Everi Holdings Inc (EVRI) 2012 Q4 法說會逐字稿

Good day ladies and gentlemen. Thank you for standing by.

Welcome to the Global Cash Access Holdings Inc 2012 fourth quarter and full year 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 March 12, 2013. I would now like to turn the conference over to Julie Yusgart, Treasury Director. Please, go ahead ma'am.

Thank you and welcome everyone to GCA's 2012 fourth-quarter and full-year earnings conference call. Joining me on today's call is President and Chief Executive Officer David Lopez and Chief Financial Officer Mary Beth Higgins.

On today's call, David will be giving an overview on the Company's progress and then Mary Beth will provide a brief update on our financial performance in the fourth quarter and full-year 2012, as well as a review of our guidance for 2013. Following these comments, we will be happy to take questions.

A few important items before I turn it over to David. First we have posted our Earnings Release to the Investor Relation 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 PM Pacific time.

As we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as a currently see it and are subject to a number of risks and uncertainties. These include, without limitation, -- Statements regarding market and segment trends and conditions in the cash access kiosk and gaming industry for 2013 and future periods. The anticipated impact of less favorable pricing terms associated with several customer contract renewals in 2012 and 2013. The anticipated impact of certain customers not renewing their contracts.

Flat to low industry growth. No significant our projected casino openings in 2013. Anticipated significant increase in our kiosk sales and service business in 2013. Continued investment with respect to the Company's technology infrastructure and personnel.

Our product pipeline and ability to introduce new products and services. Our current perspective on the internet and social gaming landscape. Our current perspective and belief about our strategic alliance with Live Gamer.

The implemented changes to rules and regulations regarding the interchange reimbursement structure for ATM transactions. Other uncertainties regarding changes in network fees on our business. Our projections and guidance regarding cash, EPS, adjusted EBITDA and other financial metrics. Regulatory approvals for new products and our competitive position.

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 David.

Thank you, Julia, and good afternoon, everyone. After nine months on the job and amazing enough just over two months as CEO, I'm truly pleased to be here today discussing Q4 and 2012 results, our view on the current business and the coming fiscal year.

On today's call, we will focus our time on the following five topics. First, of course, we'll take a quick look back at 2012. Second, we'll do an operational excellence -- have a discussion operational excellence and customer service. Third, product development and delivery. Fourth, will be people and culture. Lastly, we'll talk about returning value to our shareholders.

Let's take a look back at 2012. Clearly, fiscal 2012 was a great year of financial performance driven by a slight recovery and gain, Durbin, and the re-acquisition of the Caesars' business. Full-year EBITDA performance was the best in 2009, the fourth quarter and the year came in at the high end of our rate of guidance, and same-store numbers were positive within the quarter.

With the help of our Global Gaming Expo in October, we exited the fiscal year with good momentum in the sales pipeline for our kiosk business. So, with a positive fiscal 2012 behind us, we know we can't rest on our laurels. Our Management team is highly focused on 2013. Having reviewed the previous year from an operational and product delivery perspective, we know we have a lot of work ahead.

Looking back at the last 12 months, it was much too easy to simply focus on our wins, the account renewals and positive financial performance, as it was a successful year. But, in order to improve our Business for the coming years, we identified areas where there's room for improvement.

First example is where we have seen some margin degradation, which is mainly driven by competitive pricing in the market for core cash access services. In this space, we have seen smaller competitors continue to push down margins in an attempt to gain business from single location accounts, mainly in tribal and smaller gaming jurisdictions that have a lower bar for licensing. In the primary or larger markets, there's been some compression in margins, but to a lesser extent as evidenced by some recent renewals.

Most disappointing over the last year or so is the loss of a couple of long-term customers, one from late 2011 and another being Mohegan Sun which happened more recently.

Although pricing tends to be a leading factor for customers to change service providers, there is rarely just one reason for the change. With this in mind, we've examined our product strategy and delivery, our account management and our tactical approach to winning deals. These are all areas that affect our win-loss rate with customers, and our leadership team understands we must improve our thought process and execution, in order to maintain current customers and acquire new accounts. This is where operational excellence and customer service are so incredibly important.

Let's go ahead and move to the second topic of operational excellence and customer service. Blocking and tackling fundamentals and customers first. These aren't just clichés our business jargon, they're what I believe are the foundations to a good business practice. Business fundamentals and customer service are high on my list of initiatives for 2013. When the majority of my professional experience in operations, product management and the launching of products, putting customer first is my top priority.

These experiences are not just history for me, but they are indicators of where my focus has been with the team since joining GCA, and even more so since becoming CEO. A term we like to use when discussing customer service is operational excellence. In order to achieve our product or our customer service goals, we must expect excellence of ourselves, so that in turn, our customers will expect the same.

Being thought leaders in product strategy is extremely important and we will continue to do so. But the fundamentals of business, committing to best practices and operations, and blocking and tackling aren't just imperative elements of customer service, they're necessary for strategic execution, as well as being the foundation for growth, be it organic or otherwise. Execution needs to be in our DNA. Our senior Management team is crystal clear on the objective and is focused on delivering.

Moving on to our third topic, product development and delivery. On previous calls, we have discussed product development, product strategy and how the integration of our product lines, both existing and future, will give us a competitive advantage. While I agree 100% that a full suite of cash access products, coupled with a robust kiosk platform, along with complementary products like QuikTicket and TableXchange, are a benefit to our customers, we will be more prudent with how much detail we disclose until our products are delivered to the market.

Because we are the only pure gaming payments company that is public, I believe it is not in our best interest to share tactical product information on conference calls. That said, we will do our best to share high-level vision and long-term product strategy, but will carefully limit our sharing of product details and specific launch dates when addressing these topics on calls.

The most important aspect of delivering a new product to market is readiness to execute for the casino customer and user friendliness for casino patrons. My aim is to keep our investors and customers informed and aware of our strategy assuring everyone we understand the needs of the market and that we are uber focused on delivering on those needs.

In 2013, our product priorities and many, ranging from the upgrades of existing core products to establishment of our iGaming solutions. With our iGaming partner selected, improved technology and payments leadership in the C-Suite, and of course, the fact that Nevada and New Jersey are moving forward to allow online gaming in their respective states, we are focused and this business opportunity has our full attention.

Although some states are pushing forward on the legal front, it continues to evolve and many questions remain unanswered. We do know we will position ourselves to be an approved and licensed vendor for online gaming payments, capable of providing the most basic payment wall. Or the more complex solution of the mobile wallet, serving many purposes for both the online gaming operator and those in traditional land based casinos. Undoubtedly, our aim is to once again the user-friendly for the gamer and the casino operator.

Our last topic before I turn it over to Mary Beth is people and culture. On the last call, I spoke about people and the importance of culture within the Organization. Throughout this call, you may have picked up on these elements as people are at the heart of every topic we've covered so far. Today, I want to discuss the C-Suite and how Scott Betts and I have worked over the last nine months to solidify the team.

Although we discussed this previously, perfect example of focusing on the fundamentals was the hiring of Robert Myhre, our CIO, who not only brings his experience in the debit and prepaid card space, but he also presents us with the ability to build a strong team and recruit high-quality talent in a technology space relevant for iGaming and our core products. Rob has a great pedigree and has raised the bar for excellence in our operating group and R&D. Although there's a lot of work to do, I know we have the right CIO for the job.

More recently, we have promoted some outstanding talent from within the organization, by elevating Scott Dowty to the position of Chief Marketing Officer. Scott, with over seven years at GCA and 18 total years in the payments industry adds experience and a very high level of intensity to then team, both being important for his position in leadership. With these two additions to the C-Suite, I'm confident the team can execute on our current endeavors and future business expansion opportunities.

As previously indicated, I will continue to communicate regarding people and culture, as they are the catalyst at every company. Within the C-Suite, we now have a wealth of ops, finance, gaming, payments and tech experience all sitting around the same table. With these recent additions, I can't express how confident I am about the potential of our team leaders.

With that, I will turn it over to Mary Beth, before I close in my last topic of returning value to our shareholder.

Thanks, David. Good afternoon, everyone. As David suggested, 2012 ended at the high-end of our revised guidance.

Our cash EPS, which is defined as net income plus equity compensation expense plus deferred income tax expense plus amortization, divided by diluted shares outstanding, was $0.17 and $0.84 for the 3 and 12 months ended December 31, 2012, respectively. Average shares totaled $68 million and $67.3 million for the 3 and 12 months ended December 31, 2012. Adjusted EBITDA, which excludes non cash stock compensation expense, for the fourth quarter of 2012 was $16.4 million, a decrease of 18% for $20 million in the fourth quarter 2011. Adjusted EBITDA was $79.3 million for the 12 months ended December 31, 2012, an increase of 29% from $61.7 million for the same period in 2011.

Looking at same-store cash to the floor, our best indicator of industry trends, we have now seen positive year-over-year comparisons in both 2011 and 2012. Overall growth in the same-store cash to the floor was approximately 2.9% for the year, and was 4.6% for the fourth quarter of 2012. We continue to see growth in our cash advance transactions in both number and size, up 3.5% in number of transactions and 4.1% for cash to the floor with a continued slight shift to PIN, debit and ATM. Although ATM cash to the floor is up, absolute transaction volume is down by less than 1%, indicating a growth in the average transaction size.

Before we look into some of the details behind the numbers, I want to remind everyone that the biggest impact to segment revenues for the fourth quarter and full year of 2012 for both cash advance and ATM was the inclusion of the MCA related contracts that were acquired in the fourth quarter of last year. These contracts accounted for approximately 7% of the revenue growth in the cash advance segment for the year.

On a segment basis, cash advance revenues, operating income and margin were $55 million, $15.4 million and 28% for the fourth quarter 2012. This was a 6% revenue increase from Q4 2011, and cash advance operating income was up approximately 2% from the same quarter in 2011. The full-year 2012 revenues operating income and operating margin were $227.5 million, $63.8 million and 28%. Revenue was up 11.6% from the prior year and operating income was up $25.3 million. These were a result of both the inclusion of new properties, including the Ceasars' property as well as the impact of Durbin on our cost-of-debit transactions.

On a segment basis, ATM revenues, operating income and operating margin for the fourth quarter of 2012, were $69.8 million, $6.7 million and 10%. Revenue was down approximately $0.5 million from Q4 of 2011. The full-year 2012 revenues, operating income and operating margin were $303.2 million, $32.3 million, and 11%. Revenue was up $19.4 million or approximately 7% as compared to the year ended December 31, 2011. The ATM margin decreased slightly in the quarter, and was primarily a result of increases in surcharges that were enacted by casino customers to offset the reverse interchange pass through that came in Q2.

On a segment basis, check services revenue, operating income and operating margin for the fourth quarter were $5.7 million, $2.9 million and 51%. Revenue was down approximately $800,000 from the prior year. Full-year 2012 revenues, operating income and operating margin were $25.4 million, $13.9 million and 55%. Operating income was down 1.9% from 2011.

In our other segment, which includes primarily the result of kiosk sales and services and central credit operations, on a segment basis, other revenues, operating income and operating margin for the fourth quarter were $5.7 million, $2.9 million and 51%. Other revenue was $9.2 million for the fourth quarter of 2011, a decrease of $3.5 million. This comparison was difficult given that we had a very large casino opening in the fourth quarter of 2011, which resulted in strong kiosk sales for that period.

The full 2012 revenues, operating income and operating margin for the other segment were $28.4 million, $14.5 million and 51%. This compared to $30.2 million in other revenue for 2011, a decrease of 6% or $1.8 million.

Operating income declined $351,000, or 2.4%, from $14.8 million to $14.4 million. As we've indicated before, the timing of equipment sales is more difficult to predict given the fluidity of delivery dates and the delivery schedules, so, this number can fluctuate quarter-to-quarter.

Corporate operating expenses were $18.2 million for the fourth quarter of 2012 as compared to $16.3 million for the same period in 2011. This was primarily due to higher payroll and related costs, $1.7 million of which was for CEO separation payments and $1.5 million of that $1.7 million was non-cash. As compared to the prior year for the full-year 2012 corporate operating expenses were up approximately 7%, which was consistent with our expectations that corporate expenses would be up approximately 6% to 8% for the full year of 2012.

Looking to our guidance for 2013, the Company estimates that cash earnings per share will be approximately $0.74 to $0.83 on diluted shares of approximately 67.2 million. This is a slight tweak from our preliminary estimates as we left room for some share count interest expense variability. Adjusted EBITDA remains the same as our preliminary guidance and is estimated to be between $70 million and $74 million.

As we indicated in our press release earlier this year, our outlook is based upon margin degradation from customer renewals in both 2012 and 2013, the anticipated impact from the loss of customers, a stable but low single-digit growth in the US casino industry with no significant or projected casino openings in 2013. However, we do anticipate growth in our kiosk sales and service business in 2013.

On an operating expense basis, we anticipate slight increases to SG&A, due to the planned relocation of our corporate headquarters in early 2013, which will impact occupancy expenses, as well as continued investment with respect to the Company's technology infrastructure and personnel.

Looking briefly to the balance sheet, as of December 31, 2012, our total borrowings outstanding were $121.5 million and our leverage ratio was approximately 1.6 times. Cash at the year end was high at $153 million, due to the calendar for New Year's and limited banking dates for settlement. This cash increase was offset by a similar decrease in receivables.

Our capital expenditures were $13.7 million for the full year of 2012. After considering the proceeds from the sale of fixed assets of $900,000, our capital expenditures are only slightly higher than our revised guidance of $12 million. Capital expenditures for 2013 are estimated to be between $14 million and $16 million. This is primarily due to costs associated with the development of our iGaming platform, continued product improvement and expenses in connection with our corporate office relocation in 2013.

With that, I will turn the call back over to David for some closing remarks.

Thanks, Mary Beth. I'd like to close today with our topic of returning value to our shareholders in 2013 and beyond.

On our third-quarter call, we announced the share buyback program with a target of $40 million over the next two years. We also indicated our strategy to be in the market consistently so this program would be predictable for our shareholders. Since that announcement, we have repurchased a total of 519,000 shares. Throughout fiscal 2013, we will continue our buyback program and align with this strategy.

The only caveat is if we identify more productive use of capital than buybacks or debt repayment. This may come in the form of investments in the core business, an acquisition, or other growth opportunities. If anyone of these initiatives were to be started, it would require us to evaluate the level of buybacks but not necessarily make a change.

Beyond our goals for excellence and executing on the plan in place, the team and I are intensely focused on shareholder value in the appropriate expansion of our business. With an improving balance sheet and strong cash flow, we are poised to make changes and take the appropriate steps towards GCA's future.

Fiscal 2012 was a solid year of financial performance, and although we now transition into a challenging 2013, we do so with a newly assembled executive management team that is focused on delivering excellence to our customers and returning value to our shareholders. Personally, I'm not only excited to be here leading GCA, but I'm fired up about the team, the products, and our potential for the future.

With that, I will turn it back to the operator for some questions.

(Operator Instructions)

David Bain, Sterne Agee.

First, I was hoping just to go in again on that tweak made to the low end of guide. I guess, as David remarked, did that relate to the conservatism on potential repurchases in case of some compelling investment? And if that's the case, can we get your overall thought process on acquisitions or investments and them being accretive or strategic and just how you think about that big picture?

I'll start with your second part of the question and then I'll turn it back to Mary Beth for your first part.

So, on acquisitions, I think there's probably three types of acquisitions. Right now, I don't know about a thought process to share with you, because we haven't identified anything in particular. Obviously, there's the good old tuck and run, where it's something small. We can grab it and run with it and it is going to be accretive and it's going to be easy and it will be something easy to assimilate for our operating group. Sort of the more moderate sized acquisitions, that we'd have to be a lot more thoughtful about, consider the impact to the operating team and then there's obviously more transformative ones.

At this point, David, I think it's -- I've been here nine months. I've been two and one-half months on the job as CEO. It's certainly a focus. I think it's part of good fundamentals of business and certainly of growing businesses. I think that at the appropriate time we'll share more thought on where we want to go with acquisitions.

So, with that, I will kick it back to Mary Beth for that first part of your question.

We just honestly tweaked the cash EPS, because there are many more variables in that than the EBITDA. Originally we did preliminary estimates, we lined it up pretty tight with the EBITDA.

The reality of it is, given interest rate environments and stock volatility, we could buyback more. We could pay down more debt. We could refinance the debt and lower the interest, I mean there are some variables in that that aren't actually in the EBITDA number. So, we just gave ourselves a little bit of range around those topics and it was probably a step one way or the other.

Okay. Great. Just two more if I could.

One would be on the -- your partnership status with the casinos in states where online gaming framework is legal. Assuming these guys do go live ahead of potential full legislation, one would think that the integration period could begin ahead of that point. I guess the question is, when formalities could begin with operators on the interactive front?

That's a good question, David, and something, I think, that has come up now a couple quarters in a row. Interestingly enough, I think on the last call that we had, someone asked specifically about one of the leading casinos that wanted to be out in front of this in Nevada. They wanted to be in the market September, October. Here we sit March 12, and they are still not in the market and I'm not sure when they're going to be in the market.

So, discussions are underway and I think that's the most important part, right now, is that we're getting in front of customers. We're sharing with them our vision, how that vision of the online space and our eWallet integrates with the brick-and-mortar casino. I think that's the most important thing for us, right now. We obviously have our core cash assets business. We have our kiosk business in the casino, which is a nice entry point and a way to interact with the eWallet if you're an online gamer, and of course, the online gaming solutions.

As I said in the prepared remarks, anything from a payment wall to the full-blown eWallet is what we are focusing on. Again, just, I think to get out there in front of our customers, keep them aware of our game plan, be aware of how they want to look at the business and really use that feedback as a way to shape our strategy going forward. I'd love to say that it's right now and everything's here and now, but you probably know the casino we're talking about and, again, they're well behind schedule and that's right here in Nevada.

Right. And then just final one of I could on QuikTicket, and understanding your sensitivities there.

But, it was said that if the products in beta you would announce it. Is that, one, still the case? Two, I was hoping just to hear your big picture on pricing power as it relates to that product, if I could?

Well, I think that our bolt-on products and our kiosks business could afford us some pricing power. I'd be careful with the word power, there. It affords us the ability to go into the casino and maybe be a leader in an RFP or be the top pick in an RFP, but we may not be, and probably are not the cheapest option for them. So, the casinos would be looking at us as more of a strategic option, then just a pricing option.

I think that's, when you look at our bolt-on products, QuikTicket being one of them, as far your first part of that question, just to make sure that I answer it and I don't just forget about it. Is that, yes, we will share with you when we have, I'd say, a couple installs in the market. What's really important, David, and I think you know my history and you know, sort of, my upbringing in the vendors space.

To me, the most important part is, again, in my remarks earlier, is that the product is ready. It's to our satisfaction. It's going to be user-friendly for the casino patron and that reporting and every piece of the interactive elements of that product are what we want it to be and what our customers, the casino operator want it to be, before we really talk about it too much on the conference calls.

There will be a point, yes, we'll share it when we get a couple of installs. We're not quite there yet. When we get comfortable, we will definitely share that with you.

Okay. Great. Thank you, guys.

George Sutton, Craig-Hallum Capital Group.

David, just to close the loop on that last question, you've talked about going in more strategically to sell. And I'm just curious if you'd give us an up date on your comfort, now, with the sales force ability to sell at that more strategic level and the signs are getting back from customers?

Let me just start with the sales force. You know, I talk a lot about people. I love our sales force, I do. I think that our sales force, coupled with -- we have an executive pairing program where we go out and each executive, VP and above or senior VP and above, gets coupled with a salesperson in the field.

We're not just running point through the salesperson, but we're actually running point with executives out in the field. So, Mary Beth has an account or two. I have a few accounts. We go out and visit these people. What I am happy with, is the decision-makers that we can get in front of.

Again, I've been in the business over 15 years. This is a sales force and the leadership, and I mentioned Scott Dowty and others, they can get us in front of the decision makers. I'm getting in front of anything from a director of finance, CFO, COO and at times even higher in the organization. I'm very pleased with who we're getting in front of.

I think that we will continue to get better through some of the things that we're doing in our sales program, to be more strategic in our selling. We are certainly strategic, especially being the fact that we have a kiosk business, we have a fully integrated business. In the coming future, we'll have an eWallet, too, for the online space.

You mentioned early in your prepared remarks that you're seeing good momentum in the kiosk area. And I wondered if you could give us a little more detail there and specifically, international opportunities you are seeing?

That's a very good question, especially on the international front. We have some international opportunities on kiosks. It is not the size of our domestic business by any stretch.

A big focus for me, right now, is the kiosks business, overall, efficiencies in the operation side, how we sell it, how we package it. Certainly, domestically, the funnel is doing fantastic.

Internationally, I think that there's opportunities -- there might be some in Latin America. There certainly are some in Asia and I'm going to say Asia more broadly instead of just saying Macau. We have opportunities out there. International, overall, is something that we want to focus on.

It's definitely one of the focuses for our chief marketing officer. He understands the need to grow the international business. It's an area that I've spent a good amount of time in my career. Nothing specific for you, but it is a focus for both Scott Dowty and myself. I'm sure I have some international trips in my near future.

Lastly, for Mary Beth, could you give us a sense, what sort of comp store assumptions are you making in your guidance and with respect to the proactive move your taking, in terms of assuming some changes in future pricing? Can you just give us a sense of what your thought process is there?

The base business, we're looking at low single-digit growth in kind of across product lines, probably ATM less so than cash access, just based on the same-store trends. Part of why give you those same-store trends is so that you can see kind of what we're seeing. It's not necessarily a predictor, but it gives us a sense of momentum and there's really no metric for us to use except gaming revenue and gaming outlooks that we get, which are pretty much across the board kind of slack for 2013, really low single digits to flat in some jurisdictions. So, the top line is really pretty modest growth.

In terms of the margins, I think what we were trying to prepare you for is the guidance for 2013 absolutely takes into consideration some of our beliefs either about the reality, because we've done some of these at the end of 2012. Or some preview into 2013 that we've baked into our forecast based on what we already know, as most of you know, as you're preparing for renewals, they happen. Generally, the discussions happen well ahead of the actual renewal.

We have some visibility into those negotiations already. For those that we had, we baked them in and really -- between those compressing margins and the fairly large Mohegan move, those are really what combined -- I mean if you do a little bit of margin tweak and then throw Mohegan in, you'll get to our number pretty easily.

Got you. Thanks, guys.

Matthew Kempler, Sidoti & Company.

First, I just wanted to get your perspective on what's changing the landscape that the competition is intensifying at the local level with the smaller players?

That's a good question. As far as like what's changing it in particular? I don't know.

I mean, I don't sit on their side of the fence and I don't really know how they formulate their plans or even what, really, they're getting into. I can't get into the mind of competitors and some that appear to maybe be doing business that very skinny or no margin. What motivates that? I'm not sure. I think they're just trying to maybe get out there and get a little bit of business and get some momentum.

I don't really know that I can comment on it that much. I mean, I track the competition very closely. We have a very good idea of what their products are, what their strengths and weaknesses are.

But, again, I think what they're aiming for is more of just to get the casinos to make a tactical pricing decision. And to stay away from high-level, strategic decisions that would involve company -- a company like GCA, where they know that we have a full product suite and we're going to have an intranet solution and an eWallet. I think that they're taking it from a tactical point of view and trying to drive them away from long-term strategic decisions.

Okay. And then, you listed earlier a number of the strategic priorities for GCA. I'm wondering from your view, what do think are the most important priorities that will protect market share, if you were to prioritize them? What will help protect the market share and preserve the margins? What do you need to implement first?

I think the execution on technology and operations it's probably, unfortunately, just lumped into number one. The team would probably tell you I have five number ones. So, I don't know if I can prioritize them for you.

I think execution in technology side, execution on the operational side and getting back to a question earlier, which was regarding how we sell our products with the sales team and how we turn those into strategic sales and at the right level with customers. These are all very important. They really all go into the pot and something that we look at very closely.

We review regularly and when we don't have success, we always do a postmortem and go through exactly what happened, why we think a deal didn't happen. Sometimes, we're just making suppositions, but we're really piecing this thing apart department by department that touches customers or has an effect on our products. That's development, that's operations, that's customer service and net sales and marketing and it goes right up to the executive team in the C-Suite where we're out visiting customers.

Okay. And then, shifting over to iGaming. I know things are still in progress, but are customers today at the vendor selection stage? If not, when does that start to happen?

I think it's early for most customers to be in the vendor selection stage. I think some of them would really like to be in that stage. Reading the tea leaves on when that will happen is -- it's still hard. It's still early to say when internet is going to take off.

We know it's going on in Nevada, New Jersey. We heard some sort of grumblings today about some legislation for Pennsylvania. We heard earlier in the week about Illinois. Everybody's getting moving on this, which perhaps is just a good thing. Because, it may push this to a federal level if enough of the individual states start to take action.

Liquidity is important, so there's going to have to be compacts between states. I think that if it gets to the federal level, that's when we'll really see traction and that's when we'll really see customers in their readiness stage to work with GCA and to make a selection on an eWallet. I think it's early, and I think our job right now is back to what I was saying earlier, is just stay in front of every customer that we know wants to have an online solution. Make sure that we're at the forefront of their discussion and that they understand our strategy, long term.

Okay. And then, just lastly, I think it was this time last year or maybe it was the third-quarter call, I'm not sure, where Management said based on our contract discussions and what we've already signed, we have about 80% stability into our 2012 revenue. I'm wondering if we have -- if you feel like we have similar visibility today? Or if the discussions are a little bit more back-end loaded this time around?

I probably wasn't here for those discussions, so -- I'm sorry, can you clarify that a little bit?

I know what he's referring to. I just don't have the metric. We had, early last year, signed a couple things earlier and really had what took -- just so we put this in perspective.

What we normally would have every year is something 30% to 35% renewal. We'd already signed ahead, a portion of those, so we felt maybe there was only 20% of those still out there during the year. I don't really have that metric.

I didn't do the work on it. I don't think that there are any more front or back-end loaded. We've doing a lot of -- like I said, we have a lot of pre-work done on some of those, but you hate to jinx those, right Matt? You just say, I'm not going to count them in the done.

Yes. Now I see where you're going with the question. Mary Beth's right. About one-third of the business every year is up for renewal. I don't have that metric in front of me, either. We do have our entire list of what's up-and-coming, but we don't bring that on the call with us here.

Okay. All right. Thank you.

(Operator Instructions)

Chris Gamaitoni, Millennium Partners.

Could you give me an insight into who may be a competitor in the virtual wallet product? And, what the barriers to entry or competitive dynamics that you foresee in that solution being?

Well, that's a very good question. As far as the competition, we track them pretty closely. We try to track exactly what they're going to be offering and that's a big spectrum of what competition could be.

We really don't know what all the regulations are just yet. We know that in some instances you might need a money transmitter license and some instances you're definitely going to have to be licensed in Nevada or New Jersey. We haven't really seen which one of those jurisdictions will be the tightest yet on regulations.

As far as who the competition is, I think that if you go out and you look into the online world outside the US, some of those people may try to come into the domestic US business. I hate to mention any of their names on the conference call and give them any free press. I think I'll just refrain from that. I do apologize, but they're out there.

We study them. We watch them very closely. What we're trying to do is make sure that between alternative payments, simple payment walls and a full eWallet solution, that not only performs its job in the online space, but can cross over into the brick-and-mortar casino. We would just like to be a one-stop shop for that a make sure that our customers know that we can not only meet their needs on the brick-and-mortar side, but we can do it online, as well.

Has there been a significant focus from the limited regulatory discussions you've had about -- I just see anti-money laundering issues probably becoming the biggest issue from regularly spectrum from this space. And how that feeds into foreign counter parties.

Yes. I think it is a big deal. I think it probably should be a big deal.

I think that as the regulations come out, obviously, GCA, we root for the appropriate regulations in all these areas, know your customer, anti-money laundering. We obviously think that the bar should be relatively high for the online space versus brick and mortar. We'll wait and see how that goes and obviously we're in very close discussions with each jurisdiction right now.

Thank you so much.

Those are all the questions we have for today. Ladies and gentlemen, this concludes the Global Cash Access Holdings Inc 2012 fourth quarter and full year earnings conference call. We thank you for your participation today and you may now disconnect.