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ATM ISO Cardtronics reports much higher second-quarter net income

Cardtronics Inc., the world’s largest non-bank owner of ATMs, Wednesday reported higher second-quarter net income on improved revenue for the three-month period ending June 30.

August 4, 2010

Cardtronics Inc., the world’s largest non-bank owner of ATMs, Wednesday reported higher second-quarter net income on improved revenue for the three-month period ending June 30.

“This has been a good quarter with healthy results,” Steve Rathgaber, CEO, told analysts during a conference call. “Our ATM estate generated strong operating results during the most-recent quarter, continuing a trend that we have seen over the past several quarters.”

The Houston-based ATM ISO reported a second-quarter net income of $8.2 million compared with $2.5 million for the same three-month period last year. Income from operations was $17.8 million, up 65 percent compared with $10.8 million in the second quarter of 2009.

The business recorded revenue of $132.9 million, up 7 percent compared with $124.6 million in last year’s second quarter.

Cardtronics’ U.S. operations recorded revenue of $105.6 million compared with $102.3 million in last year’s second quarter. Cardtronics’ United Kingdom business BankMachine Ltd. reported $20.3 million in revenue compared with $18 million in 2009’s second quarter. And Cardtronics Mexico, which is 51 percent owned by Cardtronics, reported second-quarter revenue of $6.9 million compared with $4.3 million in last year’s second quarter.

The ISO recorded $68.1 million in surcharge revenues during the three months compared with $65.6 million last year. Bank-branding and surcharge-free revenues were $19.9 million compared with $16 million in 2009’s second quarter. Interchange revenues were $39.5 million compared with $37.4 million during the same three-month period last year.

The 5.6 percent increase in interchange revenue may reflect a decision made by MasterCard Worldwide. MasterCard, which is based in Purchase, N.Y., disclosed earlier this year that it would cut the interchange income allowed on withdrawal transactions on its Cirrus network.

In a May 7 United States Securities and Exchange Commission filing, Cardtronics reported that MasterCard new tiered-interchange rates would slash the ISO’s operating gross profit by nearly $2 million during the remainder of the year for transactions routed over MasterCard’s Cirrus network.

In response to MasterCard’s decision, Cardtronics has quietly signed agreements with individual banks and bank consortiums to “lock in interchange fees,” Rathgaber told analysts. “We have agreements with 39 percent of our customers and we expect to have agreements with 50 percent before the end of the year.” 

The company also revealed more information about its agreement with Kroger Co., a Cincinnati-based supermarket, convenience store and drugstore chain.

Cardtronics announced earlier this week they signed an agreement to manage ATMs deployed in nearly 800 Kroger grocery and convenience stores. During the analysts’ call, Cardtronics executives said they bought Kroger’s ATMs for an undisclosed price, expanding Cardtronics’ ATM network.

The machines are not bank-branded, and Cardtronics is trying to determine how to use the machines to drive more foot traffic to store locations. The ATMs will participate in Allpoint, Cardtronics’ surcharge-free ATM network, and Cardtronics is looking to sign bank-branding agreements for the ATMs.

Cardtronics owned 18,257 ATMs in the U.S., and it operated 9,944 merchant-owned machines. BankMachine owned 2,795 ATMs and Cardtronics Mexico owned 2,881 machines.

The company reported 65,545,000 cash withdrawals in the second quarter compared with 62,047,000 cash withdrawals in 2009’s second quarter. Cardtronics’ ATMs recorded 645 monthly cash withdrawals during the quarter compared with 627 monthly cash withdrawals last year.

Rathgaber said Cardtronics may benefit by a vote in Congress to curtail debit-card swipe fees. Congress included in the legislation in financial reform package, which it passed and was signed by President Barack Obama. Merchants may offer discounts to customers who pay with cash, Rathgaber said.