Cardtronics, the world’s largest non-bank owner of ATMs, announced its financial and operational results for the quarter ended June 30, 2010.
Key financial and operational statistics related to the quarter include:
— Consolidated revenues of $132.9 million, up 7% from the second quarter
— Revenue growth of approximately 10% for the Company’s core business
operations, which include the Company’s domestic company-owned
large-account ATM placement and branding business and the Company’s
— Gross margins of 32.5%, up from 30.1% in the second quarter of 2009
— Adjusted EBITDA of $33.9 million, up approximately 22% from $27.9
million in the second quarter of 2009
— Adjusted Net Income per diluted share of $0.26, up from $0.17 in the
second quarter of 2009
— GAAP Net Income of $8.2 million compared to $2.5 million in the second
quarter of 2009
— Free cash flow of $30.5 million, up approximately 53% from $19.9 million
in the second quarter of 2009
— Continued improvements in several key operating metrics when compared to
the second quarter of 2009:
— Total transactions increased by 9%
— Total cash withdrawal transactions increased by 6%
— Total transactions per ATM increased by 6%
— ATM operating gross profit per ATM increased by 12%
Please refer to the “Disclosure of Non-GAAP Financial Information” contained later in this release for definitions of Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow. For additional financial information, including reconciliations to comparable GAAP measures, please refer to the supplemental schedules of selected financial information at the end of this release.
“Our ATM estate generated strong operating results during the most recent quarter, continuing the trend that we have seen over the past several quarters,” commented Steve Rathgaber, the Company’s Chief Executive Officer. “In addition, we are optimistic about the progress we are seeing with respect to our new service offerings, including ATM managed services, which should continue to help drive future revenue growth for the Company.”
— Further expansion of the Company’s managed services product offering
through the execution of an ATM managed services agreement with The
Kroger Company, one of the largest retailers in the United States with
nearly 2,500 grocery stores and 800 convenience stores operating under
the banners of Kroger, Ralphs, King Soopers, KwikShop and Loaf ‘n Jug,
to name a few. The multi-year deal will initially cover about 800
locations and provide the Company with an opportunity to add more
locations with Kroger over time. Under the terms of the agreement,
Cardtronics will provide comprehensive ATM management services,
including installation, cash management, maintenance, customer service,
monitoring, and transaction processing services. With the addition of
Kroger to the Company’s customer base, Cardtronics now has ATM operating
agreements in place with 8 of the nation’s top 10 retailers that have
ATMs in their stores.
— Execution of a new bank branding agreement with PNC Financial Services
Group to provide surcharge-free ATM access to its cardholders at
approximately 230 Hess and Hess Express gasoline and retail stores
— Extension of the Company’s existing bank branding agreement with
SunTrust Banks, Inc. to cover an additional 100 ATMs in CVS store
locations in the southeastern United States.
— Execution of an ATM placement agreement with WRVS, an operator of shops
in hospitals in the United Kingdom, under which the Company expects to
install 100 ATMs in the coming year.
— Execution of a new $175 million revolving credit facility with leading
financial institutions. Management believes that the new facility will
provide the Company with continued strong liquidity and access to
capital, as well as significant additional financial flexibility.
— Issuance of a “Notice of Redemption” for the Company’s $100 million
9.25% senior subordinated notes — Series B due in 2013, which will be
redeemed on August 20, 2010 at a redemption price of 102.313% of the
principal amount, plus accrued but unpaid interest through August 20.
SECOND QUARTER RESULTS
For the second quarter of 2010, consolidated revenues totaled $132.9 million, representing a 7% increase from the $124.6 million in revenues generated during the second quarter of 2009. This increase reflects 10% revenue growth in the Company’s core business operations, which include the Company’s higher-margin domestic large-account ATM placement and international businesses. Changes in foreign currency rates did not have an impact on the year-over-year comparisons noted above. The increase in core revenues was driven by a combination of the year-over-year surcharge rate increases implemented in the United States and the unit growth in the Company’s United Kingdom and Mexico operating segments. Additionally, the Company continued to see increased bank branding and surcharge-free network revenues in the United States due to the continued growth of its surcharge-free offerings. Partially offsetting these increases was a decline in revenues from the Company’s lower-margin merchant-owned account base.
Adjusted EBITDA for the second quarter of 2010 totaled $33.9 million, compared to $27.9 million during the second quarter of 2009, and Adjusted Net Income totaled $10.9 million ($0.26 per diluted share), compared to $6.9 million ($0.17 per diluted share) during the second quarter of 2009. These increases were primarily attributable to higher gross profit margins, which increased from 30.1% during the second quarter of 2009 to 32.5% during the second quarter of 2010. Key drivers of the margin expansion included the increase in revenues (discussed above), the continued shift of revenues from lower-margin revenues earned under merchant-owned accounts to higher-margin Company-owned and surcharge-free network and bank branding revenues, as well as the Company’s ability to leverage its fixed-cost infrastructure to generate strong margins from those higher revenues. Specific costs excluded from Adjusted EBITDA and Adjusted Net Income are detailed in a reconciliation included at the end of this press release.
GAAP Net Income for the second quarter of 2010 totaled $8.2 million, compared to $2.5 million during the same quarter in 2009. The year-over-year improvement was primarily attributable to the factors identified above in the discussion of Adjusted EBITDA and Adjusted Net Income.
SIX MONTH RESULTS
Revenues totaled $260.7 million for the six months ended June 30, 2010, representing a 9% increase over the $240.0 million in revenues recorded during the same period in 2009. As was the case with the Company’s quarterly results, the year-over-year increase in revenues was primarily attributable to revenue growth in its core business operations, slightly offset by a decline in the Company’s merchant-owned account base. Excluding the impact of favorable foreign currency rate changes between both periods, the year-over-year increase in revenues totaled 8%.
Adjusted EBITDA totaled $63.2 million for the six months ended June 30, 2010, representing a 25% increase over the $50.4 million in Adjusted EBITDA for the same period in 2009, and Adjusted Net Income totaled $18.8 million ($0.46 per diluted share) for the first six months of 2010, which represents a significant increase from the $10.4 million ($0.26 per diluted share) generated during the same period in 2009. Increases in both Adjusted EBITDA and Adjusted Net Income were primarily due to the same factors noted above for the Company’s quarterly results.
GAAP Net Income for the six months ended June 30, 2010 totaled $12.2 million, compared to a $2.6 million GAAP Net Loss during the same period last year. As was the case with the quarterly results, the year-over-year improvement in the Company’s GAAP results was primarily driven by the same factors outlined above with respect to Adjusted EBITDA and Adjusted Net Income.
The Company is updating the guidance it previously issued regarding its anticipated full-year 2010 results, and now expects the following:
— Revenues of $520 million to $530 million, unchanged from the previous
— Overall gross margins of approximately 31.5% to 32.0%, up from the 31.0%
to 31.5% in the previous guidance;
— Adjusted EBITDA of $123 million to $127 million, up from the $120
million to $125 million in the previous guidance;
— Depreciation and accretion expense of $40.5 million to $41.0 million,
down from the $42.0 million in the previous guidance;
— Cash interest expense of $26.5 million to $27.0 million, down from the
$29.5 million in the previous guidance;
— Adjusted Net Income of $0.87 to $0.93 per diluted share, based on
approximately 41.5 million to 42.0 million weighted average diluted
shares outstanding, up from the $0.75 to $0.85 per diluted share in the
previous guidance; and
— Capital expenditures of approximately $45 million, net of noncontrolling
interests, unchanged from the previous guidance.
The above guidance excludes the impact of certain one-time items as well as approximately $6.5 million of anticipated stock-based compensation expense and approximately $14 million to $15 million of intangible asset amortization expense. Additionally, the above guidance is based on estimated average foreign currency exchange rates of $1.50 U.S. to POUND1.00 U.K. and $12.50 Mexican pesos to $1.00 U.S.
The Company continues to maintain a very strong liquidity position, with over $40 million in cash on hand and no amounts outstanding under the Company’s revolving credit facility (other than a $4.3 million in letter of credit posted under the facility as of quarter end). The Company’s outstanding indebtedness as of June 30, 2010, consisted of $297.6 million in senior subordinated notes, net of discounts, and $9.5 million of equipment loans associated with its majority-owned Mexico subsidiary. The fixed rate senior subordinated notes, which mature in August 2013, contain no maintenance covenants and only limited incurrence covenants, under which the Company has considerable flexibility and continues to be in compliance with, and require only semi-annual interest payments prior to their maturity date.
In July, the Company refinanced its existing $175.0 million revolving credit facility. The new facility, which is led by a syndicate of leading banks including JPMorgan Chase and Bank of America, provides the Company with access to $175.0 million in borrowings and letters of credit (subject to the covenants contained within the facility) and extends initially through February 2013; however, such date can be extended to July 2015 in the event the Company’s existing Senior Notes are no longer outstanding or have been refinanced with a maturity date later than December 2015. Additionally, it contains a feature that allows the Company to expand the facility up to $250 million, subject to the availability of additional bank commitments by existing or new syndicate participants. As of the date of this release, the Company is in compliance with the covenants contained within the new facility and would continue to be in compliance even in the event of substantially higher borrowings or substantially lower Adjusted EBITDA amounts. Other than a $4.3 million letter of credit posted under the facility, there are no amounts currently outstanding under the new facility.
Additionally, in July 2010, the Company issued a “Notice of Redemption” for its $100 million 9.25% senior subordinated notes — Series B due in 2013 (the “Series B Notes”). The call notice, which was issued on July 21, 2010, provides holders with a 30-day notice that the Series B Notes will be redeemed on August 20, 2010, at a redemption price of 102.313% of the principal amount, plus accrued but unpaid interest through August 20. The redemption will be funded with approximately $30.0 million of available cash on hand and approximately $70.0 million of borrowings under the recently-executed credit facility. The Company expects that the redemption of the Series B Notes combined with the execution of the new credit facility will assist the Company in enhancing its financial flexibility, reducing leverage, and reducing interest expense.
The continued generation of pre-tax operating profits could subject the Company to increased federal, state and local income tax cash obligations in many of its jurisdictions. However, as of December 31, 2009, the Company had in excess of $38.0 million of domestic federal net operating loss carryforwards that can be utilized to help offset such future cash tax obligations, subject to certain restrictions and limitations.
DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION
EBITDA, Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow are non-GAAP financial measures provided as a complement to results prepared in accordance with accounting principles generally accepted within the United States of America (“GAAP”) and may not be comparable to similarly-titled measures reported by other companies. Management believes that the presentation of these measures and the identification of unusual, non-recurring, or non-cash items enhance an investor’s understanding of the underlying trends in the Company’s business and provide for better comparability between periods in different years.
Adjusted EBITDA excludes depreciation, accretion, and amortization expense as these amounts can vary substantially from company to company within the Company’s industry depending upon accounting methods and book values of assets, capital structures, and the method by which the assets were acquired. Additionally, Adjusted EBITDA and Adjusted Net Income exclude certain non-recurring or non-cash items and therefore, may not be comparable to similarly-titled measures employed by other companies. Free Cash Flow is cash provided by operating activities less payments for capital expenditures. The non-GAAP financial measures presented herein should not be considered in isolation or as a substitute for operating income, net income, cash flows from operating, investing, or financing activities, or other income or cash flow statement data prepared in accordance with GAAP.
A reconciliation of Net Income (Loss) Attributable to Controlling Interests to EBITDA, Adjusted EBITDA, and Adjusted Net Income and a calculation of Free Cash Flow are presented in tabular form at the end of this press release.
CONFERENCE CALL INFORMATION
The Company will host a conference call today, Wednesday, August 4, 2010, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its financial results for the quarter ended June 30, 2010. To access the call, please call the conference call operator at:
Dial in: (877) 303-9205
Alternate dial-in: (760) 536-5226
Please call in fifteen minutes prior to the scheduled start time and request to be connected to the “Cardtronics Second Quarter Earnings Conference Call.” Additionally, a live audio webcast of the conference call will be available online through the investor relations section of the Company’s website at http://www.cardtronics.com.
A digital replay of the conference call will be available through Wednesday, August 18, 2010, and can be accessed by calling (800) 642-1687 or (706) 645-9291 and entering 87599952 for the conference ID. A replay of the conference call will also be available online through the Company’s website subsequent to the call through September 3, 2010.
Headquartered in Houston, Texas, Cardtronics is the world’s largest non-bank owner of ATMs. Cardtronics operates over 33,700 ATMs across its portfolio, with ATMs in every major market in the United States and in the U.S. territories of Puerto Rico and the U.S. Virgin Islands, approximately 2,800 ATMs throughout the United Kingdom, and approximately 2,900 ATMs throughout Mexico. Included in Cardtronics’ portfolio are approximately 2,200 multi-function financial services kiosks that, in addition to traditional ATM functions, perform other automated consumer financial services. Major merchant clients include 7-Eleven(R), Chevron(R), Costco(R), CVS(R)/pharmacy, ExxonMobil(R), Hess(R), Kroger(R), Rite Aid(R), Safeway(R), Target(R), Walgreens(R), and Winn-Dixie(R). Complementing its ATM operations, Cardtronics works with financial institutions of all sizes to provide their customers with convenient cash access and deposit capabilities through ATM branding, with currently approximately 11,600 Cardtronics owned and operated ATMs featuring bank brands. Additionally, Cardtronics offers surcharge-free access to cash for holders of traditional debit cards as well as stored-value cards issued by financial institutions that participate in the Allpoint Network, Cardtronics’ wholly-owned surcharge-free ATM network. More recently, Cardtronics started offering managed services solutions to retailers and financial institutions that are looking to outsource some or all of the operational aspects associated with operating and maintaining their ATM fleets. For more information, please visit http://www.cardtronics.com.