Friday, August 21, 2009
Global Axcess becomes a cash machine
Jacksonville Business Journal – by Kimberly Morrison
Global Axcess Corp. is one of Jacksonville’s lesser-known publicly traded companies, but if it keeps up momentum, that won’t be the case for long.
The ATM operator turned self-service kiosk provider is emerging from a three-year turnaround that has produced fatter margins and more consistent profits than it has seen in years. Management thinks the company is finally in good shape. Earnings have nine quarters of positive momentum, and in the last quarter were up nearly 24 percent to $557,000 with less debt and more cash.
It’s a different company from what it once was — a little more grown up and finally figuring out what it is really good at and how to build on that. In this newfound maturity, Global Axcess is branching out into DVD rental kiosks, which it is piloting in Jacksonville and two other markets.
The move is part of a broader strategic plan to increasingly expand beyond the ATM, which is an industry not expected to see an increase in use over the next several years.
Global Axcess (OTC: GAXC) today remains a small player in the $7 billion to $12 billion ATM industry. Its 4,300 ATMs account for just 1 percent of market share, making it the seventh-largest non-bank ATM company in the country.
As the company enters the final, high-growth stage of its turnaround, it has a new crackerjack consulting agency in tow. New York-based Hayden IR is helping the company launch an aggressive marketing and investor relations campaign to drive growth and maximize shareholder value.
“In my opinion, the management of Global Axcess Corp. has done a tremendous job of repositioning the enterprise to differentiate it from others in the industry and to set the stage for revenue growth and margin expansion,” said Brett Maas, Hayden managing partner.
Global Axcess this week landed a three-year contract with an undisclosed national grocery chain worth $750,000 per year, one of the company’s first major successes for its newly restructured sales team. CEO George McQuain sees a good future ahead.
Back in 2006, things were less stable. A management shake-up ended in three top executives resigning from the company. Michael Loiacono became chief financial officer and McQuain was named CEO, both promotions from within. But company losses accelerated to $3.6 million that quarter. There was house cleaning to do.
Before new management, the company had overestimated the benefit of an acquisition, which inflated quarterly earnings that the company later had to lower by $500,000. A group of investors sued the company, resulting in a settlement in 2007 of undisclosed terms.
“George stepped into a quagmire of trouble,” said Lock Ireland, vice chairman of the board and chairman of the board for Proficio Bank. “His first full quarter, he made a profit of $14,000, which was a tiny amount of money but an amazing turnaround.”
Global Axcess then sold an unprofitable South African subsidiary and outsourced certain functions to focus
resources where they were most needed. The company began paying down debt and working to increase cash flow, which made 2008 a banner year on the balance sheet.
McQuain looks back and can see where the company went wrong, although he refuses to take credit for getting it back on track.
“We weren’t sure of our core competencies,” he said. “We had a strategy that didn’t emphasize what we were really good at, and it stretched the company.”
His first step in the turnaround was to scrub expenses. Costs go to the bottom line, and finding places to cut was going to be easier than generating new revenue.
“We have an internal value of ‘bare bones, no frills’ — only spend money on things that add value,” McQuain said, pointing to his older, beat-up office furniture that he seems to take pride in. “So if that means I stay at a Motel 6 when I travel rather than a Howard Johnson, then that’s what I do. Our clients don’t want to pay for me to stay somewhere expensive.”
Step Two was emphasizing operational efficiencies. Divesting unprofitable operations and outsourcing was part of that, but Global Axcess also did a better job of making sure the ATMs were always working, and making money. Then the company implemented an overdue fee increase.
Step Three was to listen closely to clients — the owners of convenience stores and grocery chains where the ATMs were. Surveys and other research helped the company identify its strengths through its customers’ eyes, so it could then capitalize on the information and differentiate itself in the market. Global Axcess found out that paying its clients on time, better-operating machines and service so personal it sends gift baskets to clients on their birthday made them a standout.
It’s somewhat of an extension of how the company’s small 20-person office in Southpoint operates. The family-man side of McQuain was also listening to his employees, and he began letting parents bring their kids to work, bought laptops for each person so they could work from home if needed and recently started offering college tuition reimbursement. Happy employees are productive employees.
The strategy has paid off. Although the company’s stock hit a 52-week low in February at 10 cents, it has been on a steady ride up ever since and hitting new highs almost every day. It reached a 52-week high earlier this month at 73 cents.
“I think Global Axcess is a jewel in the sea,” Ireland said. “Cash flow has been increasing tremendously, earnings are increasing beyond our expectations and the revenue base has been increasing in 2009 beyond what we expected. We are in tremendous shape for diversification.”
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Investor Relations Contact:
Brett Maas, Hayden IR