Cardtronics Announces Third Quarter 2014 Results

HOUSTON, Oct. 29, 2014 (GLOBE NEWSWIRE) -- Cardtronics, Inc. (Nasdaq:CATM) (the "Company"), the world's largest retail ATM owner, today announced its financial and operational results for the quarter ended September 30, 2014.

Key financial statistics in the third quarter of 2014 as compared to the third quarter of 2013 include:

• Total revenues of $265.8 million, up 16% from $228.8 million.
• ATM operating revenues of $256.8 million, up 15% from $222.7 million.
• Adjusted Net Income per diluted share of $0.64, up 16% from $0.55.
• Adjusted EBITDA of $66.6 million, up 13% from $59.1 million.
• Adjusted Gross Margin of 33.7% up slightly from 33.6%.
• GAAP net income of $8.1 million or $0.18 per diluted share compared to a net loss of $8.4 million or $0.19 per diluted share in the third quarter of 2013. The third quarter of 2013 included $13.6 million in nonrecurring charges related to income tax expense incurred in conjunction with a corporate restructure and $8.4 million in costs associated with retroactive property taxes in the U.K.

The results above do not include any impact from the Welch ATM and Sunwin Services Group ("SSG") acquisitions, which were not closed as of September 30, 2014.

Steve Rathgaber, the company's chief executive officer commented, "The third quarter was the 22^nd consecutive quarter of double-digit adjusted earnings growth for Cardtronics, which is reflective of the continued steadiness of our core business and our proven track record of execution on our growth initiatives. We are also very pleased about the recent completion of the Welch acquisition which adds approximately 26,000 ATMs to our already strong network of ATMs in retail locations and some great new talent to our team."

RECENT HIGHLIGHTS

• The closing of the previously announced acquisition of Welch ATM, a leading ATM operator of approximately 26,000 ATMs in the United States. The acquisition closed October 6, 2014.
• The announcement of a seven-year, exclusive agreement to operate approximately 1,800 ATMs located in Co-operative Food ("Co-op Food") stores across the U.K. beginning in January 2016.
• The announcement of the acquisition of SSG, a subsidiary of Co-op Food. SSG's primary business is providing secure cash logistics and ATM maintenance to the Co-op Food ATM estate. The acquisition is expected to close in the fourth quarter of 2014, subject to customary closing conditions.
• The pilot launch of ALLTM – a network of ATMs that offer exclusive in-store discounts that consumers can access through their mobile devices.
• Entered into a relationship with American Express to enable Allpoint surcharge-free access on its network.
• Execution of a primary bank branding agreement with Discover Financial Services to brand over 300 ATMs in convenience, grocery and drug stores in two key U.S. markets.
• Addition of over 950 company-owned ATMs during the quarter, driven by a combination of new merchants and existing merchant growth.
• Successful private offering of $250.0 million of 5.125% senior notes due 2022.
• Successful redemption and retirement of $200.0 million of 8.25% senior notes due 2018.

Please refer to the "Disclosure of Non-GAAP Financial Information" contained later in this press release for definitions of Adjusted EBITDA, Adjusted Gross Profit Margin, Adjusted Net Income, Adjusted Net Income per diluted share and Free Cash Flow. For additional financial information, including reconciliations to comparable accounting principles generally accepted in the United States of America ("GAAP"), please refer to the supplemental schedules of selected financial information at the end of this press release.

THIRD QUARTER RESULTS

Consolidated revenues totaled $265.8 million for the third quarter of 2014, representing a 16% increase from $228.8 million in consolidated revenues generated during the third quarter of 2013. ATM operating revenues were up 15% from the third quarter of 2013, driven by a combination of organic growth and growth from acquisitions. The Company's 2013 and 2014 acquisitions accounted for approximately 7% of the 15% ATM operating revenue growth. The remaining 8% of ATM operating revenue growth was attributable to organic growth from new and existing merchants and financial institution customers. ATM product sales and other revenues increased $2.9 million and also contributed to the year-over-year increase in consolidated revenues. As the Company's ATM product sales generally produce lower margin revenues than its ATM operating revenues, the $2.9 million revenue increase from the third quarter of 2013 did not have a significant impact on the Company's profitability in the current quarter's results.

Adjusted EBITDA for the third quarter of 2014 totaled $66.6 million, compared to $59.1 million during the third quarter of 2013, and Adjusted Net Income totaled $28.9 million ($0.64 per diluted share) compared to $24.7 million ($0.55 per diluted share) during the third quarter of 2013. The increases in Adjusted EBITDA and Adjusted Net Income per diluted share were primarily driven by the same factors described above that impacted the Company's revenue growth. 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 third quarter of 2014 totaled $8.1 million, compared to a GAAP net loss of $8.4 million during the same quarter in 2013. The increase in GAAP net income from the third quarter of 2013 was attributable to (1) an increase in gross margin attributable to higher revenues (2) $8.4 million in retroactive U.K. property tax expense adjustments in the third quarter of 2013 and (3) lower income tax expense in 2014 compared to 2013 as a result of a corporate restructuring during the third quarter of 2013. These contributions to the increase in GAAP net income were partially offset by increases in redemption costs for early extinguishment of debt related to the retirement of the Company's 8.25% senior subordinated notes due in 2018 and amortization of deferred financing costs and discount associated with the Company's convertible senior notes due 2020 entered into late last year.

NINE MONTHS RESULTS

Consolidated revenues totaled $770.9 million for the nine months ended September 30, 2014, representing a 21% increase from $634.5 million in consolidated revenues generated during the same period in 2013. ATM operating revenues were up 21% from the nine months ended September 30, 2013, driven primarily by the Company's 2013 and 2014 acquisitions, which accounted for approximately 13% of the 21% ATM operating revenue growth. The remaining 8% of ATM operating revenue growth was attributable to organic growth from new and existing merchants and financial institution customers. ATM product sales and other revenues increased $9.1 million and also contributed to the year-over-year increase in consolidated revenues. As the Company's ATM product sales generally produce lower margins than its ATM operating revenues, the $9.1 million revenue increase from the nine months ended September 30, 2013 did not have a significant impact on the Company's profitability in the current quarter's results.

Adjusted EBITDA totaled $188.3 million for the nine months ended September 30, 2014, representing a 16.5% increase over the $161.6 million in Adjusted EBITDA for the same period in 2013, and Adjusted Net Income totaled $79.1 million ($1.76 per diluted share) for the nine months ended September 30, 2014, up 22% on a per share basis from $64.4 million ($1.44 per diluted share) during the same period in 2013. The increases in both Adjusted EBITDA and Adjusted Net Income were primarily due to the same factors discussed above for the Company's quarterly results.

GAAP net income for the nine months ended September 30, 2014 totaled $31.6 million, compared to $16.3 million during the same period in 2013. The increase in GAAP net income from the nine months ended 2013 was primarily due to the same factors discussed above for the Company's quarterly results.

UPDATE OF FULL-YEAR 2014 GUIDANCE

The Company is updating the financial guidance it provided in July 2014 regarding its anticipated full-year 2014 results and this guidance now includes the estimated contribution from the Welch acquisition, completed in October 2014 and the Sunwin acquisition, which is expected to be completed in November of 2014:

• Revenues of $1.04 billion to $1.05 billion;
• Gross Profit Margin of approximately 33.0%;
• Adjusted EBITDA of $251.0 million to $253.0 million;
• Depreciation and accretion expense of approximately $78.0 million, net of noncontrolling interests;
• Cash interest expense of approximately $20.5 million, net of noncontrolling interests;
• Adjusted Net Income of $2.31 to $2.34 per diluted share, based on approximately 44.9 million weighted average diluted shares outstanding; and
• Capital expenditures of approximately $100.0 million to $110.0 million, net of noncontrolling interests.

The Adjusted EBITDA and Adjusted Net Income guidance excludes the impact of certain expenses, as outlined in the reconciliation provided at the end of this press release. Additionally, this guidance is based on average foreign currency exchange rates for the remainder of the year of $1.60 U.S. to £1.00 U.K., $13.00 Mexican pesos to $1.00 U.S., $1.00 Canadian dollar to $0.90 U.S., and €1.00 Euros to $1.25 U.S.

LIQUIDITY

The Company continues to maintain a strong liquidity position, with $304.7 million in available borrowing capacity under its $375.0 million revolving credit facility as of September 30, 2014. In July 2014, the Company completed a private offering of $250.0 million of 5.125% senior notes due 2022. The majority of the net proceeds from this offering was used to fund the Company's tender offer and retirement of all outstanding 8.25% senior subordinated notes due 2018.

The Company had $140.9 million in cash on hand at the end of the third quarter of 2014. The cash on hand, along with borrowings under the Company's revolving credit facility was used to fund the Welch acquisition ($160.0 million purchase price) on October 6, 2014. The Company's outstanding indebtedness as of September 30, 2014 consisted of $250.0 million in senior notes due 2022, $287.5 million convertible senior notes due 2020 (of which $223.1 million is currently recorded as long-term debt on the balance sheet, which is being accreted up to the principal balance of $287.5 million over the term of the notes), $68.2 million in borrowings under its revolving credit facility due 2019, and $0.3 million in equipment financing notes associated with its majority-owned Mexico subsidiary.

DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION

Adjusted EBITDA, Adjusted Gross Profit Margin, Adjusted Net Income, Adjusted Net Income per diluted share, and Free Cash Flow are non-GAAP financial measures provided as a complement to results prepared in accordance with GAAP and may not be comparable to similarly-titled measures reported by other companies. The Company uses these non-GAAP financial measures in managing and measuring the performance of its business, including setting and measuring incentive based compensation for management. Management believes that the presentation of these measures and the identification of unusual, nonrecurring, 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 of intangible assets 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. Adjusted EBITDA also excludes acquisition-related expenses, certain other non-operating and nonrecurring costs, loss on disposal of assets, the Company's obligations for the payment of income taxes, interest expense and other obligations such as capital expenditures, and an adjustment for noncontrolling interests. Adjusted Gross Profit Margin is calculated excluding certain nonrecurring costs from the cost of ATM operating revenues. Adjusted Net Income represents net income computed in accordance with GAAP, before amortization of intangible assets, loss on disposal of assets, stock-based compensation expense, certain other expense (income) amounts, nonrecurring expenses, and acquisition-related expenses, and uses an assumed tax rate of 32% for the three and nine months ended September 30, 2014, 33.5% for the three months ended September 30, 2013 and 35% for the six months ended June 30, 2013, with certain adjustments for noncontrolling interests. Adjusted EBITDA %, Adjusted Pre-tax Income %, and Adjusted Net Income % are calculated by taking the respective non-GAAP financial measures over GAAP total revenues. Adjusted Net Income per diluted share is calculated by dividing Adjusted Net Income by weighted average diluted shares outstanding. Free Cash Flow is defined as cash provided by operating activities less payments for capital expenditures, including those financed through direct debt but excluding acquisitions. The Free Cash Flow measure does not take into consideration certain other non-discretionary cash requirements such as, for example, mandatory principal payments on portions of the Company's long-term debt.

The non-GAAP financial measures presented herein should not be considered in isolation or as a substitute for operating income, gross profit margin, net income, cash flows from operating, investing, or financing activities, or other income or cash flow measures prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measures used herein to the most directly comparable GAAP financial measures are presented in tabular form at the end of this press release.

CONFERENCE CALL INFORMATION

The Company will host a conference call today, Wednesday, October 29, 2014, at 3:15 p.m. Central Time (4:15 p.m. Eastern Time) to discuss its financial results for the quarter ended September 30, 2014. To access the call, please call the conference call operator at:

Please call in fifteen minutes prior to the scheduled start time and request to be connected to the "Cardtronics Third 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 www.cardtronics.com.

A digital replay of the conference call will be available through Wednesday, November 12, 2014, and can be accessed by calling (855) 859-2056 or (404) 537-3406 and entering 15446826 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 November 30, 2014.

ABOUT CARDTRONICS (Nasdaq:CATM)

Making ATM cash access convenient where people shop, work and live, Cardtronics is at the convergence of retailers, financial institutions, prepaid card programs and the customers they share. Cardtronics owns/operates more than 111,150 retail ATMs in U.S. and international locales. Whether Cardtronics is driving foot traffic for America's most relevant retailers, enhancing ATM brand presence for card issuers or expanding card holders' surcharge-free cash access on the local, national or global scene, Cardtronics is convenient access to cash, when and where consumers need it. Cardtronics is where cash meets commerce.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "believe," "estimate," "expect," "future," "will" and similar references to future periods. Forward-looking statements give the Company's current expectations, beliefs, assumptions or forecasts of future events, future financial performance, strategies, expectations, competitive environment, regulation, and availability of resources. The forward-looking statements contained in this press release include, among other things, statements concerning projections, predictions, expectations, estimates or forecasts as to the Company's business, financial and operational results and future economic performance, and statements of management's goals and objectives and other similar expressions concerning matters that are not historical facts. These statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the following:

• the Company's financial outlook and the financial outlook of the ATM industry;
• the Company's ability to respond to recent and future network and regulatory changes, including potential requirements surrounding Europay, MasterCard and Visa ("EMV") security standards;
• the Company's ability to respond to potential reductions in the amount of net interchange fees that it receives from global and regional debit networks for transactions conducted on its ATMs due to pricing changes implemented by those networks as well as changes in how issuers route their ATM transactions over those networks;
• the Company's ability to renew and strengthen its existing customer relationships and add new customers;
• the Company's ability to pursue and successfully integrate acquisitions;
• the Company's ability to provide new ATM solutions to retailers and financial institutions;
• the Company's ATM vault cash rental needs, including potential liquidity issues with its vault cash providers and its ability to continue to secure vault cash rental agreements in the future;
• the Company's ability to successfully manage its existing international operations and to continue to expand internationally;
• the Company's ability to prevent thefts of cash and data security breaches;
• the Company's ability to manage the risks associated with its third-party service providers failing to perform their contractual obligations;
• the Company's ability to manage concentration risks with key customers, vendors and service providers;
• changes in interest rates and foreign currency rates;
• the Company's ability to successfully implement its corporate strategy;
• the Company's ability to compete successfully with new and existing competitors;
• the Company's ability to meet the service levels required by its service level agreements with its customers;
• the additional risks the Company is exposed to in its U.K. armored transport business; and
• the Company's ability to retain its key employees.

Additional information regarding known material factors that could cause the Company's actual performance or results to differ from its projected results are described in its filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. You should not read forward-looking statements as a guarantee of future performance or results. They will not necessarily be accurate indications of the times at or by which such performance or results will be achieved. Forward-looking statements speak only as of the date the statements are made and are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events. The Company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information.

Cardtronics and Allpoint are registered trademarks of Cardtronics, Inc.

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