Cardtronics Inc. said Thursday that its third-quarter earnings suffered from operating and regulatory problems in the United Kingdom, as well as Hurricane Ike, but executives said there are signs of improvement.
The Houston automated teller machine operator said that despite problems in recent months, the poor economy could drive up ATM use.
As credit card issuers tighten their standards, "a lot of people just put their credit cards away and start operating from the cash in their wallets and their pocketbooks to make sure they don't overspend and they don't get themselves in trouble," Jack Antonini, Cardtronics' chief executive, said in a conference call.
His company said it has devised long-term solutions for its long-term U.K. issues. For example, J. Chris Brewster, Cardtronics' chief financial officer, said its armored van supplier is having difficulty restocking the company's fleet of ATMs. "We lose revenue if a machine is out of cash." Cardtronics' solution, which it has discussed this year, is to bring some of the van service work in-house — a project it said will take another nine months to complete.
There are other problems in the United Kingdom, Mr. Brewster said, including pressure to put up more signs explaining ATM fees and increasing competition from machines that do not charge fees.
Nicole Sturgill, the research director for delivery channels at TowerGroup Inc., a Needham, Mass., independent research firm owned by MasterCard Inc., said that in the United Kingdom, bank-owned ATMs do not charge fees to users regardless of where they bank, but those owned by independent sales organizations do.
"To go to an ISO-owned ATM, you know specifically that you're going to be paying a surcharge," she said. Two years ago "there was a pretty big uproar over the fact that a lot of the ISO ATMs were in low-income areas," whereas fee-free bank ATMs were not.
The signage, which Cardtronics said hurt its U.K. business, was meant to address that issue and make the costs clear to ATM users, Ms. Sturgill said.
Though the difference in fee structure is striking compared to how things operate in the United States, a similar trend may soon play out here, she said; as national banks consolidate and smaller ones join surcharge-free networks, it will be increasingly uncommon for bank customers to pay fees for ATM use.
Hurricane Ike disrupted Cardtronics' business in Texas, where it has many ATMs, but executives said that setback proved temporary.
"That impacted us in a major way," Mr. Antonini said. "It took a big swath of machines out." But "for the month of October, we see things right back up."
In addition, Cardtronics has been processing more transactions on its internal electronic funds transfer network. By the end of September it was processing transactions for more than 25,500 machines.
Its third-quarter net loss narrowed 61% from a year earlier, to $4.1 million. Revenue rose 15%, to $127.3 million. Cardtronics has been reporting losses, which it has attributed in part to rising costs for storing cash in ATMs, since last year.
Cardtronics reported adjusted net income — its preferred measure for reporting results — of 8 cents a share, or 4 cents short of the average estimate of analysts.
For the full year, Cardtronics now expects to report revenue of $490 million to $495 million, versus a previous range of $490 million to $505 million. It also expects to report adjusted net income of 20 to 23 cents a share, versus a previous range of 30 to 35 cents a share.
This quarter Cardtronics plans to cut 8% of its work force to save $4.5 million to $5 million a year. In the United Kingdom, it is looking to shut down or renegotiate the terms of any unprofitable ATMs.