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Global Cash Access Holdings (NYSE:GCA)

Q4 2012 Earnings Call

March 12, 2013 5:00 pm ET

Executives

Julie Yusgart

David B. Lopez - Chief Executive Officer, President and Director

Mary Elizabeth Higgins - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

David Bain - Sterne Agee & Leach Inc., Research Division

George F. Sutton - Craig-Hallum Capital Group LLC, Research Division

Matthew J. Kempler - Sidoti & Company, LLC

Chris Gamaitoni

Operator

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. [Operator Instructions] This conference is being recorded today, Tuesday, March 12, 2013. And I would now like to turn the conference over to Julie Yusgart, Treasury Director. Please go ahead, ma'am.

Julie Yusgart

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 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 p.m. Pacific Time.

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 and segment trends and conditions in the cash access kiosks 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 or 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 and 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.

David B. Lopez

Thank you, Julie, and good afternoon, everyone. After 9 months on the job and, amazing enough, just over 2 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'll focus our time on the following 5 topics: first, of course, we'll take a quick look back at 2012; second, we'll do an operational excellence -- have a discussion on operational excellence and customer service; third, product development and delivery; fourth will be people and culture; and lastly, we'll talk about returning value to our shareholders.

Let's take a look back at 2012. Clearly, fiscal '12 was a great year of financial performance driven by a slight recovery in gaming, Durbin and the reacquisition of the Caesars business. Full year EBITDA performance was the best since 2009. The fourth quarter and the year came in at the high end of our raised guidance, and same-store numbers were positive within the quarter. With the help of the 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, and 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's 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 a 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 has 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's rarely just one reason for the change. With this in mind, we have 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.

So let's go ahead and move to the second topic of operational excellence and customer service. Blocking and tackling fundamentals and customer first. These aren't just cliches or 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. With the majority of my professional experience in operations, product management and the launching of product, 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 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'll 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, and 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'll do our best to share high-level vision and long-term product strategy, but we'll 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 are many, ranging from the upgrades of existing core products to the establishment of our i-gaming solutions. With our i-gaming partners 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 be 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 9 months to solidify the team. Although we discussed this previously, a perfect example of focusing on the fundamentals was the hiring of Robert Myhre, our CIO. He 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 and technology space -- in a technology space relevant for i-gaming 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 7 years at GCA and 18 total years in the payments industry, adds experience and a very high level of intensity to the team, both being important for his position and leadership. With these 2 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 shareholders.

Mary Elizabeth Higgins

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 noncash stock compensation expense for the fourth quarter of 2012, was $16.4 million, a decrease of 18% from $20 million in the fourth quarter of 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 in 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 the continued slight shift to PIN debit and ATM. And although ATM cash to the floor is up, absolute transaction volume is down slightly 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 of 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 million 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 Caesars property, as well as the impact of Durbin on our cost of debit transaction.

On a segment basis, ATM revenues, operating income and operating margin for the first -- 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 the 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 results 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 have indicated before, the timing of equipment sales is more difficult to predict given the solidity 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 '12 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 noncash. 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 '13, 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 and 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 '13, the anticipated impact from the loss of customers, a stable but low single-digit growth in the U.S. 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 1.6x. 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 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 i-gaming 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.

David B. Lopez

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 a share buyback program with a target of $40 million over the next 2 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 in line with this strategy. The only caveat is if we identify a 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 any one 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 and 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'll turn it back to the operator for some questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of David Bain with Sterne Agee.

David Bain - Sterne Agee & Leach Inc., Research Division

First, I was hoping just to go in again on that tweak made to the low in the guide, and I guess as David remarked, does 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?

David B. Lopez

I think I'll start with your second part of the question then I'll turn it back to Mary Beth for your first part. So on acquisitions, I think there's probably 3 types of acquisitions, and right now, I don't know about a thought process to share with you because we haven't identified anything in particular, but, obviously, there's the good old tuck and run, where it's something small, we can grab it and run with it and it's 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. But at this point, David, I think it's -- I've been here 9 months. I've been 2.5 months on the job as CEO, and certainly a focus, I think, it's part of good fundamentals of business and certainly of growing businesses. And I think that at the appropriate time, we'll share more thought on where we want to go with the acquisitions. So with that, I'll kick it back to Mary Beth for the first part of your question.

Mary Elizabeth Higgins

Yes. And we just honestly tweaked the cash EPS because there are many more variables in that than the EBITDA. Originally, when we did preliminary estimates, we lined it up pretty tight with the EBITDA. But the reality of it is given interest rate environments and stock volatility, we could buy back 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.

David Bain - Sterne Agee & Leach Inc., Research Division

Okay, great. And then just 2 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 and, I guess, the question is when formalities could begin with operators on the interactive front?

David B. Lopez

That's a good question, David, and something I think that has come out now a couple of quarters in a row, and 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. And they wanted to be in the market September and October. And 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 e-wallet integrates with the brick-and-mortar casino, and I think that's the most important thing for us right now, because we obviously have our core cash access business, and we have our kiosk business in the casino, which is a nice entry point and a way to interact with the e-wallet if you're an online gamer, and, of course, the online gaming solution. And as I said in the prepared remarks, anything from a payment wall to the full-blown e-wallet is what we're focusing on. And 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. But 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.

David Bain - Sterne Agee & Leach Inc., Research Division

Right, okay. And then just final one, if I could, on QuikTicket, and understanding your sensitivities there, but it used -- it was said that if the product's at beta, you would announce it, is that, one, still the case? And then 2, I was hoping just to hear your big picture on pricing power as it relates to that product if I could.

David B. Lopez

Well I think that -- I think our bolt-on products and our kiosk business could afford us some pricing power. And I'll 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 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 than just a pricing option. So I think that's, when you look at our bolt-on products, QuikTicket being one of them, and as far as your first part of that question, just to make sure that I answer them and I don't just forget about it, is that we will share with you when we have, I'd say, a couple installs in the market. And what's really important, Dave, and I think you know my history and you know sort of my upbringing in the vendor space, and to me, the most important part is, again, in my remarks earlier, is that the product's ready, it's to our satisfaction, that 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. So 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'll definitely share that with you.

Operator

Our next question comes from the line of George Sutton with Craig-Hallum Capital Group.

George F. Sutton - Craig-Hallum Capital Group LLC, Research Division

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 could give us an update on your comfort now with the sales force's ability to sell at that more strategic level and the signs you're getting back from customers.

David B. Lopez

Well I'll start -- let me start with the sales force, and 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. And so 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 2. I have a few accounts. And we go out and visit these people. And what I'm happy with is the decision makers that we can get in front of. So again, I've been in the business over 15 years, and 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. So I'm very pleased with who we're getting in front of. And I think that we'll continue to get better through some of the things that we're doing in our sales program to be more strategic in our selling. But we are certainly strategic, especially being the fact that we have a kiosk business. We have a fully integrated business, and in the coming future, we'll have an e-wallet, too, for the online space.

George F. Sutton - Craig-Hallum Capital Group LLC, Research Division

So 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're seeing.

David B. Lopez

Yes, 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 kiosk business overall, efficiencies in the operations side, how we sell it, how we package it. And certainly, domestically, the funnel is doing fantastic. Internationally, I think that there's opportunity. 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. So 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. So nothing specific for you, but it is a focus for both Scott Dowty and myself, and I'm sure I have some international trips in my near future.

George F. Sutton - Craig-Hallum Capital Group LLC, Research Division

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

Mary Elizabeth Higgins

So the base business, we're looking at low single-digit growth in kind of an across product lines, probably ATM less so than cash access just based on the same-store trends. Part of why I give you those same-store trends so is 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 outlook that we get, which are pretty much across the board kind of flat for '13, really low single digits to flat in some jurisdictions. So the top line is really pretty modest growth. And in terms of the margins, I think what we were trying to prepare you for is the guidance for '13 absolutely takes into consideration some of our belief either about the reality, because we've done some of these at the end '12 or some preview into '13 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 renewals. So we have some visibility into those negotiations already. So 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 have to do a little bit of margin tweak and then throw Mohegan, you get to our number pretty easily.

Operator

Our next question comes from the line of Matthew Kempler with Sidoti & Company.

Matthew J. Kempler - Sidoti & Company, LLC

So first, I just wanted to get your perspective on what's changing the landscape of the competition that's intensifying at the local level with the smaller players.

David B. Lopez

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, and so I can't get into the mind of competitors and some that appear to maybe be doing business at a very skinny or no margin. So 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. But 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 Internet solution and an e-wallet. So I think that they are taking it from a tactical point of view and trying to drive them away from long-term strategic decisions.

Matthew J. Kempler - Sidoti & Company, LLC

Okay, and then you listed earlier a number of the strategic priorities for GCA. I'm wondering, from your view, what do you think are the most important priorities that will help 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?

David B. Lopez

Well I think the execution on technology and operations is probably, unfortunately, just lumped into #1. The team would probably tell you we have 5 #1s, so I don't know if I can prioritize them for you. But the -- 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, and 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. We sometimes are just making suppositions, but we're really piecing this thing apart department-by-department that touches customers or has an effect on our products. So that's development, that's operations, that's customer service and that's sales and marketing, and it goes right up to the executive team in the C suite where we're out visiting customers.

Matthew J. Kempler - Sidoti & Company, LLC

Okay, and then shifting over to i-gaming, I know things are still in progress, but are customers today at the vendor selection stage? And if not, when does that start to happen?

David B. Lopez

I think that 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, and reading the tea leaves on when that will happen is still hard. It's still early to say when Internet is going to take off. We know it's going on in Nevada and New Jersey, we heard some sort of grumblings today about some legislation for Pennsylvania. We heard earlier in the week about Illinois. So 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, and 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 e-wallet. But I think it's just -- I think it's early and I think our job right now is, back to what I was saying earlier, is just to stay in front of every customer that we know wants to have an online solution and make sure that we're at the forefront of their discussion and that they understand our strategy long term.

Matthew J. Kempler - Sidoti & Company, LLC

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, 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.

David B. Lopez

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

Mary Elizabeth Higgins

I know what he's referring to, I just don't have the metric. I mean we had, early last year, signed a couple things earlier and really had -- what we did, just so we put this in perspective. What we'd normally would have every year is something 30% to 35% renewal. We had already signed ahead a portion of those, so we felt maybe there's 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 are 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? So you just say -- you could say, "I'm not going to count them until they're done."

David B. Lopez

Yes, and so now I see where you're going with the question. And yes, Mary Beth's right. About 1/3 of the business every year is up for renewal, and 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 just -- we don't bring that on the call with us here.

Operator

[Operator Instructions] Our next question comes from the line of Chris Gamaitoni with Millennium Partners.

Chris Gamaitoni

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

David B. Lopez

Well, that's a very good question. As far as the competition, we do -- we track them pretty closely. And we try to track exactly what they're going to be offering, and that's a big spectrum of what, like, competition could be. And we really don't know at all the regulations are just yet. We know that in some instances, you might need a money transmitter license. In some instances, you're definitely going to have to be licensed in Nevada or New Jersey, and 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 U.S., some of those people may try to come into the domestic U.S. business. I hate to mention any of their names on the conference call and give them any free press, so I think I'll just refrain from that. I do apologize. But they're out there. We study them. We watch them very closely, and what we're trying to do is make sure that between alternative payments, simple payment walls and affordable e-wallet 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 and 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.

Chris Gamaitoni

And has there been a significant focus from the limited regulatory discussions you've had about -- I just see anti-money laundering issues becoming probably the biggest issue from a regulatory perspective for this space and how that kind of feeds into the foreign counterparties.

David B. Lopez

Yes, I think it is a big deal and I think probably should be a big deal. And 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. And we obviously think that the bar should be relatively high for the online space versus brick-and-mortar, but we'll wait and see how that goes and obviously, we're in very close discussions with each jurisdiction right now.

Operator

Thank you, and 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.

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