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Oct 27, 2016

Cardtronics Announces Third Quarter 2016 Results


HOUSTON, Oct. 27, 2016 (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, 2016.

Key financial statistics in the third quarter of 2016 as compared to the third quarter of 2015 include:

  • Total revenues of $328.3 million, up 6% from $311.4 million (up 11% on a constant-currency basis).
  • ATM operating revenues of $314.8 million, up 6% from $296.8 million (up 11% on a constant-currency basis).
  • Gross margin of 36.6%, up from 36.1% in 2015.
  • GAAP Net Income of $27.5 million, or $0.60 per diluted share, up from $22.0 million, or $0.48 per diluted share.
  • Adjusted Net Income per diluted share of $0.98, up 20% from $0.82 (up 26% on a constant-currency basis).
  • Adjusted EBITDA of $86.6 million, up 6% from $81.7 million (up 12% on a constant-currency basis).
  • Cash flows from operating activities of $89.3 million, up 48% from $60.5 million. For the nine months ended September 30, 2016, cash flows from operating activities were $213.9 million, up 45% from $147.1 million.

"The third quarter was exceptionally productive for our shareholders. Seven percent constant currency organic revenue growth, combined with solid execution in our classic business drivers, delivered a quarter of which the team can be proud. Allpoint sales, 1,300 new retail ATM locations, several long-term renewals, and the entry into Spain were key highlights. These activities were complemented by our first significant deal expanding our model beyond retail sites to financial institution branch locations. And then we ended the quarter announcing the acquisition of DirectCash Payments, the largest in our history, driving scale in Canada, the U.K., and Mexico, as well as adding Australia and New Zealand as new markets in the growing international roster of countries we serve," commented Steve Rathgaber, Cardtronics' chief executive officer.

RECENT HIGHLIGHTS

  • Secured ATM operating contracts representing over 1,000 locations in North America and Europe. These wins included placements at various retail and transit locations, including over 450 high-traffic convenience store locations.
  • Renewed our relationships with Kroger and Albertsons/Safeway, entering into long-term extensions to continue serving nearly 1,800 locations across the two grocery chains.
  • Added a total of 22 new financial institutions for participation in our Allpoint Network, adding nearly 670,000 cards that will have surcharge-free ATM access to our network, including an agreement with First Tennessee Bank, a top 50 bank and the largest financial institution headquartered in Tennessee.
  • Secured an outsourcing arrangement for both on-premise and off-premise ATMs with PenFed Credit Union for over 140 ATM locations.
  • Entered into an agreement to expand our bank-branding relationship with TD Bank for an additional 189 Walgreens locations in Florida.
  • Acquired over 300 off-branch ATM sites from a major financial institution in the U.K.
  • Launched our ATM business in Spain, including a relationship with the EURO 6000 ATM network and pilots with two major retailers.
  • Announced the planned acquisition of DirectCash Payments Inc. ("DCPayments"), a leading operator of approximately 25,000 ATMs across Australia, Canada, the U.K., New Zealand, and Mexico. The acquisition is subject to the DCPayments shareholder vote and other closing conditions and is expected to close early in the first quarter of 2017.

THIRD QUARTER RESULTS

Consolidated revenues totaled $328.3 million for the third quarter of 2016, representing a 6% increase from $311.4 million in the third quarter of 2015. ATM operating revenues were up 6% from the third quarter of 2015. Adjusting for movements in currency exchange rates, ATM operating revenues were up approximately 11% from the third quarter of 2015, the majority of which was driven by organic growth.

ATM operating revenues in North America were up 9% for the third quarter of 2016, driven by a mix of acquisition and organic growth. ATM operating revenues in Europe, as reported in U.S. dollars, were approximately flat compared to the same period in 2015, but increased 16% on a constant-currency basis, driven mostly by organic growth. The recent strong appreciation in the U.S. dollar relative to the British pound significantly impacted the Company's reported revenues and profits in the third quarter. The British pound was on average 15% weaker relative to the U.S. dollar during the third quarter of 2016 compared to the same period a year ago.

GAAP Net Income in the third quarter of 2016 totaled $27.5 million, compared to GAAP Net Income of $22.0 million during the third quarter of 2015. The increase in GAAP Net Income for the third quarter of 2016 was the result of continued revenue growth and a lower tax rate, partially offset by incremental professional services costs of $2.7 million associated with the Company's acquisition activities and $1.0 million associated with the Company's redomicile of its parent company to the U.K. These costs are reported in the acquisition and divestiture-related expenses and redomicile-related expenses line items, respectively, in the Company's results from operations and have been excluded from the Company's calculation of Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per diluted share in the third quarter of 2016. The Company's U.S. GAAP tax rate was 23.4% for the third quarter of 2016 compared to 36.8% in the same period in 2015, with the decrease mostly attributable to benefits from its recently completed redomicile to the U.K.

Adjusted EBITDA for the third quarter of 2016 totaled $86.6 million, representing a 6% increase (12% on a constant-currency basis) over the $81.7 million of Adjusted EBITDA during the third quarter of 2015. Adjusted Net Income totaled $44.7 million ($0.98 per diluted share or $1.03 on a constant-currency basis) for the third quarter of 2016, compared to $37.2 million ($0.82 per diluted share) during the third quarter of 2015. The increases in Adjusted EBITDA and Adjusted Net Income were both driven by the Company's revenue growth. Adjusted Net Income was also higher as a result of a lower non-GAAP tax rate. Adjusted EBITDA and Adjusted Net Income are detailed in a reconciliation included at the end of this press release.

NINE MONTH RESULTS

Consolidated revenues totaled $955.5 million for the nine months ended September 30, 2016, representing a 7% increase from $897.0 million in consolidated revenues during the same period of 2015. ATM operating revenues were up 9% from the nine months ended September 30, 2015. Adjusting for movements in currency exchange rates, ATM operating revenues were up approximately 12% for the nine months ended September 30, 2016, driven by organic growth and contributions from acquisitions. The $17.4 million decrease in ATM product sales and other revenues in the nine months ended September 30, 2016 was attributable to the Company's 2015 divestiture of the retail cash-in-transit component of its previously acquired Sunwin business in the U.K., which was included in the Company's 2015 results. Cost of ATM product sales and other revenues decreased correspondingly by $16.3 million from the same period in 2015.

ATM operating revenues in North America were up 8% for the nine months ended September 30, 2016, driven by a combination of recent acquisitions and organic growth. ATM operating revenues in Europe were up 7% for the nine months ended September 30, 2016 (18% on a constant-currency basis), driven by strong organic growth, and to a lesser extent, acquisition-related growth.

GAAP Net Income for the nine months ended September 30, 2016 totaled $63.0 million, compared to GAAP Net Income of $52.2 million during the same period in 2015. The increase in GAAP Net Income for the nine months of 2016 was the result of continued revenue growth and margin expansion, partially offset by incremental professional services costs of $4.9 million associated with the Company's acquisition activities and $12.2 million associated with the Company's redomicile of its parent company to the U.K. These costs are reported in the acquisition and divestiture-related expenses and redomicile-related expenses line items, respectively, in the Company's results from operations and have been excluded from the Company's calculation of Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per diluted share in the nine months ended September 30, 2016.

Adjusted EBITDA for the nine months ended September 30, 2016 totaled $241.4 million, representing an 8% increase from the same period in 2015. Adjusted Net Income totaled $112.8 million ($2.47 per diluted share) for the nine months ended September 30, 2016, compared to $98.6 million ($2.17 per diluted share) during the same period in 2015. The increases in Adjusted EBITDA and Adjusted Net Income were primarily due to the same factors discussed above, including the Company's revenue growth and margin improvement relative to the nine months ended September 30, 2015. For the nine months ended September 30, 2016, cash flows from operating activities were $213.9 million, up 45% from $147.1 million.

2016 GUIDANCE

The Company is updating the financial guidance it provided in July 2016 regarding its anticipated results for the full year 2016 results:

  • Revenues of $1.25 billion to $1.265 billion;
  • Gross profit margin of 35.5% to 35.7%;
  • GAAP Net Income of $84 million to $85 million;
  • Adjusted EBITDA of $317 million to $319 million;
  • Depreciation and accretion expense of $91 million to $92 million;
  • Cash interest expense $17.5 million;
  • Adjusted Net Income per diluted share of $3.21 to $3.26, based on approximately 45.8 million weighted average diluted shares outstanding; and
  • Capital expenditures of $120 million to $130 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 press release. This guidance is based on average foreign currency exchange rates for the remainder of the year of £1.00 U.K. to $1.20 U.S., $20.00 Mexican pesos to $1.00 U.S., $1.00 Canadian dollar to $0.76 U.S., and €1.00 Euros to $1.10 U.S. Additionally, this guidance is based on an estimated tax rate of approximately 29% for the last three months of 2016.

LIQUIDITY

The Company had no outstanding borrowings under its $375 million revolving credit facility due in 2021 and $60 million in cash on hand as of September 30, 2016. The revolving credit facility was amended July 1, 2016 to extend the maturity date from April 2019 to July 2021. The Company's outstanding indebtedness as of September 30, 2016 consisted of $250 million in Senior Notes due 2022 and $288 million Convertible Senior Notes due 2020. The Senior Notes and Convertible Senior Notes have carrying balances of $247 million and $238 million, respectively, and are reflected as long-term debt on the balance sheet, net of unamortized discount and capitalized debt issuance costs.

As previously reported, the Company entered into a definitive agreement on October 3, 2016 to acquire all of the outstanding shares of DCPayments. Inclusive of amounts needed to repay the estimated outstanding indebtedness of DCPayments, the Company expects the total purchase price will be approximately CAD$605 million (approximately $460 million), excluding any associated transaction-related costs. The Company is currently assessing options for financing the acquisition and has secured commitments from financial institutions in its existing revolving credit facility to provide the borrowing capacity needed to complete the acquisition. The acquisition is expected to close early in the first quarter of 2017, subject to the DCPayments shareholder vote and other closing conditions.

CONFERENCE CALL INFORMATION

The Company will host a conference call today, Thursday, October 27, 2016, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its financial results for the quarter ended September 30, 2016. 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 2016 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 10, 2016, and can be accessed by calling (855) 859-2056 or (404) 537-3406 and entering 94694053 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, 2016.

DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION

EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow, and certain U.S. GAAP as well as non-GAAP measures on a constant-currency basis represent non-GAAP financial measures provided as a complement to results prepared in accordance with U.S. 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 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 stock-based compensation expense, acquisition and divestiture-related expenses, certain non-operating expenses, certain costs not anticipated to occur in future periods (if applicable in a particular period), gains or losses on disposal 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 U.S. GAAP, before amortization of intangible assets, gains or losses on disposal of assets, stock-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 has revised the process for determining its non-GAAP tax rate and now utilizes a non-GAAP tax rate derived from the U.S. GAAP tax rate adjusted for the net tax effects of the identified Adjustments, based on the nature and geography of the Adjustments. For the three month period 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, its previous estimated long-term cross-jurisdictional tax rate of 32%. For the three and nine months ended September 30, 2015, the Company used its previous 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 U.S. 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. Management uses U.S. 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 U.S. GAAP. Reconciliations of the non-GAAP financial measures used herein to the most directly comparable U.S. GAAP financial measures are presented in tabular form at the end of this press release.

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 over 200,000 ATMs in North America and Europe. Whether Cardtronics is driving foot traffic for North America and Europe's 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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "project," "believe," "estimate," "expect," "future," "anticipate," "intend," "contemplate," "foresee," "would," "could," "plan," and similar expressions that are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on management's current expectations and beliefs concerning future developments and their potential effect on the Company. While management believes that these forward-looking statements are reasonable as and when made, 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 the Company's 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 the Company's control) and assumptions that could cause actual results to differ materially from the Company's historical experience and present expectations or projections. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include:

  • the Company's financial outlook and the financial outlook of the ATM industry and the continued usage of cash by consumers at rates near historical patterns;
  • the Company's ability to respond to recent and future network and regulatory changes, including requirements surrounding Europay, MasterCard, and Visa ("EMV") security standards;
  • the Company's ability to renew its existing customer relationships on comparable economic terms and add new customers;
  • the Company's ability to pursue, complete, and successfully integrate acquisitions, including the acquisition of DirectCash;
  • changes in interest rates and foreign currency rates;
  • the Company's ability to successfully manage its existing international operations and to continue to expand internationally;
  • the Company's ability to manage concentration risks with key customers, vendors, and service providers;
  • the Company's ability to prevent thefts of cash;
  • the Company's ability to manage cybersecurity risks and prevent data breaches;
  • the Company's ability to respond to potential reductions in the amount of net interchange fees that it receives from global and regional debit networks for transactions conducted on its ATMs due to pricing changes implemented by those networks as well as changes in how issuers route their ATM transactions over those networks;
  • the Company's ability to provide new ATM solutions to retailers and financial institutions including placing additional banks' brands on ATMs currently deployed;
  • the Company's ATM vault cash rental needs, including potential liquidity issues with its vault cash providers and its ability to continue to secure vault cash rental agreements in the future;
  • the Company's ability to manage the risks associated with its third-party service providers failing to perform their contractual obligations;
  • the Company's ability to successfully implement and evolve its corporate strategy;
  • the Company's ability to compete successfully with new and existing competitors;
  • the Company's ability to meet the service levels required by its service level agreements with its customers;
  • the additional risks the Company is exposed to in its U.K. armored transport business;
  • the impact of changes in U.S. or non-U.S. laws, including tax laws, that could reduce or eliminate the benefits expected to be achieved from the Company's recent change of its parent company from the U.S. to the U.K.;
  • the impact of, or uncertainty related to, the U.K.'s planned exit from the European Union, including any material adverse effect on the tax, tax treaty, currency, operational, legal, and regulatory regime and macro-economic environment to which the Company will be subject to as a U.K. company; and
  • the Company's ability to retain its key employees and maintain good relations with its employees.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
(CONTINUED)

Forward-looking statements also are affected by the risk factors described in the Company's Annual Report on Form 10- K for the year ended December 31, 2015, as amended, the information set forth under Risk Factors in the Company's Proxy Statement, dated May 19, 2016, 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 press release, which speak only as of the date of this press 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.

 
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2016 and 2015
(In thousands, excluding share, per share amounts, and percentages)
(Unaudited)
 
  Three Months Ended Nine Months Ended
  September 30,  September 30, 
  2016 % Change 2015 2016 % Change 2015
Revenues:                 
ATM operating revenues $  314,788    6.0  $  296,836  $  918,207    9.0  $  842,295 
ATM product sales and other revenues    13,546    (6.7)    14,514     37,335    (31.7)    54,702 
Total revenues    328,334    5.5     311,350     955,542    6.5     896,997 
Cost of revenues:                
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets shown separately below.)    195,737    5.7     185,142     580,520    8.1     537,183 
Cost of ATM product sales and other revenues    12,453    (10.4)    13,892     33,873    (32.5)    50,193 
Total cost of revenues    208,190    4.6     199,034     614,393    4.6     587,376 
Gross profit    120,144    7.0     112,316     341,149    10.2     309,621 
Gross profit %   36.6%     36.1%   35.7%     34.5%
Operating expenses:                
Selling, general, and administrative expenses    40,194    12.4     35,759     115,505    14.6     100,829 
Redomicile-related expenses    951   n/m         12,201   n/m     
Acquisition and divestiture-related expenses    2,680    (79.8)    13,289     4,938    (76.7)    21,207 
Depreciation and accretion expense    23,308    5.3     22,127     69,085    7.7     64,142 
Amortization of intangible assets    9,175    (8.7)    10,048     28,129    (3.1)    29,040 
Loss (gain) on disposal of assets    469   n/m     (12,139)    (475)  n/m     (12,425)
Total operating expenses    76,777    11.1     69,084     229,383    13.1     202,793 
Income from operations    43,367    0.3     43,232     111,766    4.6     106,828 
Other expense:                
Interest expense, net    4,269    (15.2)    5,033     13,227    (8.8)    14,496 
Amortization of deferred financing costs and note discount    2,872    0.5     2,859     8,636    2.1     8,455 
Other expense    360    (66.3)    1,067     748    (74.0)    2,882 
Total other expense    7,501    (16.3)    8,959     22,611    (12.5)    25,833 
Income before income taxes    35,866    4.6     34,273     89,155    10.1     80,995 
Income tax expense    8,388    (33.6)    12,629     26,204    (12.2)    29,837 
Effective tax rate   23.4%     36.8%   29.4%     36.8%
Net income    27,478    27.0     21,644     62,951    23.1     51,158 
Net loss attributable to noncontrolling interests    (12)  n/m     (365)    (71)  n/m     (1,081)
Net income attributable to controlling interests and available to common stockholders $  27,490    24.9 % $  22,009  $  63,022    20.6 % $  52,239 
                 
Net income per common share — basic $  0.61    $  0.49  $  1.39    $  1.17 
Net income per common share — diluted $  0.60    $  0.48  $  1.38    $  1.15 
                 
Weighted average shares outstanding — basic    45,252,869       44,833,117     45,175,604       44,769,661 
Weighted average shares outstanding — diluted    45,850,061       45,391,667     45,765,235       45,323,784 
                         


 
Condensed Consolidated Balance Sheets
As of September 30, 2016 and December 31, 2015
(In thousands)
 
  September 30, 2016 December 31, 2015
  (Unaudited)   
ASSETS      
Current assets:      
Cash and cash equivalents $ 59,521 $ 26,297
Accounts and notes receivable, net   73,140   72,009
Inventory, net   11,151   10,675
Restricted cash   35,802   31,565
Current portion of deferred tax asset, net   —   16,300
Prepaid expenses, deferred costs, and other current assets   64,039   56,678
Total current assets   243,653   213,524
Property and equipment, net   374,820   375,488
Intangible assets, net   128,743   150,780
Goodwill   537,334   548,936
Deferred tax asset, net   8,612   11,950
Prepaid expenses, deferred costs, and other noncurrent assets     19,964   19,257
Total assets $ 1,313,126 $ 1,319,935
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Current portion of other long-term liabilities $ 32,970 $ 32,732
Accounts payable and other accrued and current liabilities   279,889   244,908
Total current liabilities   312,859   277,640
Long-term liabilities:      
Long-term debt   485,647   568,331
Asset retirement obligations   47,196   51,685
Deferred tax liability, net   13,088   21,829
Other long-term liabilities   47,708   30,657
Total liabilities   906,498   950,142
Stockholders' equity   406,628   369,793
Total liabilities and stockholders' equity $ 1,313,126 $ 1,319,935
       

SELECTED INCOME STATEMENT DETAIL:

                    
Total revenues by segment:Three Months Ended Nine Months Ended
 September 30,  September 30, 
 2016 % Change 2015 2016 % Change 2015
 (In thousands, excluding percentages)
North America                   
ATM operating revenues$  214,960     8.7  $  197,733  $  625,716     7.8  $  580,569 
ATM product sales and other revenues   12,001     24.6      9,629     31,804     16.8      27,228 
North America total revenues   226,961     9.5      207,362     657,520     8.2      607,797 
Europe                   
ATM operating revenues   94,154     (0.1)     94,218     276,452     7.3      257,549 
ATM product sales and other revenues   1,409     (70.6)     4,795     4,206     (84.6)     27,384 
Europe total revenues   95,563     (3.5)     99,013     280,658     (1.5)     284,933 
Corporate & Other                   
ATM operating revenues   12,131     7.3      11,305     34,744     61.1      21,567 
ATM product sales and other revenues   136     51.1      90     1,325     1,372.2      90 
Corporate & Other total revenues   12,267     7.7      11,395     36,069     66.5      21,657 
                    
Eliminations   (6,457)    0.6      (6,420)    (18,705)    7.6      (17,390)
                    
Total ATM operating revenues   314,788     6.0      296,836     918,207     9.0      842,295 
Total ATM product sales and other revenues     13,546     (6.7)     14,514     37,335     (31.7)     54,702 
Total revenues$  328,334     5.5 %   $  311,350  $  955,542     6.5 %   $  896,997 


                    
Breakout of ATM operatingThree Months Ended Nine Months Ended
revenues:September 30,  September 30, 
 2016 % Change 2015 2016 % Change 2015
 (In thousands, excluding percentages)
Surcharge revenues$ 126,490    5.1 % $ 120,323 $ 369,658   6.1% $ 348,255
Interchange revenues  118,186    6.2     111,246   343,121   9.6    312,963
Bank-branding and surcharge-free network revenues    48,292    11.7     43,236   141,699   10.5    128,205
Managed services revenues  8,522    (2.9)    8,778   26,246   2.2    25,693
Other revenues  13,298    0.3     13,253   37,483   37.9    27,179
Total ATM operating revenues$ 314,788    6.0 %   $ 296,836 $ 918,207   9.0 $ 842,295


                    
Total gross profit by segment:  Three Months Ended Nine Months Ended
 September 30,  September 30, 
 2016 % Change 2015 2016 % Change 2015
 (In thousands, excluding percentages)
North America$ 80,175    6.8 %   $ 75,052 $ 228,963   5.0%   $ 218,074
Europe  36,656    8.8     33,704   102,102   17.7    86,774
Corporate & Other  3,313    (6.9)    3,560   10,084   111.3    4,773
Total gross profit$ 120,144    7.0 % $ 112,316 $ 341,149   10.2% $ 309,621


                    
Breakout of cost of ATM operating 
revenues (exclusive of depreciation, 
accretion, and amortization of Three Months Ended Nine Months Ended
intangible assets):September 30,  September 30, 
 2016 % Change 2015 2016 % Change 2015
 (In thousands, excluding percentages)
Merchant commissions$ 94,136    5.4 %   $ 89,346 $ 277,088    8.1 %   $ 256,361
Vault cash rental  17,904    2.0     17,553   53,764    4.1     51,622
Other costs of cash  18,421    5.0     17,551   59,321    9.2     54,321
Repairs and maintenance  19,846    14.4     17,351   56,097    7.4     52,253
Communications  7,694    (4.1)    8,027   23,305    1.4     22,978
Transaction processing  3,982    4.1     3,827   11,727    0.8     11,635
Stock-based compensation  249    (10.1)    277   636    (17.9)    775
Employee costs  16,525    1.8     16,232   50,666    14.3     44,308
Other expenses  16,980    13.4     14,978   47,916    11.6     42,930
Total cost of ATM operating revenues  $ 195,737    5.7 % $ 185,142 $ 580,520    8.1 % $ 537,183


                    
Breakout of selling, general, andThree Months Ended Nine Months Ended
administrative expenses:September 30,  September 30, 
 2016 % Change 2015 2016 % Change 2015
 (In thousands, excluding percentages)
Employee costs$ 21,022   14.1 $ 18,432 $ 61,234   15.5 $ 53,000
Stock-based compensation  6,393   31.1    4,876   15,144   12.3    13,488
Professional fees  4,592   0.6    4,564   14,353   28.1    11,206
Other expenses  8,187   3.8    7,887   24,774   7.1    23,135
Total selling, general, and administrative expenses  $ 40,194   12.4% $ 35,759 $ 115,505   14.6% $ 100,829


                    
Depreciation and accretion byThree Months Ended Nine Months Ended
segment:September 30,  September 30, 
 2016 % Change 2015 2016 % Change 2015
 (In thousands, excluding percentages)
North America$ 12,341   4.3 $ 11,837 $ 36,343   3.1 $ 35,239
Europe  9,148   3.7    8,824   27,605   7.2    25,759
Corporate & Other  1,819   24.1    1,466   5,137   63.4    3,144
Total depreciation and accretion expense  $ 23,308   5.3% $ 22,127 $ 69,085   7.7% $ 64,142
                    

SELECTED BALANCE SHEET DETAIL:

      
Long-term debt:September 30, 2016 December 31, 2015
 (In thousands)
Revolving credit facility$ — $ 90,835
5.125% Senior notes (1)  247,211   246,742
1.00% Convertible senior notes (1)    238,436   230,754
Total long-term debt$ 485,647 $ 568,331

(1) The Company's 5.125% Senior Notes due 2022 with a face value of $250.0 million are presented net of capitalized debt issuance costs of $2.8 million and $3.3 million as of September 30, 2016 and December 31, 2015, respectively. The Company's 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 $49.1 million and $56.7 million as of September 30, 2016 and December 31, 2015, respectively. In accordance with U.S. 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).

Share count rollforward:

   
Total shares outstanding as of December 31, 2015   44,953,620 
Shares repurchased   (128,405)
Shares forfeited   (5,842)
Shares issued — stock options exercised   54,051 
Shares vested — restricted stock units   426,740 
Total shares outstanding as of September 30, 2016     45,300,164 

SELECTED CASH FLOW DETAIL:

Selected cash flow statement amounts:

             
  Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2016 2015 2016 2015
  (In thousands)
Cash provided by operating activities $  89,346  $  60,525  $  213,931  $  147,112 
Cash used in investing activities    (41,635)    (98,325)    (86,403)    (171,090)
Cash (used in) provided by financing activities    (7,285)    34,988     (93,135)    13,297 
Effect of exchange rate changes on cash    (557)    (3,494)    (1,169)    (2,711)
Net increase (decrease) in cash and cash equivalents      39,869     (6,306)    33,224     (13,392)
Cash and cash equivalents as of beginning of period    19,652     24,789     26,297     31,875 
Cash and cash equivalents as of end of period $  59,521  $  18,483  $  59,521  $  18,483 
                     


 
Key Operating Metrics — Including Acquisitions in All Periods Presented
For Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
 
  Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2016  2015 2016  2015
Average number of transacting ATMs:                  
United States: Company-owned   43,216     38,510    41,366     38,310 
United Kingdom and Ireland   16,540     15,582    16,151     14,762 
Mexico   1,329     1,432    1,366     1,558 
Canada   1,825     1,915    1,846     1,757 
Germany and Poland   1,242     1,048    1,177     987 
Subtotal   64,152     58,487    61,906     57,374 
United States: Merchant-owned (1)   14,970     19,609    16,297     20,301 
Average number of transacting ATMs — ATM operations   79,122     78,096    78,203     77,675 
                   
Managed Services and Processing:                  
United States: Managed services — Turnkey   1,911     2,201    2,078     2,185 
United States: Managed services — Processing Plus and Processing operations     118,862     107,326    115,029     61,421 
Canada: Managed services   1,761     1,120    1,659     1,011 
Average number of transacting ATMs — Managed services and processing   122,534     110,647    118,766     64,617 
                   
Total average number of transacting ATMs   201,656     188,743    196,969     142,292 
                   
Total transactions (in thousands):                  
ATM operations   359,731     327,269    1,014,803     926,921 
Managed services and processing, net   179,072     170,896    526,949     239,701 
Total transactions   538,803     498,165    1,541,752     1,166,622 
                   
Cash withdrawal transactions (in thousands):                  
ATM operations   225,178     197,365    633,461     564,072 
                   
Per ATM per month amounts (excludes managed services and processing):    % Change        % Change    
Cash withdrawal transactions   949  12.7   842    900  11.5   807 
                   
ATM operating revenues $ 1,258  4.9% $ 1,199  $ 1,235  7.1% $ 1,153 
Cost of ATM operating revenues (2)   784  4.1%   753    784  6.1%   739 
ATM operating gross profit (2) (3) $ 474  6.3% $ 446  $ 451  8.9% $ 414 
                   
ATM operating gross profit margin (2) (3)   37.7%      37.2%     36.5%      35.9%

(1) Certain ATMs previously reported in this category are now included in the United States: Managed services - Processing Plus and Processing operations and United States: Company-owned categories.
(2) Amounts presented exclude the effect of depreciation, accretion, and amortization of intangible assets, which is presented separately in the Company's Consolidated Statements of Operations.
(3) Revenues and expenses relating to managed services, processing, ATM equipment sales, and other ATM-related services are not included in this calculation.

 
Key Operating Metrics — Ending Machine Count
As of September 30, 2016 and 2015
(Unaudited)
 
  As of September 30, 
  2016 2015
Ending number of transacting ATMs:    
United States: Company-owned  44,688  38,661
United Kingdom and Ireland  16,665  15,682
Mexico  1,267  1,433
Canada  1,835  1,910
Germany and Poland  1,279  1,069
Total Company-owned  65,734  58,755
United States: Merchant-owned  13,961  19,279
Ending number of transacting ATMs — ATM operations  79,695  78,034
     
United States: Managed services — Turnkey  1,087  2,212
United States: Managed services — Processing Plus and Processing operations    120,704  108,728
Canada: Managed services  1,832  1,223
Ending number of transacting ATMs — Managed services and processing  123,623  112,163
     
Total ending number of transacting ATMs  203,318  190,197
     


 
Reconciliation of Net Income Attributable to Controlling Interests and Available to Common Stockholders to
EBITDA, Adjusted EBITDA, and Adjusted Net Income
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
 
  Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2016 2015 2016 2015
  (In thousands, excluding share and per share amounts)
Net income attributable to controlling interests and available to common stockholders   $  27,490  $  22,009  $  63,022  $  52,239 
Adjustments:            
Interest expense, net    4,269     5,033     13,227     14,496 
Amortization of deferred financing costs and note discount    2,872     2,859     8,636     8,455 
Income tax expense    8,388     12,629     26,204     29,837 
Depreciation and accretion expense    23,308     22,127     69,085     64,142 
Amortization of intangible assets    9,175     10,048     28,129     29,040 
EBITDA  $  75,502  $  74,705  $  208,303  $  198,209 
             
Add back:            
Loss (gain) on disposal of assets    469     (12,139)    (475)    (12,425)
Other expense (1)    360     1,067     748     2,882 
Noncontrolling interests (2)    (15)    (336)    (50)    (1,047)
Stock-based compensation expense (3)    6,642     5,147     15,780     14,360 
Acquisition and divestiture-related expenses (4)    2,680     13,289     4,938     21,207 
Redomicile-related expenses (5)    951         12,201     
Adjusted EBITDA $  86,589  $  81,733  $  241,445  $  223,186 
Less:            
Interest expense, net (3)    4,269     5,033     13,227     14,493 
Depreciation and accretion expense (6)    23,301     22,014     69,063     63,767 
Adjusted pre-tax income $  59,019  $  54,686  $  159,155  $  144,926 
Income tax expense (7)    14,271     17,500     46,314     46,376 
Adjusted Net Income $  44,748  $  37,186  $  112,841  $  98,550 
             
Adjusted Net Income per share $  0.99  $  0.83  $  2.50  $  2.20 
Adjusted Net Income per diluted share $  0.98  $  0.82  $  2.47  $  2.17 
             
Weighted average shares outstanding — basic    45,252,869     44,833,117     45,175,604     44,769,661 
Weighted average shares outstanding — diluted    45,850,061     45,391,667     45,765,235     45,323,784 

(1) Includes foreign currency translation gains/losses 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 its Mexico subsidiary. In December 2015, the Company increased its ownership interest in its Mexico subsidiary from 51% to 95.7%.
(3) For the three and nine months ended September 30, 2015, amounts exclude a portion of the expenses incurred by the Company's Mexico subsidiary to account for the amounts allocable to the noncontrolling interest stockholders. The Company's Mexico subsidiary recognized no stock-based compensation expense or interest expense, net for the three and nine months ended September 30, 2016.
(4) Acquisition and divestiture-related expenses include costs incurred for professional and legal fees and certain other transition and integration-related costs.
(5) Expenses associated with the Company's redomicile of its parent company to the U.K., which was completed on July 1, 2016.
(6) Amounts exclude a portion of the expenses incurred by the Company's Mexico subsidiary to account for the amounts allocable to the noncontrolling interest stockholders. In December 2015, the Company increased its ownership interest in its Mexico subsidiary.
(7) Calculated using an effective tax rate of approximately 24.2% for the three months ended September 30, 2016, which represents the Company's U.S. GAAP tax rate as adjusted for the tax effects related to the items excluded from Adjusted Net Income. 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, its previous estimated long-term cross-jurisdictional tax rate of 32%. For the three and nine months ended September 30, 2015, the Company used its previous estimated long-term cross-jurisdictional tax rate of 32%. See Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.

 
Reconciliation of U.S. GAAP Revenue to Constant-Currency Revenue
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
 
Europe revenue: Three Months Ended
  September 30, 
  2016 2015 % Change
  U.S.
GAAP
 Foreign
Currency
Impact
 Constant -
Currency
 U.S.
GAAP
 U.S.
GAAP
  Constant -
Currency
  (In thousands)      
ATM operating revenues $ 94,154 $ 15,561 $ 109,715 $ 94,218   (0.1)%  16.4 %
ATM product sales and other revenues     1,409   220   1,629   4,795   (70.6)    (66.0) 
Total revenues $ 95,563 $ 15,781 $ 111,344 $ 99,013   (3.5)%  12.5 %


                   
  Nine Months Ended
  September 30, 
  2016 2015 % Change
  U.S.
GAAP
 Foreign
Currency
Impact
 Constant -
Currency
 U.S.
GAAP
 U.S.
GAAP
  Constant -
Currency
  (In thousands)      
ATM operating revenues $ 276,452 $ 26,161 $ 302,613 $ 257,549   7.3 %   17.5 %
ATM product sales and other revenues     4,206   393   4,599   27,384   (84.6)    (83.2) 
Total revenues $ 280,658 $ 26,554 $ 307,212 $ 284,933   (1.5)%   7.8 %


                   
Consolidated revenue: Three Months Ended
  September 30, 
  2016 2015 % Change
  U.S.
GAAP
 Foreign
Currency
Impact
 Constant -
Currency
 U.S.
GAAP
 U.S.
GAAP
  Constant -
Currency
  (In thousands)      
ATM operating revenues $ 314,788 $ 15,926 $ 330,714 $ 296,836   6.0 %  11.4 %
ATM product sales and other revenues     13,546   222   13,768   14,514   (6.7)    (5.1) 
Total revenues $ 328,334 $ 16,148 $ 344,482 $ 311,350   5.5 %  10.6 %


                   
  Nine Months Ended
  September 30, 
  2016 2015 % Change
  U.S.
GAAP
 Foreign
Currency
Impact
 Constant -
Currency
 U.S.
GAAP
 U.S.
GAAP
  Constant -
Currency
  (In thousands)      
ATM operating revenues $ 918,207 $ 28,612 $ 946,819 $ 842,295   9.0 %   12.4 %
ATM product sales and other revenues     37,335   442   37,777   54,702   (31.7)    (30.9) 
Total revenues $ 955,542 $ 29,054 $ 984,596 $ 896,997   6.5 %   9.8 %
                       


 
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, 2016 and 2015
(Unaudited)
 
  Three Months Ended
  September 30, 
  2016 2015 % Change
  Non -
GAAP (1)
 Foreign
Currency
Impact
 Constant -
Currency
 Non -
GAAP (1)
 Non -
GAAP (1)
  Constant -
Currency
 
  (In thousands)      
Adjusted EBITDA $ 86,589 $ 4,621 $ 91,210 $ 81,733  5.9% 11.6%
                   
Adjusted Net Income $ 44,748 $ 2,478 $ 47,226 $ 37,186  20.3% 27.0%
                   
Adjusted Net Income per diluted share (2)   $ 0.98 $ 0.05 $ 1.03 $ 0.82  19.5% 25.6%

(1) As reported on the Company's Reconciliation of Net Income Attributable to Controlling Interests and Available to Common Stockholders 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 45,850,061 and 45,391,667 for the three months ended September 30, 2016 and 2015, respectively.

                   
  Nine Months Ended
  September 30, 
  2016 2015 % Change
  Non -
GAAP (1)
 Foreign
Currency
Impact
 Constant -
Currency
 Non -
GAAP (1)
 Non -
GAAP (1)
  Constant -
Currency
 
  (In thousands)      
Adjusted EBITDA $ 241,445 $ 7,425 $ 248,870 $ 223,186  8.2% 11.5%
                   
Adjusted Net Income $ 112,841 $ 3,403 $ 116,244 $ 98,550  14.5% 18.0%
                   
Adjusted Net Income per diluted share (2)   $ 2.47 $ 0.07 $ 2.54 $ 2.17  13.8% 17.1%

(1) As reported on the Company's Reconciliation of Net Income Attributable to Controlling Interests and Available to Common Stockholders 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 45,765,235 and 45,323,784 for the nine months ended September 30, 2016 and 2015, respectively.

 
Reconciliation of Free Cash Flow
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
 
  Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2016 2015 2016 2015
  (In thousands)
Cash provided by operating activities $  89,346  $  60,525  $  213,931  $  147,112 
Payments for capital expenditures:            
Cash used in investing activities, excluding acquisitions and divestitures      (36,479)    (47,459)    (76,050)    (103,877)
Free cash flow $  52,867  $  13,066  $  137,881  $  43,235 
                     


 
Reconciliation of Estimated Net Income to EBITDA, Adjusted EBITDA, and Adjusted Net Income
For the Year Ending December 31, 2016
(In millions, excluding share and per share amounts)
(Unaudited)
 
  Estimated Range
Full Year 2016
Net Income $ 83.6 $ 85.4
Adjustments:      
Interest expense, net   17.5   17.5
Amortization of deferred financing costs and note discount   11.5   11.5
Income tax expense   34.2   34.9
Depreciation and accretion expense (1)   92.0   91.0
Amortization of intangible assets   37.0   37.0
EBITDA  $ 275.8 $ 277.3
       
Add Back:      
Other   1.0   1.0
Stock-based compensation expense   22.5   22.5
Redomicile-related expenses   12.7   12.7
Acquisition and divestiture-related expenses   5.0   5.5
Adjusted EBITDA $ 317.0 $ 319.0
Less:      
Interest expense, net   17.5   17.5
Depreciation and accretion expense   92.0   91.0
Income tax expense (2)   60.3   61.1
Adjusted Net Income $ 147.2 $ 149.4
       
Adjusted Net Income per diluted share $ 45.80 $ 45.80
       
Weighted average shares outstanding — diluted   3.21   3.26

(1) Noncontrolling interests adjustment made such that Adjusted EBITDA includes only the Company's interest of its Mexico subsidiary.
(2) Calculated using the Company's previous estimated long-term cross-jurisdictional effective cash tax rate of 32% for the six months ending June 30, 2016 and its estimated U.S. GAAP tax rate, as adjusted for items excluded from Adjusted Net Income, in the six month period ending December 31, 2016.

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
  

Cardtronics is a registered trademark of Cardtronics plc
All other trademarks are the property of their respective owners.


  
      
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