Q3 2019 Earnings Call
Thank you for calling the conference Center a conference operator will be with you momentarily.
Okay.
[noise] Good afternoon, My conference I'd number.
Hi, I'm trying to connect to the Cardtronics.
Senan I'd number Q3 earnings call.
Okay, one moment.
Thank you.
You may have a spillover from the last name.
Sure. It's Rachel are a C H O.
Yes, David Smith S M I T H.
And your company name.
[laughter] era, and I E R E.
Okay. Thank you all going into the conference.
Thank you.
You're welcome.
<unk>.
We expect transactions to grow.
This agreement reflects an alignment towards growth convenience and customer satisfaction for USA their members, our retail partners and Cardtronics.
We also entered into our first customer relationship with US bank the nation's fifth largest bank based on deposits initiating our partnership by branding approximately 80 of our ATM and the Charlotte North Carolina market.
US bank was looking to expand into this market and saw the value of being able to quickly and cost effectively deliver both their brand and ATM access for customers. We are excited about this new partnership with Us bank and aspire to deliver additional value and services over time, as they grow and optimize our platform and footprint.
Beyond these relationships. We also entered into numerous other branding arrangements this past quarter with both new and existing partners, including fifth third bank, who is enhancing brand visibility in the Carolinas by placing their brand on over 100 of our ATM in this important growth market.
On the Allpoint front, we signed agreements with 24, new financial institutions. This past quarter, providing surcharge free access to their customers via our nationwide network. We also expanded or sign new agreements with a number of growing and innovative fintech partners, including Vero and 26 and oxygen.
And to name a few.
Fintechs realize that to effectively compete for consumer accounts, they need a physical ATM solution on a national scale that does not send their customers to competitor locations. We have the premier in preferred solution for these organizations to offer their customers convenient nationwide access to ATM.
The unprecedented change in consumer financial services, that's being driven by technology innovation changing consumer preferences and competition is a growing opportunity for cardtronics our value proposition is increasingly resonating with a wide variety of f. lives, including national regional and community issuers.
The dialogues, we're having now a senior leaders at retail banks of all sizes is different banks are looking to grow strategically, but also optimizer costs and customer offerings, our portfolio solutions can help them with both their growth and cost optimization initiatives.
As we mentioned that our Investor day, we are now investing in high functioning deposit taking ATM is in the us to grow our partnership with that buys enabling more full service solutions. We currently have about 700 of these full function ATM and service and we'll continue to deploy them as we see opportunities to grow rep.
The news with attractive returns while still early days were seeing signs of incremental interest in this additional service capability.
We also continue to invest and other technologies, such as our mobile Ipi, which enables cardless transactions. These types of solutions will enhance our value proposition for current and future customers, especially Fintech partners Fintechs are realizing that while digital financial services are valuable and important convenience secure and.
Free cash access remains very important to their customers and critical to their customer engagement and growth plans.
On the retail side of our two sided network in the US we have recently renewed or expanded several relationships, including the renewal and expansion with our longtime partner righted, we will deploying Additionally, telus with rite aid during 2020.
The renewal and expansion of these key relationships demonstrates the importance of our offering for retailers they value our end to end services and ability to deliver incremental value through our network of Fi relationships retailers benefit from our scale best in class security reliability and increased store traffic, which is.
Increasingly important with many of these retailers reporting same store customer visit declines.
We once again delivered store traffic.
For our US retail partners as same store transactions in the US were up 2% for the quarter, which was driven by approximately 8% surcharge free transaction growth.
Same store surcharge transactions were down as expected for the quarter and offset a portion of the surcharge free growth surcharge free growth continues to be driven by new Allpoint participants new branding customers added to the network and also more volume from our existing Fi partners are growing branding solution and.
Allpoint network are driving millions of incremental store visits for our retail partners. Our success with financial institutions is delivering growth in our branding and surcharge free revenue category, which is up 15% in our North America segment for the quarter.
Looking more closely to Europe , and Africa segment, we reported solid topline and strong bottom line growth on a constant currency basis as many as you know we have recently been facing some headwinds in our UK business, which is by far our largest operation within the segment.
During the third quarter, we partly cycle to on one of these headwinds from the recent interchange rate reductions that adversely impacted our business.
As a result of up the first cycling and solid execution by our team to reposition our solutions and aggressively manage costs, we are able to achieve nearly flat revenue growth in the UK for the quarter and double digit adjusted EBITDA growth on a constant currency basis.
We like our position in the UK and see opportunities to leverage our platform and capabilities banks continue to reduce branches at a significant pace and we are becoming an increasingly important part of the cash infrastructure in that country.
Last month, the Guardian reported that over 3300 bank branches have been closed since 2015, nearly a third of all branches in the country.
While ATM transactions are down in the UK is worth noting that there are still over 170 billion pounds of cash dispense through ATM annually in this market that either bank or independent operator ATM.
Our services and capabilities are important to the citizens of the country and we currently account for about 16% of that cash dispense volume yet operate nearly 25% of ATM in the country.
While cash usage may continue to decline in the market. It is still a substantial an important part of the payments ecosystem.
As banks continue to reevaluate their branch in ATM strategies, we see opportunities to gain share and deliver sustainable profits and cash flows in the market.
We continue to see strong growth in our Germany, Spain in South Africa businesses with each of those regions once again, posting double digit top and bottom line growth for the quarter.
The growth in these regions continue to be mostly about deploying new ATM and quality locations with traditional branding solutions as well we see good runway for continued growth as we executed branding contracts over 600 locations and new ATM placement contracts for over 300 new sites.
In summary by all accounts it was a good quarter across our enterprise highlighted by solid operational execution and commercial successes with both retailers and financial institutions, resulting in strong Rick.
Reported numbers now I'd like to turn call over to Gary for additional details on the quarter and update on the outlook.
Thank you and we had a very solid third quarter with accelerating growth in both the top and bottom line, which yielded strong margin expansion.
I'll start my discussion this quarter with some additional details on the quarterly performance, starting with North America, where we reported constant currency revenue growth of 8% and adjusted EBITDA growth of 14%.
ATM operating revenue was up 4% for the quarter in North America, partially driven by US same store transactions that were up 2%.
Similar to recent quarterly results surcharge free transactions in the us were up approximately 8% for the quarter.
This surcharge free transaction growth was attributable to the recent growth and branding relationships increased participation in allpoint and increased usage of the network by our at by partners customers.
Bank branding and surcharge free network revenues in our North America segment were up $7 million for the quarter or 15%. This strong growth in our surcharge free category was partially offset by a small decline of about 1.3 million in North American interchange revenues similar to what we've seen earlier this year the largest driver this energy.
Revenue decrease is higher network fees associated primarily with surcharge transaction, resulting in lower net revenues received by US we expect to cycle on the network fee increase in Q2 of next year.
We also experienced strong growth in managed services and processing revenues during the quarter, reflecting the ramp up of previously announced deals.
The remainder of the lift in revenues came from higher equipment sales. These equipment filled provided a tailwind this quarter, but we do not expect these sales to be a key growth component of our medium term outlook.
Turning to our Europe , and Africa segment revenues, and adjusted EBITDA were up 5% and 22% respectively on a constant currency basis.
A few factors contributed to our strong financial results in this segment.
As Ed mentioned in his comments, we were nearly flat on the topline in the UK as we're able to offset a large portion of the link interchange rate reduction with the conversion of some of our freedoms ATM to pay to use ATM.
This action coupled with strong operational performance in incremental revenues from DCC enablement of over $5 million offset the link interchange rate reduction and the slight decline in UK same store transactions of 3% for the quarter.
Our growth countries in this segment, Germany, Spain in South Africa. Once again delivered double digit revenue growth, mostly driven by new ATM deployment. This revenue growth across the segment, coupled with strong operational improvements drove EBITDA margin expansion of over 400 basis points.
Our revenues in Australia, which accounts for less than 7% of our consolidated revenues were down over 11% and adjusted EBITDA was down 8% both on a constant currency basis.
This market continues to be under pressure from the late 2000 $17 billion ATM fee changes, but we are managing our business there aggressively and it continues to generate attractive cash flows.
We recently updated a majority of or ATM fleet in Australia to enable visa DCC transactions in time for the peak holiday in summer season in that market and expect to realize some benefits from that effort going forward.
Turning now to our consolidated adjusted EBITDA margin for the quarter of 24.8%, which was up 200 basis points for the quarter as we had good flow through from increased revenues in North America and operational improvements across all three segments.
More specifically, we experienced the year over year decline in the cost of ATM operating revenues of almost $8 million, while increasing ATM operating revenue by almost 4 million.
Additionally, we held the cost of ATM operating revenue almost flat sequentially versus Q2, 2019, while increasing ATM operating revenues by over $10 million.
These operational improvements were across most of our operating cost categories.
We experienced slightly higher SGN cost this quarter, driven mostly by increased licensing costs and other fees associated with the second phase of our new ERP system deployment and additional investment into information security and technology.
Our adjusted EPS for the quarter was 79 cents up over 27% and up 31% constant currency. This increase was primarily due to the same factors that impacted adjusted EBITDA as well as by a $2.8 million increase in depreciation expense that was mostly offset by a $2.1 million in.
Lower interest expense.
The adjusted EPS improvement was almost with officer was also impacted by the 1.7 million shares we purchase between May and September .
We estimate that the share repurchases improved our reported EBIT adjusted EBITDA EPS for the quarter by two cents or approximately three percentage points of the 27% increase.
Moving to capital expenditures, our total spend for the quarter was 35 million and it was 90 million for the nine month period.
This compares to 27 and $73 million for the same period last year.
Over half of a 2019 investment fall into growth category due to timing of deployments. We anticipate some of this year than originally planned capital investment will roll into early 2020.
Therefore, we now anticipate our full year capital investment to approximate $130 million versus our previous outlook of 135 million.
Our adjusted free cash flow continues to be strong and for the quarter. It was 48 million, which is in line with the amount generated in the third quarter of 2018.
The growth in adjusted EBITDA in the quarter was offset by the previously mentioned increasing capital investment.
For the nine month period, we generated 119 million in adjusted free cash flow, which is slightly higher than the amount we generated for the full year 2018 and significantly higher than the 74 million we generated in 2017.
Turning to the balance sheet in September we increased borrowing capacity of our revolving credit facility to 750 million from 600 million and extended the maturity another year to September 2024.
The increase facility provides us with significant liquidity and enhance capacity to retire convertible notes when they come due in December of 220, and still have plenty of remaining capacity for strategic priorities.
While we have not made any decisions on how we plan to repay the convertible notes next year. This certainly provides us a very attractive option.
Our net leverage ratio for the quarter with 2.6 times adjusted EBITDA down from 2.7 times last quarter.
The reduction in net leverage was driven by a combination of growth in adjusted EBITDA and a reduction in our net debt.
Repaid over 23 million on our credit facility, even after our Capex investments of 35 million and repurchasing 30 million in shares during the quarter.
With these Q3 share repurchases, we now have completed the existing $50 million opportunistic share repurchase authorization, having cumulatively acquired 1.7 million shares or 4% of our shares outstanding at a weighted average price of just under $29 per share.
As we mentioned previously after prioritizing high return organic growth investments, we will continue to primarily focus our free cash flow usage on reducing debt and so we enter our target leverage range of two to two and a half times adjusted EBITDA.
We are fast approaching the high end of that range and anticipate providing further update on longer term capital allocation priorities. When we are comfortably in our target leverage range.
Let me complete my discussion of the quarter with an update on the ERP implementation and some comments on restructuring charges.
We went live in the new ERP system in North American during the third quarter, while we will continue to make system enhancement enhancements and roll out additional functionality over time, our largest operations are now live on the platform. This is a significant achievement and we are pleased with the teamwork and execution that allowed us to bring a majority of our global operations onto a common.
Back office platform.
Regarding the restructuring charges, we continue to strive for operational improvement in our business and you are seeing the impact of these initiatives on our bottom line, we recorded over $3 million and restructuring charges this quarter, which in part related to the operational enhancements in the UK as well as systems and process consolidation associated with the ERP.
Rollout.
These costs, primarily relate to lease termination payment and severance charges in both of our North America in Europe and Africa segments.
Based on what we know now we would likely have a lower charge in the fourth quarter related to these activities and a small amount in the first quarter of 2020.
Now, let me turn to our outlook for the rest of the year. The third quarter was strong and was generally in line with our expectations with that mine, we are expecting similar year over year as reported performance in Q4.
Therefore, with just a quarter remaining we are mostly tightening our outlook for the year, our adjusted outlook as detailed in our earnings release, but some of the key metrics are as follows.
Revenues of 1.34 billion to $1.36 billion for the year. This is up $10 million on the bottom end of the range adjusted EBITDA of 302 to 310 million for the year up 2 million on the bottom end of the range and we've increased our adjusted EPS at both ends of the range in it is now $2.35 to $2 and fourth.
Four cents.
As implied by the midpoint of this range for the fourth quarter on an as reported basis, we're expecting revenue growth in the low to mid single digit range and adjusted EBITDA growth and the low double digit range, which is consistent with the results of Q3.
Of course foreign exchange rate movements could impact our future results and we've detailed are assumed FX rates in our earnings release.
Let me conclude by saying that we feel that our recent customer wins renewals and extensions coupled with our continued strong operational execution have set us up well for 2020, so that we can deliver on the medium term growth targets, we communicated at our Investor day in March.
As a reminder, that targets, we previously communicated weren't organic revenue growth range of 3% to 5% and an adjusted EBITDA growth range of 7% to 9%.
Obviously, there's a lot of work yet to be done and we're still working through our operating plan for next year that said we've had a good nine months in 2019 and have taken the appropriate measures to position ourselves to deliver on these financial targets.
We look forward to updating you again on our fourth quarter performance and outlook in late February with that let me turn the call back over to Ed.
Thank you Gary let me wrap up today by saying we are invigorated by the recent execution and success and to recap there are several key messages that we covered today first bank branch transformation continues to gain momentum and this is a positive trend for cardtronics as we aspire to gain more share of the cash supply.
Second our two sided network continues to strengthen with key partnership growth on both sides of the network our convenient network comprehensive solutions products security protocols and capabilities are quite unique and we are gaining market share with retailers and have buys as a result of our compelling value.
Yeah.
Third we are seeing growing demand from the Fintech community for cash solutions on a national scale, regardless of five size or strategy. We are a natural partner and we see increasing avenues for growth as we continue to invest in technology solutions and lastly, one of our top priorities as a team is driving.
Durable organic revenue profit growth.
And we are delivering on that promise based on the results over the past year and one half we are increasingly more confident in our ability to deliver on the strategic objectives and financial targets, we communicated at our Investor day earlier this year with that operator, we'd like to now turn the call back over to you.
For Q Annette.
And as a reminder to ask a question you need to press star one on your telephone.
I would draw your question. Please press the pound key please stand by only compiled the couponing roster.
And our first question comes from a line of Andrew Jeffrey with Suntrust. Your line is now.
Hey, Good afternoon, guys. Appreciate you taking the question.
I Wonder if we could dig in a little bit on the USAA deal. It's obviously, a nice expansion of that relationship at I just wanted to.
To understand what you were saying about that is this more of a transaction oriented deals and then branding.
Agreements you've had in the past.
Well good afternoon, a thanks for thanks for the question. So USAA, obviously has been a terrific long term partner of ours.
And for almost a decade with all point and a few years from brand names, we have add tremendous experience with on the working with them and as I think we all know have a very loyal membership.
Customer base.
And membership.
This relationship is quite unique.
Where their branding 5000 locations.
That are currently unbranded today allpoint locations around the country. That's volume based transaction based so it provides a convenience awareness with a very strong brand going into those locations, mostly in military markets, where they have.
Strong membership profile.
From current retired and former.
Our military personnel, so we expect us to grow over time because of.
More more volume oriented.
And driving more awareness and convenience.
For their members at these great retail locations.
Well those revenue be reported in the same.
Categories other branding deals.
As the other surcharge free so think of the overall as a surcharge free which as both.
Interchange as well as in the.
They Brandon.
But in that category all right. Thank you and dive.
The the Fintech wins, you've announced our are pretty encouraging and obviously thats.
Growth.
Segment of the market is there any way you can dimensionalize those in terms of how they do.
I think they might drive growth today are the meaningful yet and I guess the other question of that arise just as coil areas, how durable DC that youre obviously some.
New were customers newer entities that.
Our growing fast, but our maybe not as proven as traditional banks a little color on your thoughts around that segment in markets with great is a segment. Obviously, we're all very excited about seeing a lot of growth from an interest level, let's step back on why is that.
I think many are learning just the value of having the engage customer.
Who value access to a surcharge free national.
Network of ATM said I think many are are recognizing that learning that.
We have some terrific partnerships as I mentioned, adding more on.
This quarter and are in discussions with others have all of all sizes.
And we also believe over time. This is an avenue for additional products and solutions.
Particular, as we and they roll out other solutions on a mobile enabled basis and through our IR are directly with theirs.
Andrew I think we're early on we're all very early on on this many of those businesses are.
Our relatively new in young and they're building their customer profiles, but they tend to grow quickly.
Now having this access I think is very positive them, we look forward and aspire to to grow with them.
And frankly many of these are also bringing in new.
Customers to the network as well.
Okay. Thanks appreciate it I do have indicated.
Thank you and our next question comes from the line of Bob Napoli with William Blair. Your line is now open.
Hi, Thank you and good afternoon.
Some nice partnership announcements there too good to see that just on the.
2% organic growth then.
Our same store sales sorry in North America is where the was there any the transaction growth any different than that.
While overall, if you look ATM operating revenues.
As it was higher.
Just because there are multiple multiple sources and types of revenues versus just the same store.
Okay. So what is can you give the transaction trends.
Overall I don't have the.
The number as a total transactions right here with me right now.
Okay.
Then the your targets for next year the.
The long term targets that you're saying you're comfortable with as you looking into next year from what you see today to three to five topline 79 EBITDA.
The is at that higher in that in the 10.
Which regions our is north America in that range or maybe just little bit of discussion by region sure and Bob on the point on the on the same store if you recall that as withdrawals.
So the same store withdrawals on there obviously, we have other transaction time, yes, yes, yes, as well that that are occurring and where would that number on the 2% of specific to withdrawals and by the way as we've talked about before that number.
Can be quite volatile for a lot of different reasons and different things that are going on in particular regions particular markets.
It could be sometimes little bit higher can be lower its going to move around.
And candidly.
We were actually more focus.
On looking at overall different revenue streams different solutions, having different revenue types, adding new revenue types, adding both fixed and variable revenue types like a lot of the branding and allpoint membership have more fixed.
Elements into it as well managed services has more effects. So we have both fixed and variable and one of our key priorities as a company that has been driving more durable revenue streams or we have more of an influence over and I think you're seeing some of that.
Coming on as well going in to next year, obviously as Gary said, we'll provide guidance later.
But I would say over the last couple of quarters as you pointed out at the beginning here.
We have.
Announced some really terrific partnerships.
Both extensions and expansions and new ones over the last several quarters. Many of these take multiple quarters to really get up enable and really seeing the customer engagement, so that bodes well.
For the midpoint of next year and Thats why I think in both of our comments we feel good about.
Delivering on those targets that that we outlined.
Great and just last question one of your.
Editors generally different markets as a.
Benefits quite substantially off of.
Cc and I think thats been a focus and I know you're in different types of markets and.
That is are you are you seeing opportunities to benefit more from from DCC, given did that such a high margin revenue stream.
Over the next few years, yes.
And as well we talked about before.
Because our our platform is so domestically oriented where we are really are and the fabric of society and the countries where we operate.
Such a large physician in the United States, the United Kingdom.
<unk>.
Australia, Canada, just has such a high domestic orientation.
It's less.
A clinical DCC, but that doesn't mean, we don't have set and we do and historically, our DCC revenues as a percentage our total revenues roughly 2% to 3%.
And based on what we saw this past quarter I think Gary talked about some of the growth we saw in particular our Europe .
In Africa segment growth there that was now we see that going more towards.
Up a couple percentage points, probably in the 5% neighborhood and we see.
Ongoing upside opportunity.
Great. Thank you appreciate it.
Thank you and our next question comes from the line of Ramsey and they saw with Barclays. Your line is now open.
Hey, guys. This is Ben Lu Shantha Ramsey I wanted to follow up on during the conversation on from taken just kind of ask about the pipeline and I guess the same with your allpoint clients as it's been nice to see some kind of big bank wins as well as a number of fintech deal wins coming into the quarter.
We kind of expect more of the same going forward more larger banks on pointed morfin text and so I guess, how would you describe the pipeline there.
I wouldn't give us specific.
Guidance to closings and new business on our quarterly basis, I would just say over time.
We're way we've been talking about over the last year and a half this area and the focus on product broadening our solutions. This branch transformation and our comprehensive solution set has been leading to our growing at five.
Pipeline because of our multiple solutions and I would say its.
Our conversations are different now we work with a leadership of some of the largest financial institutions in the country.
Syntax and candidly.
Also a big tech scene and interest.
And this so we see this continued to evolve now you have some quarters you'll have.
More than others, it goes up and down but overall long term, we feel quite good about being the solution.
For our platform and network and our long term growth objectives.
Okay, and then if I could get one on modeling on you mentioned for the fourth quarter you expected to be similar on an as reported basis.
I know you previously commented that the product sales are tend to be lumpy can so can we expect maybe like a lessening in lessening FX impacts some kind of constant currency acceleration and lower product sales or that kind of smell right.
It feels like that might be more what you're getting at.
Yes, I mean, we didn't get that specific but.
We're not expecting as I mentioned product sales to be a big driver of our medium term outlook. If it's lumpy it depends on what quarter. It is and it's not something we spent a lot of time modeling.
In the the bottom line impact is different but.
We could have some fluctuation in currency that it could be either or but we expect to kind of perform in line with we did this quarter.
Okay, and I guess just follow up on that as it stands today do you expect FX to be a lesser headwind in the fourth quarter than the third.
Don't don't know at the moment, but we're hoping so okay alright. Thanks, so much.
Thank you and our next question comes from the line of Peter Heckmann with the Davidson. Your line is now.
Good afternoon, gentlemen, I could you talk little about.
You've done a good part of the work on your ERP transformation in terms of the back office consolidation of the infrastructure that we kind of built up over the years through.
Company was built through M&A can you talk about how you are tackling that what type of timeline you see there and maybe if you look what kind of potential savings you expected here.
Well that down that maybe one or two primary systems.
Yes, I mean, it's been a journey so far and we're going to continue I I think we're we're in very good shape right. Now this makes a big difference having one ERP system.
Doesn't mean every in every country. We're on the same system, we do roll up different ways, but the majority of the operations are under the main system, but there's still I'd say a lot of work to be done over the next couple of years Im not expecting that we will have everything integrated by six month time. So we still have work to do in the teams very focused on it.
Okay.
Elaborate on our longer term outlook.
Implies margin expansion in this would be one of those drivers who is just one on ongoing mindset of efficiencies effectiveness and in the business.
Got it got it and and you noted that the.
The USA agreement includes branding some unbranded units.
Update us on the approximate percentage of your own ATM is the currently carry no third party branding.
Well, if you just kind of step back looking at our overall portfolio.
There are roughly what we tend to think about water units at our overall kind of available for four Brandon.
Today, there are over 36000.
That are available for that.
And just shy of about 21000 when you include.
This new arrangements with.
With with USAA and by the way it as I mentioned earlier takes a while to roll in all of this out so over time, but just assuming all of these are now will be branded that leaves just shy just under a 16000 that would be available out there. So and we've been has been talking about these last couple of quarters.
<unk> increased interest in demand.
And feel good about this this particular area and our product solution, because it's very valuable for the financial institutions.
Great I appreciate I'll get back into queue.
Thank you.
Thank you and our next question comes from the line of Gary Prestopino with Barrington Research. Your line is now open.
Hey, good afternoon, everyone.
Afternoon.
These.
New relationships that you're signing up with Fintech, particularly for all point.
Are those exclusive relationships with all point or can these these fintechs put other networks on their cards.
It depends on the relationship obviously, we can't speak too specific specific ones.
But it has both.
Okay can you can you give us account of of with these these fin techs that you've signed how many additional card you you've added.
I don't I don't have they account for these most recent ones, but obviously our card count continues to grow and and expand but don't have the one specific to the most recent his most recent signs.
Okay. Thanks.
Thank you and our next question comes from the line of Kartik Mactac with Northcoast Northcoast Research. Your line is now open.
Hey, good afternoon and Gary.
Ed.
And you had really good results out of the UK concerning what's going on there and I'm wondering if you look at your fleet compared to what the market is doing from a transaction standpoint crowed standpoint.
Decrease standpoint, how it is cardtronics fleet compared to the market.
When you say to a transaction standpoint, you mean in terms of the number of transactions.
Total number of transactions. It seems like linked data would suggest that transactions are declining somewhere between 10, and 12% and so I'm wondering how that compares to cardtronics. Please.
Yeah.
What I would tell you. This is kind of stepping back look at so what is you see the data that from from link in the overall contraction. If you look at our same store, obviously I think Gary mentioned in this call we were down roughly.
A 3% on a same store basis, which frankly it was.
Was pretty decent and also relative to the overall market.
The bigger story there is when you look at the shift thats been occurring over time and is this reduction in overall bank ATM.
Bank branches, who have had a disproportionate reduction and obviously, we've picked up share over that and we would expect that overtime to continue and also have other solutions.
For the market and for the financial institutions to help support their goals and objectives.
They're in in that market.
In.
And any thoughts maybe on when you convert an ATM in the UK from free to pay obviously is paying dividends, but is there.
And the average number transaction you're able to maintain.
Or still the number of ATM you believe more ATM as you can convert from for you. So is on the existing ones.
Well monitor transactions are able to maintain and then how many more do you think you can convert.
Yes, well first of all so stepping back as you know we announced we pulled.
2018 comes out and also we converted about 3000 from of free to use a pay to use and we are big fans of free to use in support that but it has to be supported an economic sense, where how it makes sense.
And we did after convert some to pay to use and when that happens yes. There is a fairly.
Considerable reduction in volume.
On that now I think what was very strong as we reported this past quarter is that Frank our revenues in the UK were about flat.
On a year over year basis, even though we had the link reductions.
And have seen some of the same store decline, but thats just because of how we've had to manage and fine tune that.
Transition from where you used to pay to use the number of those locations.
What the what the pricing is one that honestly is very active by the team there in that market.
So we will continue to.
We're fine.
Work with the parties.
And also the communities.
For offer the best solutions in the country.
Thank you very much I appreciate it thank you.
Thank you and our next question comes on line of Tim Willi with Wells Fargo. Your line is open.
Thanks, Good afternoon, a couple of questions going back on.
From an earlier question around that Fintechs.
You can sign on.
Do you have any insight around.
Those fintechs my shared with you around.
Cash access and card activity generally speaking I know you said you don't have card commercial off the top your head I competition, just any color that you have around how those customers are acting around ATM usage in cash usage.
Well it's growing.
And so as is the engagement.
With that platform with these customers so as they grow obviously.
We will grow with them.
But also the awareness in the usage in the promotion.
John This is all.
Quite still early on I think we're on the early innings of an opportunity here and as I mentioned earlier not just in terms of.
The usage for cash a lot of this today is as card it.
What will move out over time as more mobile enabled and also different transaction types on the mobile.
As a as this broadens out in the market I think getting awareness understanding that with all point.
On.
On their on their App.
We will lead to growth one of the things that we know we've learned over the last couple of years is really working very closely with the issuers.
In terms of the awareness and so partnering with them closely driving that and they're learning the value of having.
Surcharge free cash access to a nationwide network.
Helps drive engagement for them as well and they see the value of that and how we can partner together to help their solution even be more successful.
In just two more questions. Another one on Stantec. So you talked a lot about I think contracts you sign of being used by UK and Germany are pretty robust fintech and digital bank markets in terms of startups and back I think some are coming to the U.S. originally launched over in Europe I am just Q.
Areas like is that something on your roadmap you have discussions are you is it isn't an opportunity you're sort of trying to figure out how do we export what we're doing here with the centex over into Europe , just any thoughts there.
Absolutely.
As one of the great things in terms of lot of the work that we've been doing.
In the business is making sure as we're developing these products and solutions that we can utilize those where we see the market opportunities in various markets you mentioned.
They are in the UK one on one of those in 26, who is coming here to the U.S. and announcing that.
Here recently for this quarter.
So we are doing.
Exactly that as you point out town and see future opportunity in those different markets our products and solutions are at a different stage.
In the us.
Then in other countries. We've invested on this heavily here to get it up and running and then we will begin exporting that on as we feel comfortable on on measure basis.
Great. My last question just goes back to you are seeing a little bit and I guess, maybe just allpoint overall, but as you think about 2020.
Whether it be tied into USAA here, just the overall allpoint marketing and what we see in learning as you focus this year on driving that engagement and awareness is there anything we should think about quarterly for next year or the possibility of maybe a marketing budget.
Marketing and advertising.
Being upsized downsize or anything specific that you are seeing a launch that we should just think about in that STN a line item as we do our quarterly modeling.
Yes very.
Very good very good question on it will give more guidance.
After as Gary said after the first of the year in that so at this stage we haven't finalized.
Any plans around that specifically and will outline that later I will say.
As I mentioned last quarter. This is an area, where we are investing.
We now have a chief marketing officer.
And we're enhancing and building that our data analytics our capabilities.
Experience and engagement with direct with the with the Conns consumers, who are coming to the ATM is working with our partners. So it is an area of acute focus.
Perfect. Thanks, very much at all I have.
Thank you.
Thank you and our next question comes from the line of Reggie Smith with JP Morgan. Your line is now open.
Okay gentlemen, thanks for taking my question.
Great quarter wanted to ask you see looks like withdrawal transactions were down I guess, 9% and obviously the different.
Pockets around the world and I was hoping you could give us a little color on kind of what you're seeing that sounds like.
Same store was down low single in the UK, but can you guys just walk us around the world.
General growth rates in as you get to us Im curious to know what you know surcharge versus kind of all point.
The withdrawal transaction growth rates were.
The net.
The net bucket.
So.
The biggest driver that Reggie by the way good afternoon. Thank you.
Is is the change from free to used to pay to use.
The United Kingdom is the biggest change on the withdrawals and also when you look at that interchange.
Line item on our RPL on revenues.
Changing from free to use to pay to use and that band based reduction thats by far the largest obviously you do have some underneath that same store reduction in the UK.
In the US we had same store same store growth, but thats, the lion lions share of that.
All point.
Quite strong.
And as we pointed out that line item on the.
Revenue for both brands.
Branding and surcharge free networks.
It was up I think 15% for for the quarter, So very strong double digit.
And coming from multiple factors, whether that's new branding relationships, new allpoint relationships, expanding those and having better engagement with with our partners and and consumers.
Got it yet so it sounds like going back to your analyst day earlier. This year one of the things you guys called out was that.
There was still a pretty big I guess awareness gap.
For a lot of the Allpoint card holders and just curious I know, it's only been a few quarters.
Any.
Is there anything you can provide there any color metrics anecdotes you could provide there.
As it relates to increased awareness and things like that and how should we.
Monetary measured that.
Over time.
Yeah, Great question I would say the opportunity. Since then is even getting bigger because now we have over 60 million cardholders.
With all point in their wallet and again a lot them don't even know it.
It is one of our chief.
Activities are working with our key fire partners with our retailers driving that awareness. This goes back to Tim's question around marketing why building out a marketing team getting that awareness and support I would say is probably one of the biggest upside opportunities in the businesses, having more and more engagement and by the way.
Okay.
It is also one of the biggest opportunities and the company because remember over 90% of the transactions.
For cash withdrawals in deposits happen at a bank branch or bank ATM.
That is declining.
You are tellers fewer branches.
Thats consolidating we are the perfect solution to serve that on a more convenient basis.
In a more efficient way and Thats, where as we drive that awareness.
And having that two sided network everybody benefits by that's why our confidence is where it is as we think about the future.
And if I could sneak one last question and it's when you you ended July last comment with the word confidence in here you talk I can hear the passion your voice as you kind of described.
The trends that are going on my question.
With all that said.
Does it feel like there's a.
I guess a shift in how banks are looking at this from a pricing perspective, and so is there an opportunity to counter.
Kind of flex your muscle.
As these these relationships come up for renewal, whereas you glaad pits for.
These deals where where you are now able to maybe commands a slight premium for for bank branding.
Relationships is it too too soon to too.
Two.
To think that way.
Yes, I assume knock on talk about pricing I would just say what is different frankly is.
Candidly argument travel schedule and a lot of our travel schedules, which is the number of meetings engagement and moving up higher in the institution because of our comprehensive our solution is not just for customer growth customer engagement driving operating efficiencies and now with rolling out deposits a solution for banks of all sizes and financial institutions of all.
All sizes for Fintechs of having both cash and cash out now see that as a comprehensive solution. It's our goal of getting the partners broaden.
On both sides of that network deepening the relationships and getting more utilization.
And candidly.
Obviously, where we've done a lot the company's done a terrific job on that.
Building out the overall network.
And where we see the momentum now is.
Moving up the stack.
With with everybody in having building deeper partnerships.
With these these great partners.
Perfect.
Sounds good congrats on the quarter.
Thanks ratings.
Thank you and our last question as a follow up comes from Bob Napoli with William Blair. Your line is now open.
Thank you I just wanted to.
Ill ask about entertained.
The interchange revenues the are they have there been other changes in entertained or there are there risk to other changes in the interchange rates.
In.
Any of your markets.
Well I, obviously, the most substantives.
One was the changes with link.
Other than that outside of that the to the too.
Changes there.
On that but no I would say just kind of stepping back on that Bob is.
One of our top priorities is driving the durable organic revenue growth and having more influence.
Over our srams and less of that impact by others and frankly with the growth in all point growth and brand in.
The growth in managed services you have both fixed and variable revenue streams and also we are having more control.
Over our prior over impacts from other parties. So we would hope to see event risks like that to decline.
Of our overtime.
Okay.
And then just I mean, your stock has had a nice move over the last couple of weeks and I guess is.
Have you guys were.
You buying back shares after not saying that that's the only reason stock went up but where are you buying back shares.
Post quarter end in October .
No no. We show we went through the authorization that we had prior to the quarter end.
Great. Thank you appreciate it.
Thanks.
Okay.
Thank you and this concludes today's question and answer session I would now like to turn the call back to at West.
Cardtronics CEO for any further remarks.
Thank you all for your support interesting Cardtronics and we look forward to our ongoing discussions going into the first the year and outlining.
The details on the plan objectives going into 2020 with that thank you very much and have a terrific day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.