ATM operator Cardtronics is red-hot and on a roll
July 31 would have been a very good day to buy stock in Cardtronics Inc. At 12:10 p.m. EST, the price was a paltry $29.42 per share.
Then, after the closing bell, the company conducted its Q2 earnings call. By the time that bell rang again on Aug. 1, the stock had jumped 12 percent to $33.02.
One week later, Cardtronics announced its purchase of U.K. ATM service provider Cardpoint Ltd. from Payzone Ltd. Before noon on August 8, buyers had driven the price of Cardtronics stock to $36.88.
Within one week, Cardtronics tallied an overall gain of $7.46, or 25 percent. Not too shabby. Not too shabby at all.
In an industry that's asking itself a lot of questions about how to achieve growth these days, Cardtronics is doing just that. In the company's July 31 earnings call, Steve Rathgaber gave away the secret formula for the company's success:
"It was a strong quarter for Cardtronics and it again demonstrates the fundamental strength and durability of our business model," he said. "Like the product we distribute more than a million times a day, cash, our business model has staying power."
A model's model
The company's Allpoint fee-free ATM network continues its steady expansion. On July 22, Cardtronics announced the addition of Discover to the Allpoint network — an important coup.
Additionally, the company has recruited one FI after another with its branding program, which allows banks to extend their service area without the significant upfront expense of purchasing hardware and the long-term costs of monitoring, maintenance and updates.
"Direct banking models, as you know, rely less on traditional branch presence and more on a combination of electronic service access and physical ATM access," Rathgaber said during the Q2 call. "That model creates a natural customer for Cardtronics."
Just last month, Cardtronics announced the introduction of a program that expands co-branding opportunities at premium ATM locations, with the rollout of "Preferred Branding."
The principal brand partner dominates the location with toppers, and signage and on-screen messaging when the machine is not in use. Up to nine preferred partners can place a 2-inch-square logo on the machine. But more than that, they can each project their own distinct brand experience from the moment a consumer inserts her bankcard, bringing up a display of her FI's familiar screens.
Strategic expansion at home and abroad
At the same time that it's pursuing new branding and network partners, Cardtronics also is acquiring ATM portfolios, with an eye to strategic expansion across the U.S.
With the recent purchases of Oregon-based Aptus and California-based Merrimak, the company pushed its total count of owned or operated ATMs to more than 70,000 worldwide. But more importantly over the long term, it established two anchor offices on the West Coast.
Cardtronics is intensifying its focus further abroad, as well. For Q2, Cardtronics was able to report the level of performance it's been looking for in its operations in the U.K., a market the company entered in 2005 with the purchase of BankMachine.
The company is further leveraging its considerable power of scale in the U.K. with this month's acquisition of Cardpoint Ltd. for £100 million ($150 million). The deal includes 7,100 ATMs in the U.K. operating under the Cashzone brand, more than doubling the company's presence in that market.
Also importantly, the acquisition ushers Cardtronics into a new European market — Germany — where it acquires more than 800 ATMs operating under the Cardpoint brand.
'An exciting chunk of the market'
Germany's Cardpoint is the largest independent in a country with few independents; likewise, the U.K. has few non-bank ATM estates, Rathgaber said in an Aug. 7 conference call about Cardpoint Ltd. acquisition.
"[I]ndependents are a very small piece of the ATM market in Germany, especially compared to the U.K.," he said. "And in the U.K. independents are a small share of the market compared to the U.S. We believe that defines the growth opportunity."
Further, Rathgaber said, the majority of transactions in both markets are in cash.
"Almost 55 percent of consumer payments are made with cash in the U.K., and nearly 80 percent of all payments in Germany are cash based. That compares with the U.S. market where about 30 percent of payments are made with cash."
Cardtronics' new managing director in Europe, Jonathan Simpson-Dent, said that with banks in the U.K. looking to offload branches, "quite an exciting chunk of the market" is opening up there.
Just this year, Cashzone has converted about 400 bank ATMs, Simpson-Dent said. "So I do see a decent organic opportunity in the U.K. — ditto in Germany ... the independents are naturally growing over time and filling in quite a lot of wide space over there."
Cardtronics will consolidate the three companies — Bank Machine, Cashzone and Cardpoint — under a new corporate identity, Cardtronics Europe. However, from a consumer point-of-view the brands will remain intact in both the U.K. and Germany.
Waiting for the bell
The Cardtronics business model does seem to be burning it up just now, with the leverage of scale in its operations, the power of co-branding in its product offering, and the promise of convenience and cost-savings in its message to all audiences.
Will the company fire things up with its Euro venture — or will the model flame out? The market temperature in the next several quarters will offer some indication. Rathgaber projects great confidence in the future of Cardtronics:
"[W]e sit poised in multiple markets to help financial institutions avoid costly ATM placements, and stand ready to help in delivering the ultimate distribution convenience and an increasingly large global network of ATMs operating in the most convenient location, where there customers go very day to transact their life's necessities."
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photo: Agustin Ruiz
Suzanne Cluckey / Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally. She is now the editor of ATMmarketplace.com and BlockChainTechNews.com