Nov 2, 2017
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Cardtronics Announces Third Quarter 2017 Results

HOUSTON, Nov. 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 September 30, 2017.

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

"The third quarter was a dynamic quarter where we performed well operationally under the challenges of several hurricanes and earthquakes. This quarter also marks my last earnings call as I retire at year's end. I believe I leave behind two great assets. The first is the unique, increasingly global "neighborhood ATM" platform delivering a critical service in payments — convenient access to cash. It is a unique infrastructure platform designed for growth. The second great asset is the team now in place to lead Cardtronics to the next stage of growth. I am truly privileged to have led Cardtronics for nearly eight years. Under the leadership of my successor, Ed West, I am confident that the great potential of the Cardtronics platform will be realized for our shareholders," commented Steve Rathgaber, Cardtronics' chief executive officer.

RECENT HIGHLIGHTS

Changes in currency exchange rates had an insignificant impact relative to our results in the third quarter of 2016. See Disclosure of Non-GAAP Financial Information in this earnings release for definitions of Adjusted Gross Profit, Adjusted Gross Margin, EBITDA, 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.

THIRD QUARTER RESULTS

Consolidated revenues totaled $402.0 million for the third quarter of 2017, representing a 22% increase from $328.3 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 third quarter of 2017 were up 24% from the same period of 2016.

Driven primarily by the acquisitions completed during January 2017, ATM operating revenues in North America increased 12% and ATM operating revenues in Europe & Africa increased 14% from the same period of 2016. ATM operating revenues in our Australia & New Zealand segment totaled $35.4 million during the third quarter of 2017. The Company acquired the Australia & New Zealand segment via the DCPayments acquisition, completed in January 2017, and as a result, there were no comparable revenues in the third quarter of 2016.

GAAP Net Loss for the third quarter of 2017 totaled $175.6 million compared to GAAP Net Income of $27.5 million in the same period of 2016. The GAAP Net Loss was the result of asset impairments in the Australia & New Zealand segment of $216.0 million ($193.5 million net of tax). See Asset Impairments in the Australia & New Zealand Segment in this earnings release for further discussion. Additionally, the Company incurred incremental interest, depreciation, and intangible asset amortization expenses associated with the acquisitions completed during January 2017, as well as incremental professional services and other costs associated with the Company's integration of the acquisitions. The Company's GAAP tax rate was 2.3% for the third quarter of 2017 compared to 23.4% in the same period of 2016.

Adjusted EBITDA for the third quarter of 2017 totaled $99.9 million compared to $86.6 million of Adjusted EBITDA in the same period of 2016. The increase in Adjusted EBITDA was primarily driven by the acquisitions completed during January 2017. Adjusted Net Income totaled $44.2 million ($0.96 per diluted share) for the third quarter of 2017, compared to $44.7 million ($0.98 per diluted share) in the same period of 2016.

NINE MONTH RESULTS

Consolidated revenues totaled $1.14 billion for the nine months ended September 30, 2017, representing a 20% increase from $955.5 million from the same period of 2016. This increase was driven by the acquisitions completed during January 2017. ATM operating revenues for the nine months ended September 30, 2017 were also 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 by the acquisitions completed during January 2017, ATM operating revenues in North America increased 11% and ATM operating revenues in Europe & Africa increased 6% (14% on a constant-currency basis) compared to the same period of 2016. ATM operating revenues in Australia & New Zealand totaled $99.8 million during the nine months ended September 30, 2017.

GAAP Net Loss for the nine months ended September 30, 2017 totaled $161.3 million compared to GAAP Net Income of $63.0 million in the same period of 2016. The GAAP Net Loss is attributable to asset impairments in the Australia & New Zealand segment of $216.0 million recognized during the three months ended September 30, 2017. See Asset Impairments in the Australia & New Zealand Segment in this earnings release for further discussion. The Company also incurred $15.3 million of professional services and other costs associated with the completion and integration of the acquisitions completed during January 2017 and additionally recorded $8.2 million in restructuring costs. The Company's intangible asset amortization expense was up $17.3 million compared to the same period of 2016 due to the Company's recently completed acquisitions.

Adjusted EBITDA for the nine months ended September 30, 2017 totaled $258.8 million ($265.1 million on a constant-currency basis) compared to $241.4 million of Adjusted EBITDA in the same period of 2016. The increase in Adjusted EBITDA was primarily driven by the acquisitions completed during January 2017, partially offset by slightly 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. Adjusted Net Income totaled $104.8 million ($2.27 per diluted share or $2.33 on a constant-currency basis) for the nine months ended September 30, 2017, compared to $112.8 million ($2.47 per diluted share) from the same period of 2016. The decrease in Adjusted Net Income is attributable to higher depreciation and interest expense as a result of the completion of the DCPayments and Spark acquisitions.

ASSET IMPAIRMENTS IN THE AUSTRALIA & NEW ZEALAND SEGMENT

During the third quarter of 2017, the four largest banks in Australia announced that they would remove direct charges on all domestic transactions at their ATMs. As a result of this unexpected market shift, the Company analyzed the anticipated impact to its Australian business which resulted in impairment charges of $140.0 million and $54.5 million to reduce the carrying values of its goodwill and intangible assets, respectively, associated with the Australia & New Zealand segment. Additionally, the Company recognized $21.5 million within the Loss (gain) on disposal and impairment of assets line item to recognize the impairment of certain ATM related assets. The Company acquired the business in Australia with its acquisition of DCPayments on January 6, 2017.

BORROWINGS AND LIQUIDITY

As of September 30, 2017, the Company had outstanding borrowings of approximately $158 million and had approximately $242 million in available borrowing capacity under its $400 million revolving credit facility due in 2021. Additionally, the Company had $61 million in cash as of September 30, 2017. The Company's other outstanding indebtedness as of September 30, 2017 included $288 million in Convertible Senior Notes due 2020, $250 million in Senior Notes due 2022, and $300 million in Senior Notes due 2025. The Convertible Senior Notes due 2020, Senior Notes due 2022, and Senior Notes due 2025 had carrying balances of $249 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.

On October 3, 2017, the Company entered into an amendment to its revolving credit facility. Pursuant to the amendment, the Company expanded the currencies in which the total commitments can be borrowed.

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. See Disclosure of Non-GAAP Financial Information in this earnings release for definitions of these Non-GAAP measures. This guidance is based on average foreign currency exchange rates for the year of £1.00 U.K. to $1.29 U.S., $20.00 Mexican pesos to $1.00 U.S., $1.00 Canadian dollar to $0.80 U.S., €1.00 Euros to $1.15 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 27.2% for 2017.

Included in the guidance above is the assumption that the deinstallations of the ATMs at 7-Eleven locations in the U.S., which began during the three months ended September 30, 2017, will 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. is expected to account for approximately 12% of the Company's consolidated revenues for the year ending 2017, based on the midpoint of revenue guidance. The Company estimates that the incremental gross margin for these ATMs during 2017 will be approximately 40%. The ATM deinstallation schedule continues to remain subject to change as of the date of this earnings release.

CONFERENCE CALL INFORMATION

The Company will host a conference call today, Thursday, November 2, 2017, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its financial results for the quarter ended September 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 Third 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 Thursday, November 16, 2017, and can be accessed by calling (855) 859-2056 or (404) 537-3406 and entering 95425707 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, 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 238,000 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

Adjusted Gross Profit, Adjusted Gross Margin, 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 Gross Profit represents total revenues less the total cost of revenues, excluding depreciation, accretion, and amortization of intangible assets. Adjusted Gross Margin is calculated by dividing Adjusted Gross Profit by total revenues. 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 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 nine months ended September 30, 2017, the non-GAAP tax rate used to calculate Adjusted Net Income was approximately 26.8% and 27.4%, respectively. For the three months 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, the Company used its previously 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 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 Nine Months Ended September 30, 2017 and 2016
(In thousands, excluding share, per share amounts, and percentages)

                   
  Three Months Ended Nine Months Ended
  September 30,  September 30, 
  2017 % Change   2016 2017 % Change   2016
                         
  (Unaudited)
Revenues:                   
ATM operating revenues $ 390,143   23.9 % $ 314,788  $ 1,105,191   20.4 % $ 918,207 
ATM product sales and other revenues   11,807   (12.8)    13,546    39,443   5.6     37,335 
Total revenues   401,950   22.4     328,334    1,144,634   19.8     955,542 
Cost of revenues:                  
Cost of ATM operating revenues (excludes depreciation, accretion, and amortization of intangible assets reported separately below.)   251,136   28.3     195,737    729,547   25.7     580,520 
Cost of ATM product sales and other revenues   8,920   (28.4)    12,453    34,671   2.4     33,873 
Total cost of revenues   260,056   24.9     208,190    764,218   24.4     614,393 
Operating expenses:                  
Selling, general, and administrative expenses   46,132   14.8     40,194    131,551   13.9     115,505 
Redomicile-related expenses   22   (97.7)    951    782   (93.6)    12,201 
Restructuring expenses   —  n/m    —    8,243  n/m    — 
Acquisition and divestiture-related expenses   2,889   7.8     2,680    15,338   210.6     4,938 
Goodwill and intangible asset impairment   194,521  n/m    —    194,521  n/m    — 
Depreciation and accretion expense   29,807   27.9     23,308    88,683   28.4     69,085 
Amortization of intangible assets   14,996   63.4     9,175    45,423   61.5     28,129 
Loss (gain) on disposal and impairment of assets   22,307  n/m    469    26,170  n/m    (475)
Total operating expenses   310,674  n/m    76,777    510,711  n/m    229,383 
(Loss) income from operations   (168,780) n/m    43,367    (130,295) n/m    111,766 
Other expense:                  
Interest expense, net   9,743   128.2     4,269    25,760   94.8     13,227 
Amortization of deferred financing costs and note discount   3,195   11.2     2,872    9,317   7.9     8,636 
Other (income) expense   (2,095) n/m    360    (1,730) n/m    748 
Total other expense   10,843   44.6     7,501    33,347   47.5     22,611 
(Loss) income before income taxes   (179,623) n/m    35,866    (163,642) n/m    89,155 
Income tax (benefit) expense   (4,053) n/m    8,388    (2,335) n/m    26,204 
Effective tax rate  2.3%     23.4%  1.4%     29.4%
Net (loss) income   (175,570) n/m    27,478    (161,307) n/m    62,951 
Net (loss) income attributable to noncontrolling interests   (9)  (25.0)    (12)   (3)  (95.8)    (71)
Net (loss) income  attributable to controlling interests and available to common shareholders $ (175,561) n/m% $ 27,490  $ (161,304) n/m% $ 63,022 
                   
Net (loss) income per common share — basic $ (3.84)    $ 0.61  $ (3.54)    $ 1.39 
Net (loss) income per common share — diluted $ (3.84)    $ 0.60  $ (3.54)    $ 1.38 
                   
Weighted average shares outstanding — basic   45,662,543       45,252,869    45,597,558       45,175,604 
Weighted average shares outstanding — diluted   45,662,543       45,850,061    45,597,558       45,765,235 
 

Condensed Consolidated Balance Sheets
As of September 30, 2017 and December 31, 2016
(In thousands)

       
  September 30, 2017  December 31, 2016
  (Unaudited)   
ASSETS      
Current assets:      
Cash and cash equivalents $ 61,498 $ 73,534
Accounts and notes receivable, net   112,392   84,156
Inventory, net   16,387   12,527
Restricted cash   43,646   32,213
Prepaid expenses, deferred costs, and other current assets   100,450   67,107
Total current assets   334,373   269,537
Property and equipment, net   504,395   392,735
Intangible assets, net   220,233   121,230
Goodwill   771,152   533,075
Deferred tax asset, net   7,260   13,004
Prepaid expenses, deferred costs, and other noncurrent assets   51,868   35,115
Total assets $ 1,889,281 $ 1,364,696
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Current portion of other long-term liabilities $ 31,540 $ 28,237
Accounts payable and other accrued and current liabilities   375,320   285,583
Total current liabilities   406,860   313,820
Long-term liabilities:      
Long-term debt   949,775   502,539
Asset retirement obligations   58,425   45,086
Deferred tax liability, net   43,287   27,625
Other long-term liabilities   71,761   18,691
Total liabilities   1,530,108   907,761
Shareholders' equity   359,173   456,935
Total liabilities and shareholders' equity $ 1,889,281 $ 1,364,696
 


SELECTED STATEMENT OF OPERATIONS DETAIL:
(Unaudited)

                    
Total revenues by segment:Three Months Ended Nine Months Ended
 September 30,  September 30, 
 2017  % Change  2016 2017   % Change   2016
                          
 (In thousands, excluding percentages)
North America                   
ATM operating revenues$ 249,964    11.9 % $ 223,285  $ 719,341    10.7 % $ 649,739 
ATM product sales and other revenues  9,654    (20.5)    12,137    33,191    0.2     33,129 
North America total revenues  259,618    10.3     235,422    752,532    10.2     682,868 
Europe & Africa                   
ATM operating revenues  107,497    14.2     94,154    293,827    6.3     276,452 
ATM product sales and other revenues  2,088    48.2     1,409    6,159    46.4     4,206 
Europe & Africa total revenues  109,585    14.7     95,563    299,986    6.9     280,658 
Australia & New Zealand                   
ATM operating revenues  35,368   n/m       —    99,752   n/m       — 
ATM product sales and other revenues  65   n/m       —    224   n/m       — 
Australia & New Zealand total revenues  35,433   n/m       —    99,976   n/m       — 
                    
Eliminations  (2,686)   1.3     (2,651)   (7,860)   (1.6)    (7,984)
                    
Total ATM operating revenues  390,143    23.9     314,788    1,105,191    20.4     918,207 
Total ATM product sales and other revenues  11,807    (12.8)    13,546    39,443    5.6     37,335 
Total revenues$ 401,950    22.4 % $ 328,334  $ 1,144,634    19.8 % $ 955,542 


                    
Breakout of ATM operating revenues:Three Months Ended Nine Months Ended
 September 30,  September 30, 
 2017  % Change  2016 2017  % Change  2016
                    
 (In thousands, excluding percentages)
Surcharge revenues$ 185,395   46.6% $ 126,504 $ 509,444   37.8% $ 369,658
Interchange revenues  124,259   5.2    118,162   361,158   5.3    343,121
Bank-branding and surcharge-free network revenues  48,916   0.2    48,802   143,256   1.1    141,699
Managed services revenues  17,096   100.6    8,522   48,146   83.4    26,246
Other revenues  14,477   13.1    12,798   43,187   15.2    37,483
Total ATM operating revenues$ 390,143   23.9% $ 314,788 $ 1,105,191   20.4% $ 918,207


                            
Adjusted gross profit and margin by segment:Three Months Ended Nine Months Ended
 September 30,  September 30, 
 2017 Gross
Margin
     2016  Gross
Margin
  2017 Gross
Margin
  2016 Gross
Margin
 
                            
 (In thousands, excluding percentages)
North America$ 88,670   34.2% $ 83,737   35.6% $ 245,576   32.6% $ 239,683   35.1%
Europe & Africa  44,396   40.5    36,656   38.4    111,097   37.0    102,102   36.4 
Australia & New Zealand  10,526   29.7    —  n/m    27,576   27.6    —  n/m 
Corporate & Eliminations  (1,698) n/m    (249) n/m    (3,833) n/m    (636) n/m 
Adjusted Gross Profit (1)$ 141,894   35.3% $ 120,144   36.6% $ 380,416   33.2% $ 341,149   35.7%
 
(1) As reported on the Company's Reconciliation of Gross Profit Inclusive of Depreciation, Accretion, and Amortization of Intangible Assets to Adjusted Gross Profit, see Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.


                    
Breakout of cost of ATM operating                    
revenues (exclusive of depreciation,                   
accretion, and amortization of                    
intangible assets):Three Months Ended Nine Months Ended
 September 30,  September 30, 
 2017 % Change 2016 2017 % Change 2016
                      
 (In thousands, excluding percentages)
Merchant commissions$ 130,859   39.0 % $ 94,136 $ 368,435   33.0 % $ 277,088
Vault cash rental  18,994   6.1     17,904   56,072   4.3     53,764
Other costs of cash  23,541   27.8     18,421   79,064   33.3     59,321
Repairs and maintenance  20,733   4.5     19,846   64,138   14.3     56,097
Communications  9,833   27.8     7,694   28,660   23.0     23,305
Transaction processing  5,684   42.7     3,982   17,022   45.2     11,727
Share-based compensation  197   (20.9)    249   336   (47.2)    636
Employee costs  20,463   23.8     16,525   59,271   17.0     50,666
Other expenses  20,832   22.7     16,980   56,549   18.0     47,916
Total cost of ATM operating revenues$ 251,136   28.3 % $ 195,737 $ 729,547   25.7 % $ 580,520


                    
Breakout of selling, general,                   
and administrative expenses:Three Months Ended Nine Months Ended
 September 30,  September 30, 
 2017  % Change  2016 2017  % Change  2016
                      
 (In thousands, excluding percentages)
Employee costs$ 24,073   14.5 % $ 21,022 $ 71,347   16.5 % $ 61,234
Share-based compensation expense  3,955   (38.1)    6,393   9,635   (36.4)    15,144
Professional fees  8,108   76.6     4,592   19,858   38.4     14,353
Other expenses  9,996   22.1     8,187   30,711   24.0     24,774
Total selling, general, and administrative expenses$ 46,132   14.8 % $ 40,194 $ 131,551   13.9 % $ 115,505


                    
Depreciation and accretion expense                   
by segment:Three Months Ended Nine Months Ended
 September 30,  September 30, 
 2017  % Change  2016 2017  % Change  2016
                    
 (In thousands, excluding percentages)
North America$ 16,415   15.9% $ 14,160 $ 50,973   22.9% $ 41,480
Europe & Africa  11,476   25.4    9,148   32,093   16.3    27,605
Australia & New Zealand  1,916  n/m    —   5,617  n/m    —
Total depreciation and accretion expense$ 29,807   27.9% $ 23,308 $ 88,683   28.4% $ 69,085
 

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

      
Long-term debt:September 30, 2017 December 31, 2016
      
  (In thousands) 
Revolving credit facility$ 157,630 $ 14,100
1.00% Convertible senior notes (1)  249,189   241,068
5.125% Senior notes (1)  247,869   247,371
5.50% Senior notes (1)  295,087   —
Total long-term debt$ 949,775 $ 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 $38.3 million and $46.4 million as of September 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 $2.1 million and $2.6 million as of September 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 $4.9 million as of September 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  341,691
Total shares outstanding as of September 30, 2017  45,680,321
 

SELECTED CASH FLOW DETAIL:
(Unaudited)

             
Selected cash flow statement amounts: Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2017 2016 2017 2016
                 
  (In thousands)
Net cash provided by operating activities $ 79,706  $ 89,346  $ 164,284  $ 213,931 
Net cash used in investing activities   (41,556)   (41,635)   (598,501)   (86,403)
Net cash (used in) provided by financing activities   (29,052)   (7,285)   427,284    (93,135)
Effect of exchange rate changes on cash   (777)   (557)   (5,103)   (1,169)
Net increase (decrease) in cash and cash equivalents   8,321    39,869    (12,036)   33,224 
Cash and cash equivalents as of beginning of period   53,177    19,652    73,534    26,297 
Cash and cash equivalents as of end of period $ 61,498  $ 59,521  $ 61,498  $ 59,521 
 

Key Operating Metrics — Including Acquisitions in All Periods Presented
For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

                       
  Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2017 % Change 2016 2017 % Change 2016
Average number of transacting ATMs:                      
United States   45,092   4.3 %   43,216    45,155   9.2 %   41,366 
United Kingdom and Ireland   21,688   31.1     16,540    21,498   33.1     16,151 
Australia and New Zealand   8,717  n/m     —    8,848  n/m       — 
Canada   6,197   239.6     1,825    6,152   233.3     1,846 
South Africa   2,606  n/m       —    2,460  n/m       — 
Germany, Poland, and Spain   1,627   31.0     1,242    1,526   29.7     1,177 
Mexico   978   (26.4)    1,329    1,078   (21.1)    1,366 
Total Company-owned   86,905   35.5     64,152    86,717   40.1     61,906 
United States (1)   12,175   (18.7)    14,970    12,392   (24.0)    16,297 
Canada   2,974  n/m       —    2,932  n/m       — 
United Kingdom and Ireland   682  n/m       —    632  n/m       — 
Australia and New Zealand   103  n/m       —    103  n/m       — 
Total Merchant-owned   15,934   6.4     14,970    16,059   (1.5)    16,297 
Average number of transacting ATMs — ATM operations   102,839   30.0     79,122    102,776   31.4     78,203 
                       
Managed Services and Processing:                      
United States   129,228   7.0     120,773    126,664   8.2     117,107 
Canada   3,259   85.1     1,761    3,339   101.3     1,659 
Australia and New Zealand   2,000  n/m       —    1,844  n/m       — 
Average number of transacting ATMs — Managed services and processing   134,487   9.8     122,534    131,847   11.0     118,766 
                       
  Total average number of transacting ATMs   237,326   17.7     201,656    234,623   19.1     196,969 
                       
Total transactions (in thousands):                      
ATM operations   388,736   8.1     359,731    1,141,144   12.4     1,014,803 
Managed services and processing, net   281,054   57.0     179,072    788,928   49.7     526,949 
Total transactions   669,790   24.3     538,803    1,930,072   25.2     1,541,752 
                       
Total cash withdrawal transactions (in thousands):                      
ATM operations   247,903   10.1     225,178    730,313   15.3     633,461 
                       
Per ATM per month amounts (excludes managed services and processing):                      
Cash withdrawal transactions   804   (15.3)    949    790   (12.2)    900 
                       
ATM operating revenues (2) $ 1,180   (6.2)  $ 1,258  $ 1,116   (9.6)  $ 1,235 
Cost of ATM operating revenues (2) (3)   774   (1.3)    784    749   (4.5)    784 
ATM adjusted operating gross profit (2) (3) $ 406   (14.3)% $ 474  $ 367   (18.6)% $ 451 
                       
ATM adjusted operating gross profit margin (2) (3)   34.4%      37.7%   32.9%      36.5%
 
(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. See Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.
 


Key Operating Metrics — Excluding Acquisitions in All Periods Presented

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

                       
  Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2017 % Change 2016 2017 % Change 2016
Average number of transacting ATMs:                      
United States   45,092   4.3 %   43,216    42,775   3.4 %   41,366 
United Kingdom and Ireland   16,819   1.7     16,540    16,571   2.6     16,151 
Canada   1,899   4.1     1,825    1,837   (0.5)    1,846 
Germany, Poland, and Spain   1,627   31.0     1,242    1,526   29.7     1,177 
Mexico   486   (63.4)    1,329    635   (53.5)    1,366 
Total Company-owned   65,923   2.8     64,152    63,344   2.3     61,906 
United States (1)   12,175   (18.7)    14,970    12,392   (24.0)    16,297 
Total Merchant-owned   12,175   (18.7)    14,970    12,392   (24.0)    16,297 
Average number of transacting ATMs — ATM operations   78,098   (1.3)    79,122    75,736   (3.2)    78,203 
                       
Managed Services and Processing:                      
United States   129,228   7.0     120,773    126,664   8.2     117,107 
Canada   1,943   10.3     1,761    1,984   19.6     1,659 
Average number of transacting ATMs — Managed services and processing   131,171   7.0     122,534    128,648   8.3     118,766 
                       
  Total average number of transacting ATMs   209,269   3.8     201,656    204,384   3.8     196,969 
                       
Total transactions (in thousands):                      
ATM operations   345,825   (3.9)    359,731    1,004,241   (1.0)    1,014,803 
Managed services and processing, net   185,276   3.5     179,072    515,362   (2.2)    526,949 
Total transactions   531,101   (1.4)    538,803    1,519,603   (1.4)    1,541,752 
                       
Total cash withdrawal transactions (in thousands):                      
ATM operations   212,957   (5.4)    225,178    621,164   (1.9)    633,461 
                       
Per ATM per month amounts (excludes managed services and processing):                      
Cash withdrawal transactions   909   (4.2)    949    911   1.2     900 
                       
ATM operating revenues (2) $ 1,243   (1.2)  $ 1,258  $ 1,230   (0.4)  $ 1,235 
Cost of ATM operating revenues (2) (3)   798   1.8     784    806   2.8     784 
ATM adjusted operating gross profit (2) (3) $ 445   (6.1)% $ 474  $ 424   (6.0)% $ 451 
                       
ATM adjusted operating gross profit margin (2) (3)   35.8%      37.7%   34.5%      36.5%
 
(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. See Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.
 


Key Operating Metrics — Ending Machine Count

As of September 30, 2017 and 2016
(Unaudited)

     
  September 30, 2017 September 30, 2016
Ending number of transacting ATMs:    
United States  44,738  44,688
United Kingdom and Ireland  21,748  16,665
Australia and New Zealand  8,636  —
Canada  6,235  1,835
South Africa  2,767  —
Germany, Poland, and Spain  1,653  1,279
Mexico  989  1,267
Total Company-owned  86,766  65,734
United States  12,083  13,961
Canada  2,962  —
United Kingdom and Ireland  613  —
Australia and New Zealand  103  —
Total Merchant-owned  15,761  13,961
Ending number of transacting ATMs — ATM operations  102,527  79,695
     
United States  130,215  121,791
Canada  3,255  1,832
Australia and New Zealand  2,002  —
Ending number of transacting ATMs — Managed services and processing  135,472  123,623
     
Total ending number of transacting ATMs  237,999  203,318
 


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 Nine Months Ended September 30, 2017 and 2016
(Unaudited)

             
  Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2017 2016 2017 2016
                 
  (In thousands, excluding share and per share amounts)
Net (loss) income  attributable to controlling interests and available to common shareholders $ (175,561) $ 27,490  $ (161,304) $ 63,022 
Adjustments:            
Interest expense, net   9,743    4,269    25,760    13,227 
Amortization of deferred financing costs and note discount   3,195    2,872    9,317    8,636 
Income tax (benefit) expense   (4,053)   8,388    (2,335)   26,204 
Depreciation and accretion expense   29,807    23,308    88,683    69,085 
Amortization of intangible assets   14,996    9,175    45,423    28,129 
EBITDA  $ (121,873) $ 75,502  $ 5,544  $ 208,303 
             
Add back:            
Loss (gain) on disposal and impairment of assets   22,307    469    26,170    (475)
Other (income) expense (1)   (2,095)   360    (1,730)   748 
Noncontrolling interests (2)   (9)   (15)   (19)   (50)
Share-based compensation expense   4,151    6,642    9,971    15,780 
Redomicile-related expenses (3)   22    951    782    12,201 
Restructuring expenses (4)   —    —    8,243    — 
Acquisition and divestiture-related expenses (5)   2,889    2,680    15,338    4,938 
Goodwill and intangible asset impairment (6)   194,521    —    194,521    — 
Adjusted EBITDA $ 99,913  $ 86,589  $ 258,820  $ 241,445 
Less:            
Interest expense, net   9,743    4,269    25,760    13,227 
Depreciation and accretion expense (7)   29,805    23,301    88,677    69,063 
Adjusted pre-tax income $ 60,365  $ 59,019  $ 144,383  $ 159,155 
Income tax expense (8)   16,178    14,271    39,595    46,314 
Adjusted Net Income $ 44,187  $ 44,748  $ 104,788  $ 112,841 
             
Adjusted Net Income per share — basic $ 0.97  $ 0.99  $ 2.30  $ 2.50 
Adjusted Net Income per share — diluted $ 0.96  $ 0.98  $ 2.27  $ 2.47 
             
Weighted average shares outstanding — basic   45,662,543    45,252,869    45,597,558    45,175,604 
Weighted average shares outstanding — diluted (9)   46,197,178    45,850,061    46,238,070    45,765,235 
 
(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) Expenses associated with the Company's redomicile of its parent company to the U.K., which was completed on July 1, 2016.
(4) 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.
(5) Acquisition and divestiture-related expenses include costs incurred for professional and legal fees and certain other transition and integration-related costs.
(6) Goodwill and intangible asset impairments related to the Company's Australia & New Zealand segment.
(7) 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. 
(8) For the three and nine months ended September 30, 2017, calculated using an effective tax rate of approximately 26.8% and 27.4%, 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 months 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, the Company's previously estimated long-term cross jurisdictional tax rate of 32%. See Disclosure of Non-GAAP Financial Information in this earnings release for further discussion.
(9) Consistent with the positive Adjusted Net Income, the Adjusted Net Income per diluted share amounts have been calculated using the diluted shares outstanding that would have resulted from positive GAAP Net Income.
 


Reconciliation of GAAP Revenue to Constant-Currency Revenue

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

                   
Europe & Africa revenue: Three Months Ended
  September 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 $ 107,497 $ (231) $ 107,266 $ 94,154  14.2%  13.9%
ATM product sales and other revenues   2,088   (2)   2,086   1,409  48.2   48.0 
Total revenues $ 109,585 $ (233) $ 109,352 $ 95,563  14.7%  14.4%


                   
  Nine Months Ended
  September 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 $ 293,827 $ 22,190 $ 316,017 $ 276,452  6.3%  14.3%
ATM product sales and other revenues   6,159   380   6,539   4,206  46.4   55.5 
Total revenues $ 299,986 $ 22,570 $ 322,556 $ 280,658  6.9%  14.9%


                   
Consolidated revenue: Three Months Ended
  September 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 $ 390,143 $ (623) $ 389,520 $ 314,788  23.9%   23.7% 
ATM product sales and other revenues   11,807   (6)   11,801   13,546  (12.8)   (12.9) 
Total revenues $ 401,950 $ (629) $ 401,321 $ 328,334  22.4%   22.2% 


                   
  Nine Months Ended
  September 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 $ 1,105,191 $ 22,022 $ 1,127,213 $ 918,207  20.4%  22.8%
ATM product sales and other revenues   39,443   355   39,798   37,335  5.6   6.6 
Total revenues $ 1,144,634 $ 22,377 $ 1,167,011 $ 955,542  19.8%  22.1%
 

Reconciliation of Gross Profit Inclusive of Depreciation, Accretion, and Amortization of Intangible Assets to
Adjusted Gross Profit

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

                 
  Three Months Ended Nine Months Ended
  September 30,  September 30, 
  2017 2016 2017 2016
                 
  (In thousands, excluding percentages)
Total revenues $ 401,950  $ 328,334  $ 1,144,634  $ 955,542 
Total cost of revenues (1)   260,056    208,190    764,218    614,393 
Total depreciation, accretion, and amortization of intangible assets excluded from Total cost of revenues   37,176    27,108    111,911    82,419 
Gross profit inclusive of depreciation, accretion, and amortization of intangible assets $ 104,718  $ 93,036  $ 268,505  $ 258,730 
Gross profit % (inclusive of depreciation, accretion, and amortization of intangible assets)   26.1%   28.3%   23.5%   27.1%
Total depreciation, accretion, and amortization of intangible assets excluded from gross profit $ 37,176  $ 27,108  $ 111,911  $ 82,419 
Adjusted Gross Profit exclusive of depreciation, accretion, and amortization of intangible assets $ 141,894  $ 120,144  $ 380,416  $ 341,149 
Adjusted Gross Profit % (exclusive of depreciation, accretion, and amortization of intangible assets)   35.3%   36.6%   33.2%   35.7%
 
(1) The Company presents the Total cost of revenues in the Company's Consolidated Statements of Operations exclusive of depreciation, accretion, and amortization of intangible assets.           


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, 2017 and 2016
(Unaudited)

                   
  Three Months Ended
  September 30, 
  2017 2016 % Change
  Non -
GAAP (1)
 Foreign
Currency
Impact
 Constant -
Currency
 Non -
GAAP (1)
 Non -
GAAP (1)
 Constant -
Currency
                    
  (In thousands)      
Adjusted EBITDA $ 99,913 $ (91) $ 99,822 $ 86,589  15.4   15.3% 
                   
Adjusted Net Income $ 44,187 $ (14) $ 44,173 $ 44,748  (1.3)%   (1.3)% 
                   
Adjusted Net Income per share — diluted (2) $ 0.96 $ —  $ 0.96 $ 0.98  (2.0)%   (2.0)% 


                   
  Nine Months Ended
  September 30, 
  2017 2016 % Change
  Non -
GAAP (1)
 Foreign
Currency
Impact
 Constant -
Currency
 Non -
GAAP (1)
 Non -
GAAP (1)
 Constant -
Currency
                   
  (In thousands)      
Adjusted EBITDA $ 258,820 $ 6,311 $ 265,131 $ 241,445  7.2   9.8 
                   
Adjusted Net Income $ 104,788 $ 2,860 $ 107,648 $ 112,841  (7.1)%   (4.6)% 
                   
Adjusted Net Income per share — diluted (2) $ 2.27 $ 0.06 $ 2.33 $ 2.47  (8.1)%   (5.7)% 
 
(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 46,197,178 and 45,850,061 for the three months ended September 30, 2017 and 2016, respectively, and 46,238,070 and 45,765,235 for the nine months ended September 30, 2017 and 2016, respectively. Consistent with the positive Adjusted Net Income, the Adjusted Net Income per diluted share amounts have been calculated using the diluted shares outstanding that would have resulted from positive GAAP Net Income.
 


Reconciliation of Free Cash Flow

For the Three and Nine Months Ended September 30, 2017 and 2016
(Unaudited)

             
  Three Months Ended  Nine Months Ended
  September 30,  September 30, 
  2017  2016  2017  2016
                 
  (In thousands)
Net cash provided by operating activities $ 79,706  $ 89,346  $ 164,284  $ 213,931 
Payments for capital expenditures:            
Net cash used in investing activities, excluding acquisitions and divestitures   (41,556)   (36,479)   (111,424)   (76,050)
Free cash flow $ 38,150  $ 52,867  $ 52,860  $ 137,881 
 

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 $ (155.9) $ (150.0)
Adjustments:      
Interest expense, net   35.0    34.0 
Amortization of deferred financing costs and note discount   13.0    13.0 
Income tax expense   (0.4)   1.7 
Depreciation and accretion expense   115.0    117.0 
Goodwill and intangible impairment   194.5    194.5 
Amortization expense   60.0    60.0 
EBITDA  $ 261.2  $ 270.2 
       
Add Back:      
Loss on disposal and impairment of assets   27.0    27.0 
Share-based compensation expense   15.0    15.0 
Acquisition-related expenses   16.0    17.0 
Redomicile-related expenses   0.8    0.8 
Restructuring expenses   10.0    10.0 
Adjusted EBITDA $ 330.0  $ 340.0 
Less:      
Interest expense, net   35.0    34.0 
Depreciation and accretion expense   115.5    115.5 
Income tax expense (2)   48.8    51.8 
Adjusted Net Income $ 130.7  $ 138.7 
       
Adjusted Net Income per share — diluted $ 2.83  $ 3.00 
       
Weighted average shares outstanding — diluted   46.25    46.25 
 
(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.
 


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