Cardtronics Inc. is crediting its Allpoint surcharge-free ATM network for the company’s recent rise in profitability.
The Houston-based ATM independent sales organization on Nov. 2 reported net income of 17.4 million for the third quarter ended Sept. 30, up 172% from $6.4 million during the same period last year. Revenue rose 6.2%, to $136.6 million from $128.6 million.
In September, MasterCard Worldwide and Cardtronics announced a partnership to offer surcharge-free ATM access to MasterCard’s prepaid card issuers and program partners. Cardtronics at the time said ATM withdrawals made with prepaid cards were a small part of the network’s business, but the company wanted to boost that volume (
“Prepaid cards continue to flourish and prosper, and we continue to believe our Allpoint network is a very valuable asset in the prepaid world,” Cardtronics CEO Steve Rathgaber told analysts during a conference call to discuss earnings.
Christopher Shutler, an analyst for William Blair & Co., does not believe prepaid relationships will add significant revenue in 2011 although it could in 2012 and later. "Moreover, I expect prepaid cards more generally to contribute nicely to Cardtronics' top-line growth in 2011 and beyond," he adds.
Cardtronics is set to expand to Australia through an agreement with Customers Ltd., that country’s largest ATM owner and operator. The partnership calls for the Allpoint logo to appear on 5,000 ATMs Customers will deploy in the near future. Cardholders whose financial institutions participate in Allpoint will receive surcharge-free access to Allpoint-connected ATMs in the Unites States and Australia.
The agreement puts Cardtronics “on the right side of a possible early trend in several countries that seem to be moving toward more surcharge-friendly environments,” Rathgaber said.
Cardtronics’ long-term branding agreement with Toronto-based Scotiabank Group also made gains during the quarter. Scotiabank said it would put its brand on 200 Cardtronics machines in Puerto Rico.
“Scotiabank represents the first branding deal for us outside the United States mainland and establishes the framework for Cardtronics to brand additional ATMs in other markets,” Rathgaber said.
Shutler agrees, suggesting Allpoint will help Cardtronics gain more traction in the marketplace. He also expects the company to continue to expand the network and add more banks’ brands to the machines.
As of Sept. 30, the number of Cardtronics transacting ATMs increased 3.6%, to 35,846 machines worldwide from 34,616 a year earlier. Cardtronics operates ATMs in the United States, United Kingdom and Mexico.
Cardtronics’ ATMs handled 111.8 million transactions during the quarter, up 9.4% from 102.2 million during the same period in 2009. ATM cash withdrawals totaled 68.1 million, up 4% from 65.5 million.
The ATM ISO cautioned investors that next year it expects to lose $4 million in the United Kingdom because of changes the country’s Link network made to per-transaction interchange rates. Link clears all UK ATM transactions and sets interchange using a cost-based methodology, according to Chris Brewster, Cardtronics chief financial officer. Card issuers pay interchange to ATM acquirers.
Link has announced a 5-pence (8 U.S. cents) interchange-fee reduction for cash withdrawals effective Jan. 1.
Cardtronics, however, does not view the change as a long-term problem.
“As interest rates inevitably rise over time, under Link’s methodology, interchange in the UK will also rise,” Brewster said. During the quarter, Cardtronics generated $21.7 million in revenue in the United Kingdom, up 9% from 19.9 million during the same period last year.
In personnel news, Cardtronics officially announced that Tom Pierce has joined the company’s executive management team as chief marketing officer. Pierce previously vice president for marketing strategy at Fidelity National Information Service Inc.
Cardtronics in October reorganized its U.S. operations and management structure. The company split the U.S. business into two groups. One arm focuses on network and financial services, and the other focuses on ATM services (
