News

Global Axcess reports Q3 results

November 14, 2011

Global Axcess Corp, a provider of self-service kiosk solutions, announced mixed financial results for the quarter ended Sept. 30, 2011, including that it enjoyed its third consecutive year of record ATM revenues.

Third quarter revenues were also up 39.4 percent from this time last year. However, its DVD business took a hit due in part to its largest DVD kiosk customer canceling its contract after going bankrupt, according to a company press release.

"We have made great progress in our effort to stabilize our operations and successfully focus our ATM and DVD resources on initiatives that will continually improve our metrics," Lock Ireland, vice chairman of the board of directors and co-chief executive officer, said in the release. "We are committed to growth, organically and through targeted M&A activity, and this quarter demonstrates that we are delivering on that promise."

ATM business highlights:

• Third quarter 2011 surcharge transactions equaled surcharge transactions for the second quarter of 2011 and increased by 4.9 percent over surcharge transactions for the third quarter of 2010.
• Third quarter 2011 ATM services revenue increased by 1.2 percent over ATM services revenue for the second quarter of 2011 and by 17.5 percent over ATM services revenue for the third quarter of 2010.
• Third quarter 2011 ATM services gross profit was $2.7 million compared to $2.7 million in the second quarter of 2011 and compared to $2.4 million for the third quarter of 2010.
• Third quarter 2011 ATM services adjusted EBITDA was $1.7 million, compared to $1.7 million for the second quarter of 2011 and $1.4 million for the third quarter of 2010.

DVD business highlights

• Third quarter 2011 consolidated DVD services revenue was $1.7 million, compared to $2.0 million for the second quarter of 2011 and compared to $359,000 for the third quarter of 2010.
• Third quarter 2011 consolidated DVD services gross profit was $357,000 compared to $342,000 in the second quarter of 2011 and compared to ($68,000) for the third quarter of 2010.
• Third quarter 2011 DVD services adjusted EBITDA was ($9,000) compared to ($113,000) for the second quarter of 2011 and compared to ($354,000) for the third quarter of 2010.
• Third quarter results include a $1.1 million non-cash charge for impairment of assets related to writing down obsolete DVDs and a $421,000 restructuring charge related to removing kiosks from grocery chain locations as well as related severance due to headcount reductions.

"As part of our DVD kiosk strategy, we have moved approximately 142 DVD kiosks from our grocery chain customer to higher volume locations in The Exchange, which encompasses Army and Air Force bases," Ireland said.

The company has replaced all its older machines at existing The Exchange locations with its faster, higher-capacity kiosks and continues to experience significant volume increases, Ireland said.

"This has kept our capital expenditures lower but left us with an unamortized DVD library. In addition, our main DVD customer in the northeast cancelled our contract through their bankruptcy proceedings, and as such we will be removing the remaining 95 kiosks from the grocery chain locations by early December. This, combined with the de-installation costs on other DVD kiosks removed during the quarter and severance due to headcount reductions, resulted in a restructuring charge of $421,000 in the quarter."

Q3 financial results

The company reported consolidated revenues of $8.1 million for the third quarter, down 2.9 percent from $8.3 million in the second quarter of 2011 and up 39.4 percent compared to $5.8 million for the third quarter of 2010. The year-over-year increase was due to strong ATM growth and DVD growth of The Exchange. DVD rental revenue for the third quarter of 2011 was $1.7 million as compared to $2.0 million in the second quarter of 2011 and $359,000 in the year-ago period.

Gross profit was $3.1 million, or 38.5 percent gross margin, for the third quarter compared to $2.3 million, or 39.9 percent gross margin, for the third quarter of 2010 and compared sequentially to gross profit of $3.1 million, or 36.9 percent gross margin, in the second quarter of 2011.

Operating loss was $1.2 million for the third quarter of 2011, including a $1.1 million non-cash impairment of assets related to writing down obsolete DVDs and restructuring charges of approximately $421,000. This compared to operating income of $42,000 for the third quarter of 2010 and operating income of $298,000 for the second quarter of 2011. Excluding the impairment and restructuring charges, operating income would have been $305,000 for the third quarter 2011.

During the third quarter of 2011, the Company recorded net interest expense of $194,000, compared to net interest expense of $138,000 for the same period of 2010. The increase was mainly due to an increase in debt.

Read more about DVD kiosks.