Article

Q3 a win (mostly) for ATM industry heavyweights

IADs Cardtronics and Euronet churned out double-digit revenue increases; Diebold continued its turnaround; NCR grew revenues, but missed expectations.

November 5, 2014 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

The returns are in, not only for this week's midterm elections, but also for third-quarter earnings from the largest U.S.-based ATM industry players, including ATM hardware and software providers Diebold Inc. and NCR Corp., and independent ATM deployers Cardtronics and Euronet Worldwide. And for all, the topline results were wins.

Cardtronics recorded earnings of 64 cents per share for the quarter, a 16-percent rise year over year. The company expects to hold steady for the year on projected earnings per share of $2.31 to $2.34 for the year.

Cardtronics CEO Steve Rathgaber said the nonrenewal of an 11-year-old branding agreement with Chase would create some "headwinds" in early 2015. But, as the contract was one of the company's least profitable, Cardtronics will now have the opportunity to strike new and more lucrative branding deals with other FIs, he said.

Euronet posted better-than-expected results of 80 cents cash earnings per share — up 44 percent over Q3 2013 and a quarterly record. EPS exceeded expectations by 7 cents per share.

Euronet Worldwide CEO Michael J. Brown cautioned that Q1 2015 would present an earnings challenge, due to unavoidable seasonal factors, including fewer ATM cash withdrawals; lower sales of mobile content after the Christmas season; fewer migrant jobs in the Northern hemisphere, reducing the number of cash remittances; and lower mobile phone use (hence fewer top-ups) driven by the previous two factors.

Diebold posted a marked improvement over Q3 of 2013, with net income of $33 million, or 4.3 percent of revenue, in the third quarter 2014, compared with a net loss of $21.7 million, or -3.1 percent of revenue, in the third quarter of 2013.

The notable exception to the company's upturn was its in security segment. While electronic security grew 14 percent, driven by strong performance in North America, this increase was offset by a 12-percent decline in the physical security business.

Of the four companies, NCR delivered the biggest disappointment for the quarter. Despite a 9-percent increase in revenue year over year, the company reported a 12-percent decline in earnings per share for Q3 2014 compared with 2013, delivering non-GAAP EPS of 67 cents rather than the expected 71 cents.

The company's financial services division performed well, registering a 17-percent increase in revenues year over year. But the picture for retail services was bleak, with losses of 1 percent in revenues and 52 percent in operating income.

CEO Bill Nuti attributed losses to several factors, including unexpected weakness in retail markets, retailers' reallocation of funds toward to IT security in the wake of data breaches, and what he said was "unacceptable" execution that prompted a stem-to-stern overhaul of division leadership.

NCR also was forced to recalculate its earnings estimate for the full year, lowering expectations from $3–$3.10 to $2.60–$2.70 in Non-GAAP diluted earnings per share.

Following are selected ATM and financial services highlights and CEO comments from each company's earnings call:

Euronet Worldwide

revenue: $453.4M | +26%

earnings per share: 80 cents

• launched IAD network in the U.K.;
• signed asset purchase and network participation agreement with Plus Bank in Poland;
• signed asset purchase agreement with Libra Bank in Romania;
• launched electronic KYC pilot with Development Bank of Singapore using unique ID database;
• renewed annual maintenance agreement with SCB Qatar;
• completed network migration of Carpatica Bank ATMs in Romania and Citibank ATMs in Hungary;
• launched IKANO Bank network participation agreement in Germany;
• delivered cardless cash withdrawal by mobile phone for Raiffeisen Bank in Slovakia;
• introduced China UnionPay and American Express acceptance on IAD networks in Italy, Romania and Spain;
• signed ATM and POS value-added services agreement with United Bank of Africa in Nigeria and 19 other African countries;
• added 495 ATMs for a total of 19,808 as of the end of Q3.

Cardtronics

revenue — $265.8M | +16%

earnings per share — 64 cents

• closed previously announced acquisition of Welch ATM, operator of approximately 26,000 ATMs in the U.S.;
• announced seven-year, exclusive agreement to operate approximately 1,800 ATMs located in Co-operative Food stores across the U.K. beginning January 2016;
• announced acquisition Co-op Food subsidiary SSG, provider of secure cash logistics and ATM maintenance to the Co-op Food ATM estate;
• launched pilot of AllTM, a network of ATMs offering exclusive in-store discounts that consumers can download to a mobile device and use immediately;
• entered into a relationship with American Express to enable Allpoint surcharge-free access on its network;
• executed a primary bank branding agreement with Discover Financial Services covering more than 300 ATMs in convenience, grocery and drug stores in two key U.S. markets;
• added more than 950 company-owned ATMs, driven by a combination of new merchants and existing merchant growth;
• completed a private offering of $250 million in 5.125-percent senior notes due 2022; and
• redeemed and retired $200 million in 8.25-percent senior notes due 2018.

Diebold Inc.

revenue — $768M | +8.9%

earnings per share — 54 cents

• announced new 5500 series of ATMs with ActivEdge card reader technology;
• announced service and software agreements with Belgian Post and Bankia S.A.;
• enhanced SecureStat management portal;
• continued branch transformation pilots with banks of all sizes;
• increased North American orders by 3 percent;
• increased growth in electronic security by 21 percent;
• increased total orders by 11 percent in Latin America, comparably on constant currency;
• increased orders by 8 percent in Asia and Pacific on both reported and constant currency basis;
• delivered $25 million in net savings in 2014 from cost savings plan; and
• adjusted full-year revenue expectations upward and narrowed earnings guidance to 7-percent projected revenue growth.

NCR Corp.

revenue — $1,647M | +9%

earnings per share — 68 cents

• saw core order growth of 7 percent driven by North America community financial institutions, Europe, Southeast Asia, and MEA ;
• continued strong performance in branch transformation with orders up 90 percent and revenues up 125 percent year over year;
• increased order backlog by 14 percent, driven by branch transformation and software demand;;
• increased operating margin by 55 percent — half of growth came from core, driven by mix shift; half came from Digital Insight, which exceeded expectations;
• grew software-related revenue by 96 percent; by 20 percent excluding Digital Insight;
• achieved balanced performance globally, led by North America, Europe and MEA;
• added 13 new interactive services customers; chalked up customer wins globally;
• recorded a 20-percent year-to-date increase in customer renewals; and
• installed NCR-owned data centers; began transition of customers in mid-2014, with expected completion in early 2015.

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.

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