Q2 2020 Cardtronics PLC Earnings Call
[music].
[noise], ladies and gentlemen, thank you for standing by and welcome to the clock Tronics second quarter 2020 earnings Conference call.
At this time all participants on in listen only mode. After the speakers presentation. There will be a question and answer session asked the question. During the session you would need to press Star then one on your telephone.
Please be advised that todays conference is being recorded.
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I'd now like to hand to conference over to your speaker for today, Brad Conrad you may begin.
Thank you good afternoon departure second quarter 2020 conference call.
On the call today, we had at West Chief Executive Officer, and Gary Ferrera, Chief Financial Officer.
Start with prepared remarks, and then take questions.
Before we begin a cautionary statement regarding forward looking information during the course of this call will make certain forward looking statements regarding future events results or performance.
Any forward looking statements made on this call are subject to risks and uncertainties, including but not limited to.
Vince market conditions, and other risks and uncertainties that could cause actual results to differ materially.
Please refer to our earnings release in or reports filed with the FCC, including our form 10-K for the year ended December 30, Onest 2019 updated bar forms 10-Q, four the first and second corners, which described forward looking statements and risk factors and other events that could impact future results and other factors that could impact our business.
The statements on this call are made as of the date of this call and are based on current information and maybe out that David at the time of any replay of this call. We assume no obligation to update any forward looking statements made today to reflect events that occur or circumstances that exist. After the date on which they remain.
In addition, during the course of this call we will reference certain non-GAAP financial performance measures.
Our opinion regarding the usefulness of such measures together with a reconciliation of such measures. The nearest GAAP measure is included in the earnings release issued this afternoon and available on our website.
We've also posted supplemental investor materials regarding the quarterly results along with additional information, including recent performance information since the end of the second quarter on the Investor Relations page on our website at Cardtronics Dot com.
We will make reference to some of the pages in this earning supplement during the course of today's call.
With that I will turn the call over that.
Great. Thank you Brad.
Everyone and thank you for joining our second quarter results call. It's good to be with you today, we have lots to cover first I would like to reach out to our employees to thank them again I cannot be more proud of the substantial efforts and sacrifices made by our employees to help navigate this terrific company through this challenging time and position us to capitalize.
On a burgeoning opportunity for our business.
It's great to have a purpose and whatever you do and our purpose is to provide convenient reliable and safe access to cash for individuals and communities that we serve around the world.
Cash one of the preferred forms of payment in the overall payments ecosystem provides comfort uncertainty in times of crisis and there has never been more cash in circulation than there is today.
We embrace our role as a growing platform in the payments ecosystem and no. We are building trust with our partner financial institutions retailers in their respective customers. Since we reported our first quarter results in early May and then provided a mid quarter business update on June 15, Im pleased to report that our business has.
Continues to steadily improve and our conviction in the business and our growth opportunities have increased.
As Brad mentioned, please follow along in the Investor supplement that we posted on our IR section of our web site.
Referring to page three of the supplement I would like to convey the following key messages today.
First transaction volumes are recovering across all regions and recently reached near prior year levels in the United States on a same store basis.
Also the total value the cash that we dispense was up double digits in the us versus last year, a strong indicator of the continued demand for cash.
Second dependent in the recent economic conditions have highlighted the resiliency of our platform.
Third I believe the trend of bank branch transformation is accelerating through the pandemic and consequently, our new business opportunities with F. buys in the us have never been stronger.
Fourth our Fintech partners are now driving meaningful growth with monthly transaction levels up over 225% since January of 2020.
And fifth we are well positioned financially and we will continue to focus on revenue and earnings growth free cash flow and a strong balance sheet.
Let me start with a quick recap for the second quarter results highlighted on page four.
The results were of course significantly impacted by the global pandemic and the related shelter in place directives placed on businesses and citizens are costs all of our geographies.
Revenues for the quarter were $233 million, while adjusted EBITDA came in near $47 million better than previously expected.
Our adjusted free cash flow was 38 million quite solid in the context of the operating environment and a testament to the resiliency of our platform and the team's focus on capex cost savings measures and working capital.
This solid cash flow enabled us to further reduce debt during the quarter.
While the short term impact to the transaction levels was significant in each of the countries, where we operate the recovery has been quite different.
Withdrawal trends and revenues have recently recovered to near prior year levels and both of Us and South Africa, while the recovery has been much more gradual and all other countries.
The contrast in recovery among the various markets has largely been due to the strictness and duration of the shelter in place directives.
The mix of retailer type or venue of location, such as a grocery store versus a casino as well as the breadth of our products and solutions in each specific country.
Page five reflects the transaction recovering in the US which has essentially been near prior year levels on a same store basis for June and July.
You will see on page six at the recovery in same store withdrawals in the United Kingdom has been more gradual but has consistently improved each month as restrictions have been needs in a more conservative basis across the UK.
It is important to note that these same store withdrawal charts include locations that were closed during the quarter due to Lockdowns and therefore has zero transactions this quarter, but did transact and the same period last year.
So it's a fairly rigorous comparison metric.
We are encouraged by the progress over the last few weeks in most markets outside the us and expect to improvement to continue with additional openings and general loosening of restrictions.
As mentioned last quarter, our business in countries outside of the us have a higher concentration of either touristic or entertainment related venues, which have all been severely impacted but which we believe will eventually recover and lead to improved results.
The trends in the us in South Africa appointed two important factors demand for cash is healthy and second the quality of our proprietary products and solutions is a differentiator.
Regarding cash demand remains strong and currency in circulation is up in each of the countries where we operate.
Looking at page seven.
US currency in circulation was up 12% over the last three months and is approaching a record of two trillion dollars.
Meanwhile, cash dispensed from our platform in the US was up 16% in June followed by an astonishing 27% in July.
I've heard some folks expressed concerns regarding dirty cash or cash declining of course. These concerns have been germinated by those with an agenda.
Well consumer action in the facts suggests the opposite is actually true as I mentioned cash in circulation and our dispense levels are way up which speaks to demand as well as the many attributes of cash just this week. The fed published a report on consumer payments and the coven 19 pandemic.
This report indicates of the individuals who made in person payment during the pandemic slightly more reported using cash to make in person payment during the cold period versus last year.
Further the fed report goes on to say and I quote the similar rate, which cash is being used in person suggests that stories on the erosion of payment preferences. During the pandemic may be overstated and quote.
Very interesting.
If you look at page eight the World Health organization and central banks around the world indicate there is no evidence of the disease being passed by or use of bank notes.
You also see the science behind the research, indicating that cotton and Lennon, which is what the US dollars made from our chorus substances and weak transmitters of particles as compared to glass plastic and metal such as your phone or debit card.
Independent surveys of consumers also indicate most individuals bleed cash as safety use in most prefer to use cash for small ticket items.
Anecdotally this maybe why some smaller retailers initially limited cash use upon their initial reopening, but then subsequently drop those restrictions largely due to consumer response.
The pandemic has also as illustrated the durability of our platform most especially in the us our largest market.
Looking at page nine in the supplement you will see the majority of our transactions are in locations outside of the largest 20 MSR days.
And no Metro area, including New York oral la represent even 5% of our withdrawals or number of ATM.
This reflects that our geographic dispersion is excellent.
Separately, we are well diversified with our partnerships with leading retailers split nicely among pharmacy convenience and grocery operators of note over 80% of ours state in the us is deemed to be an essential locations.
All of these attributes our partner when it comes a partnership opportunities with leading financial institutions as they seek to maintain presents and consolidate branch locations. Accordingly surcharge free withdrawals now represent nearly 60% of our total withdraws across our us non managed service.
The state.
This has all been a core part of our strategy over the past two years to drive more durable revenue streams from our proprietary solutions.
And as you can now see the results in our BNL.
Looking at our recent commercial successes on page 10, the strength in establishing new and expanded partnerships with leading retailers at buys and Fintechs continued from Q1 into Q2.
Despite all of the distractions and closures associated with the pandemic.
Notably, we established a new partnership with Keybanc, a top 25 in the US that is now on Allpoint network member.
All point now accounts seven of the top 20 retail banks in as Us partners.
I believe new Allpoint relationship with Keybanc represents an early proof point on the accelerating trend of bank branch transformation.
Despite the locked down during Q2, we signed 13, new allpoint relationships, including one with a significant fintech and added 24, new or expanded partnerships with flies to brand over 900 ATM apps.
As you can also see on page 10, the quarterly growth has been accelerating on the bank branding and surcharge free network revenue line on our TNL. This category grew 8% this past quarter, overcoming lockdowns and depressed transactions related to variable network access fees.
In addition to the success in Q2 with leading that buys and Fintechs. We also broaden our retail footprint with leading grocer Soviets in Canada to place over 500 ATM.
This follows the announcement, we made last quarter initiating a new exclusive partnership with leading convenience store operator cases to place approximately 2118 pounds in the U.S stores. These installations are currently underway.
As discussed during the last quarterly call I mentioned that the Pan NIM would likely serve as a catalyst to accelerate branch transformation and lead to closings and some of the branch networks in many of our markets.
As illustrated on page 11. This theory is now supported by public statements from many of the nations largest banks, who have indicated that they intend to reduce their footprint.
Let me take a minute to highlight why we're so we're encouraged by this trend.
First consumers value cash in the freedom of payment choice most of them individuals' one the ability to pay with a card with credit with tap digital or cash.
Cash continues to be one of the preferred forms of payment because as a secure is reliable and as private and increasingly important attribute in today's digitized world.
Cash payments as a percentage of overall payments may continue to decline due to the growing denominator of the total number of payments, but cash in circulation has continued to rise.
And contrary to assure thesis the use of cash is not going away what will be diminishing, though are the number of branches.
And if you look at page 12 over 90% of the cash withdrawal and deposit transactions take place added five branch or Fi ATM.
Today, we handle less than 4% of the transactions yet we represent 9% of the ATM in the us in an even higher percentage. If you just look at the number of unique locations.
We outlined this strategy early last year to leverage our unique platform in the us and increase our share of transactions through proprietary scalable products and solutions and the result of accelerating as evidenced by our growth in the bank branding Allpoint and managed service solutions over the past year.
We believe we have unique opportunity to partner not compete within five to serve their customers cash needs and allow them to lower their higher cost cash infrastructure, which is no longer our core business differentiator for them in the eyes of their customers.
We have proprietary scalable solutions with Allpoint branding deposit cation and mobile solutions as well as managed services. Our us platform is convenient and consumer friendly and is built on a highly secure and scalable and integrated end to end platform.
Everybody wins, the consumer can have convenient surcharge free cash in our cash out access the fi conserve their customers cash needs and an on demand customizable and convenient way and the retailer wins with more store traffic with money in consumers' hands.
Cardtronics ones as we get nearer to fill fulfilling our vision to be a trusted platform.
In the payments ecosystem with scalable high ROI growth.
One other highlight from this past quarter is the transaction growth. We are now witnessing with our growing list of Fintech partners.
Although these businesses are still relatively small the group now represents about 5% of our total allpoint transactions and is growing quickly.
Looking at page 13, the monthly transaction volume has increased over 225% just since January which is very impressive given the pandemic headwinds.
These digital only challenger banks are laser focused on their end customer.
Building, an experience and solutions that have been customized to meet the needs of their target segment.
Our integrated solution plays an important role in the success of their business model from a cash oriented segment that they are targeting to the no fee customer promise they promote.
In addition, our solution provides the national coverage they require with premium retail brands that helped build confidence and trust in their consumer brand.
This is a very exciting dynamic sector that we think has a lot of upside potential.
So in summary in the face of Gale force when called Coven, 19, we experienced new customer growth and new business opportunities with F. buys of all sizes in the us and have never been stronger.
We believe this is a long term trend and our goal in the US is to gain a higher share of the 90% of transactions presently served by five today in consequently, supporting our retail partners. This will be achieved by growing in broadening our partnerships on both sides of our two sided network.
The final comment I would like to make before turning the call over to Gary is regarding the balance sheet. In addition to all the commercial operational and new product development successes, we experienced over the past quarter around the world The finance and legal teams did a terrific job amending and our revolver and executing on a new term loan during the quarter give.
Yes, a lot more flexibility and extending our maturity schedule out to 2027.
We will continue to focus on delivering revenue and earnings growth free cash flow strong balance sheet as mentioned last quarter, we suspended our opportunistic stock repurchase program and are currently using free cash flow to pay down debt and Gary Let me turn the call over to you to give some more color on the second quarter results and the outlook.
Thank you Ed and welcome everyone I will start with a quick recap of our financial performance in the second quarter, and then talk about the balance sheet and liquidity before moving into what we are currently experiencing what could happen over the next few months.
First the cobot 19 pandemic unrelated governmental orders and recommendation had a significant impact on our Q2 results. So the year over year comparisons for the quarter are somewhat yet.
Somewhat less useful in addition, all the comparative financial metrics that I will mention today will be on a constant currency basis.
The seapass year over year declines in transactions and revenue occurred in the month of April with sequential improvements in both May and June total revenues of 233.2 million were down 30.5% for the quarter.
Adjusted EBITDA of 46.7 million declined 42% and delivered an EBITDA margin of 20%.
We expect that Q2 will likely be the low watermark for the year.
Looking at our financial results by segment North America has been the most resilient as revenue down 19% year over year in EBITDA down 24% year over year have largely been tracking with recovering transactions in the us, but our small businesses in Canada, and Mexico have been more significantly impacted and slower to recover.
For the second quarter you at same store withdrawal transactions declined 14%. This measure includes nearly 5000 ATM that were shut down for extended periods of time during the quarter.
These ATM is we're active throughout the prior year comparison period and include places such as amusement parks universities and other locations that were forced to remain closed for large parts of the second quarter.
The transaction performance steadily improved throughout the quarter and into July for the month of June use same store withdrawal transactions declines were 3% versus prior year. While July same store withdrawal transactions were about flat.
Our bank branding and surcharge free network revenues, almost all of which are in North America have continue to grow and were up 8% year over year in the second quarter.
The recovery has been slower in our Canada business, where we have a good site casino component and these are only just starting to reopen in certain locations. We have a relatively high percentage of costs in our North America segment that our variable, which along with focused cost savings measures during the quarter assistant and delivering a solid adjusted EBITDA result.
In light of the reduce transaction based revenues.
Our Europe and Africa segment saw the steepest revenue decline down 51%, while EBITDA was down 65% from Q2 last year.
These declines were attributable to a slower sequential recovery in transactions a significant decline in cross border revenues and a higher percentage of fixed costs due to our vertically integrated business in the UK.
Cross border revenues in our Europe, and Africa segment were down almost 9 million from Q2 last year, which had a significant impact on our EBITDA and resulting margins.
We would expect a similar impact versus prior year during Q3 as travel restrictions are only slowly starting to east.
For the second quarter same store withdrawal transactions, the UK declined 52% with transaction declined lessening throughout the quarter in into July June same store transaction declines were 47%. While July same store declines were at 36% as the government continues to gradually ease restrictions.
Q2, adjusted EBITDA, Europe, and Africa segment was positively impacted by approximately $4 million benefit following the recent legal decision by the Supreme Court in the UK, removing business rate effectively a form of property tax for certain ATM.
We expect a similar benefit of approximately 4 million in the second half of the year as a result of this recent UK decision.
And our smallest segment at approximately 5% of revenues, Australia, and New Zealand revenue declined 48% for Q2 2019, while EBITDA declined 63%.
While casino and gaming sites in Australia were hit, particularly hard throughout Q2 transactions of essential locations had approved to down 16% of the month of June and down 12% for July after having been down nearly 30% earlier in the quarter.
You may notice that our company owned ATM count in the key operating metrics section of our filings is lower by approximately 6000 ATM is versus Q2 of last year. This metric is calculated based on the number of ATM switch transact in any given quarter. This decrease was driven by site closures associated with Coke.
19, Lockdowns and is not reflective of any material attrition or current contractual changes.
We expect this ATM count decreased to be mostly temporary for example, the month of July we had nearly 2000 more company owned ATM transacting than in June.
Adjusted EBITDA was 46.7 million for the quarter. This was above the approximately $40 million estimate that we provided and our mid June business update.
The outperformance was driven mostly by better than expected transaction performance, primarily in the us for the second half of June and expenses coming in better than anticipated.
Adjusted EPS was 13 cents for the quarter compared to 69 cents in Q2 last year.
The decline in adjusted EPS was driven by the decline in EBITDA.
Adjusted free cash flow for the quarter was a solid at 38.2 million compared to 50.1 million in Q2 2019.
As we closely managed capex throughout the quarter coming in at 11.4 million.
We also had an approximately $7 million net working capital benefit driven primarily by strong collections of accounts receivable in the quarter.
Due to the strong adjusted free cash flow in the quarter, we're able to reduce our net debt outstanding by approximately $16 million.
Even after fees and no I'd related to our recent amendments and refinancing as well as paying up $5 million of contingent consideration related to our 2017 acquisition in South Africa.
During the quarter, we executed on several transactions to further strengthen our balance sheet.
In May we amended our revolving credit facility to provide for cautionary covenant relief, adding further confidence and operating certainty in the event transactions and corresponding revenues did not recover from what we saw early during the pandemic.
In late June we closed at a $500 million principal amount of term loan b due 2027.
We used the proceeds in cash on hand to repay all remaining borrowings on the revolving credit facility.
The term loan was issued net of an original issue discount of 175 basis points and interest accrued at the rate of LIBOR, plus 400 basis points with a 1% LIBOR floor.
There are no financial maintenance covenants associated with the term loan b concurrent with the issuance of this loan we entered into an additional amendments the revolving credit facility decreasing total capacity from 750 million to 600 million and modifying various other terms.
The covenant levels from the May revolving credit facility Amendment remain unchanged. In addition, we recently entered into a hedging transaction to fix the term loan b interest for five years on 50% of the principal amount.
Also in June we repurchased approximately 172 million principal amount of our convertible note at a slight discount to par.
Following the repurchases we have approximately 116 million of convertible note that remain outstanding and mature on December onest.
We intend to use a portion of our unrestricted cash balance for the retirement of the remaining notes.
In conjunction with the with the PERC repurchase of the convertible note. We also terminated a proportionate share of the associated derivative instruments.
Following the financing transactions at the end to the second quarter. We had total gross debt outstanding 916 million and had unrestricted cash of $211 million.
With over 200 million of unrestricted cash and 600 million of Unutilized credit facility capacity, we have substantial liquidity and we also expect to continue eight continue to generate strong cash flows.
We will continue to prioritize debt reduction with our future excess cash flows.
Net debt outstanding was 704 million at the end of June down 16 million sequentially from the end of Q1.
Our net leverage ratio as defined in the revolving credit facility was 2.7 times at the end of Q2.
The net leverage covenant in our revolving credit facility is currently four and a quarter times and widens the five to five and a half time during the period from Q4 2020 through Q3 2021.
After Q3 2021 or earlier, if we elect to terminate the covenant relief at our option the net leverage ratio covenant in the revolving credit facility will be four and a half times.
We're pleased with the execution of these financing transactions during the second quarter, which extended our maturities, while improving our flexibility and liquidity.
With these recent revisions to the capital structure, we expect 2020 interest expense to approximate 38 million.
Due to the difficulty in predicting the implications of the Cobot 19 virus, we withdrew our 2020 outlook on April Onest.
While transactions have stabilized that had been improving over the last few months, particularly in the US. We expect the remainder of 2020 will be difficult to accurately forecast, but we will continue to provide you with much visibility as we can as we all work through these uncertain times.
While it is very difficult to predict whether transaction improvements we have seen will continue or reverse over the coming months. We feel that we have successfully managed through which should be the most difficult period.
Last quarter, we mentioned a target of $30 million of cash flow savings initiatives for Q2 across both Opex and capex and during the quarter, we actually delivered approximately 35 billion of targeted cashless savings.
These are above and beyond the savings from direct mostly variable expenses associated with lower transaction.
Of the 35 million in cost savings in Q2, a little more than half was capex.
Based on our recent performance and stronger than anticipated recovery, particularly in the U.S. effective July onest, we remove the company wide compensation reductions.
While we continue to closely monitor expenses going forward, we do not expect to repeat the same scale of targeted cash flow savings in Q3 that we delivered during Q2.
As we believe we have experienced the most difficult period and plan to resume investing for growth between already contracted new business and our growing business opportunities, we're positioning ourselves for growth in 2021 and beyond two investments in sales marketing products operation in security and other functions.
We expect the Q2 will be the lowest EBITDA quarter and anticipate modest sequential quarterly improvement for the rest of the year with transaction improvements and new business being partially offset by salaries reverting to normal levels as well as continued investment for the long term, which will continue to make to take advantage market opportunities.
Yes.
Based on the sequential quarterly positive impacts of recent transaction trends and commercial when combined with the partially offsetting sequential impact of nearly $10 million related to the lifting of salary reduction a lower business rate benefit in the quarter and the resumption of hiring our current estimate for our third quarter adjusted EBITDA.
As approximately 50 million.
With an EBITDA margin approach in EBITDA margin approaching 20%.
We would expect some further modest improvement in EBITDA in Q4 from Q3, but it is difficult to predict at this time and Q3, it typically been a stronger seasonal quarter than Q4.
Moving on to capital expenditures year to date, our capital expenditures are just short of $30 million down 46% from $55 million during the first half of 2019.
As stated last quarter in order to maximize cash flow. During these unprecedented times wherever possible, we significantly reduced capital spending however, as I mentioned previously we believe we've been through the most difficult period of will now continue to make investments in the business where appropriate as we position ourselves for growth in 2020 Onest.
Beyond.
Let me conclude by saying that the company is well positioned both financially and strategically to not only whether this pandemic, but the emerged stronger the business has proven to be resilient and we're excited about the opportunities ahead now let me turn it back to Ed for some final thoughts.
Thank you Gary.
I believe this period will serve as an inflection point from which cardtronics will emerge uniquely positioned to gain transaction share and grow revenues and profits.
We're seeing strong transaction recovery in the us our largest market and cash demand in the us is at record levels.
Our platform is now pandemic tested and proven to be incredibly resilient and especially in the us.
New business opportunities in North America have never been stronger as bank branch transformation continues to accelerate and the results of the strategies that we outlined a year ago are showing up in the right areas of our PNM.
At the same time, we're experiencing continued strong growth with our Fintech partners, who are focused on a more cash oriented customer segment.
And finally, we have a great team focused on customer experience growing revenues and earnings and an Arden focus on free cash flow all underpinned by a strong balance sheet.
Overall, I've never felt more optimistic about our business model and perspective growth opportunities.
So operator with that we'll now turn call back over to you to open up for questions.
Thank you, ladies and gentlemen, as a reminder to ask the question you would need to press Star then one on your telephone.
Go ahead your question press the pound cake.
And that's still wanting to ask the question. Please.
We compile the Kenny roster.
Our first question comes from the line up Ramsey El Assal with Barclays. Your line is open.
Hey, guys. This is actually been on for Ramsey.
I really appreciate the guidance for fiscal Q3, a lot of your.
Here's an payment space haven't been doing I, just wanted to ask how much conservatism in there and I'm kind of asking in the context of seems like over the last two years you guys have been quite successful at setting guidance, then exceeding those expectations and if there was over a time for conservative guidance is probably now so.
Thoughts around that.
Yeah, Ben good to hear from you.
I Wouldnt Nestle call a conservative guidance.
We're just trying to give a general goalpost fee to be thinking about I mean, it could be a little higher little bit lower.
It really depends on how transactions recover throughout the quarter and things like that so we're not expecting you know huge increases and especially in us transactions, but we are expecting as the year progresses, a little bit more out of international in order to achieve but in general we feel pretty good amount.
Okay actually on the same kind of topics in the UK it looked like.
The month over month improvement from June to July kind of was the 9% improvement was sort of similar to what we saw in the us or are there any indications that thats likely to continue just based on the timing of the locked down or is that maybe kind of jumping ahead.
So we're hopeful that that would be the case, we've seen that since the depth of a pandemic and slowly.
On a gradual improvement you month to month in the United Kingdom.
As you know restrictions have been eased on a more aggressive undergraduate basis during the period.
We would expect that to to continue as more folks get out.
Establishment to open up more bars restaurants pubs different venues open up people begin to get back to work in the in the communities Air So where we are hopeful that but I. We believe it will be gradual and nothing going back to your first part of your question is obviously also highly uncertain.
We don't have a crystal ball on this we're just trying to give you all a thought on what we believe is is a prudent.
Reasonable look out that at the outlook.
Okay I appreciate that if I could squeeze in just one more there was some recent noise in the UK about some interest in potentially removing the link interchange cuts can completely reversing that are there any legs to that do you see that as a likelihood or maybe more.
More and more of an unknown.
Well reversing than we think will be the right thing to do versus the arbitrary our cuts that were put in a couple of years ago. What they did announce that we're aware of what we saw on the website that they are they posted.
This past week.
Was that Dave cancel the notion of a potential because I always kind of kept it out there as a potential reduction of a fourth on the fourth cut they've now officially remove that and is no longer out for consideration, but to your point.
We would hopeful that they would evaluate that I know, there's many different by those regulatory bodies.
Other.
Members of Parliament other committees have been evaluating the whole system, obviously getting back to abroad are free to use environment would be very important so to the citizens in the UK incentive system that had worked very well for long time until the end arbitrary catch were put in place.
Alright, thanks, so much for taking my questions guys.
Thank you Ben today. Thank you.
Our next question comes on the line of Tim Willi Wells Fargo. Your line is open.
Great. Thank you and good afternoon, and Gary Brandt.
Couple of things one last housekeeping, Gary you mentioned I think you sort of gave an expectation for full year.
Interest expense I didnt quite catch it and get that written down.
Could you just called that out again.
Yes, 38 million Tim.
Okay, Perfect and then and then sort of questions.
One is and maybe this isn't a big deal, but you mentioned.
In your prepared comments I think add about ATM sites that we weren't open and one of the I think examples you gave will stuff like colleges et cetera.
So I guess, giving the raging debate about people going back on college campuses, and whether or not there's football game.
Those hotels are going to have people and limits that truck is there any way to think about a two worst case scenario emerges around college college towns stadiums et cetera.
Just a couple percentage points of your USAID yen.
Worth calling out just want to make sure we don't get caught off guard buy something in October.
As a worst case scenario around the college and University environment.
We value all of our locations.
And all are important but I would say the university the footprint on universities around the country is quite de Minimis.
Economic meaningful part of the overall woe is important though.
And the communities out about people going back to restaurants as you pointed out whether it's going to sporting events venue is going to hotel is going to restaurants getting now.
Bringing in a babysitter and people feeling comfortable getting out in today's environment and we would we were hopeful that that will continue on and not just here, but in all the countries that we serve around the world. That's the bigger drivers is getting out of confidence people.
Getting back out and about in their communities.
For sure and then the last ones on the syntax side really appreciate that information and clearly there's momentum there.
I guess I'm curious.
As you sort of move down this road.
The learnings or sort of the insights may be your gleaning around the customer behavior.
With that customer base that might be different than from the traditional banks.
Or just observing how those impacts sort of go to market with products and engage their customers.
Might be corridor ball Q.
Just all point overall or product or sort of ways to help the bank.
Are you sort of become the base have knowledge for the banks, possibly around how to engage customers more digitally.
Benefit of working with the spin tax is there anything that you think emerges there or that you're seeing.
Well they firstly, they do a terrific job and I think as I've mentioned before.
They're very focused on who that customer is the segment. They serve many I'm not all the many are more focused on a cash oriented segment.
And they tailor their products and solutions to serve that community and know them well.
They also look to Allpoint Allpoint has clearly become a premier solution for the Fintechs.
They look to all pointing us to be their distribution partner.
On that and driving that.
Across the organization and actually they really promoted as well like if you go to their sites you will see broad recognition has built into their apps going looking for all points. So the new a terrific job of that and Thats something obviously, we aspire to do more with all that size.
In terms of promoting and engaging that level. So I would say is kind of coming back to your key point is there really understanding the customer promoting it very well and being laser focused and customize into their their experience.
Great.
Thanks very much.
Thanks again.
Thank you.
Our next question comes from the line up Kartik Mehta with Northcoast.
Coast Research. Your line is open thank you hey, good afternoon.
And you talked about obviously, the shrinking branch base, that's already happening in us and potentially that accelerating because the co. The 19.
Wondering are there greater opportunities because of that for bank branding or Paul point seems like if banks are especially large banks are going to shrink that they might want.
Only logo on the ATM. So I'm, just wondering where you're seeing a greater demand and if that makes a difference at all for you.
I guess the.
Good evening Kartik.
The answer overall will be yes, it's both.
It's not just.
Ill point.
Our branding, but also in the managed services.
But what we really are working with those financial institutions as being a partner brain multiple different products are solutions to them, whether they want to broaden.
The awareness into a particular community, whether they are coming pulling back or actually growing into a new market and probably more focused on branding.
Maybe they want to have nationwide access and as a distribution partner as I was mentioning about earlier, having broad cash free access.
And increasingly now on deposits solutions for those as well, which is a whole new.
Tool in the tool box all of these solutions are important each institution is different in terms of what their objectives are what their strategies, what they're trying to achieve.
Some places some institutions may want to have a dedicated unit at their branch.
Or somewhere else, that's really a 100% dedicated to them and perhaps to the managed services solution.
As appropriate obviously, we talked to about all the different solutions in which is where we're very unique bringing that broad tool box and the conversations what I, what I would say last is.
As I pointed out our dialogue there is really accelerated as I mentioned this is believe a catalyst.
The importance of our nationwide footprint convenient locations a highly secure scalable platform that can be customized to their customer experience is very much resonating and now increasingly more important the deposit side, which brings forward more solutions now for for the.
Branch.
Which is where a lot of transactions, obviously, our deposits that happen at a branch.
And I guess Ed. This is that when you talked about deposits I'm, assuming you're talking about the Allpoint plus now that you've established and I'm wondering if you could give some any statistics as to the number of institutions, you're seeing there and maybe the number and also the number of units you have in the marketplace now.
Well, that's it's growing so stepping back all point, plus we announced.
A little over a year ago and have been rolling that out we had about 1000 at the end of December Theres units across the nation, we expect to be that close to 2000 by the end of this year.
Yes, we've had a more institutions come onto if there were so it's kind of chicken the AG, we got to get the network out there.
As more partners, Tom one to it and the dialogue.
I think what has accelerated as the interest level from that buys of all sizes because now.
I think their interest has been the amplified based on their branch.
Kind of transformation strategies de branching lowing lowering down density hi, the same time wanting to move into newer markets and having a full capability at convenient locations and Allpoint plus is the only.
Surcharge free deposit retail base deposit solution out there.
And then just one last question Ed obviously, the announcement of seven ini over 711 buying Speedway and I know you've talked about the you kind of in general contract length. There, yes, if you could provide any kind of.
Both details about the contract if there's a change of control provision or where you stand with that.
Well I love to go into more detail because it frankly I think it make you feel.
A lot better, but we're not at Liberty to go into any details obviously because of the customer obligations, where I can say is speedway is a terrific long term partner with whom we've had a close working relationship and frankly, one and we aspire to maintain well into the future.
If you go to our Q, you'll see that our largest retail partners. Our largest one makes up about 6%. If you look at all of our top five.
Retail partners all those added together is about 22% in total revenues and obviously, that's very different I mean, we're a very different company in where we worry about three to five years ago, which were much higher higher percentages.
The looking at the top ones.
In terms of what they've talked about in terms of number of locations. They have on their website roughly 3900 stores, obviously not all of those have an ATM.
Based on footprint.
Or other strategies, so not all of those have an ATM that's much smaller than the footprint than some of our other large retailers just based on the store locations.
And then when you go back to those top five.
Our relationships.
Which make up of a total of 22% of revenue the average remaining life on those agreements.
As of the end of June June Thirtyth was roughly about three years.
Obviously speedway is as in that average.
Well, thank you very much.
Oh I'm sorry go ahead, I'll, just say terrific relationship.
And we aspire to maintain that for a long time.
There's a lot lot lot all can happen here.
And this will be going on for some time.
Thank you very much I really appreciate it.
Got it.
Thank you.
Next question comes from Milan, Andrew Jeffrey truly security your line is open.
Hi, good afternoon, gentlemen, thank you take internationally.
I appreciate all the the comments about.
The growth of cash in circulation as youve listened to.
Some.
Openings in the space and and you think cash gone forever.
So I think thats helpful. Can you help us understand add what you think that means practically for cardtronics business.
Now on one hand, we are seeing experiencing larger average transaction size introduce tanker paid on number of transactions like your your view on that but just generally how do we think about the direct correlation between cash and circulation and cardtronics sustainable revenue growth on the other thing.
Validating cash tenure.
Yes, I would say starts with the latter part which is this validates the cash and the overall demand.
Again, there's never been more in us dollar in circulation and pushing two trillion.
And frankly, you go back look at a long time long time data like is on that chart.
Cash in circulation has grown.
Faster than inflation, so thats a positive for us underline.
But obviously the number of transactions cast transactions. The point of sale is declining because that denominator is growing there are other types of payment of that can happen well, we want to be is at very important.
Part of the overall payments ecosystem. So cash is not going to go away people value Ed I mean look at what's happening today. They want to have they want to have it for safety they want to have it security.
They want to act as a trusted it's private which I think that you will be hearing more often is more important attribute as well, but as it declines at point of sale that cash infrastructure, where 90 plus percent of the cash withdrawals and cash deposits are made our added bank branch.
Or bank ATM or five branch or Fi ATM, we want to partner with them to help support that and work directly with the consumers to support those that buys and our retailer. So we think this bodes all very well.
For us and cash will be around for a long time, I mean, and just look at also over the last over the last quarter as.
As the fed put out cash up so much hours up so much total payments.
On the network company is actually down.
During the period of time, which is.
Quite a contrast to what you may hear or read.
And also I thought that was really interesting statement that the fed made as well and the report.
That cited earlier.
Okay.
Helpful perspective, thanks.
God.
More large retail banks to Allpoint, which is great to see good momentum there.
Fair in upper limit.
Do you think on on the size of the bank Mike Julianna.
I think cities the largest bank on Allpoint today, but.
You look at some of the biggest Jim two or three.
Retail banks do you think there are impediments to potentially signing them at some point.
No.
We think it's a applicable to everyone large or small medium everybody it's applicable.
Folks look through a different lens in terms of how they approach it because of their own network.
Where they may be or what works what doesn't so we just have to work with the value proposition and understand what their needs and objectives are.
Which is why as I mentioned earlier, when we talk about branding, our allpoint or different different solutions our goal.
Again, as we've talked about at the Investor Day, we believe the largest driver growth will be that growth.
In our surcharge free solutions.
That will scale.
In particular in the us will be our largest driver growth and then appliance too.
Every bank in the land.
Okay, and one more if I might sneak it in just on the UK.
Recognizing that lockdown.
Have been the primary culprit is there anything structural that makes you think that market doesn't ever come back and grow again.
I don't know the Crystal balls is a mines as good as yours.
I do people value.
Cash.
Having the currency it as I mentioned earlier it won't go away, where we have to use make sure the supply demand balance is appropriate what's the capacity going to look like after all this in terms of the number of ATM is 18 loans have been coming down.
Inefficiently in the United Kingdom, where does that end up.
I don't know.
Im not aware of anything that says there's just a fundamental.
Seneca shift I think was do we need to get the communities.
Everywhere around the world to open back up and people getting back out outside and commerce and activity and let's let that happen for while then we'll see where things stand.
Yes fair enough appreciate it thanks.
Thanks, Andrew Thanks.
Thank you.
Our next question comes from the amount of Reggie Smith with JP Morgan.
Line is open.
Hey, good evening, guys I guess, congrats on navigating this very difficult times.
Hello. Thank you. Thank you very license, yes, you can get great job.
One thing.
I heard mentioned on this call.
Was I missed the impact.
Stimulus be that the tax credit.
A rebate refund or unemployment do you guys have a sense.
If that had any impact on you.
How would you sizes in kind of what.
Is embedded in your guidance outlook for the back half of the year as it relates to.
Unemployment benefits and if that's baked Dan if not baked in as a potential upside if it comes through like how should we think about it.
Unemployment in stimulus.
Yeah.
Again, Reggie thanks for the feedback great question.
Obviously, whether it's been stimulus payments out there cares payments or unemployment.
Sure. We've we've seen a fair amount of just look at the amount that we dispensed.
Across our platform.
We've seen larger just been sizes, maybe some of those.
Payments come come through but it's hard to tell exactly what what is exactly how do we know what is shifting.
Where someone one week was receiving a paycheck and then or with the shelter in place guidelines then were laid off and then went into unemployment within weeks later, we're shifting from.
They are regular paycheck to then onto another type of program. The good news is for US is the overall resiliency of our platform Weve shown now whether its.
Through the best economy that we had frankly.
Just a few quarters ago.
We were growing with accelerating same store growth.
As you saw in in January and February accelerating growth in markets all across the nation. So now into a recession.
We still haven't in prior research at sessions, we provided well.
And in through a pandemic.
The platform has stayed resilience because we have multiple products multiple solutions, whether as branding whether that's all point however locations entered convenient.
80% of our footprint were deemed essential during this period of time some no matter whats happened we've had that period, we would expect that yes. There is there is some of this related to alerts unemployment or stimulus has been but what how much. That's also offset by as we talked about earlier on the.
Bigger the metric.
We we provided which many of those locations in there were closed has zero transactions yet we counted in the base.
So that also serves editors headwinds in the end tailwinds.
How much of all that offsets one another we're not quite certain yet, but we'll continue to analyze.
Sure Okay I appreciate that.
One last question.
The rough calculation I do but it it appeared that Youre.
Average revenue per withdrawal ticked up and I was curious if that was makes geography I know the UK was down and that's a pretty high I think it's a high.
Average revenue per transaction or maybe I got that wrong, but just curious what what drove that.
Big increases in revenue per withdrawal Jerez, you're probably looking at that consolidated metric.
Which that's just a really that's out there has been out there for a long time.
That's not how we manage we manage you're looking very specifically.
Location down to the Street corner, and then also ultimately into a country.
But thats really mix, that's mix, where you've had some countries impacted more than the other.
Then the the product mix in those particular countries that are hit.
Thats, a big driver on that yes, well and you will have a situation where we've got more fixed revenues now than we've ever had before and so transactions going down in that staying fairly stable will impact that a little bit so to that goes back to Ed point on resiliency.
Understood, Okay, nice nice quarter guys.
All right through it accurately.
Thank you.
Our next question comes from along with Peter Heckmann Davidson. Your line is open.
Hey, good afternoon, everyone. Thanks for taking my questions.
Do you think about the timing of placing the roughly 2500 own units between Casey and the new Canadian retail win.
There are underway as we speak and we've been moving swiftly on on those.
Underway.
Do you think you could be complete by the end of next year.
Yes, okay.
Okay.
And then in terms of the 6000 ATM that didnt transact in the quarter that were counted in the in account and then I think there was another some other number of merchant owned and and process.
When it would have put a rough or a fair estimate be that 80% of those are back on line in the third quarter or or what are you thinking there.
I don't know its.
Probably a more gradual.
I think the numbers you're talking about was the 2000 that have come back online over the since the ended June probably and so yes, it's hard to get to add point to a specific.
As I mentioned earlier.
The pace call the guidance, but the of the estimates are directions that we gave everyone. It feels like things while dramatically necessarily improving the you at but we're expecting hopefully some lift in the in our international markets.
So those machines coming back on overtime will help but it's not going to necessarily drive our numbers dramatically different from where we're pointing into it.
Got it got it if I guess have one more any seen any recovery in cross border transactions.
As you move through July.
Well.
You know there's through so a long ways to go for that.
License Bang oriented.
Terrific footprint there.
Things open back up and then kind of pulled back there had travel restrictions.
When folks went from the UK going there than trying to come back. So it's very limited we still had cross border transactions.
During the period.
Particular in the United Kingdom for folks, who just it stayed there during the pandemic, but it's good for that that would be a nice upside.
So it's quite limited yet.
Got it okay. Thank you for that.
Thanks, Pete today.
Thank you. Our next question comes from the line speed Commerce Tivo Research your line is open.
Good afternoon, Thanks for taking my question.
Good afternoon.
I wanted to ask about about the slot about things rethinking their branching I think you kind of hinted that you've you've seen similar to some more in down interest in managed services.
And Allpoint already I was kind of wondering what you will you think about the possibility of like budgetary caution on the part of as far as and whether or not those slowdown contract signings are onboarding or maybe it accelerates that because they're trying to realize cost saving sooner.
Yes, Thats a great great question, Steve and it's all of it.
So with cognitive.
Goes both ways on that were pulling back on investment in cost, but also theres a bigger opportunity in the branch consolidation and removing infrastructure.
And.
Okay.
Kind of some of the de branching.
And Densification, that's taking place they look at all expenditures.
That's out there obviously.
Multiple conversations evaluate but we have a clear and compelling value proposition to cost is merely one side of it.
Customer presents more engagements and then we've done some studies working with another from the value proposition of Allpoint and branding by having more presence.
Perceived presence on that leads to more engaged customers longer term they retain better.
So it's always a customer driving the revenue is going to even a bigger driver than the cost efficiencies the cost efficiencies of leveraging our network is pretty significant as well.
Where some of our institutions to seeing double digit reductions.
At the teller based on the efficiency of now their customers going to the convenient locations at a well known retailer near them. So we factor in all those benefits.
Okay. Thank you maybe one more for me.
No the slot about the Allpoint transaction growth from Fintechs really impressive just kind of wondering if you guys can share any color on.
Sort of the split in the growth from adding logos versus sort of the underlying customer growth from existing contracts.
It's all of it.
We've been adding more and more as you know.
Over the last a year.
Multiple quarters now and then as they come live. These are a lot of than were early stage businesses and in their business accelerate so it's both bringing on new partners as well as existing ones accelerating on their own business and they've really seen that take up during this period during the pandemic.
We saw the growth rate continue on solid growth month in month out sequentially.
So we see it on the on both sides and excited to have another.
Large fintech come on.
Onboard here this quarter and.
We will continue to try to do more.
Okay. Thank you for taking my questions. Thank you okay. Thank you Steve.
Thank you.
Im not showing any further questions in the queue I would now like to turn the call up.
For closing remarks, that's great well. Thank you all very much for the interest and as I said earlier, we couldn't be more enthusiastic about the opportunities.
And.
Growth prospects, so longer term for the business and we look forward to talking to you and hopefully soon see you in person I have a great day.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect.
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