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Cardtronics Inc  (NASDAQ:CATM)
Q4 2018 Earnings Conference Call
Feb. 21, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Cardtronics Fourth Quarter and Full Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, Brad Conrad, EVP and Treasurer. Sir, you may begin.

Brad Conrad -- Executive Vice President and Treasurer

Thank you. Good afternoon and welcome to Cardtronics Fourth Quarter and Full Year 2018 Conference Call. On the call today we have Ed West, Chief Executive Officer; and Gary Ferrera, Chief Financial Officer. We will 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, 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The statements on this call are made as of the date of this call and are based on current information and may be outdated at the time of any replay of this call.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've also posted supplemental investor materials regarding the fourth quarter results on our website. Please note, there was a typo error in the eight bullet of our Q4 highlights of the earnings release we issued after market close today. The correct number of Allpoint Financial Institutions added during the quarter is 21. This error will be corrected with an amended press release that will be issued shortly.

With that I will turn the call over to Ed.

Edward H. West -- Chief Executive Officer and Director

Thank you, Brad and welcome everyone. Our messages today will focus on the following key themes. First, we had a very good performance in North America this past quarter, driven by a 6% same-store withdrawals, record system availability and solid new sales execution. Second, we delivered on our key business priorities this past year in business momentum and confidence building. This year we expect to move past the negative headwinds, the ones that we are all way too familiar with during the first half of the year. We then expect to have attractive top line and bottom line performance in the second half of the year, which will set a great jump-off point for the following year and established a trend for the medium-term business outlook.

Let me start today by reminding you of our 2018 priorities. First drive durable organic revenue growth. Second, deliver operational excellence and portfolio optimization. Third, creating raving fans with our customers. Fourth, engender employee pride and finally deliver growth and free cash flow and pay down debt. Now looking back on the year where we were about this time a year ago, I'm very pleased with the team's execution and progress.

So starting with the top line. We return to organic growth in North America. Importantly, we demonstrated the power of our unmatched retail based ATM network and the value of Allpoint. Our US same-store withdrawals were up 6% for the full year. Certainly there were some tailwinds in the early part of the year related to the comps and recapture from 7-Eleven, but we largely cycled on those impacts in Q3 and then exited the year on solid ground. The same-store transaction levels drove ATM operating revenue growth in North America, a 5% for the full year, up from a negative 2% in 2017 when you exclude 7-Eleven.

We also saw terrific performance and double-digit growth in South Africa, Germany and Spain. On the operational excellence front, we achieved record availability in the US and the United Kingdom, which in turn drove improved revenues and lower costs. We are now operating at availability levels that most banks and retailers cannot cost effectively match on their own. We also reduced operating costs in several areas enabling investment in growth initiatives and additional security measures.

Now let me turn quickly touch on something that I have not spoken about at length on these calls before, engendering employee pride. I know it's an intangible one that's hard to measure, but this is an area that our management team is also focused on and I believe talent is crucial to the long-term success of this business. We have made progress on our culture, systems and office environments, change is in the air. We've got a strong purpose-driven mission and we're building for the long term. Our team is truly making a difference day in and day out, which is showing up on our bottom line. And regarding our bottom line, for the full year in 2018, we generated $118 million in adjusted free cash flow, up nearly 60% from 2017, which was used to pay down debt. In the context of losing $75 million in EBITDA from the loss of 7-Eleven, the significant growth in free cash flow was a notable achievement for the year.

This growth in free cash flow is a result of organic growth in the US, driven by surcharge free transactions to our existing well recognized and convenient retailer-based network essentially more transactions at our installed network driving higher ROI. That factor is combined with overall disciplined operating performance and capital cost management.

Moving specifically to the fourth quarter, ATM operating revenues in North America were up 4%, excluding 7-Eleven and on a constant currency basis. This growth was driven by strong same-store transactions of 6%, led by double-digit growth and surcharge free transactions from the Allpoint and bank branding products in the US. Our transaction driving initiatives with financial institutions and retailers are working. Additionally, we continue to add new partners to Allpoint, enabling 21 new financial institutions to our network in the fourth quarter bringing with them over 1 million additional cardholders. New Allpoint members include RBC Bank in the US, Qapital, an innovative and fast growing consumer, non-traditional financial services provider and Visa enrolling their prepaid and debit-card holders traveling to the US from various South Asian countries.

We also had success with bank branding, adding new relationships to brand over 400 new units in coming periods. We completed a FI commercial tripled in the fourth quarter by adding several key ATM managed service contracts with security service Federal Credit Union, one of the top 10 largest credit unions in the US, Central Valley Community Bank and others in total, adding nearly 200 new ATMs under managed service contracts. These ATMs are located at branches and off-premise locations.

Moving to the retail side, we added several new wins and expansions including the new placement contract with a leading operator of convenience stores located at airports and travel destinations adding high transacting ATMs with potential to add more locations over time. We ended the year on solid footing in North America. We experienced improving commercial performance at a new Allpoint bank branding and FI managed service relationships in addition to the new retail locations. This is combined with the great operational performance and same-store transaction growth.

Let me transition over to Europe and Africa segment. On a constant currency basis, revenue was down 3% for the quarter, similar to the previous quarter, the largest component of this segment, the UK was down driven by the negative change in the LINK interchange rate in addition to the removal of underperforming ATMs over the past year. These factors combined with the same-store declines of 2% caused revenues to be down about 7% in the UK in the quarter. Our fast growing Germany, Spain and South Africa businesses grew at double-digit rates as we continue to grow nicely in these markets. We added great retail and touristic locations and layered in bank branding and managed services arrangements.

We continue to take action in the UK to manage through the headwinds. As a reminder, we were impacted by the second LINK interchange rate reduction on January 1st of this year. We expect this will be the last rate reduction in the near future. This is causing many changes in the marketplace. We removed over 3,000 ATMs and transitioned about 500 units to pay-to-use from free-to-use.

In 2019, we are in the process of moving up to an additional 3,500 ATMs to pay-to-use. It is a shame that LINK has caused such disruption in the marketplace when free-to-use interchange rates in the UK were already one of the lowest in the world. These changes we are making will mitigate some, but not all of the impact from this pricing change. That said, even with these UK headwinds, we see a path where the growth countries of Germany, Spain and South Africa will largely offset the current negative impact to revenues in the UK this year. We believe there are opportunities for growth in the UK once the market stabilizes and we'll talk further about this at the upcoming Investor Day.

In Australia, our revenues were down 8% on a constant currency basis for the quarter, which while down was our best reported quarter this year. We have now just about fully cycled on the bank's removal of the direct charge in the fall of 2017. Market dynamics looked to be headed in the right direction for us as banks continue to close branches and remove ATMs. The bank ATMs are now more expensive for them as to operate due to the removal -- due to the removal of the revenue. Over time, this dynamic should be a positive one for us.

We generated an attractive amount of free cash flow this past year, paid down debt and we now have our sights on reaching our targeted leverage level. This year, we expect to increase our investments in new product in the United States, fund growth and infrastructure and still generate a significant amount of free cash flow. After making investments in the business with an attractive ROI and as we achieve our targeted leverage levels, we expect that our capital allocation plans will evolve toward returning excess cash flow to shareholders. We plan to share more with you about our plans for growth and capital allocation at the Investor Day next month.

Now on that last point, let me wrap up my comments today with a window into our upcoming Investor Day. We look forward to providing more insight into our business and management team on March 27 at the NASDAQ in New York. We will share our vision, our growth strategy, our execution plans, financial targets and capital allocation. Each of our regions have different profile. So, we will provide market and business insights across our geographies. We see growth opportunities in all of our markets, but believe the US business represents the single largest area of value creation as we leverage our network based business with retailers and FIs of all sizes and build on our managed services platform.

We have the right solutions, scale and technical capabilities to enable FIs to refocus their resources toward other digital priorities and allow us to serve their customers' cash needs. It is our vision and goal to manage their cash transactions on our convenient low cost network. This is a substantial opportunity and Cardtronics is best positioned to capitalize on this evolving secular shift in the market. There are many good things happening across the business and we are excited to share our enthusiasm with you next month.

And with that, let me turn the call over to Gary.

Gary W. Ferrera -- Chief Financial Officer

Thank you, Ed. We entered 2018 focused internally on some key objectives such as getting back to organic growth, operational excellence and focusing on delivering cash flows and repaying debt. We communicated in our outlook for performance based on our view of the market at that time, especially considering market disruptions in the UK and Australia and the loss of our largest partner in US, 7-Eleven. Talking to you year later, I believe that we've delivered on these objectives and throughout the year we were able to raise our outlook several times as we executed on our priorities and had better than expected conditions in some of our markets such as Australia.

With that, let me jump into the Q4 results. Consolidated revenues were $328 million for the quarter, adjusting the prior year to exclude 7-Eleven, this result was approximately flat to the prior year on a constant currency basis. Fortunately, this is the last time we will need to report our year-over-year results, excluding 7-Eleven. As a reminder, 7-Eleven's impact in 2018 was limited to approximately $6 million in revenues and no EBITDA in the first quarter. Excluding the 7-Eleven impact, the revenue growth rate in our North American segment was 4% for the quarter. This growth rate was once again driven by strong same-store transactions in the US, which were up a 6% (ph). A noteworthy -- noteworthy in the fourth quarter was our same-store surcharge transactions, which were basically flat, a solid indicator that while consumer payment options continue to evolve and be adopted, cash remains an important tool for consumers and they like and trust our convenient and safe ATMs when there is a fee.

The solid top line growth in our North America segment was offset by declines in our Europe and Africa and Australia segments. Our Europe and Africa segment was down 3% in constant currency for the quarter, primarily due to the UK LINK interchange rate decline that came into effect in July of 2018 and same-store transactions, which were down approximately 2% for the quarter.

Our Germany, Spain and South Africa businesses continue to perform nicely and are up double digits for the quarter on the top line, offsetting a good portion of the UK headwinds. As a reminder, the UK accounts drove over 80% of our revenues in this segment. Australia was down 8% in constant currency for the quarter, a portion of this decline was unit related. We've seen a moderation in the rate of decline of same-store transactions.

Consolidated adjusted gross margin for the quarter was 33.3%, down from 35.3% in Q4 of 2017. Similar to the third quarter, this decline in margin is primarily attributable to the 7-Eleven deconversion in US and the LINK interchange reduction in the UK. Adjusted EBITDA was $68.5 million compared to $89.8 million in Q4, 2018. This result was, of course, also impacted by the 7-Eleven deconversion and UK LINK interchange reduction.

SG&A was also up $2.6 million in Q4 versus the prior year and is primarily attributable to higher professional services fees. Adjusted EPS was $0.47 for the quarter compared to $0.73 in the fourth quarter of last year. It was impacted by the same factors that affected adjusted EBITDA. Our fourth quarter was stronger than we had anticipated when we provided our guidance update on the third quarter earnings call. And these results pushed us slightly above the top end of our full year 2018 guidance range for revenue, adjusted EBITDA and adjusted net income per diluted share. This outperformance was mainly due to the better than expected same-store performance in the US and the UK along with the continued focus on operational excellence throughout the organization.

Capital expenditures for the year were $107 million. This result was lower than $115 million we anticipated as we entered Q4. This was primarily due to a combination of increased focus on capital expenditures as well as timing of these investments. We finished the year with free cash flows of $118 million, up nearly 60% from the $74 million in 2017. This increased cash flow, enable a significant reduction of our net debt levels on a year-over-year basis of $113 million.

Free cash flow and debt reduction were a major priority in 2018 and we will continue to be a major priority in 2019. We ended the year with total debt outstanding of $847 million, grossed up to the face value of our debt instruments. We also had $40 million in unrestricted cash. Net debt to adjusted EBITDA was approximately $2.8 million as of year-end. During the fourth quarter, we completed a major refinancing effort, whereby we expanded our revolving credit facility from $400 million to $600 million and called and retired outstanding 2022 notes. This refinancing allowed us to lower our cash interest expense and improve our financial covenants, which will provide us more flexibility for capital allocation. After investing in our business to generate long-term growth, we will still continue to generate significant free cash flow. And in the near-term, we will focus on driving our net leverage to our targeted range of 2 times to 2.5 times.

Now let me move on to our outlook for 2019. I'll first go through the numbers, then I'll provide some color and a few other items. Consolidated revenues are forecasted to be $1.31 billion to $1.35 billion. Our North America business is expected to grow in the low single digit range, and we expect our Europe and Africa segment to be about flat on the top line and Australia to be down a few percentage points.

As a reminder, we have significant interchange rate reductions on our free to use ATMs in the UK in 2019. But we expect the other countries in the segment to largely offset the decline for full year. On adjusted EBITDA, we're expecting to be in the range of $285 million to $295 million. This result is meaningfully impacted by the interchange rate reduction in the UK, along with the property tax adjustment benefit that we recorded in the first half of 2018 and currency headwinds versus a significant currency tailwind during the same period. The combined impact of the prior year property tax benefit, the impact of two LINK interchange rate reductions and currency headwinds account for over $30 million in EBITDA headwinds in 2019, much of it which is weighted toward the first half. Adjusted EPS, we are currently expecting a range of $1.94 to $2.05, a few moving parts and adjusted EPS, first, the refi (ph) spoke about earlier should save up to about $8 million in interest expense.

This savings is being offset by an increase in depreciation expense driven by some of the investments we made in the last year or two in the in-year effect of increased 2019 capital expenditures. We expect our non-GAAP tax rate to be similar to 2018 at approximately 24%. Cash taxes are expected to be about $10 million to $15 million in 2019 versus less than a $1 million in 2018. This assumes status quo tax rates and regulations in our major jurisdictions. We currently anticipate 2019 capital expenditures to be approximately $135 million, while this investment is elevated compared to 2018 levels, this increase is completely due to growth projects that will benefit us in late 2019 and beyond.

These expenditures are made up of three broad categories. First, we anticipate investing approximately $65 million in 2019 for growth initiatives, primarily involving ATM placements to enhance and expand our network, along with continued growth in managed service contracts with financial institutions. We also continue to expect strong unit growth in South Africa, Spain and Germany. The second category of capital investments is IT maintenance infrastructure and product enhancements. We \project about $35 million in 2019 to continue to invest in our infrastructure for items such as IT security, our ERP implementation, which we expect to largely compete in 2019 and technology development.

The third broad category is physical infrastructure CapEx, which includes upgrades and security for our ATMs, general life cycle replacements and other operating CapEx. We estimate investing approximately $35 million in this category in 2019. Similar to 2018, we will watch capital spending very closely and place an ROI lens on each project. All of our guidance is based on exchange rates, remaining about where they are today, which we have detailed in our earnings release. As many of you know, our results are most sensitive to the US Dollar, British Pound exchange rate, we have assumed a full year of $1.28, which is a little worse in 2018 average exchange rate of $1.34.

Let me close off the guidance discussion by talking about the distribution of EBITDA adjusted -- adjusted EBITDA across the four quarters. While we don't give specific quarterly guidance, I wanted to offer some direction as we expect significant year-over-year variability by quarter. Based on how we currently anticipate the year unfolding, it really is a tale of two halves as we expect adjusted EBITDA to decline year-over-year in the first half and then begin to show growth in the second half.

More specifically, we expect the Q1 will have the toughest year-over-year comparisons as it is typically our lowest transacting quarter and we will experience some tough comparisons versus prior year. In fact, the impact of the two LINK interchange rate reductions compared to prior year, coupled with the property tax benefit we had in Q1, 2018, along with an exchange rate headwind, equates to approximately $13 million of headwinds for the quarter. Therefore we see Q1 being down almost 20% compared to the prior year. While Q2 was much stronger quarter for us, we will continue to have the LINK in currency headwinds, as well as the remainder of the property tax headwind compared to the prior year. Therefore we anticipate adjusted EBITDA being a few million below prior year.

In Q3, which is typically our strongest quarter we will cycle on the first interchange rate cut that started in Q3 of 2018, and the property tax adjustment will no longer impact our year-over-year comparisons. We also anticipate seeing an increased impact of growth from our continued sales efforts. Therefore, we expect Q3 to be the first quarter in 2019, we will see year-over-year growth in adjusted EBITDA. We currently expect the growth in adjusted EBITDA to be relatively similar in both Q3 and Q4. Based on what we know today, we believe this projected stronger second half is a good indicator of future growth as we lap many of the headwinds of 2018 and early 2019. We look forward to providing a longer-term view on our strategy and key financial metrics next month at our Investor Day.

With that, I'll turn it back over to the operator.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Andrew Jeffrey with SunTrust. Your line is open.

Andrew Jeffrey -- Robinson Humphrey, Inc. -- Analyst

Hey. Good afternoon, guys. I appreciate you taking the question.

Edward H. West -- Chief Executive Officer and Director

Good afternoon.

Andrew Jeffrey -- Robinson Humphrey, Inc. -- Analyst

Certainly good to see the beginning of a turn in the US, long time coming. On that front, Ed, can you talk a little bit about how you view the US market, perhaps changing with the introduction of contactless. I know this is something the Visa has pushed pretty hard and it sounds like, later this year and maybe in the next, it's going to be more of a reality. How do you factor that into your long-term planning.

Edward H. West -- Chief Executive Officer and Director

Well thanks Andrew. First going back to where you started. It is -- we are very pleased with the direction what we see in the US and the performance and having 6% same-store transaction growth and frankly the double-digit surcharge-free growth is very rewarding and then getting back to organic growth. And as Gary put in his comments, we see ongoing improvement next year as well in terms of the performance with positive withdrawals and inorganic growth next year as well in North America.

I'm sure contactless Visa, Mastercard, others are working to roll that out and with retailers others and with financial institutions. We've seen it clearly and in other markets as well, and we factor believe that that is -- we will see that over time in the US, although, but we also believe the opportunity that I spoke about in the US as it relates to a secular shift over time in terms of where we can support financial institutions and their needs for their customers. As we've talked about and then rolling out this past year with -- and seeing very, very good performance with our various products in the solutions that we can offer them combined with Allpoint, bank branding, managed services leads to overall long-term growth for us and will go into more of that at the Investor Day.

And I guess the last thing I would say is, the US market is very different from the other markets around the world with the diversification of retailers, diversification and financial institutions, and frankly just a consumer base here, is very different and I think we'll all do well going forward.

Andrew Jeffrey -- Robinson Humphrey, Inc. -- Analyst

Okay. I look forward to details. And as a follow-up, we hear a lot about Allpoint and clearly it's point of emphasis for the Company. Is there a point in time and if so when might that be that we think less -- We think -- we think about Cardtronics less as a -- in the US anyways business that's tied to US retail foot traffic and more independent of that by virtue of Allpoint monetization whenever that winds up looking like?

Edward H. West -- Chief Executive Officer and Director

Sure. Allpoint, obviously, as you point out is just absolutely terrific, terrific asset and terrific network. I would encourage you for all of us to think about it overall surcharge-free, because when we work with financial institution the ability to offer either through Allpoint, in terms of surcharge-free network or bank branding products to really promote their brand and marketing at well known retailers and get a better presence into our particular markets and then combine that with the managed services capabilities scale the expertise and knowledge that we have, those products offer together are a comprehensive solution for FI. And then I think as point, as you see, this past quarter and frankly throughout the year we had double-digit surcharge-free growth, growing at our retailers and we have great relationships, which has been very valuable, just the trend and the transition that you've seen.

So I think we're pointing on more to the traffic there. And I guess the last point I would just note on is when you have that double-digit growth, the traffic that's going to these locations is quite frankly immaterial. What the recapture that we were able to experience from the change of 7-Eleven of -- leaving obviously our portfolio, which by the way was a significant portion of the US business to have that recaptured and to show that kind of growth that we've been able to experience and recover from that this past year, I think is a great -- great data point for the business and the strength in the value that we also bring to retailers.

Andrew Jeffrey -- Robinson Humphrey, Inc. -- Analyst

Thank you.

Edward H. West -- Chief Executive Officer and Director

Thank you.

Gary W. Ferrera -- Chief Financial Officer

Thank you.

Operator

Thank you. Your next question comes from Bob Napoli with William Blair. Your line is open.

Bob Napoli -- William Blair -- Analyst

Thank you. Good afternoon Ed and Gary. I appreciate it. The US business you point out has the biggest opportunity I think by far. I'd just like a little more color on how you're going to take up your market share of transactions. I guess it's kind of big picture while you have 2% market share and if you go to 3%, that's pretty good. But the FI opportunity, the outsourcing -- you have I think a new team team or you've invested more in the team or what kind of metrics are you expecting? I mean getting 200 ATMs and outsource, I mean that's nice, but I think you need to get some more momentum in that to really move the needle. So I mean, if you could give some color on how you're really going to improve materially your US market share of transactions and then some color on the outsource of working more to manage ATMs core financial institutions?

Edward H. West -- Chief Executive Officer and Director

Sure. Thanks, Bob. So I think with some of the data points from this past year. I mean we have double-digit surcharge-free growth at across our network is a significant performance and then obviously the beginning we're on the very early stages of growing out of the managed services. I think that's an evolving market that will be years in the making. We just step back and just look at the overall transactions that happened in the US, over 80% of those are happening at a financial institution, whether at a bank teller or an ATM, we are very small, obviously one of the largest independently, but small percentage. It doesn't take a whole lot of growth there to be a material impact. We will go into more of this on Investor Day, and where we see that our market opportunity to be and we believe this to be very, very substantial.

The way this will happen is just a disciplined effort that we started on this past year, having the right people, the right FI capabilities, the sales force going in the comprehensive solution sale into a financial institution, offering those surcharge-free solutions between Allpoint, bank branding plus managed services, driving more transactions, again as illustrated working with both the retailers and FIs, what we've experienced this past year, a lot of that's just -- it's hand to hand combat working with our team, with the retailer and the financial institution of bringing awareness to their customers. And frankly, tying our W2 (ph) and our teams and compensation to that performance and all of us aligned to seeing that growth. I don't think it's going to be one of the things, Bob, where it's all suddenly it's skyrocket into the next quarter, but it's going to be a long-term build on a secular shift in the marketplace and no one has the scale and leveraging capability to leverage on that than we.

Bob Napoli -- William Blair -- Analyst

Then just my -- thank you, my follow-up question is, the back half of the year getting back to growth, would you expect revenue growth to be higher than EBITDA growth in the back half of the year? Maybe you are talking in the mid-to-upper single digits revenue growth or mid-single digits, what are you thinking?

Gary W. Ferrera -- Chief Financial Officer

Yeah, I think, Bob, it's probably revenue growth to be lower, but EBITDA growth to be higher, just as you'd expect from the leverage coming out of that --

Bob Napoli -- William Blair -- Analyst

Sure.

Gary W. Ferrera -- Chief Financial Officer

But, we haven't given anything specific revenue growth in the second half.

Bob Napoli -- William Blair -- Analyst

Thank you. I appreciate it.

Edward H. West -- Chief Executive Officer and Director

Thank you, Bob.

Operator

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

Tim Willi -- Wells Fargo -- Analyst

Hi, thanks and good afternoon. Two questions, the first one, I guess is a -- you've touched a little bit on I think in a couple of answers, but thinking about like the competitive landscape for Cardtronics. In the United States you still have -- while it's been consolidated there is still -- what I guess I would say it's a reasonably large market for independent deployers and ISOs and that type of competitor. And I guess I'm curious is we hear what you're doing, what CapEx product development cost of capital energy you may have versus those sort of independent type competitors? Are you seeing anything in terms of what's driving your growth? Is there a loss where they no longer can sort of add that value proposition to an independent location or afford the revenue share for the cost of capital to keep up with the evolution of the model, where maybe that's an element that plays out in your favor as well competitively?

Edward H. West -- Chief Executive Officer and Director

I couldn't agree more in terms of looking at the various markets. I think you just have to step back and view the segmentation. What you're referring to is maybe into some of the smaller retailers and some of the independent operators versus larger retail base or financial institutions. Obviously, our scale, size, capability security measures, our breadth in terms of globally, what we see around the world, how we can bring that to bear in different markets and then frankly on the FI side, the solution set that we have is -- no one replicates that because of the various products. At the smaller end what you're talking about, clearly our sales -- the size, scale, operating advantage, buying power and frankly just information and security is -- it's hard to replicate. So we do see that as advantage and something more in the area where we continue to grow and build on.

Tim Willi -- Wells Fargo -- Analyst

Great. Then, my second question and my follow-up was -- again this goes back years ago there was a product roadmap around all kinds of different things, analytics and different types of content and product, you can bring to the ATMs, I know that's probably taken a backseat, the work you guys have had do over the last year and a half, but just any thoughts around additional functionality, revenue generating type capabilities that you see, that could evolve into the marketplace, into your revenue model in the next couple of years, regardless of this year, just curious any thoughts there?

Edward H. West -- Chief Executive Officer and Director

Sure, it's actually to the contrary. It's actually to gone into the front seat where our top priority is driving durable organic revenue growth and actually we pulled back, as you know on the M&A front, reallocated resources and I've actually been investing heavily in product, new capabilities and designing other functionality and capabilities in particular with the financial institutions and we really look forward to showcasing some of that and reviewing that with you all next month at the Investor Day. So that's actually front and center and it will build to out durable competitive advantage.

Tim Willi -- Wells Fargo -- Analyst

Great, thanks very much.

Edward H. West -- Chief Executive Officer and Director

Thank you.

Operator

Thank you. Your next question comes from Ramsey El-Assal with Barclays. Your line is open.

Ramsey El-Assal -- Barclays Investment Bank -- Analyst

Hi guys, thanks for taking my questions. I wanted to ask you about the kind of growth algorithm of the Company. Sort of prior to 7-Eleven rolling off in the last couple of years, I thought of it as -- and I think this might have been something that you all had put out, it was sort of 50% new placements and 50% new transactions effectively flying over the footprint. I mean how would you characterize the growth algorithm now? It sort of feels like we're leaning more heavily toward the -- flowing more transaction over the footprint, given how built out some of the key markets are perhaps, but I'm just wondering how we should think about underlying drivers of the business going forward in that context?

Edward H. West -- Chief Executive Officer and Director

Yeah, that's great question, Ramsey, and good afternoon. It really varies by market with where we are, and depends on the stage where we are in the business and trying to -- as I talked about, in my comments here, like in the US, where you're seeing more transactions going through our network. And we will continue to add to that, build that, by working very closely with financial institutions to support them and with their customers go into our network at well known retailers. And obviously the ROI on that is very attractive as we talked about earlier in the comments. In addition to that, we'll grow through fixed rate contracts through managed services, which are long-term agreements where we have lots of visibility and contract value. Then the rest of the countries, different markets and regions around the world, they vary by market, whether it's new placements and/or driving transactions. We will share this with you and go through that next month at the Investor Day. When we have, as I mentioned earlier, a market by market review.

Ramsey El-Assal -- Barclays Investment Bank -- Analyst

And so in that context, could you give us sort of an update on I guess both Allpoint and bank branding, which are sort of the primary method currently where you're kind of increasing the flow over the transactions, kind of a state of the state on Allpoint and branding, I guess in terms of like the Allpoint pipeline, are there more large FIs in that pipeline. I think that's what's been helping to move the needle recently. And on the branding side, you still have an inventory of company-owned machines that are suitable and attractive for branding and is there a pipeline there as well? Just a little more color there would be helpful.

Edward H. West -- Chief Executive Officer and Director

Yes. If you look -- kind of stepping back, looking at the FI pipeline since -- as we've talked about before, again a lot of changes in the commercial organization. The team -- the commercial leadership team has done a terrific job, talent -- new talent, new organization, rolling out sales force, getting very discipline on the market segmentation, go-to-market strategies who we're working with in the financial institutions? What's the value proposition? And then aligning everybody's W2 to the performance that we would like to see. And with having now a pipeline -- disciplined pipeline reporting, still I would say sitting here today versus a year ago our confidence is up significantly in the pipeline, in particular the FI pipeline is up considerably from a year ago and that's by the products. as you pointed out, whether that's Allpoint, branding or managed services and, who we're talking to. I think is probably the secondary I'd mentioned. In terms of the financial institutions it's just the size of who we're working with and speaking with in different markets around the country is ranging all sizes of institutions from the very largest to community-based banks and credit unions.

Ramsey El-Assal -- Barclays Investment Bank -- Analyst

And then really quick follow-up. So on the branding side, you have enough kind of inventory -- unbranded inventory to continue rolling out branding relationships or is there sort of a ceiling that will hit or have hit in terms of the availability of incremental units that are suitable for those types of relationships?

Edward H. West -- Chief Executive Officer and Director

So today we have about -- I would say, call it 37,000 sites that are brandable and about little over 14,000 of those are branded. So there's headroom, there is availability and we look forward and have conversations routinely with financial institutions on key markets. I think -- another thing that's also changed over the last year or two, the larger banks were on the move. Markets are becoming interest, some banks have to support and defend the markets where they are, other regional and larger institutions are moving into two new markets. So obviously, the interest level there is continuing to increase.

Ramsey El-Assal -- Barclays Investment Bank -- Analyst

That's great color. Thanks for taking my question.

Edward H. West -- Chief Executive Officer and Director

Thank you.

Operator

Thank you. Your next question comes from Gary Prestopino with Barrington Research. Your line is open.

Gary Prestopino -- Barrington Research Associates, Inc. -- Analyst

Hi, good afternoon. Just wanted to maybe touch on -- if you give us some statistics in terms of the Allpoint network. What's been the year-over-year change in the card base and the year-over-year change in the financial institution base? And the numbers of cards that you're servicing now, the number of FIs that you have out there now on Allpoint?

Edward H. West -- Chief Executive Officer and Director

I would say if you -- over -- the year-over-year it's not significantly different, because obviously you had the roll-off from overall volume a year ago with over 7-Eleven. Today we have over 60 million card members, that are holders of that and that is growing, the number of financial institutions as you know, as we've been reporting out is growing. I think what's -- what we're really focused on and obviously is growing the totals, but it's really the engagement of the base, the awareness, the knowledge, what people have in their wallet and the use of the networking, which is why we've talked about this transaction-driving initiatives across -- across the Company have helped in bringing up that awareness and the utilization of Allpoint.

Gary Prestopino -- Barrington Research Associates, Inc. -- Analyst

So your same-store transactions were up 6% in the quarter, is that right and 6% for the year?

Edward H. West -- Chief Executive Officer and Director

Total transaction surcharge-free were up double-digit.

Gary Prestopino -- Barrington Research Associates, Inc. -- Analyst

Okay. What was that like last year? What was the growth last year? Do you have that ex anything that you lost on?

Edward H. West -- Chief Executive Officer and Director

You tell that on an ex 7-Eleven basis with had to pull that to figure out.

Gary Prestopino -- Barrington Research Associates, Inc. -- Analyst

Okay. But that's fine, but it's growing. And I guess the question I want to get to is what are you doing to drive that engagement?

Edward H. West -- Chief Executive Officer and Director

That gets back into the transaction driving. Well, first of all is selling new relationships. Like we pointed out, this past quarter where we had 21 new financial institutions with a million new card members of that from -- for this past quarter. What we're doing specifically, working with them is -- with -- in particular, the financial institution of awareness, whether that's programs with their apps.

So that their customers are aware of that having locator built into their, doing an email campaigns, digital campaigns, having temporary branding on key retailers around bringing that awareness to the financial institutions, putting signage and awareness at branches and also having the programs with the retailers of bringing up the awareness. So it's -- there's no one silver bullet. It's multifaceted working with a financial institution and getting the awareness and we're seeing as we've demonstrated, seen the growth here.

Gary Prestopino -- Barrington Research Associates, Inc. -- Analyst

Thank you.

Operator

Thank you. (Operators Instructions). Your next question comes from Reggie Smith with JP Morgan. Your line is open.

Reginald Smith -- JP Morgan Chase & Co -- Analyst

Gentlemen, thanks for taking my question.

Edward H. West -- Chief Executive Officer and Director

Good afternoon.

Reginald Smith -- JP Morgan Chase & Co -- Analyst

So great, good to see the same-store transaction growth accelerate in the fourth quarter in the US. Obviously, you noticed that the revenue growth in the US was lower than transaction growth and recognizing that, the surcharge free transactions don't generate as much revenue as surcharge transactions. If you kind of help us understand how the margin profile of these transactions may vary from a surcharge transaction and if it matters or is the fact that you may own the Allpoint ATM versus not only does that impact the margin profile of those transactions. Just trying to figure out how we should think about the profitability of the surcharge-free transactions.

Gary W. Ferrera -- Chief Financial Officer

Yeah. Reggie, it's Gary. Yeah, it is very hard to get specific on that. I mean there are so many different variables. The advantage of the surcharge-free obviously is volume, right. I mean we're trying to -- it's a lower price obviously, but there is a significantly higher volume and then when you start looking down, obviously it's lower revenue, but on that one. We haven't given out specific metric on profitability, on surcharge-free versus surcharge. But as I said, again, it's all about the volume in that situation.

Edward H. West -- Chief Executive Officer and Director

I would say also, it does make a difference to the second part of your question on us owning the terminal. And that's actually a differentiator, where a comprehensive solution where we can manage that experience for Allpoint as well for the customer and the financial institution.

Gary W. Ferrera -- Chief Financial Officer

Yeah, where we own the equipment as we have better results obviously.

Reginald Smith -- JP Morgan Chase & Co -- Analyst

Got it. Okay. So the way to think about it, obviously, on a lot of your transactions, you have a commission which you split with the retailer. On the surcharge-free, it means that it is safe to assume that there is no commission split and the retailers are just happy that someone is coming into their store? Is that the way to kind of think about that?

Edward H. West -- Chief Executive Officer and Director

No, I would say it wouldn't be safe to assume that there would be no commission or sharing, but it is very important seeing the traffic come into the store as evidence of the growth that we've experienced with double-digit growth going into the retailers and retailers are very aware and value that greatly in these -- the relationships.

Reginald Smith -- JP Morgan Chase & Co -- Analyst

Understood. If I could move over to I guess South Africa and maybe even Germany as well. I guess you made a comment that you kind of feel like at some point that will help offset some of the pressure you're seeing in the UK. Obviously, we're very US-centric and there is lot of discussion about the US market. Can you kind of give us a sense of like what -- what does South Africa look like from an ATM perspective? Like what's the -- where are they in the transition to point of sale of transactions like who owns the ATMs out there? I put it what that market kind of looked like, if you can make it a little real or for us here in the US or maybe I'm jumping the guidance, which you're going to cover at the Analyst Day in a month or so?

Edward H. West -- Chief Executive Officer and Director

Well we -- so the last part of that, yes, we will cover some of that in terms of some of the markets and regions. But I would just tell you from an ATM penetration is at the lower end of the spectrum, where there is lots of opportunity to the need for the cash across the country. Obviously, we're based in Cape Town, but have locations all over the country growing quite rapidly and the great news also have excellent relationships with the largest financial institutions in the country and helping to support their growth and their needs, and we feel like there is a long runway ahead of us there in an attractive market. But again, as far as the lower penetrated markets that we operate in, we'll share more with you next month.

Reginald Smith -- JP Morgan Chase & Co -- Analyst

Got it. And if I can get one last housekeeping question. You provide, I guess bank branding and I guess Allpoint revenues you break it out. Is that the entire revenue from bank branding or this -- are there also some Allpoint revs that show up in the -- if interchange bucket, like how is that -- is it fully captured in that figure? You're hoping --

Edward H. West -- Chief Executive Officer and Director

No, it's not -- also -- it's also an interchange as you pointed out. Yeah.

Reginald Smith -- JP Morgan Chase & Co -- Analyst

Got it. Okay, perfect. Thank you.

Edward H. West -- Chief Executive Officer and Director

All right. Thank you, Reggie.

Operator

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back over to Ed West, CEO for closing remarks.

Edward H. West -- Chief Executive Officer and Director

Great. Thank you, operator. 2018 was an important year for the Company. By transitioning Allpoint and bank branding off of our largest customer in 2017, who previously represented about 30% of our revenues in the US and recapturing a significant percentage of the transactions in traffic on a remaining state. We clearly proved the strength, durability and value that our network and scale offers to both retailers and FIs. We had been relentlessly focused on our key priorities and are encouraged about the momentum that we're seeing in the business. I would like to thank all of our employees for their dedication this past year to help transform Cardtronics and position us for the future. Thank you very much. Good day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you all may disconnect. Everyone have a wonderful day.

Duration: 52 minutes

Call participants:

Brad Conrad -- Executive Vice President and Treasurer

Edward H. West -- Chief Executive Officer and Director

Gary W. Ferrera -- Chief Financial Officer

Andrew Jeffrey -- Robinson Humphrey, Inc. -- Analyst

Bob Napoli -- William Blair -- Analyst

Tim Willi -- Wells Fargo -- Analyst

Ramsey El-Assal -- Barclays Investment Bank -- Analyst

Gary Prestopino -- Barrington Research Associates, Inc. -- Analyst

Reginald Smith -- JP Morgan Chase & Co -- Analyst

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