Article

Cardtronics Q1 chalks up 26th quarter of YOY growth

If cash is dead, how is Cardtronics making so darned much of it?

May 5, 2015 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

The next time some know-it-all informs you that cash is dead, do this: Look that poor, deranged soul squarely in the eye and speak just one word — "Cardtronics." 

Then, if you feel like elaborating, explain that twenty-six consecutive quarters — 6-and-a-half solid years — of year-over-year revenue increases is a highly unusual accomplishment for a company whose product supposedly is going the way of the Polaroid photograph.

"We had a strong start to 2015, driven by 15 percent top-line growth, which drove 25 percent growth in adjusted earnings per share in the first quarter," Cardtronics Inc. CEO Steve Rathgaber said in a statement issued in conjunction with the company's Q1 earnings call last Thursday.

"The first quarter was also notable for solid execution: one where we took over operations for over 1,200 Co-op Food locations in the U.K.; entered into several new key merchant relationships; extended relationships with several existing key partners; and began operations in Poland, a new market."

Like other U.S. companies with international operations, Cardtronics felt the headwinds of unfavorable foreign exchange rates. On a constant currency basis, top-line growth registered at 19 percent as opposed to 15 percent and adjusted earnings per share came in at 28 percent as opposed to 25 percent. However, CFO Chris Brewster pointed out that the company had been sheltered to at least some degree from the negative FX headwinds.

"[O]ne might think that this [negative] effect would be larger given that about a third of our revenues are now sourced outside the United States," he said during the earnings call. "But we happen to have a very good match between the currencies our revenues are denominated in and the currencies that our costs are denominated in. So, we don't see the negative effects on percentage margins that companies are seeing who have revenues denominated in weaker currencies, but substantial related costs in U.S. dollars."

The company squeezed a number of successes under its belt in the first three months of 2015. Rathgaber enumerated wins in both American and European markets: More than 2,400 ATMs brought live on the company's platform; more than 900 ATMs physically branded in the quarter; 1,200 new locations under contract for future installation; more than 230 ATMs contracted in the quarter for branding; and 22 new FIs signed to the Allpoint network, representing more than 1 million new debit cards.

But while these deals generated "a lot of good news," Rathgaber said he thought the best news was to be found in Cardtronics' activities within the global ATM market.

He cited international growth this year that included entry into the Polish market with its retail partner Shell; the signing of a deal with a U.S. retailer to provide services to its Canadian franchise; the signing of the largest convenience store chain in Northern Ireland; and the launch of a managed services arrangement with Santander Bank for its ATM locations in Puerto Rico.

"We are establishing ourselves as the international partner of choice for ATM services," Rathgaber said. "We expand into new countries with existing global retail partners, and we grow with multinational financial institutions in a variety of established Cardtronics markets," he said in the earnings call.

The company was busy on its home turf, as well, with new and renewed agreements with an assortment of retail customers including Kum & Go convenience stores, Haggen's grocery stores, Cumberland Farms convenience stores, and Universal Studios theme parks. The company also expanded its relationship with USAA, with the branding of  CVS and Walgreens sites in the FI's home market of San Antonio, Texas.

And then there was Kalpana. Cardtronics is the pilot partner for the new NCR thin client, cloud-based ATM software platform "in a more modern, sleek packaging," Rathgaber said, referring to the NCR Cx110 ATM, which was developed for use with Kalpana. "We are currently scoping the fit of this new technology with our fleet and our product plans."

Like other providers in the ATM industry, Cardtronics' announced updated full-year earnings guidance during its Q1 earnings call. However, in Cardtronics case, this was once again good news.

Brewster said that both gross margins and earnings per share were being adjusted upward just slightly, but he cautioned that expectations could change again in coming months. 

"Having said that, we are proud to be somewhat more optimistic with regard to full-year earnings outcomes, while [noting] with our usual caution, the fact that it's still early in the year, and while continuing to keep a weather eye on exchange rate changes."

While the company now expects to have more money to count 2015, it could be someone else counting it.

During the earnings call, Rathgaber announced Brewster's planned retirement from the company after 11 years as its CFO. However, he said, Brewster intends to remain with the company until his replacement is "on the ground and sufficiently transitioned."

photo istock

About Suzanne Cluckey

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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.