Transcript Slide 1

Global Axcess Corp
Presentation for
RENN Global Annual Meeting
and Investor Conference
Presented by: George A. McQuain
President and CEO
May 14, 2010
OTC BB: GAXC
Safe Harbor
The Safe Harbor Statements in our earnings release, 8-K, 10-Q and 10-K filings also apply to this
presentation.
Readers and listeners are cautioned not to base their entire analysis of the Company's business
and prospects upon isolated predictions or comments, but instead are encouraged to utilize the
entire available mix of historical and forward-looking information made available by the Company,
and other information affecting the Company and its products, when evaluating the Company's
prospective results of operations. For further information on factors that could impact Global
Axcess Corp and statements contained in this presentation, reference should be made to Global
Axcess Corp's filings with the Securities and Exchange Commission, including quarterly reports
on Form 10-Q, current reports on Form 8-K and annual reports on Form 10-K. You can access
such filings at http://www.sec.gov.
This presentation contains non-GAAP measures relating to the company's performance. You can
find the reconciliation of those measures to the nearest comparable GAAP measures in the
appendix at the end of this presentation.
You should not unduly rely on any forward-looking statements, and we assume no obligation to
update them. All information in the presentation is as of May 14, 2010, and we do not intend, and
undertake no duty, to update this presentation.
OTC BB: GAXC
Slide 2
Investment Highlights
Global Axcess Corp (OTC BB: GAXC)
• Stable, growing and profitable ATM business augmented by
emerging DVD kiosk business (higher revenue and margins)
• Existing business:
–
–
–
–
–
5th largest non-bank ATM company in the U.S.
Most profitable and stable public company in the ATM business
4,500 kiosks in 43 states with an avg. contract length of 35 months
Recurring revenue model
Business stabilized and profitable; now is the time to grow
• Strong historical financials:
–
–
–
–
–
14 consecutive profitable quarters
Non-GAAP EPS of $0.21 in 2009
$4.7 million of adjusted EBITDA
2009 free cash flow increased 26% vs. 2008
Ended Q1 2010 with approximately $0.12 per share of cash and restricted cash
OTC BB: GAXC
Slide 3
Competitive Advantages
• Superior operational excellence (relative to
peers/competitors)
• Strong customer service
• Low turnover (typically auto-renewed)
• Prompt payouts (others are slow)
• How big is Global Axcess?
–
–
–
–
OTC BB: GAXC
4,500 ATMs
2009 revenues of $21.5 million
$21.9 million market cap at 4/29/10
5th largest non-bank ATM company in the U.S
Slide 4
Highly Fragmented Industry
• Global Axcess currently
competes in the highly
fragmented, $7.5-12
billion ATM industry
 375 Independent Sales
Organizations (“ISOs”) and
over 11,000 Financial
Institutions manage over
415,000 ATMs nationwide
 Top 10 U.S. companies ~ 27%
market share
 Historically low overall entry
barriers
OTC BB: GAXC
Source: ATM & Debit News and Prepaid
Trends, Oct. 23, 2008
Slide 5
ATM Transactions Are NOT
Projected To Go Away…
# of Interactions (USA-billions/year)
Banking Example
Past
Present
Future
• 58 Billion Interactions in 2007
• 105 Billion Interactions in 2015
Source: Tower Group, ATM & Debit News & internal NCR estimates
OTC BB: GAXC
Slide 6
US Market Fundamentals –
Cash Usage
The dollar volume of cash used in the US economy is increasing at the average
rate of 5% per annum
$ Volume ($ in billions)
7000
6000
1169
1330
5000
583
721
858
1010
4000
1438
1565
1722
1871
2026
2062
2093
2014
1885
1807
1639
1609
1263
1309
1403
1439
1545
1636
3000
2000
1000
0
Cash
Source: Nilson reports from 2003-2009
OTC BB: GAXC
Checks
Credit
Debit
Two Major ISO Segments
ATM industry estimated to be between $7.5B and $12.5B annually
Merchant
Who:
Independent “mom and pop” bars,
restaurants, hotels, strip clubs,
markets, and convenience stores
Placement
Who:
Chains of grocery stores
convenience stores and hotels
What:
GAXC owns the ATMs and provides
turnkey services: GAXC monitors,
processes transactions, and provides
currency loading services
What:
GAXC sells and installs the ATM to
the merchant; provides ongoing
processing services
Margins:
Becomes profitable quickly; low
ongoing margins; Accounts for 2/3
of ATMs, 1/3 of GM $
Margins:
Takes longer to become profitable;
higher ongoing margins; Accounts
for 1/3 of ATMS, 2/3 of GM $
Market:
Approximately $1.1 – $1.8 billion in
the U.S.; Highly fragmented
Market:
Approximately $2.5 - $4.1 billion in
the U.S.; Highly fragmented
GAXC maintains a leadership position in both segments
OTC BB: GAXC
Slide 8
Diverse Industries Served and
Geographic Distribution
•
•
•
•
GAXC’s primary focus represents a $1.2B annual opportunity; tends to be
recession-resistant
Target locations with high levels of foot traffic and a need for access to cash
Historically avoided locations that require fixed fees (shopping malls)
Major customers allow GAXC to select the profitable locations and
avoid unprofitable ones
GAXC’s primary focus
OTC BB: GAXC
Slide 9
Industry Leading Quality
• GAXC ATMs have
little downtime:
Far better than direct competitors
 Average 99.2% uptime
 ISO industry average
96.9%
• GAXC pays quickly
and on-time
• GAXC provides
personal and
professional service
OTC BB: GAXC
Slide 10
Business Model
• Additional ATMs add approximately
$9,000 in revenue and $3,500+ in
GM
• Additional ATMs would be a mix of
Company-owned and Merchant
• Non-ATM kiosks hold greater
potential for both revenue and GM
• Profitable from a GM perspective in
approx. 1 month
• Positive ROI on equipment in
approximately one year
OTC BB: GAXC
Slide 11
MEGA-Trend:
Self Service, A Way of Life
• By 2010, self-service will
account for 6 out of every 10
customer service interactions
– Gartner research
• Consumers are 77% more
likely to do business with
companies that offer selfservice – Buzzback
• Over the next 5 years…
 ATMs will surpass 2 million units
installed worldwide
 Self Check Out will eclipse $1.7
trillion in transaction value – IHL
• U.S. unattended retail self
service kiosk market = $150
Billion
10 Ideas that are Changing the World
#2 End of Customer Service
• Businesses are forced to interact
with a changing consumer
• Customer’s want an accelerated
pace, so businesses in all
verticals are looking to self
service to satisfy the need
• Bill Nuti: ‘Businesses will get
smarter on how they serve their
customers’
March 13, 2008
OTC BB: GAXC
Slide 12
Growth Strategies
• Build upon core competencies and standard processes
to enter new unattended retail self-service kiosk markets
 Acquisitions
 Cross selling to our ATM clients
• ATMs have performed well in this economy due to life
simplification trends
• Organically grow our ATM business
• Expand outside of traditional ATM business
OTC BB: GAXC
Slide 13
Product Diversification
• Beyond ATMs
 GAXC’s expertise extends beyond ATMs to any selfservice kiosk
 The growing trend to self-service, coupled with
impatient consumers, works to our advantage
 First application: self-service DVD rental kiosks
• Higher revenue and GM contribution than
ATMs
• GAXC expects to roll out between 5 and 10
DVD kiosk locations per month in the first
half of 2010
• Accelerate to 15-20 kiosks per month
through the remainder of 2010
OTC BB: GAXC
First Major DVD Win
• Three-year agreement with a major grocery chain
– $7 million per year in revenue
– Expected to generate approximately $21 million over three years
– Represents 30% growth over FY 2009 revenues
• Will initially install 300 new DVD kiosk locations
– Opportunity for 20% growth
• The Grocery has been an ATM client
– Demonstrates GAXC’s ability to cross-sell DVD kiosk solutions to current
customer base
• Rollout will begin in July of this year
– Expected to be done by the end of Q3
OTC BB: GAXC
DVD Rental Trends
2008 Video Rentals
$7.6 Billion
•
•
•
•
2011 Video Rentals
$7.6 Billion
Kiosks were 19% of rental activity in the first half of 2009, ahead of projected distribution
Total spending on packaged media rentals expected to stay stable through 2013
DVD-rental kiosks are second only to seeing films in the theater
More than 40% said they use DVD-rental kiosks, and another 26% indicated they were willing
to increase their usage of DVD kiosks
OTC BB: GAXC
Business Model
Expected to turn profitable on a GM perspective in 3 – 6 months
Positive ROI on equipment: 12-15 months
Includes estimates based on incremental ATMs and DVD kiosks based on current
management expectations for revenue and gross margin
OTC BB: GAXC
Slide 17
Annual Revenue & Adjusted EBITDA
------------------------------------------
Revenue
(In $thousands)
25,000
$19,526
20,000
$21,437
$21,751
$22,171
$21,495
2006
2007
2008
2009
$13,908
15,000
10,000
------------------------------------------
$10,202
5,000
0
2003
2004
--------------------------------------
(In $thousands)
OTC BB: GAXC
2005
Adjusted EBITDA
--------------------------------------
Slide 18
Annual Free Cash Flow
------------------------------------------
(In $thousands)
Free Cash Flow
-----------------------------------
$4,000
$2,689
$3,000
$3,392
$1,679
$2,000
$304
$1,000
$0
($1,000)
($350)
($538)
($1,049)
($2,000)
2003
2004
---------------------------------
2005
2006
Free Cash Flow Per Share
2007
2008
---------------------------------$0.18
$0.20
$0.13
$0.15
$0.08
$0.10
$0.05
$0.00
$0.01
$0.00
($0.05)
($0.03)
($0.10)
2003
OTC BB: GAXC
2009
($0.07)
2004
2005
2006
2007
2008
2009
Slide 19
Questions
OTC BB: GAXC
Slide 20
2009 Income Statement
For the Fiscal Years Ended December 31,
2009
2008
Revenues
$
Cost of revenues
Gross profit
Operating expenses
Depreciation expense
Amortization of intangible merchant contracts
Selling, general and administrative
Impairment of notes receivable
Recovery of bad debts
Stock compensation expense
Total operating expenses
Operating income from continuing operations
before items shown below
OTC BB: GAXC
Interest expense, net
Gain (loss) on sale or disposal of assets
Loss on early extinguishment of debt
Income from continuing operations before income tax
benefit
Income tax benefit
Income from continuing operations
Income from discontinued operations
Net Income
21,494,867
$
22,171,072
11,316,919
10,177,948
12,347,991
9,823,081
1,178,927
786,173
5,437,624
120,188
7,522,912
1,411,360
770,270
5,288,959
159,840
7,630,429
2,655,036
2,192,652
(645,758)
(474,960)
(1,046,287)
23,872
-
$
$
$
1,534,318
1,278,888
2,813,206
2,813,206
$
$
$
1,170,237
1,170,237
1,170,237
Income per common share - basic:
Income from continuing operations
Income from discontinued operations
Net Income per common share
$
$
$
0.13
0.13
$
$
$
0.06
0.06
Income per common share - diluted:
Income from continuing operations
Income from discontinued operations
Net Income per common share
$
$
$
0.12
0.12
$
$
$
0.06
0.06
Weighted average common shares outstanding:
Basic
Diluted
21,654,554
22,845,241
20,973,924
20,973,924
Slide 21
Q1 2010 Income Statement
For the Three Months Ended
March 31, 2010
March 31, 2009
Revenues
$
Cost of revenues
Gross profit
Operating expenses
Depreciation expense
Amortization of intangible merchant contracts
Selling, general and administrative
Stock compensation expense
Total operating expenses
Operating income from continuing operations
before items shown below
5,380,078
$
5,414,434
2,857,934
2,522,144
2,855,879
2,558,555
309,895
199,332
1,525,863
47,155
2,082,245
269,494
193,617
1,292,963
25,711
1,781,785
439,899
776,770
(121,331)
318,568
(212,617)
(467,391)
96,762
Interest expense, net
Loss on early extinguishment of debt
Net Income
$
Income per common share - basic:
Net Income per common share
$
0.02
$
0.01
Income per common share - diluted:
Net Income per common share
$
0.01
$
0.01
Weighted average common shares outstanding:
Basic
Diluted
OTC BB: GAXC
21,892,152
23,831,182
$
20,973,924
20,973,924
Slide 22
Gross Profit and %
-----------------------------------------(In $thousands)
Gross Profit
---------------------------------------
$12,000
$10,000
$8,004
$8,000
$6,000
$9,032
$9,045
2006
2007
$9,832
$10,178
2008
2009
$5,703
$3,824
$4,000
$2,000
$0
2003
2004
2005
------------------------------------------
OTC BB: GAXC
Gross Profit %
-------------------------------------
Slide 23
Summary – SG & A
------------------------------------------
SG & A
------------------------------------------
(In $thousands)
OTC BB: GAXC
Slide 24
Summary – Net Income
------------------------------------------
Net Income
----------------------------------------
(In $thousands)
OTC BB: GAXC
Slide 25
Summary – Non-GAAP EPS
------------------------------------------
Non-GAAP EPS
-----------------------------------
(In $thousands)
OTC BB: GAXC
Slide 26
Net Income to Adjusted EBITDA and
Non-GAAP EPS Reconciliation
------------------------------------Q1'08
Selected Financial Data
Q2'08
Q3'08
Q4'08
------------------------------------Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
(In thousands except per share data)
Net Income
Depreciation expense
Amortization expense
Interest expense
EBITDA
Stock compensation expense
Loss on early extinguishment of debt
Adjusted EBITDA
$
$
112 $
402
192
310
1,015 $
80
1,095 $
450 $
378
193
217
1,237 $
42
1,279 $
277 $
329
193
256
1,055 $
31
1,085 $
331 $
303
193
264
1,091 $
7
1,098 $
97 $
269
194
213
772 $
26
467
1,266 $
557 $
290
195
150
1,192 $
29
1,221 $
476 $
304
202
147
1,129 $
31
1,160 $
404 $
316
196
136
1,052 $
34
1,086 $
319
310
199
121
949
47
996
Non-GAAP EPS
$
0.05 $
0.06 $
0.05 $
0.05 $
0.06 $
0.06 $
0.05 $
0.05 $
0.05
$
Weighted average common shares outstanding:
Basic
20,973,924
OTC BB: GAXC
20,973,924
20,973,924
20,973,924
20,973,924
21,873,924
21,883,924
21,883,924
21,892,152
Slide 27
Net Income to Adjusted EBITDA and
Non-GAAP EPS Reconciliation
-------------------------------------
Selected Financial Data
-------------------------------------
Net Income to Adjusted EBITDA Reconsiliation
2003
2004
2005
2006
2007
2008
2009
(In thousands except per share data)
Net Income
Depreciation expense
Amortization expense
Interest expense
Tax benefit
EBITDA
Stock compensation expense
Loss on early extinguishment of debt
Adjusted EBITDA
$
Non-GAAP EPS
Weighted average common shares outstanding:
Basic
OTC BB: GAXC
310
791
108
1,209
-
$
$
1,209
$
0.17
$
1,140 $
1,160
188
(538)
1,950 $
-
(723) $
1,418
525
209
1,429 $
-
(4,864) $
1,654
706
1,356
(1,148) $
(12)
430
1,537
726
1,233
3,925
87
$
$
1,950
$
1,429
$
(1,160) $
4,013
$
0.12
$
0.08
$
(0.06) $
0.19
$
1,170
1,411
770
1,046
4,398
160
$
$
4,558
$
2,813
1,179
786
646
(1,279)
4,145
120
475
4,740
$
0.22
$
0.22
$
$
(2003 and 2004 as adjusted for the one-for-five reverse split that occurred on April 28, 2005)
7,032,643
15,623,259
18,858,947
20,996,013
20,988,348
20,973,924
21,579,475
Slide 28
Balance Sheet
Summary Balance Sheet Data
2009
At December 31,
2008
2007
2006
2005
(In thousands)
Total current assets
Total assets
Total current liabilities
Total liabilities
Total stockholders' equity
$
4,412 $
26,117
5,776
9,551
16,566
3,466 $
23,648
3,938
10,184
13,464
1,842 $
24,001
4,968
11,866
12,134
2,797 $
26,091
6,343
14,462
11,629
5,081
31,638
6,049
15,068
16,570
Cash and cash equivalents
Resticted cash
Total cash, cash equivalents and restricted cash
$
2,008 $
800
2,808 $
1,561 $
1,561 $
540 $
540 $
754 $
754 $
2,358
2,358
Short-term and long-term debt
Warrant valuation discounts
Total debt
$
6,317 $
6,317 $
7,381 $
307
7,688 $
8,505 $
473
8,978 $
10,070 $
639
10,709 $
10,802
807
11,609
OTC BB: GAXC
$
$
Slide 29
Capitalization Table
Common Shares Outstanding
21,883,924
Weighted Average Diluted Shares Outstanding
23,606,552
(for EPS calc, 12/31/09)
Diluted Shares Outstanding
25,032,564
(all-in; assumes $1.55 options exercised)
Large Holders
Global Opportunities Special Fund
Hiedtki & Company
Renaissance Capital
Al Shams
Doucet Asset Management
Total
Total %
OTC BB: GAXC
7 million
28%
Slide 30
Debt Structure
December 31, 2007
Cash and cash equivalents
Restricted Cash
Cash and cash equivalents
Debt:
Notes payable - related parties
Frost National bank
9% interest, principal only, matures 10/2010
Other 9% debentures
9% interest, principal only, matures 10/2010
Other
Total
Notes payable
Bailey NCA
Other
Wachovia Bank
Total
Auto Loans, 60 month P&I amort., 12.2% interest
Senior lenders' notes
SunTrust
42 month P&I amort., 6.99% interest, matures 9/2012
SunTrust
36 month P&I amort., 4.96% interest, matures 1/2012
CAMOFI, net of Note Discount
Haven Trust
Wachovia
Total
Total Note debt
Total Capital leases debt
Miscellaneous capital leases, up to 12% interest
Total debt
Stockholders' equity:
Preferred stock
Common stock
Treasury stock
Additional paid-in capital
Accumulated deficit
Total stockholders' equity
Total capitalization (Note debt + Stockholder's Equity)
OTC BB: GAXC
December 31, 2008
December 31, 2009
551.4
551.4
1,560.9
1,560.9
2,007.9
800.0
2,807.9
1,000.0
225.0
112.9
1,337.9
1,000.0
225.0
103.6
1,328.6
99.4
99.4
25.0
25.0
-
92.9
92.9
3,057.4
100.0
2,200.0
5,357.4
3,211.9
1,634.9
4,846.8
3,928.6
1,200.0
5,128.6
6,720.3
6,175.4
5,320.9
1,784.5
1,205.6
996.5
8,504.8
7,381.0
6,317.4
21.0
(12.0)
22,453.6
(10,328.4)
12,134.3
21.0
(12.0)
22,613.4
(9,158.1)
13,464.3
21.9
(12.0)
22,900.9
(6,344.9)
16,566.0
18,854.5
19,639.7
21,886.9
Slide 31
Options and Warrants
Total Options Outstanding
3,055,066
“In the money” Options
2,697,500
Average Price (all options)
Average Price (in the money options)
Total Warrants Outstanding
OTC BB: GAXC
$0.389
$0.32
710,000
@ $0.20; Expiring 4/15/2014
230,000
@ $1.25; Expiring 10/21/2010
135,000
Price TBD; Expiring 10/31/2015
345,000
Slide 32
Valuation Metrics
• P/E Ratio (4/29/10):
• P/S Ratio (4/29/10):
• P/B Ratio (4/29/10):
7.97
1.02
1.32
•
•
•
•
$21.5M
$4.4M
$4.1M
5.6x
Market Cap (4/29/10):
2008 EBITDA:
2009 EBITDA:
Enterprise value/EBITDA:
OTC BB: GAXC
Slide 33
Comparison to Publicly Traded
Competitors
Industry
Stock Symbol
Global Axcess
Cardtronics
Access to Money*
Coinstar
ATM & Self Service
ATM
ATM
Self Service
GAXC.ob
CATM
AEMI.ob
CSTR
Market Cap (4/29/10)
$21.9M
$557.4M
$14.1M
$1.2B
Stock Price (4/29/10)
$1.00
$13.40
$0.64
$37.72
48
430
67
2,600
4,500
33,400
12,000
95,000
$21.5M
$493.4M
$22.6M
$1.1B
-1%
5.5%
-10.1%
44.0%
46.9%
30.2%
18.9%
30.7%
8.1%
8.7%
10.6%
7.4%
Net Income/(Loss) (FY 2009)
$2.8M
$5.8M
($6.5)M
$53.6M*
EPS (FY 2009)
$0.13
$0.13
($0.30)
$0.85*
Employees (12/31/09)
# of ATM/Kiosks (12/31/09)
Net Revenue (FY 2009)
Quarterly Revenue Growth (YoY)
Gross Margin % (ttm)
Operating Margin % (ttm)
*Basic earnings per share from continuing operations attributable to Coinstar, Inc.
OTC BB: GAXC
Slide 34