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Cardtronics Announces Third Quarter 2017 Results

HOUSTON, Nov. 02, 2017 (GLOBE NEWSWIRE) -- Cardtronics plc (Nasdaq:CATM) (“Cardtronics” or the “Company”), the world’s largest ATM owner/operator, announced today its financial and operational results for the quarter ended September 30, 2017.

Key financial statistics in the third quarter of 2017 as compared to the third quarter of 2016 include:

  • Total revenues of $402.0 million, up 22% from $328.3 million and driven by the DCPayments and Spark acquisitions completed during January 2017.
  • ATM operating revenues of $390.1 million, up 24% from $314.8 million.
  • GAAP Net Loss of $(175.6) million, or $(3.84) per diluted share, compared to GAAP Net Income of $27.5 million, or $0.60 per diluted share. During the third quarter of 2017, the Company recognized asset impairments in its Australia & New Zealand segment totaling in the aggregate $216.0 million ($193.5 million net of tax).
  • Adjusted EBITDA of $99.9 million, up 15% from $86.6 million in the prior year.
  • Adjusted Net Income per diluted share of $0.96 down from $0.98, impacted by the additional interest and depreciation expense from the acquisitions completed during January 2017.

“The third quarter was a dynamic quarter where we performed well operationally under the challenges of several hurricanes and earthquakes. This quarter also marks my last earnings call as I retire at year’s end. I believe I leave behind two great assets. The first is the unique, increasingly global "neighborhood ATM" platform delivering a critical service in payments – convenient access to cash. It is a unique infrastructure platform designed for growth. The second great asset is the team now in place to lead Cardtronics to the next stage of growth. I am truly privileged to have led Cardtronics for nearly eight years. Under the leadership of my successor, Ed West, I am confident that the great potential of the Cardtronics platform will be realized for our shareholders,” commented Steve Rathgaber, Cardtronics’ chief executive officer.

RECENT HIGHLIGHTS

  • Secured ATM operating contracts representing approximately 1,800 locations.
  • Expanded our Allpoint Network to include 1,500 additional ATMs in Speedway convenience stores.
  • The U.K. Competition and Markets Authority approved the Company to maintain its ownership of the U.K. operations of DCPayments.

Changes in currency exchange rates had an insignificant impact relative to our results in the third quarter of 2016. See Disclosure of Non-GAAP Financial Information in this earnings release for definitions of Adjusted Gross Profit, Adjusted Gross Margin, EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow, and certain other non-GAAP measures on a constant-currency basis. For additional information, including reconciliations to the most directly comparable financial measure recognized under accounting principles generally accepted in the U.S. (“GAAP”), see the supplemental schedules of selected financial information in this earnings release.

THIRD QUARTER RESULTS

Consolidated revenues totaled $402.0 million for the third quarter of 2017, representing a 22% increase from $328.3 million from the same period of 2016, driven by the DirectCash Payments Inc. (“DCPayments”) and Spark ATM Systems Pty Ltd. (“Spark”) acquisitions completed during January 2017. ATM operating revenues for the third quarter of 2017 were up 24% from the same period of 2016.

Driven primarily by the acquisitions completed during January 2017, ATM operating revenues in North America increased 12% and ATM operating revenues in Europe & Africa increased 14% from the same period of 2016. ATM operating revenues in our Australia & New Zealand segment totaled $35.4 million during the third quarter of 2017. The Company acquired the Australia & New Zealand segment via the DCPayments acquisition, completed in January 2017, and as a result, there were no comparable revenues in the third quarter of 2016.

GAAP Net Loss for the third quarter of 2017 totaled $175.6 million compared to GAAP Net Income of $27.5 million in the same period of 2016. The GAAP Net Loss was the result of asset impairments in the Australia & New Zealand segment of $216.0 million ($193.5 million net of tax). See Asset Impairments in the Australia & New Zealand Segment in this earnings release for further discussion. Additionally, the Company incurred incremental interest, depreciation, and intangible asset amortization expenses associated with the acquisitions completed during January 2017, as well as incremental professional services and other costs associated with the Company’s integration of the acquisitions. The Company’s GAAP tax rate was 2.3% for the third quarter of 2017 compared to 23.4% in the same period of 2016.

Adjusted EBITDA for the third quarter of 2017 totaled $99.9 million compared to $86.6 million of Adjusted EBITDA in the same period of 2016. The increase in Adjusted EBITDA was primarily driven by the acquisitions completed during January 2017. Adjusted Net Income totaled $44.2 million ($0.96 per diluted share) for the third quarter of 2017, compared to $44.7 million ($0.98 per diluted share) in the same period of 2016.

NINE MONTH RESULTS

Consolidated revenues totaled $1.14 billion for the nine months ended September 30, 2017, representing a 20% increase from $955.5 million from the same period of 2016. This increase was driven by the acquisitions completed during January 2017. ATM operating revenues for the nine months ended September 30, 2017 were also up 20% from the same period of 2016. Adjusting for movements in currency exchange rates, ATM operating revenues were up 23% from the same period of 2016.

Driven by the acquisitions completed during January 2017, ATM operating revenues in North America increased 11% and ATM operating revenues in Europe & Africa increased 6% (14% on a constant-currency basis) compared to the same period of 2016. ATM operating revenues in Australia & New Zealand totaled $99.8 million during the nine months ended September 30, 2017.

GAAP Net Loss for the nine months ended September 30, 2017 totaled $161.3 million compared to GAAP Net Income of $63.0 million in the same period of 2016. The GAAP Net Loss is attributable to asset impairments in the Australia & New Zealand segment of $216.0 million recognized during the three months ended September 30, 2017. See Asset Impairments in the Australia & New Zealand Segment in this earnings release for further discussion. The Company also incurred $15.3 million of professional services and other costs associated with the completion and integration of the acquisitions completed during January 2017 and additionally recorded $8.2 million in restructuring costs. The Company’s intangible asset amortization expense was up $17.3 million compared to the same period of 2016 due to the Company’s recently completed acquisitions.

Adjusted EBITDA for the nine months ended September 30, 2017 totaled $258.8 million ($265.1 million on a constant-currency basis) compared to $241.4 million of Adjusted EBITDA in the same period of 2016. The increase in Adjusted EBITDA was primarily driven by the acquisitions completed during January 2017, partially offset by slightly lower revenue in the U.S., coupled with changes in currency exchange rates and higher operating costs, primarily associated with the Company’s U.S. ATM fleet upgrade to comply with the EMV security standard. Adjusted Net Income totaled $104.8 million ($2.27 per diluted share or $2.33 on a constant-currency basis) for the nine months ended September 30, 2017, compared to $112.8 million ($2.47 per diluted share) from the same period of 2016. The decrease in Adjusted Net Income is attributable to higher depreciation and interest expense as a result of the completion of the DCPayments and Spark acquisitions.

ASSET IMPAIRMENTS IN THE AUSTRALIA & NEW ZEALAND SEGMENT

During the third quarter of 2017, the four largest banks in Australia announced that they would remove direct charges on all domestic transactions at their ATMs. As a result of this unexpected market shift, the Company analyzed the anticipated impact to its Australian business which resulted in impairment charges of $140.0 million and $54.5 million to reduce the carrying values of its goodwill and intangible assets, respectively, associated with the Australia & New Zealand segment. Additionally, the Company recognized $21.5 million within the Loss (gain) on disposal and impairment of assets line item to recognize the impairment of certain ATM related assets. The Company acquired the business in Australia with its acquisition of DCPayments on January 6, 2017.

BORROWINGS AND LIQUIDITY

As of September 30, 2017, the Company had outstanding borrowings of approximately $158 million and had approximately $242 million in available borrowing capacity under its $400 million revolving credit facility due in 2021. Additionally, the Company had $61 million in cash as of September 30, 2017. The Company’s other outstanding indebtedness as of September 30, 2017 included $288 million in Convertible Senior Notes due 2020, $250 million in Senior Notes due 2022, and $300 million in Senior Notes due 2025. The Convertible Senior Notes due 2020, Senior Notes due 2022, and Senior Notes due 2025 had carrying balances of $249 million, $248 million, and $295 million, respectively, and are reflected as long-term debt on the balance sheet, net of unamortized discount and capitalized debt issuance costs.

On October 3, 2017, the Company entered into an amendment to its revolving credit facility. Pursuant to the amendment, the Company expanded the currencies in which the total commitments can be borrowed.

2017 GUIDANCE

Below is the Company’s financial guidance for the full year 2017:

  • Revenues of $1.47 billion to $1.5 billion;
  • GAAP Net Loss of $(156) million to $(150) million;
  • Adjusted EBITDA of $330 million to $340 million;
  • Depreciation and accretion expense of approximately $115.5 million;
  • Cash interest expense of $34 million to $35 million;
  • Adjusted Net Income of $131 million to $139 million;
  • Adjusted Net Income per diluted share of $2.83 to $3.00, based on approximately 46.25 million weighted average diluted shares outstanding; and
  • Capital expenditures of $130 million to $140 million.

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 earnings release. See Disclosure of Non-GAAP Financial Information in this earnings release for definitions of these Non-GAAP measures. This guidance is based on average foreign currency exchange rates for the year of £1.00 U.K. to $1.29 U.S., $20.00 Mexican pesos to $1.00 U.S., $1.00 Canadian dollar to $0.80 U.S., €1.00 Euros to $1.15 U.S., $1.00 Australian dollar to $0.77 U.S., and R14.29 South African Rand to $1.00 U.S. Additionally, this guidance is based on an estimated non-GAAP tax rate of approximately 27.2% for 2017.

Included in the guidance above is the assumption that the deinstallations of the ATMs at 7-Eleven locations in the U.S., which began during the three months ended September 30, 2017, will be substantially complete by the end of the year, with a small number of units expected to continue to operate into the first quarter of 2018. 7-Eleven in the U.S. is expected to account for approximately 12% of the Company’s consolidated revenues for the year ending 2017, based on the midpoint of revenue guidance. The Company estimates that the incremental gross margin for these ATMs during 2017 will be approximately 40%. The ATM deinstallation schedule continues to remain subject to change as of the date of this earnings release.

CONFERENCE CALL INFORMATION

The Company will host a conference call today, Thursday, November 2, 2017, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its financial results for the quarter ended September 30, 2017. To access the call, please call the conference call operator at:

Dial in:(877) 806-7890
Alternate dial-in:(973) 935-8713

Please call in fifteen minutes prior to the scheduled start time and request to be connected to the “Cardtronics Third Quarter 2017 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, November 16, 2017, and can be accessed by calling (855) 859-2056 or (404) 537-3406 and entering 95425707 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, 2017.

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 238,000 ATMs in North America, Europe, Asia-Pacific, and Africa. Whether Cardtronics is driving foot traffic for 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.

CONTACT INFORMATION

Media Relations
Nick Pappathopoulos
Director – Public Relations
832-308-4396
npappathopoulos@cardtronics.com
Investor Relations
Phillip Chin
EVP – Corporate Development & Investor Relations
832-308-4975
ir@cardtronics.com

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This earnings release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provisions thereof. These forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effect on the Company and 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 its 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 its control) and assumptions that could cause actual results to differ materially from its historical experience and present expectations or projections. Risk factors are described in the Company’s 2016 Form 10-K, and those set forth from time-to-time in other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements contained in this earnings release, which speak only as of the date of this earnings release. 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.

DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION

Adjusted Gross Profit, Adjusted Gross Margin, EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow, and certain GAAP as well as non-GAAP measures on a constant-currency basis represent non-GAAP financial measures provided as a complement to financial 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 notable, non-cash, and/or (if applicable in a particular period) certain costs not anticipated to occur in future periods 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 Gross Profit represents total revenues less the total cost of revenues, excluding depreciation, accretion, and amortization of intangible assets. Adjusted Gross Margin is calculated by dividing Adjusted Gross Profit by total revenues. 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 methods by which the assets were acquired. Adjusted EBITDA also excludes share-based compensation expense, acquisition and divestiture-related expenses, certain non-operating expenses, (if applicable in a particular period) certain costs not anticipated to occur in future periods, gains or losses on disposal and impairment 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 Net Income represents net income computed in accordance with GAAP, before amortization of intangible assets, gains or losses on disposal and impairment of assets, share-based compensation expense, certain other expense amounts, acquisition and divestiture-related expenses, certain non-operating expenses, and (if applicable in a particular period) certain costs not anticipated to occur in future periods (together, the “Adjustments”). Prior to June 30, 2016, Adjusted Net Income was calculated using an estimated long-term, cross-jurisdictional effective cash tax rate of 32%. Subsequent to the redomicile of the Company’s parent company to the U.K., the Company revised the process for determining its non-GAAP tax rate and now utilizes a non-GAAP tax rate derived from the GAAP tax rate adjusted for the net tax effects of the Adjustments, based on the nature and geography of the Adjustments. For the three and nine months ended September 30, 2017, the non-GAAP tax rate used to calculate Adjusted Net Income was approximately 26.8% and 27.4%, respectively. For the three months ended September 30, 2016, the non-GAAP tax rate used to calculate Adjusted Net Income was approximately 24.2%. For the nine months ended September 30, 2016, the Company used 24.2% for the quarter ended September 30, 2016, and for the six months ended June 30, 2016, the Company used its previously estimated long-term cross-jurisdictional tax rate of 32%. 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 mandatory principal payments on portions of the Company’s long-term debt. Management calculates certain GAAP as well as non-GAAP measures on a constant-currency basis using the average foreign currency exchange rates applicable in the corresponding period of the previous year and applying these rates to the measures in the current reporting period. Management uses GAAP as well as non-GAAP measures on a constant-currency basis to assess performance and eliminate the effect foreign currency exchange rates have 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 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 earnings release.

Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2017 and 2016
(In thousands, excluding share, per share amounts, and percentages)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 % Change 2016 2017 % Change 2016
(Unaudited)
Revenues:
ATM operating revenues $ 390,143 23.9 % $ 314,788 $ 1,105,191 20.4 % $ 918,207
ATM product sales and other revenues 11,807 (12.8) 13,546 39,443 5.6 37,335
Total revenues 401,950 22.4 328,334 1,144,634 19.8 955,542
Cost of revenues:
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets reported separately below.) 251,136 28.3 195,737 729,547 25.7 580,520
Cost of ATM product sales and other revenues 8,920 (28.4) 12,453 34,671 2.4 33,873
Total cost of revenues 260,056 24.9 208,190 764,218 24.4 614,393
Operating expenses:
Selling, general, and administrative expenses 46,132 14.8 40,194 131,551 13.9 115,505
Redomicile-related expenses 22 (97.7) 951 782 (93.6) 12,201
Restructuring expenses n/m 8,243 n/m
Acquisition and divestiture-related expenses 2,889 7.8 2,680 15,338 210.6 4,938
Goodwill and intangible asset impairment 194,521 n/m 194,521 n/m
Depreciation and accretion expense 29,807 27.9 23,308 88,683 28.4 69,085
Amortization of intangible assets 14,996 63.4 9,175 45,423 61.5 28,129
Loss (gain) on disposal and impairment of assets 22,307 n/m 469 26,170 n/m (475)
Total operating expenses 310,674 n/m 76,777 510,711 n/m 229,383
(Loss) income from operations (168,780) n/m 43,367 (130,295) n/m 111,766
Other expense:
Interest expense, net 9,743 128.2 4,269 25,760 94.8 13,227
Amortization of deferred financing costs and note discount 3,195 11.2 2,872 9,317 7.9 8,636
Other (income) expense (2,095) n/m 360 (1,730) n/m 748
Total other expense 10,843 44.6 7,501 33,347 47.5 22,611
(Loss) income before income taxes (179,623) n/m 35,866 (163,642) n/m 89,155
Income tax (benefit) expense (4,053) n/m 8,388 (2,335) n/m 26,204
Effective tax rate 2.3% 23.4% 1.4% 29.4%
Net (loss) income (175,570) n/m 27,478 (161,307) n/m 62,951
Net (loss) income attributable to noncontrolling interests (9) (25.0) (12) (3) (95.8) (71)
Net (loss) income attributable to controlling interests and available to common shareholders $ (175,561) n/m% $ 27,490 $ (161,304) n/m% $ 63,022
Net (loss) income per common share – basic $ (3.84) $ 0.61 $ (3.54) $ 1.39
Net (loss) income per common share – diluted $ (3.84) $ 0.60 $ (3.54) $ 1.38
Weighted average shares outstanding – basic 45,662,543 45,252,869 45,597,558 45,175,604
Weighted average shares outstanding – diluted 45,662,543 45,850,061 45,597,558 45,765,235

Condensed Consolidated Balance Sheets
As of September 30, 2017 and December 31, 2016
(In thousands)

September 30, 2017 December 31, 2016
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 61,498 $ 73,534
Accounts and notes receivable, net 112,392 84,156
Inventory, net 16,387 12,527
Restricted cash 43,646 32,213
Prepaid expenses, deferred costs, and other current assets 100,450 67,107
Total current assets 334,373 269,537
Property and equipment, net 504,395 392,735
Intangible assets, net 220,233 121,230
Goodwill 771,152 533,075
Deferred tax asset, net 7,260 13,004
Prepaid expenses, deferred costs, and other noncurrent assets 51,868 35,115
Total assets $ 1,889,281 $ 1,364,696
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of other long-term liabilities $ 31,540 $ 28,237
Accounts payable and other accrued and current liabilities 375,320 285,583
Total current liabilities 406,860 313,820
Long-term liabilities:
Long-term debt 949,775 502,539
Asset retirement obligations 58,425 45,086
Deferred tax liability, net 43,287 27,625
Other long-term liabilities 71,761 18,691
Total liabilities 1,530,108 907,761
Shareholders' equity 359,173 456,935
Total liabilities and shareholders’ equity $ 1,889,281 $ 1,364,696


SELECTED STATEMENT OF OPERATIONS DETAIL:
(Unaudited)

Total revenues by segment:Three Months Ended Nine Months Ended
September 30, September 30,
2017 % Change 2016 2017 % Change 2016
(In thousands, excluding percentages)
North America
ATM operating revenues$ 249,964 11.9 % $ 223,285 $ 719,341 10.7 % $ 649,739
ATM product sales and other revenues 9,654 (20.5) 12,137 33,191 0.2 33,129
North America total revenues 259,618 10.3 235,422 752,532 10.2 682,868
Europe & Africa
ATM operating revenues 107,497 14.2 94,154 293,827 6.3 276,452
ATM product sales and other revenues 2,088 48.2 1,409 6,159 46.4 4,206
Europe & Africa total revenues 109,585 14.7 95,563 299,986 6.9 280,658
Australia & New Zealand
ATM operating revenues 35,368 n/m 99,752 n/m
ATM product sales and other revenues 65 n/m 224 n/m
Australia & New Zealand total revenues 35,433 n/m 99,976 n/m
Eliminations (2,686) 1.3 (2,651) (7,860) (1.6) (7,984)
Total ATM operating revenues 390,143 23.9 314,788 1,105,191 20.4 918,207
Total ATM product sales and other revenues 11,807 (12.8) 13,546 39,443 5.6 37,335
Total revenues$ 401,950 22.4 % $ 328,334 $ 1,144,634 19.8 % $ 955,542


Breakout of ATM operating revenues:Three Months Ended Nine Months Ended
September 30, September 30,
2017 % Change 2016 2017 % Change 2016
(In thousands, excluding percentages)
Surcharge revenues$ 185,395 46.6% $ 126,504 $ 509,444 37.8% $ 369,658
Interchange revenues 124,259 5.2 118,162 361,158 5.3 343,121
Bank-branding and surcharge-free network revenues 48,916 0.2 48,802 143,256 1.1 141,699
Managed services revenues 17,096 100.6 8,522 48,146 83.4 26,246
Other revenues 14,477 13.1 12,798 43,187 15.2 37,483
Total ATM operating revenues$ 390,143 23.9% $ 314,788 $ 1,105,191 20.4% $ 918,207


Adjusted gross profit and margin by segment:Three Months Ended Nine Months Ended
September 30, September 30,
2017 Gross
Margin
2016 Gross
Margin
2017 Gross
Margin
2016 Gross
Margin
(In thousands, excluding percentages)
North America$ 88,670 34.2% $ 83,737 35.6% $ 245,576 32.6% $ 239,683 35.1%
Europe & Africa 44,396 40.5 36,656 38.4 111,097 37.0 102,102 36.4
Australia & New Zealand 10,526 29.7 n/m 27,576 27.6 n/m
Corporate & Eliminations (1,698) n/m (249) n/m (3,833) n/m (636) n/m
Adjusted Gross Profit (1)$ 141,894 35.3% $ 120,144 36.6% $ 380,416 33.2% $ 341,149 35.7%
(1) As reported on the Company’s Reconciliation of Gross Profit Inclusive of Depreciation, Accretion, and Amortization of Intangible Assets to Adjusted Gross Profit, see Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.


Breakout of cost of ATM operating
revenues (exclusive of depreciation,
accretion, and amortization of
intangible assets):Three Months Ended Nine Months Ended
September 30, September 30,
2017 % Change 2016 2017 % Change 2016
(In thousands, excluding percentages)
Merchant commissions$ 130,859 39.0 % $ 94,136 $ 368,435 33.0 % $ 277,088
Vault cash rental 18,994 6.1 17,904 56,072 4.3 53,764
Other costs of cash 23,541 27.8 18,421 79,064 33.3 59,321
Repairs and maintenance 20,733 4.5 19,846 64,138 14.3 56,097
Communications 9,833 27.8 7,694 28,660 23.0 23,305
Transaction processing 5,684 42.7 3,982 17,022 45.2 11,727
Share-based compensation 197 (20.9) 249 336 (47.2) 636
Employee costs 20,463 23.8 16,525 59,271 17.0 50,666
Other expenses 20,832 22.7 16,980 56,549 18.0 47,916
Total cost of ATM operating revenues$ 251,136 28.3 % $ 195,737 $ 729,547 25.7 % $ 580,520


Breakout of selling, general,
and administrative expenses:Three Months Ended Nine Months Ended
September 30, September 30,
2017 % Change 2016 2017 % Change 2016
(In thousands, excluding percentages)
Employee costs$ 24,073 14.5 % $ 21,022 $ 71,347 16.5 % $ 61,234
Share-based compensation expense 3,955 (38.1) 6,393 9,635 (36.4) 15,144
Professional fees 8,108 76.6 4,592 19,858 38.4 14,353
Other expenses 9,996 22.1 8,187 30,711 24.0 24,774
Total selling, general, and administrative expenses$ 46,132 14.8 % $ 40,194 $ 131,551 13.9 % $ 115,505


Depreciation and accretion expense
by segment:Three Months Ended Nine Months Ended
September 30, September 30,
2017 % Change 2016 2017 % Change 2016
(In thousands, excluding percentages)
North America$ 16,415 15.9% $ 14,160 $ 50,973 22.9% $ 41,480
Europe & Africa 11,476 25.4 9,148 32,093 16.3 27,605
Australia & New Zealand 1,916 n/m 5,617 n/m
Total depreciation and accretion expense$ 29,807 27.9% $ 23,308 $ 88,683 28.4% $ 69,085

SELECTED BALANCE SHEET DETAIL:
(Unaudited, excluding December 31, 2016)

Long-term debt:September 30, 2017 December 31, 2016
(In thousands)
Revolving credit facility$ 157,630 $ 14,100
1.00% Convertible senior notes (1) 249,189 241,068
5.125% Senior notes (1) 247,869 247,371
5.50% Senior notes (1) 295,087
Total long-term debt$ 949,775 $ 502,539
(1) The 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 $38.3 million and $46.4 million as of September 30, 2017 and December 31, 2016, respectively. In accordance with 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). The 5.125% Senior Notes due 2022 with a face value of $250.0 million are presented net of capitalized debt issuance costs of $2.1 million and $2.6 million as of September 30, 2017 and December 31, 2016, respectively. The 5.50% Senior Notes due 2025 with a face value of $300.0 million are presented net of capitalized debt issuance costs of $4.9 million as of September 30, 2017.

Share count rollforward:

Total shares outstanding as of December 31, 2016 45,326,430
Shares issued – stock options exercised 12,200
Shares vested – restricted stock units 341,691
Total shares outstanding as of September 30, 2017 45,680,321

SELECTED CASH FLOW DETAIL:
(Unaudited)

Selected cash flow statement amounts: Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands)
Net cash provided by operating activities $ 79,706 $ 89,346 $ 164,284 $ 213,931
Net cash used in investing activities (41,556) (41,635) (598,501) (86,403)
Net cash (used in) provided by financing activities (29,052) (7,285) 427,284 (93,135)
Effect of exchange rate changes on cash (777) (557) (5,103) (1,169)
Net increase (decrease) in cash and cash equivalents 8,321 39,869 (12,036) 33,224
Cash and cash equivalents as of beginning of period 53,177 19,652 73,534 26,297
Cash and cash equivalents as of end of period $ 61,498 $ 59,521 $ 61,498 $ 59,521

Key Operating Metrics – Including Acquisitions in All Periods Presented
For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 % Change 2016 2017 % Change 2016
Average number of transacting ATMs:
United States 45,092 4.3 % 43,216 45,155 9.2 % 41,366
United Kingdom and Ireland 21,688 31.1 16,540 21,498 33.1 16,151
Australia and New Zealand 8,717 n/m 8,848 n/m
Canada 6,197 239.6 1,825 6,152 233.3 1,846
South Africa 2,606 n/m 2,460 n/m
Germany, Poland, and Spain 1,627 31.0 1,242 1,526 29.7 1,177
Mexico 978 (26.4) 1,329 1,078 (21.1) 1,366
Total Company-owned 86,905 35.5 64,152 86,717 40.1 61,906
United States (1) 12,175 (18.7) 14,970 12,392 (24.0) 16,297
Canada 2,974 n/m 2,932 n/m
United Kingdom and Ireland 682 n/m 632 n/m
Australia and New Zealand 103 n/m 103 n/m
Total Merchant-owned 15,934 6.4 14,970 16,059 (1.5) 16,297
Average number of transacting ATMs – ATM operations 102,839 30.0 79,122 102,776 31.4 78,203
Managed Services and Processing:
United States 129,228 7.0 120,773 126,664 8.2 117,107
Canada 3,259 85.1 1,761 3,339 101.3 1,659
Australia and New Zealand 2,000 n/m 1,844 n/m
Average number of transacting ATMs – Managed services and processing 134,487 9.8 122,534 131,847 11.0 118,766
Total average number of transacting ATMs 237,326 17.7 201,656 234,623 19.1 196,969
Total transactions (in thousands):
ATM operations 388,736 8.1 359,731 1,141,144 12.4 1,014,803
Managed services and processing, net 281,054 57.0 179,072 788,928 49.7 526,949
Total transactions 669,790 24.3 538,803 1,930,072 25.2 1,541,752
Total cash withdrawal transactions (in thousands):
ATM operations 247,903 10.1 225,178 730,313 15.3 633,461
Per ATM per month amounts (excludes managed services and processing):
Cash withdrawal transactions 804 (15.3) 949 790 (12.2) 900
ATM operating revenues (2) $ 1,180 (6.2) $ 1,258 $ 1,116 (9.6) $ 1,235
Cost of ATM operating revenues (2) (3) 774 (1.3) 784 749 (4.5) 784
ATM adjusted operating gross profit (2) (3) $ 406 (14.3)% $ 474 $ 367 (18.6)% $ 451
ATM adjusted operating gross profit margin (2) (3) 34.4% 37.7% 32.9% 36.5%
(1) Certain ATMs previously reported in this category are now included in the United States: Managed services and processing or United States: Company-owned categories.
(2) ATM operating revenues and Cost of ATM operating revenues relating to managed services, processing, ATM equipment sales, and other ATM-related services are not included in this calculation.
(3) Amounts presented exclude the effect of depreciation, accretion, and amortization of intangible assets. See Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.


Key Operating Metrics – Excluding Acquisitions in All Periods Presented

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 % Change 2016 2017 % Change 2016
Average number of transacting ATMs:
United States 45,092 4.3 % 43,216 42,775 3.4 % 41,366
United Kingdom and Ireland 16,819 1.7 16,540 16,571 2.6 16,151
Canada 1,899 4.1 1,825 1,837 (0.5) 1,846
Germany, Poland, and Spain 1,627 31.0 1,242 1,526 29.7 1,177
Mexico 486 (63.4) 1,329 635 (53.5) 1,366
Total Company-owned 65,923 2.8 64,152 63,344 2.3 61,906
United States (1) 12,175 (18.7) 14,970 12,392 (24.0) 16,297
Total Merchant-owned 12,175 (18.7) 14,970 12,392 (24.0) 16,297
Average number of transacting ATMs – ATM operations 78,098 (1.3) 79,122 75,736 (3.2) 78,203
Managed Services and Processing:
United States 129,228 7.0 120,773 126,664 8.2 117,107
Canada 1,943 10.3 1,761 1,984 19.6 1,659
Average number of transacting ATMs – Managed services and processing 131,171 7.0 122,534 128,648 8.3 118,766
Total average number of transacting ATMs 209,269 3.8 201,656 204,384 3.8 196,969
Total transactions (in thousands):
ATM operations 345,825 (3.9) 359,731 1,004,241 (1.0) 1,014,803
Managed services and processing, net 185,276 3.5 179,072 515,362 (2.2) 526,949
Total transactions 531,101 (1.4) 538,803 1,519,603 (1.4) 1,541,752
Total cash withdrawal transactions (in thousands):
ATM operations 212,957 (5.4) 225,178 621,164 (1.9) 633,461
Per ATM per month amounts (excludes managed services and processing):
Cash withdrawal transactions 909 (4.2) 949 911 1.2 900
ATM operating revenues (2) $ 1,243 (1.2) $ 1,258 $ 1,230 (0.4) $ 1,235
Cost of ATM operating revenues (2) (3) 798 1.8 784 806 2.8 784
ATM adjusted operating gross profit (2) (3) $ 445 (6.1)% $ 474 $ 424 (6.0)% $ 451
ATM adjusted operating gross profit margin (2) (3) 35.8% 37.7% 34.5% 36.5%
(1) Certain ATMs previously reported in this category are now included in the United States: Managed services and processing or United States: Company-owned categories.
(2) ATM operating revenues and Cost of ATM operating revenues relating to managed services, processing, ATM equipment sales, and other ATM-related services are not included in this calculation.
(3) Amounts presented exclude the effect of depreciation, accretion, and amortization of intangible assets. See Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.


Key Operating Metrics – Ending Machine Count

As of September 30, 2017 and 2016
(Unaudited)

September 30, 2017 September 30, 2016
Ending number of transacting ATMs:
United States 44,738 44,688
United Kingdom and Ireland 21,748 16,665
Australia and New Zealand 8,636
Canada 6,235 1,835
South Africa 2,767
Germany, Poland, and Spain 1,653 1,279
Mexico 989 1,267
Total Company-owned 86,766 65,734
United States 12,083 13,961
Canada 2,962
United Kingdom and Ireland 613
Australia and New Zealand 103
Total Merchant-owned 15,761 13,961
Ending number of transacting ATMs – ATM operations 102,527 79,695
United States 130,215 121,791
Canada 3,255 1,832
Australia and New Zealand 2,002
Ending number of transacting ATMs – Managed services and processing 135,472 123,623
Total ending number of transacting ATMs 237,999 203,318


Reconciliation of Net Income Attributable to Controlling Interests and Available to Common Shareholders to
EBITDA, Adjusted EBITDA, and Adjusted Net Income

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands, excluding share and per share amounts)
Net (loss) income attributable to controlling interests and available to common shareholders $ (175,561) $ 27,490 $ (161,304) $ 63,022
Adjustments:
Interest expense, net 9,743 4,269 25,760 13,227
Amortization of deferred financing costs and note discount 3,195 2,872 9,317 8,636
Income tax (benefit) expense (4,053) 8,388 (2,335) 26,204
Depreciation and accretion expense 29,807 23,308 88,683 69,085
Amortization of intangible assets 14,996 9,175 45,423 28,129
EBITDA $ (121,873) $ 75,502 $ 5,544 $ 208,303
Add back:
Loss (gain) on disposal and impairment of assets 22,307 469 26,170 (475)
Other (income) expense (1) (2,095) 360 (1,730) 748
Noncontrolling interests (2) (9) (15) (19) (50)
Share-based compensation expense 4,151 6,642 9,971 15,780
Redomicile-related expenses (3) 22 951 782 12,201
Restructuring expenses (4) 8,243
Acquisition and divestiture-related expenses (5) 2,889 2,680 15,338 4,938
Goodwill and intangible asset impairment (6) 194,521 194,521
Adjusted EBITDA $ 99,913 $ 86,589 $ 258,820 $ 241,445
Less:
Interest expense, net 9,743 4,269 25,760 13,227
Depreciation and accretion expense (7) 29,805 23,301 88,677 69,063
Adjusted pre-tax income $ 60,365 $ 59,019 $ 144,383 $ 159,155
Income tax expense (8) 16,178 14,271 39,595 46,314
Adjusted Net Income $ 44,187 $ 44,748 $ 104,788 $ 112,841
Adjusted Net Income per share – basic $ 0.97 $ 0.99 $ 2.30 $ 2.50
Adjusted Net Income per share – diluted $ 0.96 $ 0.98 $ 2.27 $ 2.47
Weighted average shares outstanding – basic 45,662,543 45,252,869 45,597,558 45,175,604
Weighted average shares outstanding – diluted (9) 46,197,178 45,850,061 46,238,070 45,765,235
(1) Includes foreign currency translation gains/losses, the revaluation of the estimated acquisition-related contingent consideration payable, and other non-operating costs.
(2) Noncontrolling interests adjustment made such that Adjusted EBITDA includes only the Company’s ownership interest in the Adjusted EBITDA of one of its Mexican subsidiaries.
(3) Expenses associated with the Company’s redomicile of its parent company to the U.K., which was completed on July 1, 2016.
(4) Restructuring expenses primarily related to employee severance costs associated with a corporate reorganization and broad initiative to reduce costs implemented in the first quarter of 2017.
(5) Acquisition and divestiture-related expenses include costs incurred for professional and legal fees and certain other transition and integration-related costs.
(6) Goodwill and intangible asset impairments related to the Company’s Australia & New Zealand segment.
(7) Amounts exclude a portion of the expenses incurred by one of the Company’s Mexican subsidiaries to account for the amounts allocable to the noncontrolling interest shareholders.
(8) For the three and nine months ended September 30, 2017, calculated using an effective tax rate of approximately 26.8% and 27.4%, respectively, which represents the Company’s GAAP tax rate as adjusted for the net tax effects related to the items excluded from Adjusted Net Income. For the three months ended September 30, 2016, the non-GAAP tax rate used to calculate Adjusted Net Income was approximately 24.2%. For the nine months ended September 30, 2016, the Company used 24.2% for the quarter ended September 30, 2016, and for the six months ended June 30, 2016, the Company’s previously estimated long-term cross jurisdictional tax rate of 32%. See Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.
(9) Consistent with the positive Adjusted Net Income, the Adjusted Net Income per diluted share amounts have been calculated using the diluted shares outstanding that would have resulted from positive GAAP Net Income.


Reconciliation of GAAP Revenue to Constant-Currency Revenue

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

Europe & Africa revenue: Three Months Ended
September 30,
2017 2016 % Change
U.S.
GAAP
Foreign
Currency
Impact
Constant -
Currency
U.S.
GAAP
U.S.
GAAP
Constant -
Currency
(In thousands)
ATM operating revenues $ 107,497 $ (231) $ 107,266 $ 94,154 14.2% 13.9%
ATM product sales and other revenues 2,088 (2) 2,086 1,409 48.2 48.0
Total revenues $ 109,585 $ (233) $ 109,352 $ 95,563 14.7% 14.4%


Nine Months Ended
September 30,
2017 2016 % Change
U.S.
GAAP
Foreign
Currency
Impact
Constant -
Currency
U.S.
GAAP
U.S.
GAAP
Constant -
Currency
(In thousands)
ATM operating revenues $ 293,827 $ 22,190 $ 316,017 $ 276,452 6.3% 14.3%
ATM product sales and other revenues 6,159 380 6,539 4,206 46.4 55.5
Total revenues $ 299,986 $ 22,570 $ 322,556 $ 280,658 6.9% 14.9%


Consolidated revenue: Three Months Ended
September 30,
2017 2016 % Change
U.S.
GAAP
Foreign
Currency
Impact
Constant -
Currency
U.S.
GAAP
U.S.
GAAP
Constant -
Currency
(In thousands)
ATM operating revenues $ 390,143 $ (623) $ 389,520 $ 314,788 23.9% 23.7%
ATM product sales and other revenues 11,807 (6) 11,801 13,546 (12.8) (12.9)
Total revenues $ 401,950 $ (629) $ 401,321 $ 328,334 22.4% 22.2%


Nine Months Ended
September 30,
2017 2016 % Change
U.S.
GAAP
Foreign
Currency
Impact
Constant -
Currency
U.S.
GAAP
U.S.
GAAP
Constant -
Currency
(In thousands)
ATM operating revenues $ 1,105,191 $ 22,022 $ 1,127,213 $ 918,207 20.4% 22.8%
ATM product sales and other revenues 39,443 355 39,798 37,335 5.6 6.6
Total revenues $ 1,144,634 $ 22,377 $ 1,167,011 $ 955,542 19.8% 22.1%

Reconciliation of Gross Profit Inclusive of Depreciation, Accretion, and Amortization of Intangible Assets to
Adjusted Gross Profit

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands, excluding percentages)
Total revenues $ 401,950 $ 328,334 $ 1,144,634 $ 955,542
Total cost of revenues (1) 260,056 208,190 764,218 614,393
Total depreciation, accretion, and amortization of intangible assets excluded from Total cost of revenues 37,176 27,108 111,911 82,419
Gross profit inclusive of depreciation, accretion, and amortization of intangible assets $ 104,718 $ 93,036 $ 268,505 $ 258,730
Gross profit % (inclusive of depreciation, accretion, and amortization of intangible assets) 26.1% 28.3% 23.5% 27.1%
Total depreciation, accretion, and amortization of intangible assets excluded from gross profit $ 37,176 $ 27,108 $ 111,911 $ 82,419
Adjusted Gross Profit exclusive of depreciation, accretion, and amortization of intangible assets $ 141,894 $ 120,144 $ 380,416 $ 341,149
Adjusted Gross Profit % (exclusive of depreciation, accretion, and amortization of intangible assets) 35.3% 36.6% 33.2% 35.7%
(1) The Company presents the Total cost of revenues in the Company’s Consolidated Statements of Operations exclusive of depreciation, accretion, and amortization of intangible assets.


Reconciliation of Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per diluted share on a
Non-GAAP basis to Constant-Currency

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

Three Months Ended
September 30,
2017 2016 % Change
Non -
GAAP (1)
Foreign
Currency
Impact
Constant -
Currency
Non -
GAAP (1)
Non -
GAAP (1)
Constant -
Currency
(In thousands)
Adjusted EBITDA $ 99,913 $ (91) $ 99,822 $ 86,589 15.4% 15.3%
Adjusted Net Income $ 44,187 $ (14) $ 44,173 $ 44,748 (1.3)% (1.3)%
Adjusted Net Income per share – diluted (2) $ 0.96 $ $ 0.96 $ 0.98 (2.0)% (2.0)%


Nine Months Ended
September 30,
2017 2016 % Change
Non -
GAAP (1)
Foreign
Currency
Impact
Constant -
Currency
Non -
GAAP (1)
Non -
GAAP (1)
Constant -
Currency
(In thousands)
Adjusted EBITDA $ 258,820 $ 6,311 $ 265,131 $ 241,445 7.2% 9.8%
Adjusted Net Income $ 104,788 $ 2,860 $ 107,648 $ 112,841 (7.1)% (4.6)%
Adjusted Net Income per share – diluted (2) $ 2.27 $ 0.06 $ 2.33 $ 2.47 (8.1)% (5.7)%
(1) As reported on the Company’s Reconciliation of Net Income Attributable to Controlling Interests and Available to Common Shareholders to EBITDA, Adjusted EBITDA, and Adjusted Net Income, see Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.
(2) Adjusted Net Income per diluted share is calculated by dividing Adjusted Net Income by the weighted average diluted shares outstanding of 46,197,178 and 45,850,061 for the three months ended September 30, 2017 and 2016, respectively, and 46,238,070 and 45,765,235 for the nine months ended September 30, 2017 and 2016, respectively. Consistent with the positive Adjusted Net Income, the Adjusted Net Income per diluted share amounts have been calculated using the diluted shares outstanding that would have resulted from positive GAAP Net Income.


Reconciliation of Free Cash Flow

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands)
Net cash provided by operating activities $ 79,706 $ 89,346 $ 164,284 $ 213,931
Payments for capital expenditures:
Net cash used in investing activities, excluding acquisitions and divestitures (41,556) (36,479) (111,424) (76,050)
Free cash flow $ 38,150 $ 52,867 $ 52,860 $ 137,881

Reconciliation of Estimated Net Income to EBITDA, Adjusted EBITDA, and Adjusted Net Income
For the Year Ending December 31, 2017
(In millions, excluding per share amounts)
(Unaudited)

Estimated Range
Full Year 2017 (1)
Net Income $ (155.9) $ (150.0)
Adjustments:
Interest expense, net 35.0 34.0
Amortization of deferred financing costs and note discount 13.0 13.0
Income tax expense (0.4) 1.7
Depreciation and accretion expense 115.0 117.0
Goodwill and intangible impairment 194.5 194.5
Amortization expense 60.0 60.0
EBITDA $ 261.2 $ 270.2
Add Back:
Loss on disposal and impairment of assets 27.0 27.0
Share-based compensation expense 15.0 15.0
Acquisition-related expenses 16.0 17.0
Redomicile-related expenses 0.8 0.8
Restructuring expenses 10.0 10.0
Adjusted EBITDA $ 330.0 $ 340.0
Less:
Interest expense, net 35.0 34.0
Depreciation and accretion expense 115.5 115.5
Income tax expense (2) 48.8 51.8
Adjusted Net Income $ 130.7 $ 138.7
Adjusted Net Income per share – diluted $ 2.83 $ 3.00
Weighted average shares outstanding – diluted 46.25 46.25
(1) See Disclosure of Non-GAAP Financial Information in this earnings release for definitions of the non-GAAP measures included in this table.
(2) Calculated using the Company’s estimated non-GAAP tax rate of approximately 27.2%, as adjusted for items excluded from Adjusted Net Income, see Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.


Cardtronics is a registered trademark of Cardtronics plc and its subsidiaries.

All other trademarks are the property of their respective owners.

Source:Cardtronics USA, Inc.