Aug 2, 2017
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Cardtronics Announces Second Quarter 2017 Results

HOUSTON, Aug. 02, 2017 (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 June 30, 2017.

Key financial statistics in the second quarter of 2017 as compared to the second quarter of 2016 include:

"Our second quarter was marked by operational focus as we made significant progress on several key fronts, including the integration of DCPayments, software and EMV upgrades on a significant portion of our Company-owned U.S. ATM fleet, and the continued execution of our cost efficiency initiative. We made significant strides in the quarter to position ourselves for steady execution of the core business and focused pursuit of growth opportunities with financial institutions," commented Steve Rathgaber, Cardtronics' chief executive officer.

RECENT HIGHLIGHTS

See Disclosure of Non-GAAP Financial Information in this earnings release for definitions of Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow, and certain other non-GAAP measures on a constant-currency basis. For additional information, including reconciliations to the most directly comparable financial measure recognized under accounting principles generally accepted in the U.S. ("GAAP"), see the supplemental schedules of selected financial information in this earnings release.

SECOND QUARTER RESULTS

Consolidated revenues totaled $385.1 million for the second quarter of 2017, representing a 19% increase from $324.0 million from the same period of 2016, driven by the DirectCash Payments Inc. ("DCPayments") and Spark ATM Systems Pty Ltd. ("Spark") acquisitions completed during January 2017. ATM operating revenues for the second quarter of 2017 were up 20% from the same period of 2016. Adjusting for movements in currency exchange rates, ATM operating revenues were up 23% from the same period of 2016.

Driven primarily by the acquisitions completed during January 2017, ATM operating revenues in North America increased 11% and ATM operating revenues in Europe & Africa increased 6% (16% on a constant-currency basis) compared to the same period of 2016. The DCPayments operations in Australia & New Zealand contributed $32.9 million in ATM operating revenues and $8.9 million in gross profit during the second quarter of 2017. The appreciation of the U.S. dollar relative to the British pound adversely impacted the Company's reported revenues and profits in the second quarter of 2017. The British pound was on average 10% weaker relative to the U.S. dollar during the second quarter of 2017 compared to the same period of 2016.

GAAP Net Income for the second quarter of 2017 was $15.2 million compared to GAAP Net Income of $20.1 million during the same period of 2016. The decrease in GAAP Net Income was primarily the result of the incremental interest, depreciation, and intangible asset amortization expenses associated with the acquisitions completed during January 2017, as well as the incremental professional services and other costs associated with the Company's integration of the acquisitions. The Company's GAAP tax rate was 23.6% for the second quarter of 2017 compared to 32.9% for the same period of 2016.

Adjusted EBITDA for the second quarter of 2017 totaled $87.7 million ($90.9 million on a constant-currency basis) compared to $81.7 million of Adjusted EBITDA during the same period of 2016. The increase in Adjusted EBITDA was primarily driven by the acquisitions completed during January 2017, partially offset by changes in currency exchange rates and higher operating costs, primarily associated with the Company's U.S. ATM fleet upgrade to enable technology enhancements and comply with the EMV security standard and interim fraud loss exposure. Adjusted Net Income totaled $35.0 million ($0.76 per diluted share or $0.79 on a constant-currency basis) for the second quarter of 2017, compared to $36.8 million ($0.80 per diluted share) during the same period of 2016. The decrease in Adjusted Net Income is attributable to the factors discussed above and increased depreciation and interest expense associated with the acquisitions, as well as increased depreciation expense associated with the Company's U.S. ATM fleet upgrade.

SIX MONTH RESULTS

Consolidated revenues totaled $742.7 million for the six months ended June 30, 2017, representing an 18% increase from $627.2 million from the same period of 2016, driven by the acquisitions completed during January 2017. ATM operating revenues for the six months ended June 30, 2017 were up 19% from the same period of 2016. Adjusting for movements in currency exchange rates, ATM operating revenues were up 22% from the same period of 2016.

Driven by the acquisitions completed during January 2017, ATM operating revenues in North America increased 10% and ATM operating revenues in Europe & Africa increased 2% (14% on a constant-currency basis) compared to the same period of 2016. The DCPayments operations in Australia & New Zealand contributed $64.4 million in ATM operating revenues and $17.1 million in gross profit during the six months ended June 30, 2017. The appreciation of the U.S. dollar relative to the British pound adversely impacted the Company's reported revenues and profits in the six months ended June 30, 2017. The British pound was on average 12% weaker relative to the U.S. dollar during the six months ended June 30, 2017 compared to the same period of 2016.

GAAP Net Income for the six months ended June 30, 2017 was $14.3 million compared to GAAP Net Income of $35.5 million during the same period of 2016. The decrease in GAAP Net Income is partially attributable to $8.2 million of restructuring expenses recognized during the six months ended June 30, 2017, mostly related to employee severance costs in conjunction with the Company's cost reduction initiative. The Company also incurred $12.4 million of professional services and other costs associated with the completion and integration of the acquisitions completed during January 2017. Also, related to the recently completed acquisitions, the Company's intangible asset amortization expense was up $11.5 million compared to the same period of 2016. The Company's GAAP tax rate was 10.8% for the six months ended June 30, 2017 compared to 33.4% for the same period of 2016.

Adjusted EBITDA for the six months ended June 30, 2017 totaled $158.9 million ($164.8 million on a constant-currency basis) compared to $154.9 million of Adjusted EBITDA during the same period of 2016. The increase in Adjusted EBITDA was primarily driven by the acquisitions completed during January 2017, partially offset by lower revenue in the U.S., coupled with changes in currency exchange rates and higher operating costs, primarily associated with the Company's U.S. ATM fleet upgrade to comply with the EMV security standard and interim fraud loss exposure and to enable other technology enhancements. Adjusted Net Income totaled $60.6 million ($1.31 per diluted share or $1.36 on a constant-currency basis) for the six months ended June 30, 2017, compared to $68.1 million ($1.49 per diluted share) during the same period of 2016. The decrease in Adjusted Net Income is attributable to the factors discussed above and increased depreciation and interest expense associated with the acquisitions, as well as increased depreciation expense associated with the Company's U.S. ATM fleet upgrade.

BORROWINGS AND LIQUIDITY

On April 4, 2017, the Company issued $300 million in aggregate principal amount of 5.50% Senior Notes due 2025 (the "2025 Notes") in a private placement offering. The net proceeds after payment of the related expenses were used to repay a portion of the outstanding borrowings under the revolving credit facility. Subsequent to the issuance of the 2025 Notes, the revolving credit facility was amended to decrease the borrowing capacity from $600 million to $400 million. The revolving credit facility was also amended to include an accordion provision enabling an additional potential borrowing capacity of approximately $100 million under certain conditions.

As of June 30, 2017, the Company had outstanding borrowings of approximately $184 million and approximately $216 million in available borrowing capacity under its $400 million revolving credit facility due in 2021. Additionally, the Company had $53 million in cash as of June 30, 2017. The Company's other outstanding indebtedness as of June 30, 2017 included $288 million Convertible Senior Notes due 2020, $250 million in Senior Notes due 2022, and the $300 million 2025 Notes that were issued during the second quarter of 2017. The Convertible Senior Notes due 2020, Senior Notes due 2022, and 2025 Notes had carrying balances of $246 million, $248 million, and $295 million, respectively, and are reflected as long-term debt on the balance sheet, net of unamortized discount and capitalized debt issuance costs.

SEGMENT REPORTING CHANGE

During the second quarter of 2017, the DCPayments operations in Canada and Mexico were integrated into the Company's North America operations and are now reported in the North America segment. The Australia and New Zealand operations that were acquired in the DCPayments acquisition are now presented in a newly created Australia & New Zealand segment. The DCPayments operations in the U.K. are now reported within the Company's Europe & Africa segment. Additionally, the Company's transaction processing operations are now reported within the North America segment, having previously been reported in the Corporate & Other segment. Conforming changes to prior periods have been made, where applicable.

2017 GUIDANCE

Below is the Company's financial guidance for the full year 2017:

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 earnings release. This guidance is based on average foreign currency exchange rates for the year of £1.00 U.K. to $1.25 U.S., $20.00 Mexican pesos to $1.00 U.S., $1.00 Canadian dollar to $0.77 U.S., €1.00 Euros to $1.10 U.S., $1.00 Australian dollar to $0.77 U.S., and R14.29 South African Rand to $1.00 U.S. Additionally, this guidance is based on an estimated non-GAAP tax rate of approximately 27% for the remainder of 2017.

Included in the guidance above is the assumption that the deinstallations of the ATMs at 7-Eleven locations in the U.S. will occur primarily throughout the next five months of 2017 and be substantially complete by the end of the year, with a small number of units expected to continue to operate into the first quarter of 2018. 7-Eleven in the U.S. accounted for approximately 18% of the Company's consolidated revenues for the year ended 2016. The Company estimates that the incremental gross margin associated with these revenues is approximately 45%, compared to the Company's reported consolidated gross margin of 36% in 2016. While the ATM deinstallation schedule remains subject to change as of the date of this earnings release, the Company currently estimates that the approximate revenue impact associated with the deinstallations is approximately $40 million to $60 million and the approximate impact to gross margin will be approximately $30 million to $35 million in 2017, relative to 2016, during which the Company had the contract in place for the full year.

CONFERENCE CALL INFORMATION

The Company will host a conference call today, Wednesday, August 2, 2017, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its financial results for the quarter ended June 30, 2017. 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 Second Quarter 2017 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 Wednesday, August 16, 2017, and can be accessed by calling (855) 859-2056 or (404) 537-3406 and entering 40593740 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 August 31, 2017.

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 approximately 237,000 ATMs in North America, Europe, Asia-Pacific, and Africa. Whether Cardtronics is driving foot traffic for 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.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This earnings release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provisions thereof. These forward-looking statements are based on management's current expectations and beliefs concerning future developments and their potential effect on the Company and 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 its 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 its control) and assumptions that could cause actual results to differ materially from its historical experience and present expectations or projections. Risk factors are described in the Company's 2016 Form 10-K, 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 earnings release, which speak only as of the date of this earnings 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.

DISCLOSURE OF NON-GAAP FINANCIAL INFORMATION

EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow, and certain GAAP as well as non-GAAP measures on a constant-currency basis represent non-GAAP financial measures provided as a complement to financial results prepared in accordance with 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 share-based compensation expense, acquisition and divestiture-related expenses, certain non-operating expenses, (if applicable in a particular period) certain costs not anticipated to occur in future periods, gains or losses on disposal and impairment 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 GAAP, before amortization of intangible assets, gains or losses on disposal and impairment of assets, share-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 and for the three and six months ended 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 revised the process for determining its non-GAAP tax rate and now utilizes a non-GAAP tax rate derived from the GAAP tax rate adjusted for the net tax effects of the Adjustments, based on the nature and geography of the Adjustments. For the three and six months ended June 30, 2017, the non-GAAP tax rate used to calculate Adjusted Net Income was approximately 27.7% and 27.9%, respectively. 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 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 in the current reporting period. Management uses 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 GAAP. Reconciliations of the non-GAAP financial measures used herein to the most directly comparable GAAP financial measures are presented in tabular form at the end of this earnings release.

 
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2017 and 2016
(In thousands, excluding share, per share amounts, and percentages)
 
  Three Months Ended Six Months Ended
  June 30,  June 30, 
  2017  % Change 2016  2017  % Change 2016 
                       
  (Unaudited)
Revenues:                
ATM operating revenues $373,260  19.9% $311,331  $715,048  18.5% $603,419 
ATM product sales and other revenues  11,852  (6.2)  12,630   27,636  16.2   23,789 
Total revenues  385,112  18.9   323,961   742,684  18.4   627,208 
Cost of revenues:                
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets reported separately below.)  246,484  24.0   198,843   478,411  24.3   384,783 
Cost of ATM product sales and other revenues  11,116  (3.2)  11,487   25,751  20.2   21,420 
Total cost of revenues  257,600  22.5   210,330   504,162  24.1   406,203 
Gross profit  127,512  12.2   113,631   238,522  7.9   221,005 
Gross profit %  33.1%     35.1%   32.1%     35.2% 
Operating expenses:                
Selling, general, and administrative expenses  43,470  14.7   37,912   85,419  13.4   75,311 
Redomicile-related expenses     (100.0)  5,214   760  (93.2)  11,250 
Restructuring expenses    n/m     8,243  n/m   
Acquisition and divestiture-related expenses  3,993  492.4   674   12,449  451.3   2,258 
Depreciation and accretion expense  29,755  28.8   23,100   58,876  28.6   45,777 
Amortization of intangible assets  15,247  57.3   9,691   30,427  60.5   18,954 
Loss (gain) on disposal and impairment of assets  669  n/m  (1,326)  3,863  n/m  (944)
Total operating expenses  93,134  23.7   75,265   200,037  31.1   152,606 
Income from operations  34,378  (10.4)  38,366   38,485  (43.7)  68,399 
Other expense:                
Interest expense, net  9,460  111.8   4,466   16,017  78.8   8,958 
Amortization of deferred financing costs and note discount  3,146  5.5   2,982   6,122  6.2   5,764 
Other expense  1,945  106.3   943   365  (5.9)  388 
Total other expense  14,551  73.4   8,391   22,504  48.9   15,110 
Income before income taxes  19,827  (33.9)  29,975   15,981  (70.0)  53,289 
Income tax expense  4,670  (52.6)  9,861   1,718  (90.4)  17,816 
Effective tax rate  23.6%     32.9%   10.8%     33.4% 
Net income  15,157  (24.6)  20,114   14,263  (59.8)  35,473 
Net (loss) income attributable to noncontrolling interests  (1) (97.1)  (34)  6  n/m  (59)
Net income attributable to controlling interests and available to common shareholders $15,158   (24.8%) $20,148  $14,257   (59.9%) $35,532 
                 
Net income per common share — basic $0.33    $0.45  $0.31    $0.79 
Net income per common share — diluted $0.33    $0.44  $0.31    $0.78 
                 
Weighted average shares outstanding — basic  45,637,778     45,199,450   45,564,527     45,136,553 
Weighted average shares outstanding — diluted  46,222,112     45,748,570   46,272,191     45,704,474 
                     


Condensed Consolidated Balance Sheets
As of June 30, 2017 and December 31, 2016
(In thousands)
 
  June 30, 2017  December 31, 2016
  (Unaudited)   
ASSETS      
Current assets:      
Cash and cash equivalents $53,177 $73,534
Accounts and notes receivable, net  98,751  84,156
Inventory, net  14,232  12,527
Restricted cash  46,909  32,213
Prepaid expenses, deferred costs, and other current assets  86,329  67,107
Total current assets  299,398  269,537
Property and equipment, net  505,454  392,735
Intangible assets, net  278,471  121,230
Goodwill  903,101  533,075
Deferred tax asset, net  9,727  13,004
Prepaid expenses, deferred costs, and other noncurrent assets  38,881  35,115
Total assets $2,035,032 $1,364,696
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Current portion of other long-term liabilities $32,793 $28,237
Accounts payable and other accrued and current liabilities  345,395  285,583
Total current liabilities  378,188  313,820
Long-term liabilities:      
Long-term debt  973,339  502,539
Asset retirement obligations  57,096  45,086
Deferred tax liability, net  49,915  27,625
Other long-term liabilities  68,421  18,691
Total liabilities  1,526,959  907,761
Shareholders' equity  508,073  456,935
Total liabilities and shareholders' equity $2,035,032 $1,364,696
       
       

SELECTED STATEMENT OF OPERATIONS DETAIL:
(Unaudited)

                    
Total revenues by segment:Three Months Ended Six Months Ended
 June 30,  June 30, 
 2017   % Change  2016  2017   % Change  2016 
                          
 (In thousands, excluding percentages)
North America                   
ATM operating revenues$242,189    10.9 % $218,449  $469,377    10.1 % $426,454 
ATM product sales and other revenues 9,667    (13.9)   11,228   23,536    12.1    20,992 
North America total revenues 251,856    9.7    229,677   492,913    10.2    447,446 
Europe & Africa                   
ATM operating revenues 100,946    5.5    95,713   186,330    2.2    182,298 
ATM product sales and other revenues 2,208    57.5    1,402   4,071    45.5    2,797 
Europe & Africa total revenues 103,154    6.2    97,115   190,401    2.9    185,095 
Australia & New Zealand                   
ATM operating revenues 32,891   n/m       64,384   n/m     
ATM product sales and other revenues 74   n/m       159   n/m     
Australia & New Zealand total revenues 32,965   n/m       64,543   n/m     
                    
Eliminations (2,863)   1.1    (2,831)  (5,173)   (3.0)   (5,333)
                    
Total ATM operating revenues 373,260    19.9    311,331   715,048    18.5    603,419 
Total ATM product sales and other revenues 11,852    (6.2)   12,630   27,636    16.2    23,789 
Total revenues$385,112    18.9 % $323,961  $742,684    18.4 % $627,208 
                          


Breakout of ATM operating revenues:Three Months Ended Six Months Ended
 June 30,  June 30, 
 2017  % Change  2016 2017  % Change  2016
                    
 (In thousands, excluding percentages)
Surcharge revenues$169,794   34.4% $126,317 $324,049   33.3% $243,154
Interchange revenues 123,248   4.5   117,917  236,899   5.3   224,959
Bank-branding and surcharge-free network revenues 47,933   4.4   45,934  94,340   1.6   92,897
Managed services revenues 15,434   73.7   8,885  31,050   75.2   17,724
Other revenues 16,851   37.2   12,278  28,710   16.3   24,685
Total ATM operating revenues$373,260   19.9% $311,331 $715,048   18.5% $603,419
                    


Total gross profit by segment:Three Months Ended Six Months Ended
 June 30,  June 30, 
 2017  % Change 2016  2017  % Change 2016 
                        
 (In thousands, excluding percentages)
North America$81,712    4.0% $78,570  $156,906    0.6% $155,946 
Europe & Africa 38,092    7.8   35,331   66,701    1.9   65,446 
Australia & New Zealand 8,850   n/m      17,050   n/m    
Corporate & Eliminations (1,142)  n/m   (270)  (2,135)  n/m   (387)
Total gross profit$127,512    12.2% $113,631  $238,522    7.9% $221,005 
                        


Breakout of cost of ATM operating                    
revenues (exclusive of depreciation,                   
accretion, and amortization of                    
intangible assets):Three Months Ended Six Months Ended
 June 30,  June 30, 
 2017  % Change  2016 2017  % Change  2016
                     
 (In thousands, excluding percentages)
Merchant commissions$123,471   30.6 % $94,557 $237,578   29.9% $182,952
Vault cash rental 18,426   (0.9)   18,587  37,078   3.4   35,860
Other costs of cash 26,951   30.6    20,631  55,522   35.8   40,900
Repairs and maintenance 22,096   16.6    18,948  43,405   19.7   36,251
Communications 9,681   21.0    7,999  18,825   20.6   15,611
Transaction processing 5,728   38.3    4,143  11,334   46.3   7,745
Employee costs 19,858   17.2    16,939  38,805   13.7   34,141
Other expenses 20,273   19.0    17,039  35,864   14.5   31,323
Total cost of ATM operating revenues$246,484   24.0 % $198,843 $478,411   24.3% $384,783
                     


Breakout of selling, general,                   
and administrative expenses:Three Months Ended Six Months Ended
 June 30,  June 30, 
 2017  % Change  2016 2017  % Change  2016
                      
 (In thousands, excluding percentages)
Employee costs$22,459   14.9 % $19,547 $47,274   17.6 % $40,212
Share-based compensation expense 3,440   (39.6)   5,700  5,680   (35.1)   8,751
Professional fees 5,803   43.4    4,047  11,750   20.4    9,761
Other expenses 11,768   36.6    8,618  20,715   24.9    16,587
Total selling, general, and administrative expenses$43,470   14.7 % $37,912 $85,419   13.4 % $75,311
                      


Depreciation and accretion expense                   
by segment:Three Months Ended Six Months Ended
 June 30,  June 30, 
 2017  % Change  2016 2017  % Change  2016
                    
 (In thousands, excluding percentages)
North America$17,404   26.7% $13,739 $34,559   26.5% $27,320
Europe & Africa 10,782   15.2   9,361  20,617   11.7   18,457
Australia & New Zealand 1,569  n/m     3,700  n/m   
Total depreciation and accretion expense$29,755   28.8% $23,100 $58,876   28.6% $45,777
                    

SELECTED BALANCE SHEET DETAIL:
(Unaudited, excluding December 31, 2016)

Long-term debt:June 30, 2017 December 31, 2016
      
 (In thousands)
Revolving credit facility$184,234 $14,100
1.00% Convertible senior notes (1) 246,444  241,068
5.125% Senior notes (1) 247,701  247,371
5.50% Senior notes (1) 294,960  
Total long-term debt$973,339 $502,539
      

(1) The 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 $41.1 million and $46.4 million as of June 30, 2017 and December 31, 2016, respectively. In accordance with 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). The 5.125% Senior Notes due 2022 with a face value of $250.0 million are presented net of capitalized debt issuance costs of $2.3 million and $2.6 million as of June 30, 2017 and December 31, 2016, respectively. The 5.50% Senior Notes due 2025 with a face value of $300.0 million are presented net of capitalized debt issuance costs of $5.0 million as of June 30, 2017.

Share count rollforward:

Total shares outstanding as of December 31, 2016  45,326,430
Shares issued — stock options exercised  12,200
Shares vested — restricted stock units  311,672
Total shares outstanding as of June 30, 2017  45,650,302
   

SELECTED CASH FLOW DETAIL:
(Unaudited)

Selected cash flow statement amounts: Three Months Ended  Six Months Ended
  June 30,  June 30, 
  2017  2016  2017  2016 
                 
  (In thousands)
Cash provided by operating activities $ 74,130  $ 79,932  $ 84,579  $ 124,587 
Cash used in investing activities   (31,307)   (33,011)   (556,945)   (44,767)
Net cash (used in) provided by financing activities   (26,864)   (51,809)   456,337    (85,850)
Effect of exchange rate changes on cash   (3,027)   (509)   (4,328)   (615)
Net increase (decrease) in cash and cash equivalents   12,932    (5,397)   (20,357)   (6,645)
Cash and cash equivalents as of beginning of period   40,245    25,049    73,534    26,297 
Cash and cash equivalents as of end of period $ 53,177  $ 19,652  $ 53,177  $ 19,652 
                 


Key Operating Metrics — Including Acquisitions in All Periods Presented
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
  Three Months Ended  Six Months Ended
  June 30,  June 30, 
  2017 % Change 2016 2017 % Change 2016
Average number of transacting ATMs:                    
United States  45,207   9.1%  41,450   45,196   11.8%  40,413 
United Kingdom and Ireland  21,574   34.3   16,063   21,416   34.4   15,936 
Australia and New Zealand  8,816  n/m      8,913  n/m    
Canada  6,053   225.3   1,861   6,126   230.1   1,856 
South Africa  2,368  n/m     2,352  n/m    
Germany, Poland, and Spain  1,535   32.9   1,155   1,478   29.4   1,142 
Mexico  957   (30.7)  1,381   1,117   (19.5)  1,387 
Total Company-owned  86,510   39.7   61,910   86,598   42.6   60,734 
United States (1)  12,363   (25.6)  16,613   12,499   (26.7)  17,063 
Canada  2,974  n/m      2,919  n/m    
United Kingdom and Ireland  635  n/m      616  n/m    
Australia and New Zealand  103  n/m      103  n/m    
Total Merchant-owned  16,075   (3.2)  16,613   16,137   (5.4)  17,063 
Average number of transacting ATMs — ATM operations  102,585   30.6   78,523   102,735   32.1   77,797 
                     
Managed Services and Processing:                    
United States  127,435   8.3   117,696   125,493   8.8   115,327 
Canada  3,411   99.8   1,707   3,385   110.1   1,611 
Australia and New Zealand  1,857  n/m      1,776  n/m    
Average number of transacting ATMs — Managed services and processing  132,703   11.1   119,403   130,654   11.7   116,938 
                     
Total average number of transacting ATMs  235,288   18.9   197,926   233,389   19.8   194,735 
                     
Total transactions (in thousands):                    
ATM operations  390,094   14.1   341,941   752,408   14.9   655,072 
Managed services and processing, net  261,293   47.6   176,998   507,874   46.0   347,877 
Total transactions  651,387   25.5   518,939   1,260,282   25.7   1,002,949 
                     
Total cash withdrawal transactions (in thousands):                    
ATM operations  248,166   14.8   216,197   482,411   18.2   408,283 
                     
Per ATM per month amounts (excludes managed services and processing):                    
Cash withdrawal transactions  806   (12.2)  918   783   (10.5)  875 
                     
ATM operating revenues (2) $1,136   (9.1) $1,250  $1,084   (11.1) $1,220 
Cost of ATM operating revenues (2)(3)  767   (4.5)  803   737   (6.0)  784 
ATM operating gross profit (2) (3) $369   (17.4%) $447  $347   (20.4%) $436 
                     
ATM operating gross profit margin (2) (3)  32.5%    35.8%  32.0%    35.7%

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


Key Operating Metrics — Excluding Acquisitions in All Periods Presented
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
  Three Months Ended  Six Months Ended
  June 30,  June 30, 
  2017 % Change 2016 2017 % Change 2016
Average number of transacting ATMs:                    
United States  45,207   9.1%  41,450   42,816   5.9%  40,413 
United Kingdom and Ireland  16,567   3.1   16,063   16,451   3.2   15,936 
Canada  1,835   (1.4)  1,861   1,813   (2.3)  1,856 
Germany, Poland, and Spain  1,535   32.9   1,155   1,478   29.4   1,142 
Mexico  523   (62.1)  1,381   699   (49.6)  1,387 
Total Company-owned  65,667   6.1   61,910   63,257   4.2   60,734 
United States (1)  12,363   (25.6)  16,613   12,499   (26.7)  17,063 
Total Merchant-owned  12,363   (25.6)  16,613   12,499   (26.7)  17,063 
Average number of transacting ATMs — ATM operations  78,030   (0.6)  78,523   75,756   (2.6)  77,797 
                     
Managed Services and Processing:                    
United States  127,435   8.3   117,696   125,493   8.8   115,327 
Canada  2,033   19.1   1,707   2,009   24.7   1,611 
Average number of transacting ATMs — Managed services and processing  129,468   8.4   119,403   127,502   9.0   116,938 
                     
Total average number of transacting ATMs  207,498   4.8   197,926   203,258   4.4   194,735 
                     
Total transactions (in thousands):                    
ATM operations  345,912   1.2   341,941   658,416   0.5   655,072 
Managed services and processing, net  166,643   (5.9)  176,998   330,086   (5.1)  347,877 
Total transactions  512,555   (1.2)  518,939   988,502   (1.4)  1,002,949 
                     
Total cash withdrawal transactions (in thousands):                    
ATM operations  212,919   (1.5)  216,197   408,207   —   408,283 
                     
Per ATM per month amounts (excludes managed services and processing):                    
Cash withdrawal transactions  910   (0.9)  918   898   2.6   875 
                     
ATM operating revenues (2) $1,192   (4.6) $1,250  $1,181   (3.2) $1,220 
Cost of ATM operating revenues (2)(3)  791   (1.5)  803   784   —   784 
ATM operating gross profit (2) (3) $401   (10.3%) $447  $397   (8.9%) $436 
                     
ATM operating gross profit margin (2) (3)  33.6%    35.8%  33.6%    35.7%

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


Key Operating Metrics — Ending Machine Count
As of June 30, 2017 and 2016 
(Unaudited)
 
  June 30, 2017 June 30, 2016
Ending number of transacting ATMs:    
United States 45,195 42,097
United Kingdom and Ireland 21,682 16,203
Australia and New Zealand 8,784 
Canada 6,146 1,833
South Africa 2,389 
Germany, Poland, and Spain 1,604 1,193
Mexico 947 1,364
Total Company-owned 86,747 62,690
United States 12,278 16,353
Canada 3,001 
United Kingdom and Ireland 718 
Australia and New Zealand 103 
Total Merchant-owned 16,100 16,353
Ending number of transacting ATMs — ATM operations 102,847 79,043
     
United States 128,716 119,309
Canada 3,335 1,724
Australia and New Zealand 1,992 
Ending number of transacting ATMs — Managed services and processing 134,043 121,033
     
Total ending number of transacting ATMs  236,890  200,076
     


Reconciliation of Net Income Attributable to Controlling Interests and Available to Common Shareholders to
EBITDA, Adjusted EBITDA, and Adjusted Net Income
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
  Three Months Ended  Six Months Ended
  June 30,  June 30, 
  2017  2016   2017  2016 
                 
  (In thousands, excluding share and per share amounts)
Net income attributable to controlling interests and available to common shareholders $ 15,158  $ 20,148   $ 14,257  $ 35,532 
Adjustments:            
Interest expense, net   9,460    4,466    16,017    8,958 
Amortization of deferred financing costs and note discount   3,146    2,982    6,122    5,764 
Income tax expense   4,670    9,861    1,718    17,816 
Depreciation and accretion expense   29,755    23,100    58,876    45,777 
Amortization of intangible assets   15,247    9,691    30,427    18,954 
EBITDA  $ 77,436  $ 70,248  $ 127,417  $ 132,801 
             
Add back:            
Loss (gain) on disposal and impairment of assets   669    (1,326)   3,863    (944)
Other expense (1)   1,945    943    365    388 
Noncontrolling interests (2)   (6)   (17)   (10)   (35)
Share-based compensation expense   3,623    5,970    5,820    9,138 
Acquisition and divestiture-related expenses (3)   3,993    674    12,449    2,258 
Redomicile-related expenses (4)   —    5,214    760    11,250 
Restructuring expenses (5)   —    —    8,243    — 
Adjusted EBITDA $ 87,660  $ 81,706  $ 158,907  $ 154,856 
Less:            
Interest expense, net   9,460    4,466    16,017    8,958 
Depreciation and accretion expense (6)   29,754    23,093    58,872    45,762 
 Adjusted pre-tax income $ 48,446  $ 54,147  $ 84,018  $ 100,136 
Income tax expense (7)   13,418    17,327    23,449    32,043 
Adjusted Net Income $ 35,028  $ 36,820  $ 60,569  $ 68,093 
             
Adjusted Net Income per basic share $ 0.77  $ 0.81  $ 1.33  $ 1.51 
Adjusted Net Income per diluted share $ 0.76  $ 0.80  $ 1.31  $ 1.49 
             
Weighted average shares outstanding — basic   45,637,778    45,199,450    45,564,527    45,136,553 
Weighted average shares outstanding — diluted   46,222,112    45,748,570    46,272,191    45,704,474 
                 

(1) Includes foreign currency translation gains/losses, the revaluation of the estimated acquisition-related contingent consideration payable, 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 one of its Mexican subsidiaries.
(3) Acquisition and divestiture-related expenses include costs incurred for professional and legal fees and certain other transition and integration-related costs.
(4) Expenses associated with the Company's redomicile of its parent company to the U.K., which was completed on July 1, 2016.
(5) Restructuring expenses primarily related to employee severance costs associated with a corporate reorganization and broad initiative to reduce costs implemented in the first quarter of 2017.
(6) Amounts exclude a portion of the expenses incurred by one of the Company's Mexican subsidiaries to account for the amounts allocable to the noncontrolling interest shareholders.
(7) For the three and six months ended June 30, 2017, calculated using an effective tax rate of approximately 27.7% and 27.9%, respectively, which represents the Company's GAAP tax rate as adjusted for the net tax effects related to the items excluded from Adjusted Net Income. For the three and six months ended June 30, 2016, 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 GAAP Revenue to Constant-Currency Revenue
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
Europe & Africa revenue: Three Months Ended
  June 30, 
  2017 2016 % Change
  U.S.
GAAP
 Foreign
Currency
Impact
 Constant -
Currency
 U.S.
GAAP
 U.S.
GAAP
 Constant -
Currency
                   
  (In thousands)      
ATM operating revenues $100,946 $10,474 $111,420 $95,713 5.5% 16.4%
ATM product sales and other revenues  2,208  195  2,403  1,402 57.5  71.4 
Total revenues $103,154 $10,669 $113,823 $97,115 6.2% 17.2%
                   


  Six Months Ended
  June 30, 
  2017 2016 % Change
  U.S.
GAAP
 Foreign
Currency
Impact
 Constant -
Currency
 U.S.
GAAP
 U.S.
GAAP
 Constant -
Currency
                   
  (In thousands)      
ATM operating revenues $186,330 $21,909 $208,239 $182,298 2.2% 14.2%
ATM product sales and other revenues  4,071  394  4,465  2,797 45.5  59.6 
Total revenues $190,401 $22,303 $212,704 $185,095 2.9% 14.9%
                   


Consolidated revenue: Three Months Ended
  June 30, 
  2017 2016 % Change
  U.S.
GAAP
 Foreign
Currency
Impact
 Constant -
Currency
 U.S.
GAAP
 U.S.
GAAP
 Constant -
Currency
                   
  (In thousands)      
ATM operating revenues $373,260 $10,849 $384,109 $311,331 19.9 % 23.4 %
ATM product sales and other revenues  11,852  195  12,047  12,630 (6.2)  (4.6) 
Total revenues $385,112 $11,044 $396,156 $323,961 18.9 % 22.3 %
                     


  Six Months Ended
  June 30, 
  2017 2016 % Change
  U.S.
GAAP
 Foreign
Currency
Impact
 Constant -
Currency
 U.S.
GAAP
 U.S.
GAAP
 Constant -
Currency
                   
  (In thousands)      
ATM operating revenues $715,048 $22,300 $737,348 $603,419 18.5% 22.2%
ATM product sales and other revenues  27,636  375  28,011  23,789 16.2  17.7 
Total revenues $742,684 $22,675 $765,359 $627,208 18.4% 22.0%
                   


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 Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
  Three Months Ended
  June 30, 
  2017 2016 % Change
  Non -
GAAP (1)
 Foreign
Currency
Impact
 Constant -
Currency
 Non -
GAAP (1)
 Non -
GAAP (1)
 Constant -
Currency
                   
  (In thousands)      
Adjusted EBITDA $87,660 $3,214 $90,874 $81,706 7.3 % 11.2 %
                   
Adjusted Net Income $35,028 $1,495 $36,523 $36,820 (4.9)% (0.8)%
                   
Adjusted Net Income per diluted share (2) $0.76 $0.03 $0.79 $0.80 (5.0)% (1.3)%


  Six Months Ended
  June 30, 
  2017 2016 % Change
  Non -
GAAP (1)
 Foreign
Currency
Impact
 Constant -
Currency
 Non -
GAAP (1)
 Non -
GAAP (1)
 Constant -
Currency
                   
  (In thousands)      
Adjusted EBITDA $158,907 $5,941 $164,848 $154,856 2.6 % 6.5 %
                   
Adjusted Net Income $60,569 $2,527 $63,096 $68,093 (11.0)% (7.3)%
                   
Adjusted Net Income per diluted share (2) $1.31 $0.05 $1.36 $1.49 (12.1)% (8.7)%

(1) As reported on the Company's Reconciliation of Net Income Attributable to Controlling Interests and Available to Common Shareholders 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 46,222,112 and 45,748,570 for the three months ended June 30, 2017 and 2016, respectively, and 46,272,191 and 45,704,474 for the six months ended June 30, 2017 and 2016, respectively.


 
Reconciliation of Free Cash Flow
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
  Three Months Ended  Six Months Ended
  June 30,  June 30, 
  2017   2016   2017   2016 
                 
  (In thousands)
Cash provided by operating activities $74,130  $79,932  $84,579  $124,587 
Payments for capital expenditures:            
Cash used in investing activities, excluding acquisitions and divestitures  (31,307)  (23,120)  (69,868)  (39,571)
Free cash flow $42,823  $56,812  $14,711  $85,016 
                 


Reconciliation of Estimated Net Income to EBITDA, Adjusted EBITDA, and Adjusted Net Income
For the Year Ending December 31, 2017
(In millions, excluding per share amounts)
(Unaudited)
 
  Estimated Range
Full Year 2017 (1)
Net Income $47.0 $54.0
Adjustments:      
Interest expense, net  35.0  34.0
Amortization of deferred financing costs and note discount  13.0  13.0
Income tax expense  15.0  17.0
Depreciation and accretion expense  112.0  115.0
Amortization of intangible assets  63.0  62.0
EBITDA $285.0 $295.0
       
Add Back:      
Share-based compensation expense  13.0  16.5
Restructuring expenses  8.2  8.2
Redomicile-related expenses  0.8  0.8
Acquisition-related expenses  13.0  14.0
Loss on disposal and impairment of assets  5.0  5.5
Adjusted EBITDA $325.0 $340.0
Less:      
Interest expense, net  35.0  34.0
Depreciation and accretion expense  112.0  115.0
Income tax expense (2)  48.4  52.0
Adjusted Net Income $129.6 $139.0
       
Adjusted Net Income per diluted share $2.80 $3.00
       
Weighted average shares outstanding — diluted  46.3  46.3

(1) See Disclosure of Non-GAAP Financial Information in this earnings release for definitions of the non-GAAP measures included in this table.
(2) Calculated using the Company's estimated non-GAAP tax rate of approximately 27.2%, as adjusted for items excluded from Adjusted Net Income, see Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.

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