect on October 1, 2011. We believe the implementation of this cash on interchange could have both a beneficial impact to our customers and a material impact to GCA's future earnings beginning in the fourth quarter of 2011. We estimate that in the fourth quarter of 2011, the Durbin Amendment impact could be approximately 100 basis points of improvement to our full 2011 total gross profit margins, and in excess of 400 basis points of improvement to our total gross profit margin for 2012. This assumes, of course, the final regulations will be implemented in accordance with those previously published by the Federal Reserve. This calculation is net of the benefit that will accrue to our customers, which is also significant.

Having provided this insight, I would like to remind everyone that, although we have clarity on the legislation and have run the numbers through our model, the impact will depend on the ultimate interpretation and implementation by the card associations and Federal Reserve Board. Additionally, there is always the risk that the networks and associations may implement other fees that may offset a portion of these benefits. Although we try to be conservative in our estimates, we believe it is very important for all to clearly understand that these risks could greatly affect our projections and guidance. Due to the potential material impact of this, we want everyone clear on this and refer you to a detailed discussion of these risks in item 1A of our form 10-Q for the period ending June 30, 2011.

That having been said, we fully believe this legislation will be implemented as described by the Federal Reserve and that it will have a material impact on our financial performance for the foreseeable future. If we include the fourth quarter impact from this debit interchange reduction, we believe the Company's estimates for both cash EPS and EBITDA will end the year within our current guidance ranges. We are maintaining our full-year cash EPS guidance of between $0.38 and $0.43 and EBITDA guidance between $58 million and $65 million. These both would include the impact of the debit interchange reduction as well as the adjustments we discussed for one-time charges. We are still on track with our estimate for cash outlays for CapEx between $7 million and $9 million. However, we believe we are probably closer to the low end of that range, and we fully expect diluted shares outstanding for the year to be between 64 million and 65 million. We anticipate continued use of free cash flow for debt repayment throughout the rest of the year. With that, I'd like to turn the call back over to Scott Betts.

Thank you, Mary Beth. Now that we see a level of stability and predictability in both the underlying business as well as the vast majority of our contract portfolio being resigned, we are focusing all of our attention on opportunities for growth. While Durbin would provide a welcome kick-start, whether this transpires or not, we see several key areas for growth over the next 12 to 18 months. First, we are continuing to grow in the white space areas that we can, focusing on new casino openings, competitive accounts and international markets. In the last quarter we've opened up the Rivers Casino in Chicago, as well as the Galaxy Casino in Macau. Both of these properties have experienced terrific success in the early months and promise to be top 20 accounts for us. For perspective, while still early in these two properties -- still early, these two properties are on track to contribute between $6 million and $8 million in revenue annually. We are looking forward to the Aqueduct opening in fall, as it is clearly one that has the potential to perform on a similar basis.

The UK has successfully started up, and we will be launching several significant initiatives over the next 60 days to increase our growth rates in this market. Net, we feel these initiatives will provide welcome growth in the coming year. We feel, in today's market, the smartest thing we can do is to ensure that we are growing with our most dynamic and growing customers. The second area of focus in growth will be in cross-sales, or increasing our revenue per customer. Products like CSI continue to grow in the pipeline of new customers is growing. Our new our new CXC kiosk platform is a key growth opportunity for us as properties will increasingly be facing the replacement cycle on old devices.

We are leveraging new technology, functionality, pricing models and leasing options to give GCA the advantage in this segment of the market. We have learned a lot in the first year of ownership of Western Money, and the new kiosk design continues to receive good reactions in the market. We expect this part of the business to continue to grow at rates above the market. We are fully -- we are finally seeing a clear path to get QuikTicket into the market after a very long wait on the card association rules. This technology will lead to an increase product stream for cashless and account-based wagering products in the coming year. The new rules on debit transaction may allow us to complete more transactions in a self-service manner.

A new focus area for us over the next 12 months will be in strengthening and creating new partnership opportunities. We have identified a list of potentials strategic partners, targeting areas such as systems integration, marketing, and embedded payment engines for i-gaming. We think the timing is right for these types of partnerships today, and we feel our channel penetration, sales and technology capabilities and product offerings are in level to be very interesting to others. There will be more on this as we move forward. Lastly, we will continue to aggressively buy down our debt. This is the biggest lever we have on our cost structure moving forward. As you can see, we are well on the way, as we have reduced our debt approximately $29 million so far this year.

So, in closing, we are focusing on managing the growth -- managing and growing this business, in addition to the market recovery that may happen as we move into the next year. We clearly are in the strongest position in the category, and our customers are getting healthier. They will be looking for the products and services we offer, as they try to move their business forward. Having resigned most of the portfolio moving forward gives us the opportunity to focus more on expanding our products across our current base versus fighting for contracts. Make no mistake, we will continue to fight for all the business we can. But the extraordinary competitive environment we have just been through should settle down over the next 12 to 18 months, as we continue differentiate take ourselves from our other companies -- from the other companies. With that, I will open it up for questions and turn it back over to the Operator.

(Operator instructions).

Matthew Kempler, Sidoti & Company.

I have a couple of things -- I guess first -- going back to Durbin and the effect on your numbers. I want to make sure I had it right. You say that you expect, for 2011, to see a 100 basis point improvement, for the full year and then in 2012, 400 basis points improvement in the gross margin, after revenue share with your clients.

Yes.

Okay. And so how are your clients, in the discussions you've been having so far -- how are they responding to the post share that you're looking to offer them?

Well, the share that we have is already in our contract. So those are all contractually clear as the interchange goes up and down. So, there's really not a lot of discussion other than getting prepared for the final implementation.

Okay. So as contracts come up for renewal in 2013 and beyond, that contribution may change a little bit?

Yes.

Understood. Okay. And then I guess, when you're looking at the impact, I assume you're just talking about Durbin, but what is your assumption on the mix shift we've been seeing in credit card usage -- affecting those numbers?

Well, we've run them with kind of our current guesstimates on the transaction volume, so it -- there is a slight mix shift from credit to debit but it has certainly slowed, and I think that we all agree that, with the new debit cost structure over the next 1 to 5 years, it is difficult to even guesstimate what the mix shift is going -- what the reactions are in the marketplace as it becomes a competitive product against an ATM product.

Okay. Well, it certainly looks like the gross margins can be moving up pretty rapidly, and, with that said, we've pretty much just maintained our guidance range for the year, so I'm just wondering you said for the overall casino industry, looking for a slight improvement for the rest of the year. How different is that what you're thinking a quarter go?

I think that we were always kind of hoping for an improvement, and I would say going back to late 2010 when we are building our original forecast -- we were looking for -- we were ever optimistic and hopeful for a rebound at the end of '11. I think that we modified that at the end the first quarter saying just some modest recovery. And when we were saying modest, I mean, we are seeing it in some of our geographies -- we're talking somewhere 1% to 3%. You're not talking about dramatic growth. So that's really what we were looking for in there so most of these numbers just sort of assume that the numbers we're seeing now are going to be about where we are. We certainly get a little bit of increase in some of the jurisdiction, a little bit the decrease in some and the new locations opening up, but, I think, we're not going to see any real drama in those numbers.

Okay. And with Durbin are there any other major milestones that you're watching up to October 1-- that could affect your interpretation of how that could affect the business?

You know, --

We will continue to work with our sponsor banks and the associations as they come out with clarity on how they are going to implement it. They are still are certainly significant questions around the issue of splitting this or bifurcating this -- these rules around banks above $10 billion and below $10 billion still an open question for us. And, frankly, until we actually see the thing implemented in the first weeks of October, there's no other real milestones out there.

Okay, good. And then you mentioned the price stabilization you are seeing now in your contracts because you basically renewed 80% of your revenue through 2012. So, is it safe to say you've that renewed all of your other top 20 clients that may have come up renewal this year?

Yes.

Okay. And when you net out -- if you try to just do a big picture -- if you net out any losses you may have had in your portfolio versus the wins you've been having, do think your contract value has gone up or down or pretty much stayed the same from a customer basis?

Sort of ex- Harrah's or Caesars, right?

Yes.

That's sort of a big driver. My guess would be right now we are about stable on wins and losses, and we will probably see that tick up slightly to the positive as we move through the year.

Okay.

We start to get the full impact of the 2 openings we've had, and, with Aqueduct, and then again looking forward in 2012 -- we are certainly optimistic that the Ohio opening and things like that will continue to give us some opportunities here in the US, just as we look to expand Macao over the next year and also get the UK up and growing.

Okay. And then -- last question from me -- as the gross profit moves up, which means stable revenue, what are your thoughts on areas that you'd like to reinvest in from an operating spend standpoint, or do you think, even as we go into 2012, that there's a lot of leverage on operating line as well?

Well, I think we will look for opportunities to expand the business if we can. I think that, certainly within kind of close enough for government work, where we are seeing the expense line is pretty close to what I think a run rate of this business is. We've continued to invest, and, in fact, have increased our investment in development costs, as we've made savings in other parts of the business, and that's not quite obvious to the outside looking in. But, there aren't any major places like that. We -- as we look at moving forward in seeing what happens to the marketplace, we will always be looking for opportunities to do acquisitions or something else to grow the business. But, right now, I think, sort of plus or minus $1 million or so, our run rate of investment in the business is probably about right. Again, if we find other opportunities, we will accelerate that. Right now, I think, certainly for the short-term, you will see us get our debt down to where we want to more rapidly, and I think that's good and healthy for the Company.

Okay, thank you.

David Bain, Sterne, Agee.

I guess my first one is for Mary Beth. Did Q2 adjusted cash EPS you gave us $0.10. Did that include any normalization on the tax rate? It seems like you had a rather high tax rate for the second quarter.

It certainly adds back the taxes, and the tax rate really is a function of some significant fixed costs associated with some previously expensed stock comp. So that number is not attached to an earnings, it just is kind of a flat number so the percentage of taxes paid really is just a result of that fixed feature.

Okay. And then, I guess, Scott, what do you envision now as sort of the timeline on rollout data to revenue of QuikTicket?

You know, we've had quite a long wait here as we've kind of gone through some of the changes in the card associations. There is some work we need to do now that we've kind of got some clarity, moving forward. And we'll -- I think the value proposition still is strong as it used to be. At this point in time, I think that's probably all we will share for competitive reasons right now.

Okay. And then just when you're speaking with your clients about the product, it seems like we've seen a lot of regional casinos talk about marketing spend as a percentage of GGR come in a little bit, I guess rational levels, so in today's environment, versus 3 months ago, is selling a new product like that, is it easier, worse? Just try to get an idea of customer feedback and terms of (multiple speakers)-- --

I think our customers in general are healthier than they were 2 years ago -- feeling slightly more optimistic. I don't think anybody's saying their business is going to grow a double-digit right now. But I think everybody's wisely managed their business through this downturn. And I think what I feel, at least from the customers, is more ability to think about it and talk about products services and technologies that will help them compete in the long-term and lower their cost structure both of which they still have to do and those who do it better will be better off competitively. So, when you talk about marketing expense and having to be more targeted and understanding that, CSI is the perfect product for that, and I think we are seeing that pipeline starting to grow materially. So, that's good for us. We do have a replacement cycle on kiosks that people are going to have to be facing, and I think the opportunities as we move forward and, where we are with our technology, puts us in a good position to continue to penetrate the market on the equipment side of it. A bit unlike slot machines, our machines do have a wear factor to them that's higher, so there is a finite life to those. And again, we are seeing high receptivity on the new devices, both in new casinos as well as existing customers that we have in looking to upgrade their floor with those. As we move out products that have long-term potential, lower their costs and cash handling cost they are going to be receptive to those. One of the things that we've talked about probably a year ago when we talked about our strategy, one of the things we are very focused on doing is getting these products to the market in a way that does not require huge capital investments. Okay? These run on the current networks, they run on our current equipment. They interface with the current slot management systems. They can interface with their current promotion and player tracking systems. So the ability to just overlay this without huge upfront cost is -- we think will be a big competitive advantage and terms of uptick in the market.

And is some of that strategy then moving to more of a lease model?

I think equipment always -- we've always had the financial strength going back years in terms of sort of creating a full-service kiosk environment with some of our partners back then. We've always been able to leverage our sort of financial strength and the ability to offer options to customers, either adjusting commission rates, being able to provide, basically, quote-unquote a leasing type arrangement -- our ability to look at other costs and services, because we are so integrated. All of those, I think, will just continue to increase our opportunity to be able to lower sort of that barrier to buy which is the tight capital budgets today.

Okay, great.

(Operator Instructions)

Ed Antonian, Chartwell

Can you guys tell me what the gross profit margins are in the Check Services business?

I don't know if we've disclosed that previously.

I don't know if we broke that out.

I don't know that that's broken out in our public filings. Suffice it to say that it's fairly significant.

Okay, and similar for, obviously, Central Credit

Yes.

Different from Central Credit. Check services because -- Check Services certainly has a warranty -- there are different cost and the Central Credit is more of a service business as opposed to the actual --

Is there anything below the line in the Op Expense, the normalized Op Expense the $15 million or roughly $15 million -- that kind of pertain specifically to Check Services essential credit?

Not that I can think of. I mean there may be some minor supplies or something -- nothing that I can think of that's material.

And last is where would the revenues for Western Money show up?

In other.

So, combined with essential credit?

Combined with Central Credit and Check Services -- really there are 4 or 5 different --

You break out Central Credit and other is $6.6 million, so you're telling me that includes the $4 million of Western Money?

I've got for other in the quarter -- so were talking about the same -- Central Credit and other, that $6.6 million does include Western money.

And how much did you say was Western money?

For the quarter, I believe $4.12 million -- $4.2 million, I think.

And versus last year?

$3.5 million-ish.

All right. And that clearly is a lower margin than the core Central Credit and Check Services.

Yes, it is much more traditional manufacturer's margin.

Okay. That's helpful.

Michael Chapman, Private Capital Management.

A couple of quick questions -- the $15 million -- that's the cash G&A before soft based comp, is that right?

That's correct. That's just a traditional cut of OpEx.

Okay. And then, just on the new customers, you guys mentioned you had 2 of them as $6 million to $8 million, per year, and you mentioned that you kind of locked up your customers and you're feeling relatively happy with kind of where things are. Given that the progression of revenue in last 3 quarters have been $138 million, $135 million, $135 million, is this $135 million level of revenue the new -- what you would consider kind of a base level within $1 million or $2 million? And then you would add the new customers on top of that? So, given what you said, should we expect sequential revenue growth in the next 2 quarters?

Well, there is a little bit of seasonality in the revenues, not in all of our market but in some of our markets. So I don't think you can just take that $135 million and roll it forward, but you certainly can, in a modest amount of sort of seasonal impact, use that as a relatively good base, because both of those new properties were not in the $135 million number.

Right, and the third quarter tends to be a better seasonal quarter, correct?

Yes.

The fourth quarter tends to be --

The fourth tends to be slightly lower.

Right. You should be sequentially better just on seasonality and so plus 2 customers, who weren't fully reflected and depending on when Aqueduct gets up and going.

Correct.

Okay. Then just on free cash flow -- you guys have paid down a substantial amount of debt, but it hasn't really come through from the operating cash line. It seems to be more from cash in the balance sheet. Is the second half of the year going to kind of normalize, and where should we expect that to come from? Prepaids are up where they were over last year. Where should we expect that come from outside of just operating cash?

You have to -- when you look at the cash flow statement this is very -- I'm getting myself accustomed to it, but it really is very difficult to assess the movement in working capitals that are just based on settlement date and days. So I would really drive you back to EBITDA minus interest in the fixed cost because the rest of the things tend to move somewhat in sequence. There may be $1 million or $2 million that moved outside of sequence, but most of those, I am, as you are trying to get a handle on how to read the cash flow statement relative to really where my free cash flow sources are. And so, for the 6 months, let's say my EBITDA is $28.5 million, and I've got roughly, call it the better part of $10 million in interest expenses, some of which were non-cash about $1 million of it. I think you're really looking at the bulk of that $20 million-ish is coming from operations the way that you would traditionally look at it and probably somewhere around $10 million that came our of cash that was on the balance sheet that needed to be deployed.

Okay, when you're looking at -- or when I'm looking at going forward a trailing 12 month number for net cash provided by or used in operating activities, is that not going to really fit very closely with EBITDA minus interest?

No. It really -- because of the way the settlement receivables and payables work, day of the week is important. So, depending on the comparison, if you're looking at a Monday or a Friday, things could skew, and so I would probably use a more traditional kind of EBITDA minus CapEx minus interest to get a real -- a better sense of how the cash is being used because really that's what I'm playing with, if you will.

I can understand quarter to quarter basis but shouldn't over time, over 12 month period, what your able to generate from EBITDA minus interest show up in the net cash or is it just -- is the distorting effect so big that you can have massive --

It should, but, again, if you're starting with a strange 12/31 date and ending -- I'm not going to say in every year that12 month cash flow is going to work perfectly, but it should -- but barring the kind of matchup of the working capital items settlement receivables instead -- a payables and accrueds kind of roll those together. The rest should kind of give you a sense of where the cash went.

Okay. Then just on the guidance on the Durbin impact, which is very much appreciated. If it is roughly 400 basis points year-over-year, and then maybe down the road some of that gets given back to the customers, but year-over-year on that $500 million, $550 million revenue run rate that's a net more than $20 million that should show up in free cash flow to you guys, is that about right?

You did the math.

What's that?

You did the math.

Right. And I'm not completely off base there?

No, that's the math.

Great, I appreciate it.

There are no further questions in the queue. I would like to turn the conference back to Management for any closing remarks at this time.

No, I think we are all set here. I thank everybody for their participation today, and we will talk to you next quarter.

Thank you, ladies and gentlemen, that concludes the Global Cash Access Holdings second quarter 2011 earnings conference call. We thank you for your participation. You may now disconnect.