Cardtronics Reports Lower Net in Part on Faster Retail Deployment

Cardtronics Inc., which operates the largest network of ATMs in the U.S., reported a net loss of $900,000 for the fourth quarter of 2005 along with a full-year drop in net of $3.7 million, to $900,000. The results came on increases of 12.6% and 39.5% in revenue, respectively, for the fourth quarter and calendar year, to $69.8 million and $269 million. The Houston-based network, which finished the year with more than 26,000 ATMs, blamed the drop in net income on increases in expenses related to a string of acquisitions, higher selling and debt costs, and a faster rollout of machines in Walgreen and CVS stores. These new machines are still ramping up in transaction volume, the company says. Total transactions on Cardtronics ATMs came to 156.9 million for the year, the company reported, including 119 million withdrawals. These results were up 41% and 37%, respectively. Monthly withdrawals per machine were 379 last year, down from 403 in 2004. But operating gross profit per ATM edged up to $189, from $182. The average number of machines linked to the network was 26,175 for the year, up from 17,936 in 2004. Much of the increase in revenue and machine count stemmed from a full year of results from a portfolio of 15,000 machines acquired in June 2004 from E*Trade Financial Corp. for $106 million, as well as other acquisitions. The company blames the drop in average withdrawals per machine largely on the former E*Trade portfolio, which is made up of merchant-owned ATMs. These ATMs, Cardtronics says, produce lower transaction volumes than do its company-owned machines. Cardtronics has pursued an aggressive branding strategy in which it deploys ATMs in retail locations with the logos of bank partners, These machines are usually surcharge-free to users who are customers of the bank. The bank typically pays marketing fees to Cardtronics in these arrangements. The company has been expanding its presence in the surcharge-free arena. Earlier this month, Cardtronics acquired ATM National Inc., operator of the Allpoint network, for $4 million in cash plus Cardtronics stock. Linking 32,000 ATMs and processing transactions for 2.6 million cardholders with more than 250 banks, Allpoint is the largest no-surcharge ATM network in the U.S. “[Allpoint] is a major component of the company's strategy to profitably participate in the market for surcharge-free ATM transactions, which we believe represent 70% to 75% of the total U.S. ATM transaction marketplace,” the company says in its earnings release.