Theories abound on when and how cash will go the way of the
dinosaur. For now, though, most people still like to keep folding
money on hand in case they need it.
Consequently, most consumers like to know they'll have quick,
convenient and reliable access to cash via ATMs and other
cash-dispensing machines and services.
) is one of the companies making sure cash is readily available.
It's the world's biggest nonbank automated teller machine
operator, with more than 81,000 retail ATMs in North America and
Europe, and also manages some ATMs on behalf of banks.
The company provides cash dispensing, bank account balance
inquiry and money transfer services as well as bill payment,
check cashing and remote-deposit capture services. It has
operations in the U.S., Canada, Mexico, Puerto Rico, the U.K. and
Customers include banking giantsCitigroup (
),Bank of America (
) andJPMorgan Chase (
), as well as big retail industry namesTarget (
),Costco (COST),Kroger (KR),Walgreen (WAG) andCVS Caremark
Cardtronics has spent much of the past year rapidly expanding
its operation and market reach, both domestically and
Its most recent deal came in October, when Cardtronics
acquired CGI, a Chandler, Ariz.-based ATM operator of about 1,000
mainly merchant-owned ATMs.
That deal followed Cardtronics' August buyout of Cardpoint, a
European ATM services provider that operates as Cashzone in the
U.K. and Cardpoint in Germany. That deal brought aboard about
7,100 ATMs in the U.K. and another 800 in Germany.
In all, Cardtronics made five buyouts in 2013. Analysts reckon
that the company will keep scouting deals as a way of padding its
lead in the nonbank ATM sector.
"Expectations call for a continuation of small tuck-in
acquisitions of merchant-owned ATM deployers, with a very active
pipeline," noted Barrington Research analyst Gary Prestopino.
On a third-quarter conference call with analysts, Cardtronics
CEO Steve Rathgaber pointed out that his company's Q3
acquisitions helped it push past the 80,000-ATM milestone.
The significance of that milestone "can be hard to truly
appreciate," he said, until you consider that some of the largest
financial institutions have closer to 10,000 to 20,000 ATMs. And
since many individual bank branches have multiple ATMs, the
actual number of ATM locations is more like 5,000 to 7,000 for
"Cardtronics, on the other hand, has 80,000 locations, as we
typically have one ATM per retailer outlet and we are only in
general retail outlets," Rathgaber said. "When you do the math,
Cardtronics is present in about 10 times the number of locations
of some of the largest banks. That is a powerful and valuable
asset for communicating with people."
Cardtronics hasn't only used buyouts to expand its operation
and customer base. The company has also scored some impressive
wins in recent quarters.
During the third quarter, it signed extensions to provide ATM
operating services to Costco andChevron (CVX), securing more than
700 ATMs in 43 states.
Cardtronics added another 600-plus ATMs when it won long-term
contracts with three unnamed retailers that previously operated
their own ATM fleets. Two of the retailers are in the U.S., while
the other is in the U.K.
Follow The Money
One reason size and mass are important to Cardtronics is that
the largest share of its revenue comes from surcharges customers
pay for using ATMs. The more machines it operates, the more
revenue it gets from surcharges.
Cardtronics' second-biggest revenue source is interchange fees
paid by banks. These fees are paid to the company for each
transaction it executes on behalf of cardholders.
A third source of revenue comes from services such as
customizing ATMs with the logos, colors and the customer
interface of bank customers.
Cardtronics also gets revenue from smaller banks and credit
unions that pay a monthly or annual fee to participate in its
surcharge-free Allpoint network.
Customers who bank with financial institutions in the network
are allowed surcharge-fee ATM transactions. The idea is to let
smaller banks provide ATM services to customers without investing
in their own ATM network.
"Cardtronics' bank branding offering and surcharge-free
network appeal to national banks, community banks and alternative
financial service providers looking for a cost efficient and less
capital-intensive way to expand the reach of surcharge-free ATMs
available to their customers," JPMorgan analyst Reginald Smith
noted in a third-quarter earnings report.
Financially, Cardtronics has a record of delivering solid
gains on both the top and bottom lines. It has posted
double-digit sales and EPS growth in eight of the last 10
The company's third-quarter 2013 revenue rose 15% from the
prior year to $228.8 million as acquisitions helped drive strong
gains in ATM transactions.
Q3 earnings climbed 28% to 55 cents a share, topping analyst
consensus views for 49 cents. Gross margin improved 230 basis
points to 33.6%.
Analysts expect fourth-quarter earnings of 47 cents a share,
up from 41 cents a year earlier. Full-year profit is seen rising
19% for 2013 and 18% for 2014, with future estimates likely to
"Recent acquisitions set the stage for above-average growth
and guidance raises in the near-term," Smith noted.
Cardtronics shares set a record high of 44.46 on Dec. 23 and
currently trade near 43.