After a few years spent snapping up competitors in a steady succession, Cardtronics' acquisitive streak seems to have slowed a bit. The company's recent announcement that it had purchased Chase's portfolio of approximately 2,500 retail ATMs was the first in a while.
The consolidation of smaller IADs under the expanding Cardtronics umbrella is certain to continue, but for the moment, the company seems to have fixed its attention on organic growth, judging by comments from CEO Steve Rathgaber during the company's recent Q1 earnings call:
We started the year with strong performance in the first quarter. A few key growth metrics speak to our execution. ATM operating revenues grew 15 percent on a constant currency basis, 9 percent of this was organic, our highest quarterly organic growth rate in over three years.
This follows a four-year span in which annual ATM operating revenues grew more through acquisitions than from existing operations, according to the company's presentation at a JPMorgan Chase & Co. conference in February.
Rathgaber credited the U.K. and North American markets for Cardtronics' strong Q1 performance. The company saw 27 percent growth in ATM revenues in the U.K. on a constant currency basis, the result of improved sales execution, investments, and gains in revenues and margins, among other factors.
In Q1, the U.K. fleet converted to new processing platform and a seven-day cash-in-transit service, improving ATM availability to the highest level in several years, Rathgaber said.
North America also performed well, producing organic and same-store revenue growth of 7 percent, respectively, according to the Q1 report.
This growth was multifaceted, including branding, convenience fee increases, volume lift from Allpoint, and other, one-time events, Rathgaber said.
During Q1, the company's U.S. arm deployed 700 new ATMs and activated nearly a quarter-million new cards on the Allpoint surcharge-free network.
With a global ATM count approaching 200,000, Cardtronics is enjoying what Rathgaber termed "a unique strategic advantage" derived from the benefits of massive scale:
This proven model allows us to win profitable business that powers the next improvement in our scale. We have solid pipelines for ATM placements in multiple markets. Our acquisition pipeline is robust and international. Allpoint has a healthy pipeline and our branding offering has a good outlook for the remainder of the year. The business model that powers these numbers is durable and performing well.
And the company's model promises to continue to perform well into the future, with new opportunities arising from trends toward branch transformation and closure.
As consumers embrace digital banking channels, financial institutions are responding to a corresponding drop in branch traffic by cutting branch locations and personnel and instead maintaining a presence through ATMs, "since ATM access is table stakes for attracting and retaining customers," Rathgaber said.
In such a case, a bank might opt to outsource its retail ATMs fo an independent provider, as was the situation with Chase.
An "equally significant trend," Rathgaber said, is the removal of unprofitable banking facilities from small communities, leaving them without any banking facilities whatsoever. This poses an ongoing problem in the U.K., where more than 400 bank branches — about 5 percent of the total — are expected to close in 2016 alone.
Rathgaber pointed to an example in which branch closures left two small English towns entirely without banking services. Cardtronics worked with each of these towns to reestablish cash access with its own ATM placements.
And closures are not only taking place across the pond. In the U.S., two of the nation's largest banks are in the process trimming their branch networks, closing approximately 150 branches apiece — about 5 percent of their respective totals — and taking with them branch ATM access.
Whether Cardtronics steps in as an outsourced provider of bank-branded ATMs or as an independent owner-operator, the results suit Rathgaber just fine:
It doesn't take a whole lot of imagination to see the possibilities for Cardtronics as banks in the U.S., U.K. and elsewhere rationalize their high cost branch delivery channel. We are the ATM plumbing that can help banks focus on their strategy [and] deliver for them the convenient cash access that their customers will demand for years and years to come.
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transcription courtesy seekingalpha.com
/ 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.