Article

Two ATM ISOs, two stories of triumph in a challenging economy

ATM independents TRM Corp. and Global Axcess have proven that changes in leadership and corporate direction can save even the most downtrodden, despite the odds.

February 18, 2009 by Tracy Kitten — Editor, AMC

But for TRM Corp. and Global Axcess Corp., which operates the Nationwide Money Services ATM line, the story has been much different. Both are reporting record or drastically improved financial results. For TRM, the acquisition of the Access to Money ATM portfolio and a strategic alliance with Select-A-Branch ATM Network LLChave proved to be the best moves the company has made in the last five years. For Global Axcess, which in 2006came close to cutting its losses and selling, the key has been a leaner operation with a single focus: retail ATMs.

Both companies have taken similar approaches: They've restructured their corporate operations and boldly enforced change from the bottom up, the top down.

George McQuain, who took the helm of Global Axcess and the Nationwide Money Services ATM business in October 2006, was swift in 2007 to steer the Florida-based ISO away from the glaciers.

Global Axcess reported a net loss of $3.6 million during the third quarter of 2006 — a deficit on the downside of the $80,000 loss it reported for the same quarter in 2005.

In November 2006, McQuain said: "We've grown pretty rapidly, and we weren't always smart. I don't think the growth hurt us, per se; but not being smart about it and losing our focus did."

On Tuesday, Global Axcess reported record financial results, closing 2008 with $1.2 million in net income, 6 cents per share, and $22.2 million in revenue. At the end of 2007, Global reported net income of $430,500, 2 cents per share, and revenue of $21.8 million.

Even more staggering was the company's fourth-quarter margin: Global Axcess, despite a 4 percent decline in revenue year-over-year, reported net income of $331,000, up 430 percent from the $62,179 in net income it reported at the end of 4Q 2007.

"We're going into 2009 with the best business ever," McQuain said. "Our transactions are up. We're actually having trouble keeping cash in some of our machines because the transactions are so high."

During the fourth quarter of 2008, Global Axcess recorded interest expense of approximately $264,000, compared to an interest expense of $309,400 for the same period in 2007. Included in the 4Q 2008 interest expense was $26,700 of non-cash expense related to an October 2005 interest swap agreement it signed with its senior lender. Soon, tethers to that lender are expected to be cut.

Global Axcess closed 2008 with 4,440 ATMs and $11.3 million in merchant-contract assets. 

"Through our strategic focus on operational excellence, attention to detail and frugal expense management, we have delivered a good quarter and a strong year," McQuain said. "These accomplishments validate the strength and resilience of our operating philosophy" — a philosophy McQuain credits to empowering employees and giving them a voice in corporate governance.

A repeat performance?

Doug Falcone, the chief operating officer of Access to Money — the name under which TRM is now doing business — has adopted a similar philosophy. Another ISO that grew too large too fast, TRM knows all about losses.

TRM, once the world's second-largest ISO, hit rock bottom in July 2008, when its stock was delisted from the NASDAQ Stock Marketfor being behind on its financial filings. Over the course of 2006 and 2007, the company's losses took their toll, from quarter to quarter. At the end of the 1Q 2007, TRM reported a net loss of $2.2 million — a loss that was 47 percent greater than the $1.5 million loss it reported during the same quarter of 2006.

The company quickly began selling off parts of its business, including its photocopier businesses in Canada and the United Kingdom. But the losses continued. At the end of the 2Q 2007, TRM reported another net loss of $2.2 million. In April 2008, again, an end-of-year loss of $8.4 million for 2007 was reported.

In May, TRM reported a $436,000 net loss for 1Q 2008.

"TRM had 80 million dollars in annual revenue, but it was a company that had been horribly managed," Falcone said. "The $80 million company was being run by the old, old management like a rich, $500 million company. Now we're running it more like an entrepreneurial company: leaner. And candidly, we know how to squeeze sugar out of gum. And we have a phenomenal staff that knows the business."

In August, when TRM released its Q2 2008 financials, things started to look up, despite a net loss of $3.7 million. Sales for the company were up 1.7 percent that quarter, totaling $23.9 million, and the acquisition of Access to Money was complete. In November, TRM reported a third-quarter net loss of $1.1 million and positive EBITDA of $900,000, up from the negative $400,000 EBITDA it reported at the end of Q3 2007.

Like McQuain, Falcone says Access to Money is going into 2009 with optimism and excitement.

Access to Money now has 12,000 terminals, about a third of which are fully cash-managed ATMs from the TRM side of the business. The rest of portfolio is merchant-owned, merchant-filled. The two models complement one another and add balance, Falcone says. And both ATM-placement models will continue, though Falcone says TRM/Access to Money won't sell more than 750 fully cash-managed ATM deals per year.

"We continue to sell 60 to 80 merchant-owned, merchant-vault machines per month," he said. "The merchant-owned model was the Access to Money model; TRM was more full-placement. So it's been a nice balance. So if you lose a full-placement customer, with 600 machines, let's say, you don't lose the whole thing. On the merchant-owned side, you don't have that kind of attrition, so it's safer."

The company will release its fourth-quarter and end-of-year results on March 31.

The TRM/Access to Money story is an unfolding one. The company's alignment with SAB and the complement of the Access to Money portfolio are expected to bring it back into the black, Falcone says, and he's excited.

"The guys that are out there doing the same thing, doing deals with the same merchants, will soon learn that those days are over," he said. "Unless you've got something different, it's going to be hard to build new business. If you don't have a Select-A-Branch or an All Point, something different to offer the credit union or the bank, you're a dying grape on the vine."

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