Cardtronics Inc. says it expects its Vcom kiosks to start making money this year.
The Houston automated teller machine operator said last week that it has nearly completed an overhaul of its Vcom operations, including the renegotiation of some contracts and the moving of many machines to new sites.
Cardtronics bought the 2,000 Vcom kiosks from 7-Eleven Inc. in July, along with 3,500 standard automated teller machines, for $135 million. Jack Antonini, Cardtronics' president and chief executive, said in a conference call Thursday that adding 7-Eleven's ATM portfolio had made his company "the largest ATM network in the world" but noted that "the advanced-technology, or Vcom, operations have historically generated losses."
He said he now expects the Vcom business to turn a profit this year, driven in part by persuading financial institutions to accept check-image deposits made through the kiosks, which will "enhance the transaction levels."
Cardtronics has also started using positive-pay services to generate more check-cashing volume. With positive pay, businesses give banks a list of checks they have issued, and their amounts; this lets Cardtronics verify that checks are good by looking at the amounts, rather than evaluating the history of the person trying to cash a check; it also makes authorizing these transactions easier and less risky, Mr. Antonini said.
The Vcom unit took in $566,000 in the fourth quarter, but its costs for that period exceeded $3.4 million.
To compensate, Cardtronics has renegotiated several contracts and brought some outsourced functions in-house. It expects these decisions to save the unit $6.2 million a year.
It is also relocating many Vcom machines, which were built by NCR Corp., to focus on 15 to 16 major markets. The machines were previously deployed nationwide, but Mr. Antonini said that dispersing the machines so widely diluted the Vcom presence in many cities. "They were in a lot of markets, frankly, where they were in a small percentage of 7-Eleven stores," Mr. Antonini said. Cardtronics is now focusing on markets where the machines had been most successful under 7-Eleven's ownership. (They are still in 7-Eleven stores.)
Mr. Antonini's comments on the Vcom program came when he discussed the company's fourth-quarter and full-year results.
Cardtronics' total revenue in the quarter rose 55%, to nearly $116 million, from the year earlier. It had a net loss of $7.4 million, compared with income of $2.1 million a year earlier.
Revenue for all of 2007 rose 29%, to $378 million, from the prior year. The net loss widened to $27.1 million from the $531,000 a year earlier. The company projected 2008 earnings of 30 cents to 35 cents a share. It said that part of last quarter's loss was due to the costs incurred for its initial public offering in December.
Reginald L. Smith, an analyst at JPMorgan Chase & Co.'s JPMorgan Securities Inc., wrote in a research note Friday that he expects Cardtronics to generate earnings of 30 cents per share this year, down from an earlier estimate of 38 cents that excluded the Vcom operation's results. He wrote that the company "sounded confident [it] could reach break-even" on its Vcom machines with the plan "to cluster Vcom devices in key markets to better leverage marketing and promotion efforts."
