Type: Public Company
Address: 7350 Dean Martin Drive, Suite 309, Las Vegas, Nevada, 89139, U.S.A.
Telephone: (702) 987-7169
Toll Free: (877) 987-7171
Fax: (702) 987-7168
Web: http://www.cashsystemsinc.com
Employees: 289
Sales: $96.03 million (2006)
Stock Exchanges: NASDAQ
Ticker Symbol: CKNN
Incorporated: 1983 as Cameron Resources, Inc.
NAIC: 541512 Computer Systems Design Services
SIC: 7373 Computer Integrated Systems Design; 7379 Computer Related Services Nec
Cash Systems, Inc., is a leading provider of cash-access products and related services to the gaming industry. The company provides three primary services to casinos that enable their guests to obtain cash. Cash Systems facilitates credit and debit card advances, automated-teller-machine (ATM) withdrawals, and check-cashing services. The company operates in approximately 135 casinos and at 25 retail locations, deriving roughly 60 percent of its business from casinos operated by Native American tribes. Cash Systems maintains offices in Las Vegas, Nevada; Burnsville, Minnesota; and San Diego, California.
Origins
Early in adulthood, Craig Potts set his sights on the gaming industry, adopting his father's career interest as his own. Potts' father owned a business that provided check-cashing services to casinos, a service Potts intended to offer, as well as others, through his own company. Before he could begin to court casinos as customers, however, Potts needed to establish himself as an entrepreneur, something he started to do when he was 24 years old. In 1997, he teamed up with Christopher Larson, also 24 years old, and began earning the financial clout to pave his entry into the casino business.
The two Cash Systems founders, both Minnesota residents, demonstrated impressive business skills from the start. They borrowed $25,000 and purchased five ATMs, installing the machines in service stations and supermarkets in the Minneapolis-St. Paul area. By doing so, the two young entrepreneurs drew a battle line, squaring off against two massive, Minneapolis-based financial holding companies, U.S. Bancorp and TCF Financial Corp., the main competitors in the area. "I thought I could provide customers with better service and higher commission than TCF and U.S. Bank," Potts explained in an August 31, 2003, interview with the Star Tribune.
Founders Turn to Casinos
Potts' customers, store operators, evidently agreed with his self-appraisal. By the end of 1999, Cash Systems had ATMs installed in approximately 125 locations. Annual revenues nearly reached $2 million. The company's net income climbed into the six-figure range. It was an encouraging, profitable start for the entrepreneurial neophytes, but in their minds the deployment of ATMs merely was a means to an end. Potts and Larson had something else in mind, a business plan that needed the profits from the ATM business to reach its execution stage. When Larson talked to the Star Tribune on August 31, 2003, he referred to the financial results recorded in 1999, saying, "that wasn't a lot of profit, but it was enough to leverage into the bank loans we needed to move into the casino market," before adding, "which is where we wanted to go all along."
Potts and Larson switched their focus. The change in strategy found them butting against new competitors, but Potts, for the second time, was undaunted by the presence of larger adversaries. "There were three big competitors in the casino market," he said in his interview with the Star Tribune, "and I thought their cash-advance systems were slow and inflexible, hard for guests to use." His riposte to the established market leaders could not be made without considerable investment, however. Potts saw deficiencies in technology and planned to beat his competition by developing superior technology. Cash Systems spent nearly $2 million developing more powerful, feature-filled software for use in casinos, focusing its efforts on a credit card system.
The investment into software development became the linchpin of Cash Systems' success. The proprietary software made the task of obtaining cash far easier for casino guests, who were able to gain authorization to access their accounts without having to know their personal identification number (PIN). For obvious reasons, casino operators wanted their guests to have access to cash as easily as possible, but the main reason Cash Systems' software proved to be a commercial success had little to do with it being user-friendly. The product offered by Potts and Larson became commercially successful because it gave casino operators important data about their guests, including name, address, telephone number, and transaction history, on a real-time basis. Information critical to developing marketing programs that previously had only been available through weekly or monthly updates was available instantly. The superior technology was a magnet for customers, drawing casino operators to the Burnsville, Minnesota, company headed by Potts and Larson.
Cash Systems made the first sale of its new system in October 2000. Canterbury Park, a horse-racing track and casino in Shakopee, Minnesota, and the Jackpot Casino in Morton, Minnesota, became the company's first gaming customers. Additional contracts soon followed, fueling revenue growth from $1.9 million in 2000 to $7.9 million in 2001. Once Potts, who served as president and chief executive officer, and Larson, who served as chief financial officer, realized they had developed a successful business model they took the next logical step: turn to Wall Street for the capital to finance their company's rapid expansion.
Public Company in 2001
The route the founders took to convert their burgeoning business into a publicly traded company was chosen for its speed. It also gave Cash Systems the odd incorporation date of 1983, back when Potts and Larson were ten years old. Rather than wade through the process of completing an initial public offering (IPO) of stock, the founders opted to merge with a publicly traded corporate shell, a so-called blank-check company. They chose a Utah-based company incorporated in June 1983 named Cameron Resources, Inc., which changed its name to Unicom, Inc., in 1989 and to Unistone, Inc., in 1998. The company was formed to participate in the mineral, oil, and gas business, but it never found its footing, existing as a company with no assets and no employees when Cash Systems merged into it in October 2001, thereby becoming a publicly traded company. "This is a very exciting and significant milestone for Cash Systems as we take the important step of becoming a fully reporting publicly traded company," Potts said in a statement published in the October 12, 2001, issue of Finance and Commerce Daily. "Our primary objective will be to devote all our resources to rapidly expanding Cash Systems' share of the casino cash-access industry."
Cash-Advance Service Fueling Growth
Cash Systems flourished in its role as a cash-access provider. Potts earned recognition for determining the needs and desires of casino operators and developing products and services that fulfilled their expectations. As more customers flocked to Cash Systems, its revenues swelled, increasing to $15.3 million 2002 before more than doubling to $32.7 million in 2003, when the company had contracts with 120 casinos and racetracks in 21 states and four Caribbean countries.
Driving the company's sales growth was its credit/debit card cash-advance (CCCA) service, which accounted for 70 percent of its revenue in 2003. For a credit card cash-advance, gaming patrons typically paid a fee of 7 percent of the sum they obtained. For debit card withdrawals considered to be CCCA transactions, patrons paid a fixed fee of $1.95 plus 2 percent of the amount withdrawn. Cash Systems depended on ATM cash withdrawals for 20 percent of its revenue, a service that entailed installing ATMs and processing the ATM transactions. The company collected a fixed fee charged for each transaction. Check-cashing services generated 10 percent of Cash Systems' revenue. The company offered two types of service, either providing a software system that ensured the availability of a patron's funds or providing the service at a booth located in the casino, which was staffed by Cash Systems employees. For its check-cashing service, the company collected a variable fee depending on the amount of the check.
A Failed Acquisition in 2003
For a brief period, it looked as if Cash Systems was going to record a sizable increase in its financial totals. In mid-2003, the company announced it had agreed to acquire Chex Services Inc., a company that provided CCCA, ATM, and check-cashing services to several Native American-owned casinos. Cash Systems brokered the deal with Chex Services' parent company, Englewood, Colorado-based Equitex, Inc. Cash Systems agreed to a $4 million, all-stock deal, which was expected to add $20 million to the company's annual revenue volume and $1.5 million in annual profits, but negotiations with Equitex soon turned hostile. Cash Systems terminated the agreement in December 2003, alleging Equitex had accepted a competing offer from another company. Equitex disagreed, claiming Cash Systems owed it $50,000 for terminating the agreement. Months of legal wrangling ensued, but the matter was eventually resolved through an out-of-court settlement in April 2004.
A New Leader in 2005
As Cash Systems matured into a market leader, the company underwent a change in management. For undisclosed reasons, Potts resigned from the company at the end of 2004. He was replaced on the first day of 2005 by Michael D. Rumbolz, who became Cash Systems' new chief executive officer. The year also marked the relocation of the company's main offices from Burnsville to Las Vegas.
Potts, the inexperienced yet confident young entrepreneur, was replaced by a seasoned veteran. Rumbolz, who served as chairman of the Nevada Gaming Control Board during the 1980s, earned his bachelor's degree from the University of Nevada-Las Vegas. He earned his law degree from the University of California's Gould School of Law. After completing his education, Rumbolz set up his own legal practice, practiced law for several years, and earned the esteem of the legal community. In 1983, Rumbolz was appointed chief deputy attorney general for Nevada. Next, he held various executive positions at Trump Hotels & Casino Resorts, served as director of corporate development for Circus Circus Enterprises Inc., and presided as president and chief executive officer of Anchor Gaming. After leaving Anchor Gaming in 2000, Rumbolz became vice-chairman of Casino Data Systems Inc.
In the capable hands of Rumbolz, Cash Systems continued to record robust growth. Rumbolz negotiated his first deal in November 2005, when Cash Systems agreed to acquire Indian Gaming Services from Borrego Springs Bank, a bank owned by the Viejas Band of Kumeyaay Indians. Indian Gaming Service provided CCCA, ATM, and check-cashing services to 11 casinos. The acquisition was completed in February 2006.
A decade after Potts and Larson acquired five ATMs to pave their entry into the casino market, Cash Systems stood as a national leader. From $48.4 million in 2004, sales increased to $63.1 million in 2005 before leaping to $96 million in 2006. The company entered 2007 with its systems installed at 135 gaming locations, each offering casino operators and their guests a wealth of cash-access options. Cash Systems marketed "all in 1" ATMs, which conducted ATM and CCCA transactions. "Cashclub," another service offered by the company, enabled patrons to receive funds for CCCA and check-cashing transactions directly from an ATM, eliminating the need for guests to visit the casino cage to obtain their cash. The company sold its "powercash" system, which enabled players to access funds from their enrolled credit cards without leaving a gaming device, such as a slot machine. Cash Systems offered "tablecash," a wireless, cash-on-demand system that supported a full range of payment methods.
As Cash Systems looked to the future, its success hinged on its ability to effectively wed new technology with customer service. To retain its market share, the company needed to devise new ways to give casino operators and their guests safe, reliable, and speedy access to account information and account funds. For the short-term at least, Rumbolz figured as the executive to lead the company forward. In 2007, he signed a two-year contract renewal with Cash Systems. "I'm excited by the progress we have made at the company and with our new product development," he noted in a March 7, 2007, company press release. "I look forward to continuing to work with our board and our strategic partners to create long-term shareholder value."
Principal Subsidiaries
Cash Systems of Canada, Inc.
Principal Competitors
Global Cash Access, Inc.; Global Payments, Inc.; Fidelity National Information Services, Inc.
Further Reading
Allen, Mike, "Bank Sells Gaming Arm," San Diego Business Journal, November 21, 2005, p. 28.
Brus, Brian, "Cash Systems Inks Contract with Creek Nation of Oklahoma," Journal Record, September 12, 2005.
"Cash Systems Agrees to Buy Chex Services," Cardline, July 25, 2003, p. 1.
"Cash Systems, Inc. Gets GLI Approval for Powercash," Wireless News, November 20, 2007.
"Cash Systems Launches Smart Processing Solutions," CNW Group, October 11, 2006.
"Cash Systems Secures New Contract," Wireless News, February 24, 2007.
"Cash Systems Secures New Contract," Wireless News, September 22, 2007.
"Chex Service, Cash Systems Settle Their Lawsuits," Cardline, April 23, 2004, p. 1.
Lindenmayer, Isabelle, "New Chief Executive for Cash Systems," American Banker, December 27, 2004, p. 6.
"Minneapolis-Based Cash Systems Completes Reorganization Agreement," Finance and Commerce Daily Newspaper, October 13, 2001.
Youngblood, Dick, "Cash Dealings," Star Tribune, August 31, 2003, p. 3D.
— Jeffrey L. Covell
International Directory of Company Histories. Copyright © 2006 by The Gale Group, Inc. All rights reserved.
