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Cardtronics Inc.'s exclusive agreement with marketing company Royal Buying Group Inc. may help counter problems within the banking industry that have made it difficult for Cardtronics to sign new ATM bank-branding agreements, one analyst who monitors the company believes.
The ATM independent sales organization announced the deal with Lisle, Ill.-based Royal Buying Group on July 22. Royal Buying Group will recommend to its nearly 6,000 members in all 50 states that they purchase ATMs from Houston-based Cardtronics, which will provide participating members with exclusive pricing and promotions.
"Due to the recent turmoil within the banking industry, Cardtronics has experienced a limited ability to sign new bank-branding deals for ATMs," Franco Turrinelli of William Blair & Co. wrote in a July 22 analyst report. "We view this recent announcement as [an example of] one type of an agreement the company will be able to reach–with large groups or associations–to expand its national footprint and create a more-attractive portfolio of ATM locations for future branding opportunities."
Royal Buying Group members include convenience stores, gas stations, college bookstores, truck stops, travel plaza centers, tobacco outlets, auto-repair shops and liquor stores, Turrinelli says. Cardtronics operates ATMs within 7-Eleven stores and at Chevron, ExxonMobil, Hess Corp. and Sunoco service stations nationwide.
"The locations demonstrate [Cardtronics'] ability to meet the service needs of significant networks of convenient stores and petroleum locations," Turrinelli says.
Royal Buying Group chose Cardtronics because it can offer good products for its members, according to Michael Zielinksi, the group's president and CEO.
"The ATM business continues to evolve, especially these days of [data-security standards] compliance and other regulatory controls, and Royal Buying Group has partnered with the industry leader to provide experience and a stable team to address this important convenience-store category," Zielinski said in a statement. "This program will complement our portfolio of financial-service programs offered by Royal Buying Group and provide our members with a long-term successful ATM program."
The agreement comes at a good time for Cardtronics, which has seen its ATM bank-branding business–historically a large source of income for the company– dramatically slow down because of the recession (ADN, 5/7).
During the company's first-quarter earnings conference call in April, J. Chris Brewster, Cardtronics chief financial officer, said financial institutions had cut branding agreements that involved Cardtronics deploying ATMs in off-premise locations.
"Growth in the bank-branding revenues has slowed," Brewster said. "Bank-management teams are obviously somewhat distracted by other issues."
Approximately 10,200 ATMs Cardtronics owns or operates feature bank brands, the company says.
At the end of the March, Cardtronics operated more than 33,040 ATMs compared with 32,474 machines a year earlier.
Cardtronics' agreement with Royal Buying Group will not have a material effect on its 2009 economic forecast, says Turrinelli, adding that agreements such as this "should provide an avenue for long-term growth through additional ATM locations." ATM
