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Best of Howard Stutz

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Howard Stutz
 

Inside Gaming: Global Cash changes name as focus shifts to slot machines

5 August 2015

Global Cash Access Holdings is disappearing.

Sort of.

The gaming industry's top provider of payment processing equipment will unveil a new name, logo and New York Stock Exchange ticker symbol later this month that reflects the Las Vegas-based company's place within the casino equipment manufacturing sector.

That's what last year's $1.2 billion purchase of rising slot machine manufacturer Multimedia Games will do for a business.

The new corporate moniker will receive a proper roll-out at the Global Gaming Expo in Las Vegas at the end of September.

"Our new brand will provide us with the unique identity that conveys our intention to be a full-service supplier of casino gaming equipment and payment solutions," Global Cash CEO Ram Chary said last week on the company's second-quarter earnings conference call.

The reasoning is that Global Cash wants the investment community to focus on Multimedia Games, which has design and manufacturing facilities in Austin, Texas.

Global Cash is best known for providing the casino industry with ATMs, point-of-sale and debit card transaction devices, as well as slot machine ticket redemption kiosks. The company is licensed for payment processing equipment in far more jurisdictions than Multimedia Games is for slot machines.

"When we acquired Multimedia, we viewed the strategic rationale for the transaction, including the opportunity that exists to sell Multimedia's products into our significantly larger payments customer base," Chary said.

On the conference call, Chary said the company received commitments from four large casino operators to use both Global Cash's payment processing equipment and Multimedia slot machines. He didn't provide much color, other than to say the commitments were in various stages of progress.

Craig-Hallum gaming analyst George Sutton said Global Cash is becoming a strategic player in both business segments.

"The early evidence provided by customers indicated that there is a need for more content and a clearer combined vision for the entity as a whole," Sutton said.

Global Cash has owned Multimedia for two full quarters. The game manufacturer's best-known slot machine product is TournEvent, a linked system for casinos that offers games with both individual play and tournament-style capabilities. But Global Cash sees potential for expansion throughout the slot machine market.

Chary said Global Cash plans to embark on an 18-month expansion to Multimedia Games' research and development capabilities, doubling the number of slot machine content studios the company uses, to 16. Global Cash is opening two studios this year — one in Reno and one in Chicago.

He said the increased research and development costs and re-branding would have a "several million dollar" price tag this year. The company has spent $9.9 million in those areas during first six months of 2015.

"We want to be identified as the most strategic partner in the casino supply space to casino operators," Chary said.

It's a bold step.

Global Cash is competing for slot machine sales against giants Scientific Games Corp. and International Game Technology. Both companies grew through a combined $14.3 billion in mergers and buyouts in the past 24 months. Other slot machine makers — Aristocrat Technologies, Konami Gaming and Ainsworth Technologies — are vying for casino slot floor space.

Eilers Research founder Todd Eilers said there are opportunities for small slot machine vendors with quality products to take market share away from the larger companies. Multimedia Games filled that roll in 2013 and 2014, making it an attractive buy. Global Cash surprised the investment community last fall when it became the purchaser.

Eilers said Global Cash's slot machine segment has been "respectable from a revenue standpoint" in the first six months. However, "aggressive" research and development costs will add some pressure to the company's bottom line.

"That said, improved industry gross gaming revenue trends should continue to benefit both the cash access business as well as the games segment," Eilers said.

In the quarter that ended June 30, Global Cash grew revenue 42%, but lost $12.7 million because of costs associated with the Multimedia Games purchase.

Deutsche Bank gaming analyst Andrew Zarnett said the plan announced by Global Cash Access was "well thought out." If it works, the company will be positioned to "leverage its business model into higher revenues and profitability."
Inside Gaming: Global Cash changes name as focus shifts to slot machines is republished from CasinoVendors.com.