GAXC

16 Comments »

• Tom says:

  August 30, 2009 at 5:53 pm

  Great to hear about you buying in. I’ve got a good sized position but have been in for over 2 years.

  While I understand that the ATM with surcharge business is a whore’s business, I think some of the following will bode well for GAXC.

  – As of the beginning of the year the Feds cut off state reimbursement of the mailing of unemployment checks (to the unbanked) so some states are scrambling to introduce a value added card, like South Carolina and Florida (both of which fall into GAXC’s ATM fleet footprint). I know FL took bids to do this in late April and I expect them to start testing this year. Of course, with unemployment so high and likely to get worse before better and Congress likely to extend benefits, GAXC should see some collateral benefits.

  – More of a shift to cash based on effects of economy and overleveraging. Also, credit card issuers are cutting peoples credit card lines in a big way, now they are starting to cancel active cards.
  http://www.cnbc.com/id/32596801

  – Growing acceptance of the Direct Express card for Social Security benefits since recipients are getting more uncomfortable with banks health in general. Last time I checked, they had issued over 500k cards in June 09.

  – More acceptance of value added cards for tax refunds by HR Block and Jackson Hewitt, George McQuain can confirm this.

  – More bankruptcies are happening driving these people to chapter 7 their credit cards and go to cash (usually with a new bank)

  – more bank closings will mean less Financial Institution ATMs available.

  Most of this should bode well for GAXC

  Let me know what you find out

  Tom
• iancassel says:

  August 30, 2009 at 7:37 pm

  Tom:

  Thanks for the reply. The ATM industry is a very disjointed one but you can still make money in it. The CEO gave me a great analogy. He said the airline industry is a bad one and yet Southwest has been constantly profitable and the best and yet no other airline can duplicate it. GAXC’s ATM business is made up of two parts. 75% of their ATMs are simply maintenance contracts, and the others are wholly owned ATM’s with maintenence components. The company is looking to gain market share inthe wholly owned segment and the gross margins are very good. The avg atm brings in $4000-5000/year with 40% margin on average. They are really going after large grocery’s, convenience store chaines etc.. GAXC has the highest up time percentage of anyone in the space (ie99.2%) which is a big deal. This is also similar to Southwest airlines and their customer satisfaction % is always the highest. Because of this GAXC has a real advantage for new RP’s (requests for proposals). The last two years for GAXC has been a turnaround, and only in the last six months have they been starting to push the accellerator as they have more RP’s out in the last few months then the whole companies history.

  Now the beauty of the above is that they are going to their current customer base (ie grocers/etc..) and upselling them on these DVD kiosks. An average dvd kiosk brings in $4000/month with 50% gross margin, and since the same maintence person that maintains the ATM maintains the DVD kiosk there is really little added SGA cost.

  100 DVD Kiosks would add $5million/year in revenue and probably 5-7c in bottom line profits.

  It’s a very compelling story. I will write more once I learn more post visit.

  Regards,

  Ian
• Tom says:

  August 31, 2009 at 2:30 pm

  Thanks Ian,

  If you haven’t already, be sure to see a copy of the earnings call transcript. Were you on the call ? These calls are pretty informative, lots of good info.

  I would love to know which micro cap funds might have been on the call, I know there were some questions from some of them.

  As someone posted today on the yahoo board, there should be a roadshow at the end of Sept likely, and the NOL carryfwd is massive. The low interest rate too will keep their gross margin pretty strong. When you’re at the company, maybe you can find out what an expected hedge future would cost them to lock in this low rate.

  I know a lot of us and my impression in the past of mgmt is to polish of the company to sell it, to maybe a Cardtronics. You might see what they say about this now.

  Big unknown is the DVD kiosk business. I occasionally stop by a location in Jacksonville to check it out and it doesn’t do near the business of a Redbox at McDonalds or Walmart or the Blockbuster machine at Publix (local grocery chain if you’re not familiar with). Their machines are definitely the beer budget variety. At $15k per copy, they need to monitor their downside if any.

  Last piece that interests me is the potential for bank branding considering so many banks are or will go belly up. On last call, McQuain said that the low interest rate did not make the business model work. I used to think that this potential was huge.

  Ditto on the assesment of mgmt, McQuain and Loiacono are definitely front page quality.

  Anyway, that’s all I have for now. I look fwd to what you might find out (and can reveal) after your visit to the company.

  Tom
• iancassel says:

  August 31, 2009 at 3:20 pm

  As you know George he is ultra conservative. If he says an avg DVD kiosk will do 4k/month, then I believe him. I listened to the CC several times as there was lots of meat to digest. I like what hes doing as he is basically letting the low margin maintenance biz sorta fizzle as there is no margin there and sticking with the fully owned ATM model towards large chains and up selling them on DVD’s. I know a couple VP’s that work for grocers that currently use RedBox and they hate them because the customer service is terrible. It just so happens that GAXC is known to have the best customer service in the ATM Biz…what a perfect up sell. Will report back as I learn more.
• Tom says:

  September 15, 2009 at 1:30 pm

  Hey Ian,

  I read some of your posts on the yahoo bd, good stuff…..

  A couple of questions if you can answer:

  1 What’s the ATM sales pipeline now ? and do they still have approx 20 RFPs pending ?

  2 Any talk of a secondary offering to finance the DVD kiosks ?

  3 Next kiosk coming down the pike, can you say anything, if not do you think it’s a potential winner ?

  4 Any idea how the DVD kiosk pilot is going ?

  5 What’s the guess on the margins for the last 2 announced sales, I assume the yearly value # they published was gross sales.

  Thanks
  Tom
• iancassel says:

  September 15, 2009 at 3:10 pm

  1 What’s the ATM sales pipeline now ? and do they still have approx 20 RFPs pending ? I didn’t ask because they wouldn’t tell me if I did ask (ie insider info)

  2 Any talk of a secondary offering to finance the DVD kiosks ? They are leasing the kiosks on very favorable terms. No need for financing.

  3 Next kiosk coming down the pike, can you say anything, if not do you think it’s a potential winner ? They are looking at several. Sounded like they were evaluating different ones ..nothing final since they are spending time/energy to make sure DVD’s is a success

  4 Any idea how the DVD kiosk pilot is going ? Probably see an update one of these days. Just said it was going well.

  5 What’s the guess on the margins for the last 2 announced sales, I assume the yearly value # they published was gross sales. I didn’t ask since I figured it was on avg with their other ATM deals. They aren’t a group that will push quantity (low margin) over quality.
• iancassel says:

  September 26, 2009 at 11:00 am

  I believe we will see a DVD update end of October which will tell investors a lot, including me of GAXC potential. I know I would like to know what the “real” expected rev/month, gross margin is based off the pilot. They’ve stated $3-4k/month in revenues but I think that is high. Holding some shares I bought at a 70c basis, and waiting for update to decide to make it a real position. Not much risk regardless, company will earn 10c this year anyway.
• Tom says:

  September 29, 2009 at 3:15 pm

  Ian,

  The $4K per month DVD kiosk estimate was based on ave of Redbox units which gross a little under this. I agree, est is way too high based on Redbox locations currently and how long they’ve been there. Blockbuster is rolling out their unit in Jacksonville now at the Publix stores and seem to get good traffic.

  I would only price in the current and projected (by year end) ATM business. Your estimate of 3.7 and 3.9 cents (q3 &4 this year) is too high as well, unless they knock down a big ATM win soon. Co should only make about 600k in q3 and a little less in q4 since that is their slowest quarter. If I’m missing something, let me know. What I don’t know is the 126 new units announced in June, are they high volume ones like the last 2 atm win announcements.

  I’m disappointed that we see no activity after the roadshow, but it does sound like you’re cooling off on the stock.
• iancassel says:

  September 29, 2009 at 5:52 pm

  I never said they would earn 3.7c to 3.9c Q3/Q4. I said I thought they could earn 12c this year since they basically did 6c through first six months when you take out the one time hit in Q1. I think your estimates are accurate, ie 2-3c q3, 2-3c q4, so maybe 10-12c for the year.

  Yeah i would imagine $2,500-$3,000 per month via dvd kiosks would be more accurate.

  I’m not surprised on the follow through or lack there of from the roadshow, as this was the first time the company really did this type of thing. Also, management is very tight lipped which can actually be a bad thing when trying to get new investors in the stock but I also can’t blame them. They are still probably 2-4 wks from getting a conclusion on the dvd rollout, so they don’t/can’t make bold statements to the street about this yet.

  Not cooling on it, just need more insight from the company on dvds to really develop a accurate model. When they give this you can figure out if this is going to be a $1.50 stock in a year or $3. Probably a few weeks away still. Either way the stock is trading at less then 10x this years EPS, so not much risk.
• Tom says:

  September 29, 2009 at 8:08 pm

  Sorry, I mistook you for someone else on the investor’s hub board w/r to the 3/4qtr estimates

  We’re on the same page re forecasts, I’m more than comfortable at these levels

  They’ve got an investor’s reception in Jacksonville 10/15, I’m hoping they have some news out before that. They promised quarterly updates and the last one they put out was on June 29
• Tom says:

  September 30, 2009 at 2:15 pm

  Just in case you didn’t see this, McQuain talking about DVD Kiosks
  You’re not kidding about him being tightlipped. Rollout is definitely taking some time too. I hope this is all part of a “media blitz” with this side of the business.

  http://www.atmmarketplace.com/article.ph...
• Tom says:

  September 30, 2009 at 2:16 pm

  http://www.atmmarketplace.com/article.php?id=11357&na=1

  Sorry, here’s the whole link.
• iancassel says:

  September 30, 2009 at 3:43 pm

  Nice find Tom

  Ian
• Tom says:

  December 3, 2009 at 6:10 pm

  Ian,

  Did you attend the GAXC presentation at LD Micro ? If so, your thoughts ???

  Any interest by the funds present ? Also, did they suggest any guidance at all ? How about the DVD initiative ?

  Thanks
  Tom
• iancassel says:

  December 3, 2009 at 6:45 pm

  Tom:

  I ended up not going out to the conference. The last I heard is they will make a decision before year end on DVD rollout (ie: board mtg scheduled mid dec). I wouldn’t expect any guidance from them.

  IC
• Tom says:

  December 4, 2009 at 12:48 pm

  While I only checked on 20 companies that attended the LD Micro conf (at random) seems GAXC was the only one making $$.