Cardtronics Announces First Quarter 2016 Results

HOUSTON, April 28, 2016 (GLOBE NEWSWIRE) -- Cardtronics, Inc. (Nasdaq:CATM) (“Cardtronics” or the “Company”), the world’s largest ATM owner/operator, today announced its financial and operational results for the quarter ended March 31, 2016.

Key financial statistics in the first quarter of 2016 as compared to the first quarter of 2015 include:

• Total revenues of $303.2 million, up 8% from $281.9 million (10% on a constant-currency basis).
• ATM operating revenues of $292.1 million, up 12% from $260.0 million (15% on a constant-currency basis).
• Gross margin of 35.4%, up from 33.4% in 2015.
• GAAP Net Income of $15.4 million, or $0.34 per diluted share, compared to GAAP Net Income of $15.2 million, or $0.34 per diluted share.
• Adjusted Net Income per diluted share of $0.68, up 6% from $0.64.
• Adjusted EBITDA of $73.2 million, up 8% from $67.5 million.
• Cash flows from operating activities of $44.7 million, up 45% from $30.9 million.

“We had a good start to 2016, with our core ATM operating revenues up approximately 15% on a constant-currency basis for the quarter. We also enjoyed expansion of gross margins – which were up 200 basis points, once again demonstrating the strength and durability of our model and solid execution by our team. We continue to see opportunities for profitable revenue growth in our key markets and are seeing increasing opportunities for expansion into new markets,” commented Steve Rathgaber, Cardtronics’ chief executive officer.

RECENT HIGHLIGHTS

• In April, completed the acquisition of a 2,586 location ATM portfolio from Chase, which included contracts with Walgreens, ampm, Duane Reade, and other retail and airport locations.
• Secured ATM operating contracts representing over 550 locations in Europe.
• Launched ATM operations in the Republic of Ireland and entered into a long-term agreement to operate approximately 120 ATMs (included in the 550 locations above) for Topaz, the largest convenience/fuel retailer in Ireland.
• Installed ATMs at over 700 new turnkey sites during the first quarter of 2016.
• Entered agreements with 20 new financial institutions for participation in the Allpoint Network, adding over 100,000 cards that will seek surcharge-free ATM access to our network.
• Announced the Company’s plan to redomicile in the U.K., subject to shareholder approval.

FIRST QUARTER RESULTS

Consolidated revenues totaled $303.2 million for the first quarter of 2016, representing an 8% increase from $281.9 million in the first quarter of 2015. ATM operating revenues were up 12% from the first quarter of 2015. Adjusting for unfavorable movements in currency exchange rates, ATM operating revenues were up approximately 15% from the first quarter of 2015, driven primarily by organic growth. The $10.7 million decrease in ATM product sales and other revenues in the first quarter was attributable to the Company’s 2015 divestiture of the retail cash-in-transit component of its previously acquired Sunwin business in the U.K. Cost of ATM product sales and other revenues decreased correspondingly by $9.4 million in the first quarter.

Adjusted EBITDA for the first quarter of 2016 totaled $73.2 million, representing an 8% increase over the $67.5 million of Adjusted EBITDA during the first quarter of 2015. Adjusted Net Income totaled $31.3 million ($0.68 per diluted share) for the first quarter of 2016, compared to $29.0 million ($0.64 per diluted share) during the first quarter in 2015. The increases in Adjusted EBITDA and Adjusted Net Income were primarily driven by the Company’s revenue growth and margin expansion. Adjusted EBITDA and Adjusted Net Income are detailed in a reconciliation included at the end of this press release.

GAAP Net Income for the first quarter of 2016 totaled $15.4 million, compared to GAAP Net Income of $15.2 million during the first quarter in 2015. The increase in GAAP Net Income for the first quarter of 2016 was the result of continued revenue growth and margin expansion, which was mostly offset by nonrecurring professional services costs of approximately $6.0 million during the quarter associated with the Company’s planned redomicile of its parent company in the U.K., announced on April 27, 2016. These costs are reported in our results from operations under the redomicile-related expense category and have been excluded from the Company’s calculation of Adjusted EBITDA and Adjusted Net Income in the first quarter.

ATM operating revenues in North America were up 7% for the quarter, all of which was accounted for by organic growth. ATM operating revenues in Europe were up 20% for the quarter (27% constant-currency basis), driven by a combination of strong organic growth and to a lesser extent, acquisition-related growth.

2016 GUIDANCE

The Company is updating the financial guidance it provided in February 2016 regarding its anticipated results for the full year 2016:

• Revenues of $1.25 billion to $1.27 billion;
• Gross Profit Margin of 35.0% to 36.0%;
• Adjusted EBITDA of $320 million to $328 million;
• Depreciation and accretion expense of $94 million to $96 million, net of noncontrolling interests;
• Cash interest expense of $18.0 to $18.5 million, net of noncontrolling interests;
• Adjusted Net Income per diluted share of $3.08 to $3.18, based on approximately 45.8 million weighted average diluted shares outstanding; and
• Capital expenditures of $150 million to $160 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 £1.00 U.K. to $1.40 U.S., $17.50 Mexican pesos to $1.00 U.S., $1.00 Canadian dollar to $0.75 U.S., and €1.00 Euros to $1.10 U.S.

LIQUIDITY

The Company had $315 million in available borrowing capacity under its $375 million revolving credit facility due in 2019 and $25 million in cash on hand as of March 31, 2016. The Company’s outstanding indebtedness as of March 31, 2016 consisted of $250 million in senior notes due 2022, $288 million convertible senior notes due 2020, and $60 million in borrowings under its revolving credit facility due 2019. The senior and convertible senior notes have carrying balances of $247 million and $233 million, respectively, and are reflected as long-term debt on the balance sheet, net of issuance costs and unamortized discounts.

CONFERENCE CALL INFORMATION

The Company will host a conference call today, Thursday, April 28, 2016, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its financial results for the first quarter ended March 31, 2016. 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 First 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 Thursday, May 12, 2016, and can be accessed by calling (855) 859-2056 or (404) 537-3406 and entering 86110230 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 May 31, 2016.

DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION

Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow, and Revenue on a constant-currency basis are non-GAAP financial measures provided as a complement to results prepared in accordance with U.S. 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 stock-based compensation expense, acquisition and divestiture-related expenses, certain other non-operating and nonrecurring expenses, gains or losses on disposal of assets, the Company’s obligations for the payment of income taxes, interest expense and other obligations such as capital expenditures, and includes an adjustment for noncontrolling interests. Adjusted EBITDA % is calculated by taking Adjusted EBITDA over U.S. GAAP total revenues. Adjusted Net Income represents net income computed in accordance with U.S. GAAP, before amortization of intangible assets, gains or losses on disposal of assets, stock-based compensation expense, certain other (income) expense amounts, nonrecurring expenses, and acquisition and divestiture-related expenses, and uses an estimated long-term cash tax rate of 32.0% for the three months ended March 31, 2016 and 2015, with certain adjustments for noncontrolling interests. 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. Management calculates Revenue on a constant-currency basis by using the average foreign exchange rates applicable in the corresponding period of the previous year and applying these rates to foreign-denominated revenue of the current period. The difference between revenue calculated based on these foreign exchange rates and revenue calculated in accordance with U.S. GAAP is referred to as the foreign exchange impact on revenue. Management uses Revenue on a constant-currency basis to eliminate the effect foreign currency has on comparability between periods.

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 measures prepared in accordance with U.S. GAAP. Reconciliations of the non-GAAP financial measures used herein to the most directly comparable U.S. GAAP financial measures are presented in tabular form at the end of this press release.

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 provides services to approximately 195,000 ATMs in North America and Europe. Whether Cardtronics is driving foot traffic for North America and Europe’s top retailers, enhancing ATM brand presence for card issuers or expanding card holders’ surcharge-free cash access, Cardtronics is convenient access to cash, when and where consumers need it. Cardtronics is where cash meets commerce.

CAUTIONARY STATEMENT 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 “project,” “believe,” “estimate,” “expect,” “future,” “anticipate,” “intend,” “contemplate,” “foresee,” “would,” “could,” “plan,” and similar expressions that are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effect on the Company. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting the Company will be those that are anticipated. All comments concerning the Company’s expectations for future revenues and operating results are based on the Company’s estimates for its existing operations and do not include the potential impact of any future acquisitions. The Company’s forward-looking statements involve significant risks and uncertainties (some of which are beyond the Company’s control) and assumptions that could cause actual results to differ materially from the Company’s historical experience and present expectations or projections. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include:

• the Company’s financial outlook and the financial outlook of the ATM industry and the continued usage of cash by consumers at rates near historical patterns;
• the Company’s ability to respond to recent and future network and regulatory changes, including forthcoming requirements surrounding Europay, MasterCard, and Visa (“EMV”) security standards;
• the Company’s ability to renew its existing customer relationships on comparable economic terms and add new customers;
• the Company’s ability to pursue and successfully integrate acquisitions;
• changes in interest rates and foreign currency rates;
• the Company’s ability to successfully manage its existing international operations and to continue to expand internationally;
• the Company’s ability to manage concentration risks with key customers, vendors and service providers;
• the Company’s ability to prevent thefts of cash;
• the Company’s ability to manage cybersecurity risks and prevent data breaches;
• 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 provide new ATM solutions to retailers and financial institutions including placing additional banks’ brands on ATMs currently deployed;
• 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 manage the risks associated with its third-party service providers failing to perform their contractual obligations;
• the Company’s ability to successfully implement and evolve 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;
• the Company’s ability to retain its key employees and maintain good relations with its employees.

Forward-looking statements also are affected by the risk factors described in the Company’s Annual Report on Form 10- K for the year ended December 31, 2015, as amended, and those set forth from time-to-time in other filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

SELECTED INCOME STATEMENT DETAIL:

SELECTED BALANCE SHEET DETAIL:

⁽¹⁾ Our 5.125% senior notes due 2022 with a face value of $250.0 million are presented net of capitalized debt issuance costs of $3.1 million and $3.3 million as of March 31, 2016 and December 31, 2015, respectively. Our 1.00% convertible senior notes due 2020 with a face value of $287.5 million are presented net of the unamortized discount and capitalized debt issuance costs of $54.2 million and $56.7 million as of March 31, 2016 and December 31, 2015, respectively. In accordance with U.S. GAAP the estimated fair value of the conversion feature within the convertible senior notes was recorded as additional paid-in capital within equity at issuance. The convertible senior notes are being accreted over the term of the notes to the full principal amount ($287.5 million).

Share count rollforward:

SELECTED CASH FLOW DETAIL:

Selected cash flow statement amounts:

⁽¹⁾ Certain ATMs previously reported in this category are now included in the United States: Managed services - Processing Plus and Processing operations, net category below.
⁽²⁾ The notable increase in the United States: Managed services - Processing Plus and Processing operations, net category is mostly attributable to the July 1, 2015 acquisition of Columbus Data Services, L.L.C. (“ CDS”) and the incremental number of transacting ATMs for which CDS provides processing services.
⁽³⁾ Amounts presented exclude the effect of depreciation, accretion, and amortization of intangible assets, which is presented separately in the Company’s Consolidated Statements of Operations.
⁽⁴⁾ Revenues and expenses relating to managed services, processing, ATM equipment sales, and other ATM-related services are not included in this calculation.

⁽¹⁾ Noncontrolling interests adjustment made such that Adjusted EBITDA includes only the Company’s ownership interest in the Adjusted EBITDA of its Mexico subsidiary. In December 2015, the Company increased its ownership interest in its Mexico subsidiary from 51.0% to 95.7%.
⁽²⁾ For the three months ended March 31, 2015, amounts exclude a portion of the expenses incurred by the Company’s Mexico subsidiary to account for the amounts allocable to the noncontrolling interest stockholders.
⁽³⁾ Acquisition and divestiture-related expenses include nonrecurring costs incurred for professional and legal fees and certain transition and integration-related costs, including employee-related severance costs.
⁽⁴⁾ For the three months ended March 31, 2016, the Company incurred $6.0 million in expenses associated with its plan to redomicile to the U.K.
⁽⁵⁾ Amounts exclude a portion of the expenses incurred by the Company’s Mexico subsidiary to account for the amounts allocable to the noncontrolling interest stockholders. In December 2015, the Company increased its ownership interest in its Mexico subsidiary.
⁽⁶⁾ Calculated using the Company’s estimated long-term, cross-jurisdictional effective cash tax rate of 32.0%.

⁽¹⁾ Noncontrolling interests adjustment made such that Adjusted EBITDA includes only the Company’s interest of its Mexico subsidiary.
⁽²⁾ Calculated using the Company’s estimated long-term, cross-jurisdictional effective cash tax rate of 32.0%.

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