Cardtronics plc
Q2 2020 Earnings Call Transcript

Published: 9 Aug 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Cardtronics Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I will now like to hand the conference over to your speaker for today, Brad Conrad you may begin.

[Brad Conrad:]

Thank you. Good afternoon, and welcome to Cardtronics second quarter 2020 conference call. On the call today, we have Ed West, Chief Executive Officer and Gary Ferrera, Chief Financial Officer. We'll start with prepared remarks and then take questions. Before we begin, a cautionary statement regarding forward-looking information. During the course of this call, we 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, events, market conditions and other risks and uncertainties that could cause actual results to differ materially. Please refer to our earnings release and our reports filed with the SEC, including our Form 10-K for the year ended December 31, 2019, as updated by our Forms 10-Q for the first and second quarters, which describe 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 The statements on this call are made as of the date of this call and are based on current information and may be outdated at the time of any replay of this call.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 are made. 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 to the nearest GAAP measure, is included in the earnings release issued this afternoon and available on our website. We have 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 of our website at cardtronics.com. We will make reference to some of the pages in this earnings supplement during the course of today's call. With that, I will turn the call over to Ed.

[Ed West:]

Great. Thank you, Brad. Hello, everyone, and thank you for joining our second quarter results call. It's good to be with you today and 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 in whatever you do and our purpose is to provide convenient, reliable and safe access to cash for individuals and the communities that we serve around the world. Cash one of the preferred forms of payment, in the overall payments ecosystem, provides comfort and certainty in times of crisis and there has never been more cash in circulation than there is today. We embraced our role as a growing platform in the payments ecosystem and know we are building trust with our partner financial institutions, retailers and their respective customers. Since we reported our first quarter results in early May and then provided a mid-quarter business update on June 15, I'm pleased to report that our business has continued to steadily improve in 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 website. Referring to page 3 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 of the cash that we dispensed was up double-digits in the U.S. versus last year, a strong indicator of the continued demand for cash. Second, the pandemic and the recent economic conditions have highlighted the resiliency of our platform. Third, I believe the trend of bank branch transformation is accelerating due to the pandemic and consequently, our new business opportunities with FIs in the U.S. 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 of the second quarter results highlighted on page 4. The results were of course significantly impacted by the global pandemic and the related shelter-in-place directives placed on businesses and citizens across 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 in both the U.S. and South Africa, while the recovery has been much more gradual in all other countries. The contrast and 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 5 reflects the transaction recovery in the U.S., which has essentially been near prior year levels on a same-store basis for June and July. You will see on page 6 that the recovery in same-store withdrawals in the United Kingdom has been more gradual, but has consistently improved each month as restrictions have been eased in a more conservative basis across the U.K. It is important to note that these same-store withdrawal charts include locations that were closed during the quarter due to lockdowns, and therefore had zero transactions this quarter, but did transact in the same period last year. So it's a fairly rigorous comparison metric. We're encouraged by the progress over the last few weeks in most markets outside of the U.S. and expect the improvement to continue with additional openings and general loosening of restrictions. As mentioned last quarter, our business in countries outside of the U.S., 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 U.S. and South Africa point to two important factors

[Gary Ferrera:]

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 and what could happen over the next few months. First, the COVID-19 pandemic and related governmental orders and recommendations had a significant impact on our Q2 results. So the year-over-year comparisons for the quarter are somewhat yet -- I'm sorry somewhat less useful. In addition, all of the comparative financial metrics that I will mention today will be on a constant currency basis to see this 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 in 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 and EBITDA down 24% year-over-year have largely been tracking with recovering transactions in the U.S., but our small businesses in Canada and Mexico have been more significantly impacted and slower to recover. For the second quarter, U.S. same-store withdrawal transactions declined 14%. This measure includes nearly 5,000 ATMs that were shut down for extended periods of time during the quarter. These ATMs were 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, U.S. same-store withdrawal transaction 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 continued 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-sized casino component and these are only just starting to reopen in certain locations. We have a relatively high percentage of cost in our North America segment that are variable, which along with focused cost savings measures during the quarter assisted in delivering a solid adjusted EBITDA result in light of the reduced 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 are 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 U.K. 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 ease. For the second quarter, same-store withdrawal transactions in the U.K. declined 52%, with transaction declines lessening throughout the quarter and 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 in our Europe and Africa segment was positively impacted by an approximately $4 million benefit following the recent legal decision by the Supreme Court in the U.K. removing business rates effectively a form of property tax for certain ATMs. We expect a similar benefit of approximately $4 million in the second half of the year as a result of this recent U.K. decision. In our smallest segment at approximately 5% of revenues Australia and New Zealand revenue declined 48% from Q2 2019, while EBITDA declined 63%. While casino and gaming sites in Australia were hit particularly hard throughout Q2. Transactions at essential locations had improved to down 16% in 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 6,000 ATMs versus Q2 of last year. This metric is calculated based on the number of ATMs, which transact in any given quarter. This decrease was driven by site closures associated with COVID-19 lockdowns and is not reflective of any material attrition or contractual changes. We expect this ATM count decrease to be mostly temporary. For example, in the month of July, we had nearly 2000 more company-owned ATMs transacting than in June. Adjusted EBITDA was $46.7 million for the quarter. This was above the approximately $40 million estimate that we provided in our mid-June business update. The outperformance was driven mostly by better-than-expected transaction performance primarily in the U.S. for the second half of June and expenses coming in better than anticipated. Adjusted EPS was $0.13 for the quarter compared to $0.69 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 manage 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 were able to reduce our net debt outstanding by approximately $16 million. Even after fees and OID related to our recent amendments and refinancing as well as paying out $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 precautionary 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 a $500 million principal amount of term loan B due 2027. We used the proceeds and 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 accrues 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 amendment to 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 notes at a slight discount to par. Following the repurchases, we have approximately $116 million of convertible notes that remain outstanding and mature on December 1st. We intend to use a portion of our unrestricted cash balance for the retirement of the remaining notes. In conjunction with the repurchase of the convertible notes, we also terminated a proportionate share of the associated derivative instruments. Following these financing transactions at the end of the second quarter, we had total gross debt outstanding of $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 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 4.25 times and widens to five to 5.5 times 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 4.5 times. We are 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 COVID-19 virus, we withdrew our 2020 outlook on April 1st. While transactions have stabilized and have been improving over the last few months particularly in the U.S., we expect the remainder of 2020 will be difficult to accurately forecast. But we will continue to provide you as much visibility as we can as we all work through these uncertain times. While it is very difficult to predict whether the transaction improvements we have seen will continue or reverse over the coming months, we feel that we have successfully managed through what 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 million of targeted cash flow savings. These are above and beyond the savings from direct mostly variable expenses associated with lower transactions. Of the $35 million in cash 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 1st, we removed 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 are positioning ourselves for growth in 2021 and beyond through investments in sales, marketing, products, operations, security and other functions. We expect that 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 we'll continue to make to take advantage of market opportunities. Based on the sequential quarterly positive impacts of recent transaction trends and commercial wins combined with the partially offsetting sequential impacts of nearly $10 million related to the lifting of salary reductions, a lower business rates benefit in the quarter and the resumption of hiring our current estimate for our third quarter adjusted EBITDA is approximately $50 million, with an EBITDA margin approaching 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 has 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 and we'll now continue to make investments in the business where appropriate as we position ourselves for growth in 2021 and beyond. Let me conclude by saying that, the company is well positioned both financially and strategically to not only weather this pandemic. but to emerge stronger. The business has proven to be resilient and we are excited about the opportunities ahead. Now let me turn it back to Ed for some final thoughts.

[Ed West:]

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 U.S. our largest market and cash demand in the U.S. is at record levels. Our platform is now pandemic-tested and proven to be incredibly resilient and especially in the U.S.. 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 P&L. At the same time we are 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 ardent focus on free cash flow all underpinned by a strong balance sheet. Overall, I've never felt more optimistic about our business model and prospective growth opportunities. So operator with that we'll now turn the call back over to you to open up for questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Ramsey El-Assal with Barclays. Your line is open.

[Unidentified Analyst:]

This is actually Ben on for Ramsey. I really appreciate the guidance for first for Q3 a lot of your peers in the payments space haven't been doing that. I just wanted to ask how much conservatism in there? And I'm just kind of asking in the context of it seems like over the last two years, you guys have been quite successful at setting guidance then exceeding those expectations. And if there was ever a time for conservative guidance is probably now so just any thoughts around that?

[Gary Ferrera:]

Yes Ben. Good to hear from you. I wouldn't necessarily call it conservative guidance. We're just trying to give a general goalpost to be thinking about. I mean it could be a little higher a little bit lower. It really depends on how transactions recover throughout the quarter and things like that. So we're not expecting huge increases in -- and especially in U.S. 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 about it.

[Unidentified Analyst:]

Okay. Actually on the same kind of topic just in the U.K. it looks 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 U.S.. Are there any indications that that's likely to continue just based on the timing of the lockdown? Or is that maybe kind of jumping ahead?

[Ed West:]

So we're hopeful that that would be the case. We've seen that since the depth of the pandemic and slowly - gradual improvement month-to-month in the United Kingdom as restrictions have been eased on a more kind of gradual basis during the period. We would expect that to continue as more folks get out establishments open up more bars, restaurants, pubs different venues open up people will begin to get back to work in the communities there. So we are hopeful of that. But I -- we believe it will be gradual. And I think going back to your first part of your question it's 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 a prudent reasonable look at the outlook.

[Unidentified Analyst:]

Okay. Appreciate that, if I could squeeze in just one more. There was some recent noise in the U.K. about some interest in potentially removing the LINK interchange cuts completely reversing them. But are there any legs to that? Do you see that as a likelihood or maybe more of an unknown?

[Ed West:]

Well reversing them we think would be the right thing to do versus the arbitrary cuts that were put in a couple of years ago. What they did announce, what we're aware of we saw on the website that they posted this past week was that they've cancelled the notion of a potential because they always kind of kept it out there as a potential reduction of -- on the fourth cut. They've now officially removed that and is no longer up for consideration. But to your point we would -- hopeful that they would evaluate that. I know there are many different -- whether those regulatory bodies other members of Parliament, other committees have been evaluating the whole system obviously getting back to a broad free-to-use environment would be very important to citizens in the U.K. and it's a system that has worked very well for a long time until the arbitrary cuts were put in place.

[Unidentified Analyst:]

All right. Well thanks so much for taking my question guys.

[Ed West:]

Thank you, Ben. Good day.

[Operator:]

Thank you. Our next question comes from the line of Tim Willi with Wells Fargo. Your line is open.

[Tim Willi:]

Hey, thank you and good afternoon. Ed -- and Gary and Brad, a couple of things, one was housekeeping. Gary you mentioned -- I think you sort of gave an expectation for full year interest expense. I didn't quite catch it and get that written down. Could you just call that out again?

[Gary Ferrera:]

Yes $38 million, Tim.

[Tim Willi:]

$38 million. Okay. Perfect. And then two other questions, one is, maybe this isn't a big deal but you mentioned in your prepared comments I think Ed about ATMs that weren't open and one of the -- I think examples you gave was stuff like colleges etcetera. So I guess given the raging debate about people going back on to college campuses whether or not there's football games and whether or not those hotels are going to have people in them etcetera. Is there any way to think about if a true worst-case scenario emerges around college, college towns, stadiums etcetera? Is that just a couple of percentage points of your U.S. ATMs? Is it not even worth calling out? Just want to make sure we don't get caught off guard by something in October if it is a worst-case scenario around college and the university environment?

[Ed West:]

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. They're not a meaningful part of the overall. What is important though is getting the communities out and about people going back to restaurants as you pointed out, whether it's going to sporting events, venues, going to hotels, going to restaurants, getting out, bringing in a baby sitter, people feeling comfortable getting out into an environment. And we would -- we're hopeful that, that will continue on not just here, but in all the countries that we serve around the world. That's the bigger driver just getting out confidence people getting back out and about in their communities.

[Tim Willi:]

Yes for sure. And then the last one is on the fintech 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 maybe you're gleaning around, the customer behavior of that customer base, that might be different than from the traditional banks? Or just observing how those fintechs sort of go-to-market with products and engage their customers, that might be portable to just Allpoint overall, or product, or sort of ways to help the banks? You sort of become this base of knowledge for the banks possibly around how to engage customers more digitally, a benefit of working with these fintechs. Is there anything that you think emerges there? Or that you're seeing?

[Ed West:]

Well. They -- first of all, they do a terrific job. I think, as I've mentioned before, they're very focused on who that customer is to the segment they serve. Many not all but 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. And they look to Allpoint and us to be their distribution partner on that and driving that across the organization. And actually they really promote it as well. Like if you go to their sites, you will see, broad recognition that's built into their apps, going and looking for Allpoint. So they do a terrific job of that. And that's something obviously we aspire to do, more with all FIs, in terms of promoting and engaging that level. So I would say, it's kind of coming back to your key point is really understanding the customer promoting it very well and being laser-focused in customizing to their experience.

[Tim Willi:]

Great. Thanks very much.

[Ed West:]

Thanks,

[Gary Ferrera:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Kartik Mehta with Northcoast Research. Your line is open.

[Kartik Mehta:]

Thank you. Hi. Good afternoon. Ed, you talked about obviously the shrinking of branch base, that's already happening in the U.S. and potentially that accelerating because of COVID-19. And I'm wondering, are there greater opportunities because of that for bank branding or Allpoint? It seems like if banks especially large banks are going to shrink, that they might want their 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?

[Ed West:]

I guess the – well good evening, Hi, Kartik. The answer overall would be, yes. It's both. And it's not just Allpoint's or branding, but also in the managed services. But what we really are working with those financial institutions as being a partner, bringing multiple different products or solutions to them, whether they want to broaden the awareness into a particular community, whether they're 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 deposit solutions for those as well, which is a whole new tool in the toolbox. 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. In some places, some institutions may want to have a dedicated unit, at their branch or somewhere else that's really 100% dedicated to them and perhaps where the managed services solution is appropriate. Obviously, we talk to them about all the different solutions. And which is where we're very unique, bringing that broad toolbox in the conversations. What I would say last is, as I pointed out, our dialogue there has really accelerated. As I mentioned this is going to be 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 the branch, which is where a lot of transactions obviously are deposits that happen at a branch.

[Kartik Mehta:]

And I guess, Ed, that when you talk about deposits, I'm assuming you're, talking about the Allpoint+ network 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?

[Ed West:]

Well. That -- it's growing. So stepping back, Allpoint+ we announced a little over a year ago. And have been rolling it out. We had about 1,000 at the end of December, in terms of units across the nation. We expect to be that close to 2,000 by the end of this year. Yes, we've had more institutions come on to it. But we're still -- it's kind of the chick-or-the-egg. We got to get the network out there as more partners come on to it, in the dialogue. I think what has accelerated is the interest level from FIs of all sizes. Because now I think their interest has been amplified based on their branch kind of transformation strategies, de-branching, lowering down density, at the same time wanting to move into newer markets and having a full capability at convenient locations. And Allpoint+ is the only surcharge-free deposit -- retail-based deposit solution out there.

[Kartik Mehta:]

And then just one last question, Ed. Obviously the announcement of Seven & i or 7-Eleven buying Speedway and I know Ed you've talked about, the kind of general contract length there. I'm just -- if you could provide any kind of details about the contract if there's a change on control provision? Or where you stand with that?

[Ed West:]

Well. I'd love to go into more detail. Because frankly I think, it makes you feel a lot better. But we're not at liberty to go into any details obviously because of the customer obligations. What I can say is Speedway is a terrific long-term partner with whom we've had a close working relationship and frankly one that 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%. And 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 than what we were three to five years ago, which were much higher percentages. But looking at the top ones, in terms of what they've talked about in terms of number of locations that they have on their website, roughly 3,900 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 store locations. And then, when you go back, to those top five relationships which make up of a total of 22% of revenue, the average remaining life on those agreements, as of the end of June 30 is roughly about three years. And, obviously, Speedway is in that average.

[Kartik Mehta:]

Thank you very much. I’m sorry, go ahead.

[Ed West:]

I would just say terrific relationship and we aspire to maintain that for a long time. There's a lot can happen here and this will be going on for some time.

[Kartik Mehta:]

Thank you very much, Ed. I really appreciate it.

[Ed West:]

Thanks, Kartik.

[Operator:]

Thank you. Our next question comes from the line of Andrew Jeffrey with Truist Securities. Your line is open.

[Andrew Jeffrey:]

Hi. Good afternoon, gentlemen and thank you for taking the question. I appreciate all the comments about the growth of cash in circulation, as you listen to some companies new in the space and you'd think the cash has gone forever. So I think that's helpful. Can you help us understand, Ed, what you think that means practically for Cardtronics business? On one hand we are seeing -- you're experiencing larger average transaction sizes and to the extent you're paid on number of transactions, I'd like your view on that. But just generally, how do we think about the direct correlation between cash in circulation and Cardtronics' sustainable revenue growth, other than validating cash as a tender type?

[Ed West:]

Yes. Obviously, it starts with the latter part, which is it validates cash in the overall demand. Again, there's never been more in U.S. dollar in circulation, its approaching $2 trillion. And, frankly, you go back look at a long time, a long time data like is on that chart, cash in circulation has grown faster than inflation. So that's a positive for us underlying. But, obviously, the number of transactions, cash transactions at the point-of-sale is declining, because that denominator is growing. There are other types of payment of that can happen. What we want to be is a very important part of the overall payments ecosystem. So cash is not going to go away, people value it. I mean, look at what's happening today, they want to have it. They want to have it for safety. They want to have it for security. They want to have it, because they trust it. It's private, which, I think, that you will be hearing more of, as a more important attribute as well. But as it declines at the point-of-sale, that cash infrastructure were 90-plus percent of the cash withdrawals and cash deposits are made are out of bank branch or bank ATM or FI branch or FI ATM. We want to partner with them to help support that and to work directly with the consumers to support those FIs and our retailers. 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 quarter as the Fed put out cash up so much, ours up so much, total payments from the network companies is actually down during the period of time, which is quite a contrast to what you may hear or read. And then also I thought that was a really interesting statement that the Fed made as well in the report that I have cited earlier.

[Andrew Jeffrey:]

Okay. Helpful perspective. Thanks. And as you add more large retail banks to Allpoint, which is great to see, good momentum there, is there an upper limit do you think on the size of a bank that might join? I'm guessing, Citi's the largest bank on Allpoint today. But when you look at some of the biggest two or three retail banks, do you think that there are impediments to potentially signing them at some point?

[Ed West:]

No. We think it's applicable to everyone, large, small, medium, everybody. It's applicable. Folks look through a different lens in terms of how they approach it, because of their own network or 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 or Allpoint or different solutions our goal -- and again, as we've talked about at the Investor Day, we believe the largest driver of growth will be that growth in our surcharge-free solutions that will scale. In particular in the U.S., it will be our largest driver of growth and that applies to every bank in the land.

[Andrew Jeffrey:]

Okay. And one more, if I might sneak it in. Just on the U.K., recognizing that lockdowns have been the primary culprit. Is there anything structural that makes you think that that market doesn't ever come back and grow again?

[Ed West:]

I don't know. The crystal ball mine's as good as yours. I do know people value cash, having the currency. As I mentioned earlier, it won't go away. What we have to do is 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 ATMs? ATMs have been coming down pretty significantly in the United Kingdom. Where does that end up? I don't know. I'm not aware of anything that says, there's just a fundamental systemic shift, I think, which we need to get the communities everywhere around the world to open back up and people getting back out outside in commerce and activity and let's let that happen for a while and then we'll see where things stand.

[Andrew Jeffrey:]

Yeah. Fair enough. Appreciate it. Thanks.

[Ed West:]

All right. Thanks, Andrew.

[Gary Ferrera:]

Thanks, Andrew.

[Operator:]

Thank you. Our next question comes from the line of Reggie Smith with JPMorgan. Your line is open.

[Reggie Smith:]

Hey, good evening guys. I guess congrats on navigating this very difficult time.

[Ed West:]

Thank you.

[Reggie Smith:]

Just had two questions. Yes. No, you guys did a great job. One thing I've not heard mentioned on this call was I guess the impact of stimulus be that the tax credit or rebate or refund or unemployment. Do you guys have a sense if that had any impact on you? How would you size it? And kind of what is embedded in your guidance or outlook for the back half of the year as it relates to unemployment benefits? And if that's baked in, if it's not baked in is it a potential upside, if it comes through? Like how should we think about unemployment and stimulus?

[Ed West:]

Yes. Again Reggie thanks for the feedback. Great question. Obviously, whether it's been stimulus payments out there or CARES payments or unemployment sure. We've seen a fair amount of -- just look at the amount that we've dispensed across our platform and we've seen larger dispense sizes maybe as some of those payments come through. I mean, it's hard to tell exactly what it is exactly. How do we even know what is shifting where someone one week was receiving a paycheck and then with the shelter-in-place guidelines then were laid off and then went into unemployment within weeks later, whether it's shifting from their regular paycheck to then onto another type of program. The good news is for us is the overall resiliency of our platform. We've shown now whether it's 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 January and February accelerating growth in markets all across the nation. So now we're into a recession. We still have -- and in prior recessions we've provided well. And during a pandemic the platform has stayed resilient because we have multiple products, multiple solutions whether it's branding, whether that's Allpoint, we have locations that are convenient. 80% of our footprint were deemed essential during this period of time. So no matter what's happened we've had that period, we would expect that yes there is -- some of this is related to what was unemployment or stimulus has been. But what -- how much of that's also offset by as we talked about earlier on the rigor of the metric that we've provided which many of those locations in there were closed had zero transactions yet we counted it in the base. So that also serves that. And there's headwinds and tailwinds, how much of all that offsets one another, we're not quite certain yet, but we'll continue to analyze.

[Reggie Smith:]

Sure. Okay. I appreciate that. One last question. I missed this rough calculation that I do, but it appeared that your average revenue per withdrawal ticked up. And I was curious, if that was mixed geography. I know the U.K. 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 drove that big year-over-year increase in revenue per withdrawal?

[Ed West:]

Yes, Reggie, you're probably looking at that consolidated metric which -- that's just a really -- it's out there and it's been out there for a long time. That's not how we manage here looking very specifically location down to the street corner and then also ultimately into a country. But that's really mixed. It's mixed where you had some countries impacted more than the other then the product mix in those particular countries that are hit. That's a big driver on that.

[Gary Ferrera:]

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 and that's staying fairly stable will impact that a little bit. So that goes back to Ed's point on resiliency.

[Reggie Smith:]

Understood. Okay. Nice quarter guys.

[Ed West:]

All right. Thank you, Reggie.

[Operator:]

Thank you. Our next question comes from the line of Peter Heckmann with Davidson. Your line is open.

[Peter Heckmann:]

Hey, good afternoon everyone. Thanks for taking my questions. What do you think about the timing of placing the roughly 2,500 owned units between Casey's and the new Canadian retail win?

[Ed West:]

They're underway as we speak. And we've been moving swiftly on those and are underway.

[Peter Heckmann:]

Do you think you could be complete by the end of next year?

[Ed West:]

Yes.

[Peter Heckmann:]

Okay. And then in terms of the 6,000 ATMs that didn't transact in the quarter that weren't counted in the counts and then I think there was another -- some other number of merchant-owned and in process. Would a rough or a fair estimate be at 80% of those are back online in the third quarter? Or what are you thinking there?

[Ed West:]

I don't know. It's probably more gradual.

[Gary Ferrera:]

I think the numbers you're talking about was the 2,000 that have come back online over the -- since the end of June probably. And so yeah it's hard to get to Ed's point to a specific. As Ed mentioned earlier, I hate to call it guidance, but the estimates or directions that we gave everyone assumes like things won't dramatically necessarily improve in the U.S. but we're expecting hopefully some lift in our international markets. So those machines coming back on over time will help, but it's not going to necessarily drive our numbers dramatically different from where we're pointing it towards.

[Peter Heckmann:]

Got it, got it. And if I could just have one more. Have you seen any recovery in cross-border transactions as you move through July?

[Ed West:]

Well, it was a long ways to go for that, like, in Spain where we have a terrific footprint there. Things opened up back up and pulled back there had travel restrictions when folks went from the U.K. going there and then trying to come back. So it's very limited. We still had cross-border transactions during the period particularly in the United Kingdom for folks who just stayed there during the pandemic. But -- that would be a nice upside, but it's quite limited.

[Gary Ferrera:]

Yeah.

[Peter Heckmann:]

Got it. Okay. Thank you.

[Gary Ferrera:]

Thanks, Pete. Good day.

[Operator:]

Thank you. Our next question comes from the line of Steve Comery with G. Research. Your line is open.

[Steve Comery:]

Ed, good afternoon and thanks for taking my question.

[Ed West:]

Hi, Steve. Afternoon.

[Steve Comery:]

Yeah. I wanted to ask about the, slide about banks rethinking their branching. I think Ed you hinted that you've seen some more inbound interest in managed services and Allpoint already has. I was wondering what you think about the possibility of like budgetary caution on the part of FIs and whether or not that would slow down contract signings or onboarding, or maybe it accelerates it because they're trying to realize cost savings sooner?

[Ed West:]

Yeah. No that's a great question Steve. And it's all of it. It's a little bit cognitive. It goes both ways on that where pulling back on the investment and cost, but also there's a bigger opportunity in the branch consolidation and removing infrastructure. And the, kind of, some of the debranching and densification that's taking place. So they will look at all the expenditures that's out there. Obviously we have multiple conversations to evaluate. But we have a clear and compelling value proposition. The cost is merely one side of it. Customer presence, more engagements and we've done some studies working with another firm. The value proposition of Allpoint and branding by having more presence, perceived presence on that leads to more engaged customer’s longer term, they retain better. So always the customer driver of the revenue is going to be 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 have seen 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 of those benefits.

[Steve Comery:]

Okay. Thank you. And maybe one more for me. The slide about the Allpoint transaction growth from fintechs really impressive. Just wondering, if you guys could share any color on the split in the growth from adding logos versus the underlying customer growth from existing contracts?

[Ed West:]

It's all of it. We've been adding more and more as you know over the last year in multiple quarters now. And then as they come live these are -- a lot of them were early stage businesses and then their business accelerates. 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 off. 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 both sides. I'm excited to have another large fintech come on onboard here this quarter and we'll continue to try to do more.

[Steve Comery:]

Okay. Thank you for taking my questions.

[Ed West:]

Thanks, Steve.

[Operator:]

Thank you. I'm not showing any further questions in the queue. I would now like to turn the call over to Ed West for closing remarks.

[Ed West:]

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 longer term for the business and we look forward to talking to you and hopefully soon seeing you in person. Have a great day. Bye.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect.