Global Axcess Corp Announces Second Quarter 2010 Financial Results

JACKSONVILLE, Fla., Aug. 10 /PRNewswire-FirstCall/ -- Global Axcess Corp (OTC Bulletin Board: GAXC; the "Company"), an independent provider of self-service kiosk solutions, today announced the financial results for the second quarter ended June 30, 2010.

Mr. George McQuain, Chief Executive Officer of the Company, stated, "We are pleased to report our 15th consecutive profitable quarter, demonstrating our financial strength and again validating our diversification strategy. We delivered this profit while accelerating investment in our DVD kiosk initiative. In aggregate, across the Global Axcess system, we have deployed over 165 DVD kiosks as of the end of July, and we expect to install additional kiosks in the third quarter, activating them by the end of the year. We just began deployment of new DVD kiosks with the major grocery chain that Global Axcess signed to a three-year contract in May, and to date, over 125 new DVD kiosks have been deployed and 323 total kiosks are scheduled to be deployed with this grocery chain by the end of August. The revenue from our DVD initiative is just beginning, and is not expected to exceed the expenses for this project in the third quarter, but we remain confident in our ability to gain market share in this emerging and ultimately profitable industry."

Second Quarter 2010 Financial Results

The Company reported revenues from continuing operations of $5.5 million for the three-month period ended June 30, 2010 a 3% increase compared to $5.4 million for the three-month period ended June 30, 2009. Core ATM revenue was approximately $5.4 million and revenues generated from the DVD rental kiosks were approximately $60,000. Gross profit from continuing operations was $2.5 million, or 45.6% gross margin, for the second quarter of 2010 compared to $2.6 million, or 47.6% gross margin, for the same period of 2009. Approximately $106,000 of the increase in cost of revenues year over year related to the DVD business.

Operating expenses for the second quarter ended June 30, 2010 increased 17.8% to $2.2 million from $1.8 million in the year-ago period. The increase in SG&A expenses was mainly due to $221,000 of expenses incurred in connection with the DVD rental kiosk initiative. Depreciation expense increased due to increased ATM and DVD kiosks purchased during the latter part of 2009 to support new business in both business lines.

Operating income from continuing operations was $332,000 for the quarter ended June 30, 2010 compared to $707,000 in the year-ago period. During the second quarter of 2010, the Company recorded net interest expense of $110,000 compared to net interest expense of $150,000 for the same period in 2009. The decrease was mainly due to decreased debt balances at the three-month period ended June 30, 2010, as compared to the debt balances at the three-month period ended June 30, 2009. EBITDA (earnings before net interest, taxes, depreciation and amortization) for the second quarter of 2010 was $751,000, compared to $1.2 million in the second quarter of 2009. Adjusted EBITDA (EBITDA before stock compensation expenses and loss on early extinguishment of debt) was $908,000 for the second quarter of 2010, down from $1.2 million for the second quarter of 2009. EBITDA represents a non-GAAP (Generally Accepted Accounting Principles) financial measure. A table reconciling this measure to the appropriate GAAP measure is included in this release.

Net income for the second quarter ended June 30, 2010 was $121,000, or $0.01 per share (based on 21.9 million and 23.8 million basic and diluted weighted average shares outstanding, respectively), which compares to net income of $557,000, or $0.03 per share (based on 21.9 million and 22.3 million basic and diluted weighted average shares outstanding, respectively), for the same period of 2009. Second quarter 2010 net income included expenses of $102,000 relating to the payoff of debt balances with a senior lender and a note payable.

Year-to-Date 2010 Financial Results

For the six month period ended June 30, 2010, total revenue was $10.9 million, an increase of 1.0%, compared to $10.8 million for the same period of 2009. Core ATM revenue was approximately $10.8 million and revenues generated from DVD rental kiosks were $103,000. Gross profit for the six month period ended June 30, 2010, was $5.0 million, reflecting a gross margin of 46.2%, compared to gross profit of $5.1 million, or a gross margin of 47.4%, for the comparable 2009 period. Approximately $166,000 of the increase in cost of revenues year over year related to the DVD business. Operating income from continuing operations for the six months was $772,000, compared to $1.5 million for the same period of 2009. Net income for the six months ended June 30, 2010, was $439,000, or $0.02 per basic and diluted share (based on 21.9 million and 23.8 million basic and diluted weighted average shares outstanding, respectively), compared to net income for the same period of 2009 of $654,000, or $0.03 per share (based on 21.4 million basic and diluted weighted average shares outstanding). EBITDA decreased to $1.7 million for the six months ended June 30, 2010, from $2.0 million for the six months ended June 30, 2009. Adjusted EBITDA decreased to $1.9 million for the six months ended June 30, 2010, from $2.5 million for the six months ended June 30, 2009.

Mr. McQuain continued, "Our core ATM business continues to progress as we believe there are several opportunities in the contract review phase which have a reasonable probability of resulting in executed agreements in the coming months. We've added an additional ATM salesperson and believe we can further penetrate this market as we continue to prove our service levels and our quality. Our Instaflix brand is also generating industry attention, and we have received additional inquiries from our installed base about this opportunity."

Balance Sheet and Cash Flows

Net cash provided by continuing operating activities during the six-month period ended June 30, 2010 was $275,000 compared to net cash provided by continuing operating activities of $2.1 million in the year-ago period.  The decrease in net cash provided by operating activities was partly attributable to $1.3 million of prepaid amounts made to the Company’s DVD kiosk manufacturer for DVD kiosks that will be delivered and installed at customer sites in July and August of 2010.   Shareholders’ equity increased 3.3% to $17.1 million from $16.6 million at December 31, 2009.

Michael J. Loiacono, Chief Financial Officer of the Company, stated, "We continue to see the positive results of eliminating and refinancing our debt, and our strengthened balance sheet has enabled us to accelerate our investments in our DVD kiosk initiative. In the quarter, we significantly increased our inventory of DVD kiosks to meet the implementation schedule for our major grocery chain customer and also significantly increased the library of DVD's to meet demand as installations are completed. We are confident we have the resources at favorable terms to fund our growth, including the $17 million credit facility from Fifth Third Bank. To date, we have drawn down $2.1 million against this facility."

Conference Call Information

Anyone interested in participating in the conference call scheduled for Wednesday, August 11, 2010 at 10 a.m. ET should call 877-879-6243 and enter pass code 7519410 if calling within the United States, or 913-312-1376 and pass code 7519410 if calling internationally, approximately 5 to 10 minutes prior to 10 a.m. There will be a playback available until August 18, 2010. To listen to the playback, please call 888-203-1112 if calling within the United States or 719-457-0820 if calling internationally. Please use pass code 7519410 for the replay.  A transcript of the conference call will be available on the Company's website on August 16, 2010 or by calling Brett Maas of Hayden IR at 646-536-7331.

About Global Axcess Corp

Headquartered in Jacksonville, Florida, Global Axcess Corp was founded in 2001 with a mission to emerge as the leading independent provider of self-service kiosk services in the United States. The Company provides turnkey ATM and other self-service kiosk management solutions that include cash and inventory management, project and account management services. Global Axcess Corp currently owns, manages or operates more than 4,500 ATMs and other self-service kiosks in its national network spanning 43 states. For more information on the Company, please visit http://www.globalaxcess.biz. For more information on Nationwide Money Services, please visit http://www.nationwidemoney.com.

This press release may contain forward-looking statements. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as: "believes," "expects," "may," "will," "should," or "anticipates," or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. Various important risks and uncertainties may cause the Company's actual results to differ materially from the results indicated by these forward-looking statements. For a list and description of the risks and uncertainties the Company faces, please refer to Part I, Item 1 of the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 3, 2010, and other filings that have been filed with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, and such statements are current only as of the date they are made.

The following table sets forth a reconciliation of net income from continuing operations to EBITDA from continuing operations for the three months ended June 30, 2010 and 2009:

The following table sets forth a reconciliation of net income from continuing operations to EBITDA from continuing operations for the six months ended June 30, 2010 and 2009:

The following table sets forth a reconciliation of net income from continuing operations to EBITDA from continuing operations before stock compensation expense and loss on early extinguishment of debt ("Adjusted EBITDA") for the three months ended June 30, 2010 and 2009:

The following table sets forth a reconciliation of net income from continuing operations to EBITDA from continuing operations before stock compensation expense and loss on early extinguishment of debt ("Adjusted EBITDA") for the six months ended June 30, 2010 and 2009:

The following table summarizes our revenue, gross profit, SG&A, depreciation, operating income and net income by segment for the periods indicated:

SOURCE Global Axcess Corp

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