Cardtronics battens down for the ATM industry's 'perfect storm'

Aug. 8, 2017 | by Suzanne Cluckey
Cardtronics battens down for the ATM industry's 'perfect storm'

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In a Q2 earnings call late last week, Rathgaber referred to a "perfect storm" of events that are making it unusually difficult to understand the company's evolving same-store transaction data and to translate it into a forecast for the future.

"There are just too many moving parts to see clearly without the passage of some additional time," he told analysts on the call.

What the company does know is that the software update and EMV migration that played havoc with uptime throughout Cardtronics' U.S. fleet has now been mostly resolved.

Additionally, new agreements this year have managed to replace at least some of the revenue from the 8,000 ATMs that Cardtronics is now in the process of removing from 7-Eleven stores following last month's parting of ways between the longstanding partners.

Further, the company is currently integrating the largest acquisition in its corporate history — DCPayments — with the expectation that it will quickly bring the company to scale in both new and existing markets.

Also importantly, Cardtronics has shed $35 million in expenses over the past year while improving availability and services.

Additionally, Rathgaber said, the company has assembled a new senior management team of "exceptional industry depth and experience. And we are investing to strengthen elements of our core product and service infrastructure. So I feel that we are preparing very well for the next stage of our growth journey."

Still that journey will present challenges as Cardtronics makes its way through the fast-evolving and brutally competitive world of consumer payments.

As Rathgaber put it, "… [T]he same global industry trends that create unique opportunities for our company apply some pressure to our own economics. I am speaking of the gradually declining volumes of cash usage that manifest in the form of reduced ATM use."

However, he said, what presents a growing headwind in the near term also offers additional lift for the company over the longer haul.

"Our thesis has been and remains that gradual declines of cash use and ATM transactions enable a future source of growth for Cardtronics," he said.

This makes absolutely no sense at all … until you consider the side effects that declining cash will almost certainly produce.

These include cost pressures on financial institutions that operate their own ATM fleets, combined with ongoing branch closures for those same FIs as customers migrate in greater numbers to digital banking methods.

Rathgaber explained that this global trend in banking will present the opportunity to consolidate traffic at Cardtronics ATMs in all the markets the company serves.

"Cardtronics is mission-critical banking infrastructure, connecting our physical ATM network to the financial institution's digital offerings," Rathgaber said.

He added that the company believes it is seeing signs of this shift already, evidenced by the recent signing on to the company's Allpoint network by a number of financial institutions.

"These accounts are performing at or above our expectations," he said.

But at the same time the company is seeing these kinds of promising signs, it is also feeling the squeeze of declining foot traffic in many locations.

This is due in no small part to a shift in consumer buying behavior from brick-and-mortar to click-and-order. The resulting reduction in traffic at physical retail outlets has been dubbed "the Amazon effect."

Software operating issues; EMV upgrades; the learning curve for consumers as they begin to use these EMV-enabled machines; and, finally, the decline of in-store traffic. It all adds up to that perfect storm buffeting ATM deployers worldwide.

With its advantages of reach and scale, though, Cardtronics emerge from this passing storm not only intact, but also stronger, Rathgaber said:

Until this is accomplished, we will battle — along with everyone else — pressure from declining same-store transaction volumes. But it is that very pressure that creates the growth opportunity for the most efficient consolidator, Cardtronics.

Our job will be to navigate the likely ups and downs of this industry transition to be the specialist. To weather the expected bumps in this growth journey, Cardtronics will execute with a relentless focus on cost, simplicity, security and service excellence.

In short, expect to see Cardtronics buckling up and buckling down to ride out the storm.


Topics: Distributors / ISO / IAD, Public Companies

Companies: Cardtronics



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 wwwView Suzanne Cluckey's profile on LinkedIn

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