Cardtronics (CATM) Q1 2020 Earnings Call Transcript

Cardtronics (CATM)
Q1 2020 Earnings Call
May 08, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Cardtronics first-quarter 2020 earnings conference call. [Operator instructions] Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Mr. Brad Conrad, treasurer and head of investor relations.

Sir, you may begin.

Brad Conrad -- Treasurer and Head of Investor Relations

Thank you. Good morning, and welcome to Cardtronics' first-quarter 2020 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, including our Form 10-K for the year ended December 31, 2019, as updated by our Form 10-Q for the quarter ended March 31, 2020, 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The statements on this call are made as of the date of this call and are based on current information and may be outdated at the time of any replay of this call.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 morning 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 first quarter on the investor relations page of our website at cardtronics.com. With that, I will turn the call over to Ed.

Ed West -- Chief Executive Officer

Thank you, Brad. Hello, everyone, and thank you for dialing in to our first-quarter call today. First, I would like to say that we are humbled by and truly grateful for the actions and sacrifices of first responders and healthcare professionals across the world who continue to protect and care for all of us. We are also extremely grateful for our employees who continue to provide essential services around the world, and I have been inspired by the resolve and commitment demonstrated by our team during this unprecedented time.

Today, I will touch on our Q1 results and focus my comments on the impact that we have seen on our business, the actions that we've taken as a result of the pandemic and the longer-term implications for our company. In a crisis, it's important to have a plan, a committed team and be able to adapt quickly. I could not be prouder of our team and our company as we navigate this challenging period. We have and will continue to protect the well-being of our employees.

Just like nearly every other business in the world, we have faced challenges from this pandemic, and we have learned a lot about our business. Our strategy, values and business continuity planning have served us well. We haven't missed a beat operationally, and we continue to earn new business. As we look forward to being on the other side of this pandemic and economic lockdown, we can see opportunities that may emerge from this crisis.

I would like to convey the following key messages today. First, we are managing the business for the long-term. As we navigate through the challenges caused by the COVID pandemic, I believe this period of time will serve as an inflection point from which Cardtronics will emerge a better company and poised to gain transaction share and grow revenues and profits. This crisis will likely accelerate the trend of bank branch transformation that we have been discussing on previous calls and outlined last year.

The pressure on cost savings at FIs has dramatically increased as a result of the pandemic. We are also advancing our software and cash in, cash out capabilities as we build on our network of mobile-enabled digital-to-physical access points. Second point, this crisis has highlighted the strength and resiliency of our ATM network. The geographic dispersion of our footprint, the diversity of retailer locations and the broad spectrum of end users that we serve has allowed us to mitigate the unprecedented economic ramifications caused by this pandemic.

And third, Cardtronics provides a critical and valuable cash infrastructure for the communities which we serve. Consumers value access, safety and security in crisis situations and we play an important role in ensuring fundamental economic activity is available for all citizens irrespective of their socioeconomic status. Cash preserves privacy, an increasingly important and rare quality in today's society. It is also a meaningful payment of choice that is enduring and vital for many communities that we serve.

And lastly, the company is in good shape and well positioned financially. We will continue to focus on a strong balance sheet, free cash flow, revenue and earnings growth. And before we get into the Q1 results, I would like to take you back to roughly a year ago when we outlined our strategic direction and longer-term guidance at our Investor Day. I indicated that we believe there will be a burgeoning opportunity for common infrastructure or utility operator in the cash distribution area due to branch transformation.

Accordingly, we announced a new direction for the company, including an ardent focus on leveraging our surcharge-free network, increased investments in technology skills and solutions for our retail and FI partners. Rolling out Allpoint+, the first retail-based deposit network and focusing on and creating digital physical access points to handle a better array of user-driven and mobile-enabled transaction types. All of this was to be achieved by developing our own leading software on our proprietary platform and operating within a disciplined mindset to drive organic growth, increase free cash flow and pay down debt. I'm pleased to report that a year later, we saw strong momentum in the first quarter as a result of our actions over the past couple of years.

For the months of January and February, we had constant currency revenue growth of 6% and solid double-digit adjusted EBITDA growth on a consolidated basis. Revenue growth was led by an 8% increase in North America. In fact, our U.S. same-store withdrawal transactions were up 6% through mid-March, higher than any quarter throughout 2019.

Across the globe, we started to be impacted by the pandemic in the early part of March, and same-store transactions began to soften. And then by mid-March, when most of our markets were in shelter-in-place status, we saw further transaction declines. Despite the transaction fall off during March, we grew margin, earnings and cash flow during the first quarter. Let me now talk a little bit about what we've been seeing with our transactions across our markets since mid-March and through today.

First, places that are heavily reliant on travel, tourism and recreation, have been, as you would expect, the most adversely impacted. Fortunately, these represent a small portion of our ATMs and revenues. To put this category into perspective, these ATM locations accounted for approximately 10% of total revenues in 2019. Casinos and theme parks, for example, transactions have gone to zero, but we believe that, that will be temporary.

As another example, transactions are down over 90% in Spain, which is also heavily tourist-dependent, but it accounts for 1% of our total revenues. On the other hand, the staple of our business across our segments are our ATMs located mostly at well-known convenience, grocery, pharmacy and big box retailers. Approximately 95% of our ATMs in these location types in the U.S. have remained operational through the pandemic, providing critical cash access to the citizens within the markets that we serve.

We have seen varying degrees of impact across our geographic segments, but across all geographies, our core convenience, pharmacy and grocery locations have mostly remained open and have been the most resilient with respect to transaction volumes. In the U.K., our second largest market, our same-store transactions have been down approximately 55% since mid-March and is similar to the transaction volume declines that can be seen across the banks and ATM operators in this market. We have seen a consistent improvement to this trend in the U.K. over the last few weeks.

DCC revenues in the U.K., our largest DCC market, have been impacted due to the travel restrictions. In the U.S., our largest market, our same-store transactions have been more resilient, down approximately 25% since mid-March across our entire ATM fleet and actually trending more favorable since the earlier low point. You will see the transactions at these locations were down about 15% over the last seven days. I refer you to Pages 6 and 7 of the investor supplement posted on our website for some additional detail on recent transaction performance within the U.S.

As you would expect, within the U.S., we have seen the most significant impact on our ATMs in the metropolitan areas that have been highly impacted by the COVID-19 virus and under strict shelter-in-place orders. For example, same-store transactions at our ATMs in New York are down over 40% since mid-March. Interestingly and perhaps somewhat surprising to some, in light of the certain views that the contactless payments rollout on New York subways may significantly alter cash usage is the fact that our New York ATMs had same-store transactions in the first quarter through mid-March that were higher than what we saw across the whole country. Our same-store transactions in New York have been growing over the past several quarters, another testament to the executing on our strategic plans.

While New York is the largest city in the U.S. and certainly an important market to us, it is less than 5% of our transactions and ATM counts. And this brings us to an important point about the value of our network. One of the more powerful aspects of our state is its geographic dispersion.

The top 20 metro areas in the U.S. account for approximately 40% of our total transactions in the country with no single metro area accounting for even 5% of our transactions. We operate in all 50 states, and the majority of our transactions take place at locations outside of the top 20 metro areas. These less densely populated areas have been performing better on the whole compared to our ATMs in the top 20 metro areas since mid-March.

A second point of resiliency is the diversity of our customer base. Our frontline consumers range from customers of some of the largest FIs in the U.S. via branding arrangements to customers of over 1,000 FIs via access to the Allpoint network. In addition, prepaid, payroll, state and federal aid programs also participate via Allpoint.

And of course, convenient locations play a large role when it comes to convenience or surcharge transactions. This crisis has also highlighted the strength of our network, reflected by the diversity of our retail locations in the U.S. Looking at our U.S. ATM estate another way through the lens of the location type, we can see how our network has performed across different types of retailers.

I refer you to Page 8 in the investor supplement. You will see our pharmacy and grocery ATMs in the U.S., overall, same-store transactions have been down less than 20% since mid-March. These ATMs account for almost 50% of our ATMs. To summarize, the vast majority of our U.S.

ATMs are located at everyday locations, most of which have been designated as essential businesses by the U.S. government. While the transactions in the U.S. are down, given the extent of the nationwide shutdown, we are encouraged by the resilience of our fleet.

And while our transactions have been impacted by the shelter-in-place orders enacted in most states, we can clearly see that cash matters to many people. Things could change, but we have recently seen some solid signs of stabilization and improvement. As the economic stimulus measures and unemployment funding started to be distributed in the U.S. around mid-April, we saw a nearly 50% week-over-week improvement in volumes, and we expect that transaction volumes will continue to improve to a certain extent as shelter-in-place protocols are lifted.

For example, during the three days leading into this past weekend, we dispersed over $350 million from our company-owned retail-based ATMs in the U.S., up as compared to the same weekend last year. Although same-store transactions have been down for the entirety of the period since mid-March, we have witnessed days with significant year-over-year increases in same-store transactions as well. We are also seeing a double-digit increase in the amount of cash being withdrawn per withdrawal. For example, in the U.K., while the number of transactions have been down around 55% since mid-March, the average withdrawal amount has gone up by nearly 25%.

This highlights that cash matters to most people. And second, the impact of transactions is more about shelter-in-place directives and people not going out versus an unfounded fear of cash. To illustrate the point, same-store transactions were down about 23% for the month of April in the U.S., while total cash dispersed was only down 11%. Our transaction volumes declines are fairly consistent with the decreases in recent consumer spending trends.

For comparative purposes, various network and processor data reflects consumer transaction declines in ranges comparable to what we have seen across our U.S. ATM network. In fact, credit card present data suggests even higher reductions to credit card transactions. I think it's also important to highlight some of the things that we've been doing operationally over the past couple of months.

Like most companies of our size, we had a business continuity plan that we had tested and were able to implement swiftly and seamlessly. Most of our employees across our geographies have been working remotely since mid-March, and I am pleased to report that the work-from-home transition has been seamless. Our employees have been equipped with the tools that they need to carry out their day-to-day activities and our operations overall have not been impacted. We also were prepared to have plenty of cash available for our ATMs, ensuring limited service disruption.

It has been a priority for us to ensure the health and safety of our employees, while we deliver on our mission and make sure the right locations around the world had sufficient levels of cash so that local communities were served. These logistical challenges have led to some elevated cost in the second quarter as we move cash around in increased levels at essential locations. Early in April, we made an announcement regarding actions we have taken to mitigate the impact of the pandemic and reduced cost, preserve financial flexibility and cash flows. These were significant cost savings measures, including salary reductions, furloughs, professional fees and various discretionary reductions as well as reductions to capital expenditures.

The anticipated cost savings are in excess of $30 million from a cash flow perspective in Q2. During this period, as we navigate through the impacts of the shelter-in-place directives, we continue to bring in new business and have accelerated some of our product initiatives. We entered into several new important relationships with retailers and financial institution partners during the first quarter. On the retail side, we announced a new agreement with Casey's general stores, a Fortune 500 company with over 2,100 convenience store locations in the U.S.

We are now the exclusive ATM partner for Casey's and have already commenced installing our ATMs at their store locations. We are thrilled to add Casey's to our list of premier retail partners. On the FI side, we expanded our branding relationships with Citi and two other top 25 banks during the quarter. On the Allpoint front, we signed 27 new FI partners during the quarter, including several of which also joined our Allpoint+ deposit network.

FIs and fintechs of all sizes continue to value and trust our Allpoint network as a convenient ATM solution for their customers. We also expanded our managed services business, signing new and expanded agreements with 27 different FI partners in the quarter. We are increasingly the partner of choice for financial institutions of all sizes to manage their customers' cash distribution needs via ATMs. I would also point out that many of these agreements with financial institutions were signed during the month of March, which suggests even in these extraordinary times, partners see the value in our services.

Last quarter, I spoke about a new software at our ATMs that we have developed in-house and why this is a pivotal development for us. This software, coupled with enhanced mobile capabilities and a growing number of cash-accepting ATMs, continues to drive new business opportunities. Despite the numerous challenges presented by this pandemic, we continue to deploy this software across our fleet and continue to roll out cash-accepting ATMs. A times of crisis often produced innovative solutions.

Earlier this week, in the United Kingdom, we launched an innovative new mobile cash service in association with Pin4, a U.S.-based fintech. This service is the first of its kind in the United Kingdom, and will utilize our countrywide network of ATMs to provide citizens with the access to cash sent to them via an SMS to their mobile phones. Our teams were able to deliver this capability from concept-to-market pilot within five weeks. The functionality is already gaining significant interest from a wide range of potential partners including FIs, charities and government agencies.

So in spite of the worldwide slowdown caused by the pandemic, we continued to execute on our strategy during the first quarter, growing, enhancing and demonstrating the value of our network. Let me now turn the call over to Gary to talk about the first quarter results, the balance sheet and some directional guidance on the financials in the near term.

Gary Ferrera -- Chief Financial Officer

Thank you, Ed. I will start with a quick recap of our financial performance in the first quarter and then talk about the balance sheet and liquidity before moving into what we are experiencing during, and how we are adapting to COVID-19.First, the results for Q1 were solid. And we had been quite strong had the pandemic not come into play across all our segments in mid-March. In spite of the challenges related to COVID-19, we grew adjusted EBITDA by 6% on a constant currency basis for the full quarter, delivering 160 basis points of EBITDA margin expansion.

Revenues were down 2.5% constant currency for the quarter, but were up 6% through the end of February. EBITDA growth in the first quarter came from our Europe and Africa segment as we lapped the second interchange rate cut in the U.K. and had strong EBITDA growth across South Africa, Spain and Germany. Our North America business was continuing to show solid growth into early March and then came the mid-March downturn in transactions due to COVID-19.

In addition, we had made investments in both personnel and product during the quarter to help accelerate growth. Even after considering these investments and the impact of COVID-19, we still ended up just about flat from the prior year on both the top and bottom line for the segment. Some additional color for this segment is that our U.S. business was quite strong through February and adjusted EBITDA in the U.S.

was still up for the quarter as a whole. Our Canada business, which has a good-sized casino component, was hit especially hard during the month of March. Adjusted EPS of $0.42 was up 20% from the prior year, reflecting the EBITDA growth, along with lower depreciation, interest expense and a lower share count. Adjusted free cash flow for the quarter was solid at $22.6 million, up 11% from $20.4 million in Q1 2019.

Before the COVID-19 pandemic began to impact our business, we repurchased over 500,000 shares during the quarter for $16.8 million. As you can see from the numbers, we clearly had strong momentum heading into this crisis. Let me now turn to balance sheet. As many of you know, one of the things Ed and I have been consistent about is attaining conservative leverage levels and balancing capital allocation priorities.

We spent the last few years very focused on growing free cash flows and paying down debt, so we entered this crisis in a good place from a leverage perspective. At the end of the first quarter, we had total gross debt outstanding of $1.3 billion and had unrestricted cash of $614 million. Net debt outstanding was $720 million. Our net leverage ratio was 2.4 times EBITDA, flat from what we reported at year-end.

The net leverage covenant in our credit facility is 4.25 times. So we currently have significant headroom. In an abundance of caution, in late March, we do the entirety of available capacity under the $750 million revolving credit facility, primarily to address forthcoming convertible debt obligations. We have $288 million of convertible notes that are due on December 1.

And as we have planned for several quarters now, we intend to retire these notes using the proceeds from our revolving credit facility. The incremental interest expense associated with the fully drawn revolver borrowings will add approximately $8 million to $9 million above the 2020 outlook previously provided. Due to the unprecedented situation with COVID-19 virus, we withdrew our 2020 outlook on April 1 and are obviously not in a position to offer a detailed financial outlook in the near term. However, we feel it is important to provide some color to assist you in better understanding how we performed recently during the period of lockdowns across our geographic footprint and how we might perform as circumstances evolve over the coming months.

We have seen varying degrees of impact across regions since mid-March as our business varies based on geography. For example, in Spain, we experienced some of the strictest stay-at-home rules, and we are more dependent on tourists. Whereas in the U.S., our largest market, we operate mostly in essential locations for consumers that have remained open during the stay-at-home orders, such as pharmacy, convenience and grocery locations. I would like to reiterate what Ed previously mentioned, transactions have stabilized, and over the last couple of weeks, have been improving, particularly in the U.S.

And while it is very difficult to predict whether that improvement will continue over the coming months, we feel we have successfully managed through what should be some of the most difficult weeks. While it varies widely across geographies, a good part of our cost base is variable. We estimate on a consolidated basis that our variable costs are approximately 55%. Some portion of the approximately 45% of our cost structure that we are classifying as fixed are only fixed in the short term, but can be and are being reduced.

One example would be where we remove or hibernate a no longer profitable ATM that has some recurring cost components such as rent, communication lines, maintenance contracts, etc. We've been working toward increasing the percentage of our costs that are variable, both prior to and during the crisis. In early May, we've seen continued stability and improvements in volumes across most jurisdictions. However, we are mindful that late May and June would typically be a time when we would see more travel and tourism and accompanying DCC revenues in some of our more tourist-based geographies.

While transactions tied to travel and tourism are not a large part of our business, we do have some degree of exposure. And as we've previously mentioned, during 2019, DCC revenues were approximately 4% of our total revenues. We do not believe it is prudent to assume any significant recovery in travel and tourism in the near term. All that being said, we were EBITDA positive in April, which is what we, as a team, believe, should be the worst month of this crisis as every single geography we operate in was on lockdown.

The U.S., our largest market, performed the best during April. We have seen trends stabilizing and slightly improving over the last couple of weeks. And we expect continued positive EBITDA in Q2. Based on what we experienced in April as well as recent transaction trends, we would expect to see Q2 adjusted EBITDA margins in the mid-teens, generating about half of the $64 million in adjusted EBITDA that we reported in Q1.

Even including elevated interest payments in our second and fourth quarters related to semiannual interest on our bonds, this Q2 adjusted EBITDA result should drive positive free cash flow during the quarter. We would expect this to be the lowest free cash flow quarter of the year. We would also expect to continue generating positive free cash flow for the remainder of the year, even in scenarios where there is a minimal recovery in transactions. We expect Q2 to be the lowest EBITDA quarter, and we would anticipate sequential quarterly improvement for the rest of the year.

I should also mention that our 2020 and Q2 results will likely be adversely impacted by unfavorable exchange rates as the dollar has strengthened versus all of the currencies in the countries where we operate. This will result in additional near-term headwinds on an as-reported basis. Moving on to capital expenditures. We are already starting the year at a lower level of capex than in Q1 2019 with $18 million, down $11 million or 37% from the prior year.

Additionally, in order to maximize cash flows, we have, wherever possible, significantly reduced future capital spending. And we not see any significant improvements in transaction volumes as the year progresses, we believe we can bring full year capex down to about half of our initial 2020 outlook of approximately $140 million. However, I'd like to note that we will be monitoring capex very closely and we'll adjust quickly as we navigate through these headwinds. We spoke with many of you at our first Investor Day a little over a year ago, where we laid out a strategy for longer-term growth and expected growth rates for revenues and adjusted EBITDA.

Our growth rates will, of course, be impacted this year because of the pandemic. That said, heading into this pandemic, I think we were ahead of schedule in terms of where we thought we could be at this time a year ago. I think the company can still achieve the medium-term growth rates we set forth. I believe that the market dynamics as banks and consumers adapt in the post pandemic environment could provide additional fuel for growth.

These market dynamics, coupled with the company's strategic positioning and continued execution, give us confidence as we look further ahead. Let me conclude by saying we are very well positioned both financially and strategically to weather this pandemic. I am excited for the future of this company. And based on the business success we experienced immediately proceeding and which we continue to experience during COVID-19, we believe we will be even better positioned when this pandemic subsides.

Now let me turn it back to Ed for some final thoughts.

Ed West -- Chief Executive Officer

Thank you, Gary. I will conclude my remarks today with some thoughts on how the pandemic may impact us over the longer term. First, let me start with the question some have raised. While consumers use less cash in the post-pandemic world, we believe cash as a percentage of transactions at the point-of-sale will continue to decline, but as previously stated, we think this will lead to branch transformation and allow us to grow transaction share.

We also believe consumers will continue to exercise freedom of choice when it comes to payment options. Cash is enduring. It is secure, meaning it cannot be hacked. It is reliable.

It works in any situation and it is private, an increasingly important attribute in today's networked world. Petra Hielkema, director of payments at the Dutch Central Bank, probably put it best, "Cash provides trust." This pandemic is driving new and different payments patterns for sure. But we believe cash will remain highly relevant and the role of an ATM will expand as an important user-driven digital physical access point. This shift is now opening us up to a broader set of transaction types that can leverage mobile-enabled cash in, cash out capabilities.

An example of this is the announcement we made last quarter with Amazon Cash, allowing cardless cash-in transactions to your Amazon account at our Allpoint+ locations. I believe we will look back at this time as an inflection point and also a catalyst that accelerates branch transformation. FIs will likely be looking for new and expanded partnerships as they pull back on their costly infrastructures. We believe we have the network, the breadth, the scale and the expertise financial institutions want to serve their customers now and into the foreseeable future.

And we are ready to capitalize on the opportunity in more significant ways than before, offering both low-cost, on-demand common infrastructure and technology solutions. As outlined last March, we estimate that the U.S. alone is about a $15 billion market opportunity. And today, we own approximately 10% of the ATMs and still handle less than 4% of the total transactions.

We estimate that over 90% of the cash supply transactions presently take place at a bank branch or bank ATM in the United States. A little bit of share growth here goes a long way for Cardtronics. Many leading retail banks have closed significant portions of their branch footprint as a result of this crisis. While it's unclear what is going to happen in the future, all FIs will need to lower their costs and it's unlikely that all of these branches will reopen.

At the same time, consumers still need cash access and our utility ATM platform provides a convenient national cash infrastructure to help fill the void left by branch closures and enable banks to maintain a branded presence in these markets. We will capitalize on this growing opportunity in the U.S. by partnering with FIs of all sizes to leverage our convenient surcharge-free network via Allpoint and high-value branding locations. Additionally, for those FIs who prefer to maintain a dedicated fleet, they can outsource their ATM fleet by partnering with the most experienced operator in the world via our managed services solution.

With respect to our retail partners, we are providing valuable and increasingly diversified services to their customers. Additionally, with our expansive and growing financial institution partner list, we help drive traffic to their stores as consumers seek convenient and fee-free access to cash. Retailers also will increasingly want to partner with a safe, reliable, value-driving and innovative partner. We check all the boxes.

Retailer and FI partnerships have grown during this recent period, and we expect that to continue. With vast branch closures across the globe, consumers will need to find alternative access points for cash transactions, both cash in and cash out. Our retail footprint located in essential businesses provides this cash infrastructure to the communities that we serve. Trust is critical and trust is earned, and we expect that Cardtronics will continue to be viewed as an important and trusted partners.

So in conclusion, let me wrap up with the following. Cardtronics is well positioned financially and strategically. The pandemic will likely accelerate branch transformation and drive more transactions to our network. Our ATM network and platform have proven to be resilient and strong.

Importantly, we have geographic and retailer diversity, highly convenient locations that customers trust and an unmatched level of FI partnerships through branding in our Allpoint network, all supported by exceptional operations and capabilities. In spite of the challenges presented by this crisis, our underlying network continues to expand with new and renewed partnerships, and we continue to make progress on rolling out new products, solutions and functionality across our platform of user-driven and mobile-enabled digital to physical access points. And lastly, and most importantly, we are taking care of our employees and partners who will continue to serve our communities with a valuable and essential service. I would like to say a special additional thank you to all of our employees who continue to ensure cash is conveniently available in the communities that we serve.

Our employees' resolve, dedication and commitment has been very inspiring. And for that, I thank you. Operator, we'll now turn the call over for questions and answers.

Questions & Answers:

Operator

[Operator instructions] And the first question comes from Peter Heckmann from D.A. Davidson.

Alexis Huseby -- D.A. Davidson -- Analyst

Good morning everyone. This is Alexis on for Pete.

Ed West -- Chief Executive Officer

Thank you Alexis. Good morning.

Alexis Huseby -- D.A. Davidson -- Analyst

So I just wanted to start on the subject of this likely driving the FI digital transformation. I'm wondering if you've actually been seeing any uptick in interest in ATM outsourcing, specifically given more financial pressure on small banks and credit unions.

Ed West -- Chief Executive Officer

Well, as I went through in my prepared remarks, we actually had a terrific quarter during the first quarter in many of these relationships that we closed actually occurred also during the month of March, which I think is a true testament to the interest and the value that our FI partners see in our solutions. We added 27 new Allpoint relationships and either expanded or added new partners totaling about 27 during the quarter for managed services solutions, which is that outsourcing solution. It's just natural to think that based on everything that's been happening in the market and the relentless focus on cost that FIs around the world are going to be seeing and experiencing with where interest rates have gone, changes in habits in other places around the world, that we believe that this will be an accelerating point. And as I mentioned earlier, potentially an inflection point for this area of the business.

And we're very unique in this because of our broad suite of solutions that we have to offer and to partner with the financial institution. The managed services side or the outsourcing is just one part of it and that's just for those who might want to keep a dedicated fleet. But even bigger opportunity is to leverage our common infrastructure, which is our surcharge-free network. And in the United States, we bring that together through Allpoint and branded relationships with financial institutions to offer a very large surcharge-free network in common infrastructure for the country.

Alexis Huseby -- D.A. Davidson -- Analyst

That definitely makes sense. And I appreciate the clarification on some of those being closed in the March month. So then moving over, could we get a time line for the Casey's rollout? And then more broadly, have you seen or are you expecting to see any delays to implementation from your customers?

Ed West -- Chief Executive Officer

The rollout with Casey's, which is just a terrific operator in the Midwest, over 2000 locations. So we're honored to have the relationship there and add them to a very valuable suite of convenience operators. That's under way right now. I mean we're rolling that out as we speak with supply that's been coming in ATMs, new ATMs, and we have not seen any significant implications to the supply chain to date.

Alexis Huseby -- D.A. Davidson -- Analyst

OK. And then just one more, if I could. Could you comment on any progress on moving units? And sorry if I missed this in your prepared remarks, but moving units to pay-to-use in the U.K. The linked data looks like about 50% are now paid to use?

Ed West -- Chief Executive Officer

Over the last year, we did make some significant changes because of the cuts that LINK had made to the interchange rate some time ago. And unfortunately, those cuts impacted all operators in the market, which had implications. And obviously, just based on economics where we saw lower volumes, we had to change to free-to-use. So yes, our ratio with pay-to-use has gone up in that.

And we see volume on all, whether it's free-to-use or pay-to-use. But we haven't made any significant changes to that, that's been relatively stable for the last couple of quarters. And actually, I would say, just because of the changes in the marketplace, and the reductions, we're seeing other operators, some others have pulled out capacity in the marketplace. And actually, more recently, some signs of improving, just kind of a steady improvement.

You'll see in the investor supplement where each seven-day period has gotten a little bit better, and that's continued on through actually yesterday of a nice, steady improvement. And today, our ratio is a little greater on the pay-to-use side than free-to-use in terms of number of ATMs.

Alexis Huseby -- D.A. Davidson -- Analyst

OK. That's helpful information. Thank you guys.

Operator

Our next question comes from Bob Napoli from William Blair.

Bob Napoli -- William Blair and Company -- Analyst

Good morning everybody. Good to hear from you. Just on the outsourcing. I was curious there was an acquisition of an outsourcing company in the U.S.

by a competitor. This is a difficult time from a capital perspective, but is that something you would have been interested in? Are you interested in making acquisitions in that space?

Ed West -- Chief Executive Officer

A couple of things, on the acquisition. Let's start with the latter part of that. All along, looked at different opportunities where we saw value. We've actually done some smaller acquisitions, but we saw significant value, achieved a higher hurdle rate and had a quick return on those.

And so we will continue to look at things where we think it makes strong economic sense. But as you know, and as we outlined a year ago, our ardent focus has been on driving organic growth and continue to build out our network. I'm really pleased with the performance. And as I think it was reflected, and you saw that in the last couple of quarters and including the first quarter where we had nice organic growth, 8% growth, frankly, in the month of January and February in the U.S.

alone. The first part of the question, just going back to that particular acquisition you're referring to. I think it's great. It further validates the market and the opportunity that we see in the space.

That was a small operator, roughly 1,000-or-so ATMs. We think it's great to have more salespeople in the market, trying to kick up and gen up opportunities and educating the market. It makes a lot of sense. And I think that's very positive.

But I would also say, just selling and working on a single source around outsourcing, ATM is very different than bringing forth what I've talked about earlier, a broad suite of solutions that includes the retail-based surcharge-free network, which in these highly convenient 40,000 convenient locations across the nation, to offer your FI to their customers. But branding opportunities, getting their brand out there for better presence, better services, surcharge-free network, is a broader, more comprehensive solution with outsourcing just being one of those.

Bob Napoli -- William Blair and Company -- Analyst

And then the expense cuts that you made, could be permanent versus temporary for the current environment? How much of it was salary versus other costs?

Ed West -- Chief Executive Officer

Well, I'll turn it over to Gary. He and I were talking about some of the things that were implemented during this past quarter.

Gary Ferrera -- Chief Financial Officer

Yes, it was about 50-50 between capex and opex in that $30 million. And just to be clear, those were actions taken versus what would typically just be in that variable fixed balance. So quite a bit of it can be held for a while, but that's all the specificity, I think I'm comfortable giving at this time.

Bob Napoli -- William Blair and Company -- Analyst

OK. And then just last question. I mean you drew down your entire credit line, understandably, but what would you need to see to understand that you're paying off convertible notes December 1, but at what point would you pay back a big chunk of that credit line and reduce your interest expense?

Gary Ferrera -- Chief Financial Officer

Yes. I think we'd like to get through Q2 or some part of Q2 to get a feel for where things are. As we mentioned, it was out of an abundance of caution at that point in time. Those of us who lived through the last time in '07, '08 time frame, just made sure that we had liquidity there.

So we went ahead and drew, and we'll just keep an eye on it every day.

Bob Napoli -- William Blair and Company -- Analyst

Thank you appreciate it. Thank you Bob about thank you.

Operator

Our next question comes from Tim Willi from Wells Fargo.

Tim Willi -- Wells Fargo Securities -- Analyst

Good morning Gary. Two quick questions. One is you mentioned Pin4 in the U.K., somewhat familiar with them in some of their solutions. But could you talk about what you're doing with them there? I believe it's sort of a value-add type of product.

And just sort of any thoughts about other opportunities you're seeing from people that want to leverage your distribution for interesting products or services across the ATM network, if there's anything else that sort of we should be thinking about longer term in that respect?

Ed West -- Chief Executive Officer

Yes, we are excited about that, partnering with them. As I mentioned on my previous remarks, this is new and unique in the U.K. and over time, we'll have this enabled across the fleet. We're in pilot phase now with them and rolling that out, but it's allowed a sender to send funds direct to consumers using an SMS going to their mobile phone and then be able to go to the ATM and take out the cash with the code.

So we're excited to do that. There's been a lot of interest in it there. And frankly, that was accelerated during this period because of the need to get cardless access out in areas, in particular, by senders who didn't have a card portfolio with customers of theirs. So now this is a way to leverage that and the technology that we have also with them.

And it really goes back to that other part as the strategy that we outlined last March. And I talked about further today, we're one side, we have ongoing opportunity, we believe, growth on the branch transformation front. But it's also really building out that digital to physical access point that's mobile-enabled and allow a broader set of transactions. And as we're rolling out now in the United States cash-in capabilities, that too allows us to open up to more and more different types of transactions versus just the historical history of around just cash dispense.

And an example of that, thinking a little bit differently, is what we announced last quarter with Amazon Cash and be able to put cash into your Amazon account just simply, and that is a cardless transaction. So that's going to be the first. There will be more to come, more different types of relationships. And I think just some of the changes that are happening in the market right now that will open up to new opportunities for us and being that digital and physical access point that we have because our locations are so unique.

Tim Willi -- Wells Fargo Securities -- Analyst

Great. And then my follow-up was sort of around the competitive environment. So I guess, as I think about the U.S. in particular, right, there were, I guess, you could say, for lack of a better description, almost ATMs everywhere you turn, especially in the metropolitan areas, appreciating that, as you pointed out, those are probably a minority of overall volumes, but still large.

So I guess when I think about competitively a lot of restaurants, retail, bars, et cetera, being shut down or having little to no traffic and those independent ATM deployers that are your competitors who probably don't have the financial strength that you all have. Do you think there's a possibility that net ATM count in the U.S. could actually shrink, and therefore, reducing alternatives for consumers as things come back. But then, as you pointed out, your locations, still being there, it helps accelerate that share shift that you have long talked about?

Ed West -- Chief Executive Officer

We do. That's why, as we sit here today and what we see, I think there will be less capacity over time, not just in the U.S. but in many markets around the world. It may even look a little different, but that infrastructure and what is so valuable for us, is that convenient infrastructure that we have in those convenient locations is very, very exciting.

As I sit here today, we outlined a year ago, our longer term plans, put out some long-term opportunities and objectives and what we thought that would look like financially and from a growth standpoint. As I sit here today, I'm more confident and more excited about what's ahead than I was at the Investor Day a little over a year ago. And why? Because we see what we've developed and rolled out. Those were all we were talking about.

This was going to be coming out. They're now out in the marketplace now. We're now signing up partnerships like in Amazon. We're signing up additional partnerships with the biggest banks in the country in many countries around the world.

And we see this is happening. It's now real. And we believe, early on right now, but we believe that it could likely accelerate as a result of this pandemic. And that's why I'm more optimistic today than I was even a year ago.

Tim Willi -- Wells Fargo Securities -- Analyst

Great. Thanks very much for the time appreciate it.

Operator

Our next question comes from Kartik Mehta from Northcoast Research.

Kartik Mehta -- Northcoast Research -- Analyst

Good morning, Ed, Gary. You talked about some opportunities you could have on the outsourcing side or branch transformation. How will you manage that with maybe some of the capital requirements that you might need if you do get some large opportunities to convert some machines?

Ed West -- Chief Executive Officer

Yes. Let me start on that, and I'll turn it over to Gary as well. So in terms of partnering with financial institutions, we feel very highly, the majority of that will be done partnering with and leveraging our surcharge-free network. That network is already out there.

It's out there. Now we'll continue to enhance it and make changes to that over time. But that's out there. And that is probably the most effective way for a financial institution to leverage the common infrastructure and the lowest cost.

As I said in my prepared comments, there are also institutions who would want to keep a dedicated fleet. We can do that with managed services. And we've had that in our capex plans and outlook that we've shared with you all before. So I'll turn it over to Gary to talk a little bit more about that latter point.

Gary Ferrera -- Chief Financial Officer

Yes. No, I agree with everything Ed said. I think the difference, Kartik, is we'll watch this very closely. Obviously, if a fantastic opportunity comes out, we will rejigger, we'd come back to you and let you know.

Capex might be higher. But that's something we just got to watch month to month. And I wouldn't -- depending on what size the deal is, would probably still fit in the guidance or outlook. So I'm not worried about that.

And again, if some real big opportunity came up, we would come back to the market and let you know.

Kartik Mehta -- Northcoast Research -- Analyst

Right. And then just on DCC. I think you've said most of that is from the U.K., and I'm wondering if this is probably in the Q, but I'm not 100% sure. Just sizing the impact from DCC and what do you anticipate from that this year, especially with potentially limited travel in the summer?

Ed West -- Chief Executive Officer

Gary, you want to touch on that? I think you had that in your comments.

Gary Ferrera -- Chief Financial Officer

Sure. Yes, Kartik, it was 4% of our 2019 revenues. Yes, U.K. and Spain, etc., are the larger markets for that.

And that's why we pointed that out as an area because we're not expecting tourism to come back in some major way over Q2 and Q3, which are big travel months. Obviously, we'd love it if it did. But in our plans, we're not planning for that.

Kartik Mehta -- Northcoast Research -- Analyst

Perfect. Thank you very much I really appreciate it.

Operator

Our next question comes from Reggie Smith from JP Morgan.

Reggie Smith -- J.P. Morgan -- Analyst

Hey, good morning gentlemen. Thanks for taking my question. I wanted to ask, so it sounds like same-store transactions were up 6% in the first two months of the year. I was hoping to get a little more color about that.

And then I appreciate the disclosure about April and the week-to-week trends. Was there any appreciable difference in volume from, say, your surcharge-free network versus surcharge? Like is there anything appreciable there? Or were the trends generally similar for both buckets?

Ed West -- Chief Executive Officer

Sure. Good morning Reggie. Going into the first quarter, and actually we put a fair amount of information and detail in our supplement. If you look on Page 7, really shows you how that distribution occurred around the country.

You referenced the 6%. That's obviously the same-store in the United States. And that 6% was going through mid-March before the shelter-in-place really started kicking in. So we saw a very strong performance during that period of time.

And frankly, it was the best period that we've seen in over a year in terms of same-store, and that's just really a lot of effort from the different initiatives that we put under way over the last couple of years. Whether that's additional branding arrangements. More Allpoint relationships with partners around the country. And those things come together, so more and more people going to our locations.

And interestingly, as I said in my comments earlier, one of the stronger cities, markets that we had seen that was actually had been accelerating in terms of the growth has been New York. And from the performance, that just gets back to the testament about working closely with our key FI partners, seeing more and more traffic to those locations. And then I would come back to your other point around whether a surcharge, surcharge-free. We've actually seen a fairly uniform change across our locations that those changes between up and down really moved in tandem throughout the period of time.

And I think I also highlight one last point on Page 6, where you can see we kind of hit the lower point of declines in the U.S. during early April period, and that's just continued to improve week in and week out. And then when we look at the last seven days, so that's the rolling seven days most recent where we continue to show improved levels. We're now down about 15%.

And I have one last point of color here, which I really feel strongly about from what we've seen. The big impact from that, while we were doing around 6%, we felt like that would have continued on during the period. But once the shelter-in-place orders went into place, that's when we saw it come off. And now as you start seeing some of those shelter-in-place orders starting to back off, we're seeing that change as citizens get out in their communities.

For example, cities like Jacksonville, Florida, cities like Atlanta, Dallas, Houston are some of our markets that have been performing better since the easing of the shelter-in-place orders, ensure our best improvement since the worst periods.

Reggie Smith -- J.P. Morgan -- Analyst

Got it. That's helpful. No, it was nice to see that 6% figure. And I'll be honest, I was somewhat surprised at how nicely it snapped back as April kind of progressed.

Not sure if this was covered on the call, how should we think about revenue in light of these withdrawal trends? Is this a fair proxy or starting point for us to think about revenue in April, tracking kind of withdrawals?

Ed West -- Chief Executive Officer

Well, I'll start and then turn it over to Gary. I think we provided some fairly explicit thinking about what we're seeing or thinking for the second quarter and then backing into margin. I would tell you, I have a direct correlation back to revenue because there's so much at play. Because we may have higher revenues from certain arrangements, but it's very low-margin for us.

So for example, in places that are really closed down like a casino, where those are essentially 0 right now, but those are high-volume locations, which tend to be high revenue drivers. So it won't track exactly with transactions also because of what we've done over the last couple of years of more arrangements, whether it's managed services, Allpoint, branding relationships and other areas that have more fixed elements and components to our revenue, streams of revenue. Gary, any further thoughts on that?

Gary Ferrera -- Chief Financial Officer

Yes. No, I think it's exactly what you said. There's going to be some revenue that will be gone for a short time, but it's lower margin. And I'd mentioned what we thought Q2 would do, which would be about half of Q1 and that the margins be in the mid-teens.

So that should give you a general idea of where we think revenue is coming out.

Ed West -- Chief Executive Officer

And Reggie, obviously, as you sit here today, no one knows where things are going to go. But the good news is, we're seeing consistent improvement week on, week out, not just in the U.S. but -- and frankly, also in the United Kingdom, and other markets in the world as they begin to open up. And we're seeing that improvement, which is very encouraging.

Reggie Smith -- J.P. Morgan -- Analyst

Got it. And last question for me. You kind of talked about it, but I wanted to give you kind of platform to speak about a little bit more. One thing we've heard for the last 1.5 weeks or so from different payment processes, networks, et cetera, is that they see this pandemic is kind of accelerating the movement away from cash.

And it sounds like you have a different approach. And I've heard people talk about cash is dirty and the people are shutting cash. It doesn't sound like that's what you're seeing and hearing. I wanted to, I guess, let you kind of respond to that because that's definitely something that we've heard a lot in the last week or so.

Ed West -- Chief Executive Officer

Well, yes, thanks for asking. I mean, obviously, we feel strongly about cash, but we're not the only ones. Billions of people around the world feel very strongly about it including hundreds of millions of citizens of United States and the United Kingdom and other countries in which we operate and feel very, very strongly about it. Why? Because cash matters to their lives.

You mentioned about the dirty part. I think it's important, look at the facts. The facts are medical experts, government agencies, university researchers all indicate that there's no scientific evidence that cash represents any particular or significant risk. What you do hear is that several people who are pushing their own digital agenda and their own digital payments are putting out an agenda.

The World Health Organization, WHO has indicated on their website, there's no evidence of that. And frankly, and candidly, the European Central Bank actually went and commissioned studies because some were questioning. They commissioned studies and found that plastic, glass and metal services are 10 times to 100 times worse than a poor service of like cotton and linen, which is what the U.S. dollar is made of.

So the actual facts and what the agencies put out is contrary to that other agenda. And we feel strongly in our mission to support these communities around the world who desire access. And I think just by the amount of cash that we see that goes out of our machines, which is in the billions of dollars of cash, and it can go out very rapidly when people are looking for convenient access. I would say one last element, which is why it's also so important about the communities that we serve.

There's a big portion of our population in the United States, 25% of the households in the United States are either unbanked or underbanked. And the majority of their transactions are with cash. I think it's important that the support is there and who desire to use that. And the one last element I would mention was around the three points of secure, reliable and private.

And we feel like privacy is going to continue to get more and more focus and attention. So we're strong advocates, and we'll continue to be.

Reggie Smith -- J.P. Morgan -- Analyst

Perfect. Thank you.

Ed West -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Ramsey El-Assal from Barclays.

Ramsey El-Assal -- Barclays -- Analyst

I wanted to ask about a couple of external factors in the environment right now and kind of get your perspective on the impact on the business. One is, of course, the stimulus payments. I'm presuming a lot of that ends up as a cash out, depending on the channel and the consumer receiving the stimulus. And then the other one was tax season and the impact on the business of that deferral and the tax filing date.

I think that's probably also a season where you have some liquidity that may get shifted around a bit. So I was wondering if you could kind of comment on how you see those two things, maybe stimulus having already impacted the volumes that you showed, plus maybe what we could expect from a later tax season or whether that's a factor at all.

Ed West -- Chief Executive Officer

Yes. As I put in my comments, as I said earlier, we do see, like on the latter part, around whether it's stimulus or unemployment, other state aid programs, where many states look for efficient, low-cost, surcharge-free networks providing access. So one of the duties we do is also serving those communities and have access to cash there. And as I pointed out earlier, we have seen some increases as a result of that.

Unfortunately, with unemployment levels now at the highest that we've seen in our lifetimes, that's not going to be changing, unfortunately anytime soon. And aid programs will continue on. But moreover, we think also communities will begin to open back up and people will start getting back out, shopping, getting out, going around their various areas where they live, and we'll see transactions naturally pick up from there. I do feel that if we come back to the overarching point, is around that infrastructure, that cash will always be around.

It will continue to be used. But realistically and as we've talked about for years, at the point of sale, it will continue to climb. But that's because the number of transactions for the moreover is going up. Cash and circulation continues to go up.

Both the Fed, as well as the Central European Central Bank just pointed out, cash was up in significant levels in terms of out in circulation into April. So the facts are, it's still out there, but it's also highly used and we have growing populations. We feel strongly that we could become that infrastructure, an efficient and convenient channel for citizens in the countries that we serve.

Ramsey El-Assal -- Barclays -- Analyst

OK. And this kind of dovetails into the comments that you just made. But can you remind us, you touched on this in your slide presentation, which is super helpful, by the way. Can you remind us about the kind of prior performance or the typical performance that Cardtronics basically puts up during and post sort of recession to kind of countercyclical trends in the business.

At the end of the day, last time around, I think you had coming out of the last downturn, as I recall, I remember hearing a lot about an increased share of transactions from prepaid card due to is sort of a proxy of some of these benefits flowing in as well as reloadable prepaid cards that unbanked and underbanked folks were using, sort of a long-term boost in essence that the company was getting from those kind of recessionary trends. Can you just kind of remind us what happened last time and kind of what you might expect this time if anything would differ?

Ed West -- Chief Executive Officer

Sure. Great question. And we thought about this. And so we included in our supplement on Page 18.

Hey, how did the company perform last time there was a significant economic impact and through the last recession and what did the company witnessed during that period of time? And obviously, any kind of situation like this is going to be different. And so we're not saying this is exactly how it would occur this time. But the fact is, during the recession, the company actually did see transactions go up. So cash usage go up.

And why? Because it's a great planning and budgeting tool that provides security. And also, unfortunately, during a recession, consumers have less access to credit. Unfortunately now we've seen unemployment levels go up that's likely to impact access to credit. Cash could be used, become more of a stronger use tool.

That is what happened back during the last recession, and we're prepared to support that to the extent we see the same. And as I mentioned earlier, the un- and underbanked population and the lower middle-income areas, which there's about 25% of the households that are either un- or underbanked, unfortunately, that could go up because of the level of unemployment and the implication in our society. So this is what happened last time, and we'll be here, prepared to support through this recession.

Ramsey El-Assal -- Barclays -- Analyst

Great. And let me take one quick one, last one in. And you may have addressed this in your remarks, so I apologize if I didn't catch it. But why again was the U.K.'s performance worse than the U.S.? Is that just sort of like an urban-rural mix issue? Or was there a lockdown more severe? Or why was the U.K.'s performance so rough versus the U.S.?

Ed West -- Chief Executive Officer

Yes. No, it's a great question. I think the lockdown, once that was done, it was a significant countrywide shelter-in-place order and it just went in place right there across the country. But we have seen, I think the worst.

It went down roughly around on a seven-day basis, roughly around 60%. And just a steady improvement, and even more so, even going into the last seven days in few days. In contrast to that, the U.S., I really think the U.S., it really comes back to our broad suite of solutions and the partnerships that we have. And when you have Allpoint, you have the branding locations, you have the awareness.

We're in those critical and essential locations across the country in which we're honored to be able to serve in places, some of the pharmacy locations, grocery stores, convenient locations that evolve for the most part. And I think I said earlier, like about 95% of these places have stayed open and been operational. And so we've been a key element to help support those communities. So that may be also a little bit of a different driver relative to the U.K.

Ramsey El-Assal -- Barclays -- Analyst

Got it. Makes perfect sense. Thanks for taking my questions.

Ed West -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Andrew Jeffrey from SunTrust.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Hi guys. Good morning.

Ed West -- Chief Executive Officer

Good morning.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Haven't heard any mention on this call, and maybe it sort of wrapped up in the FI commentary, about neobanks that you signed several to the Allpoint network. I wonder if that's sort of building on Ramsey's question about stimulus. How do you think about that as a potential driver? And as these banks become more relevant, what they might mean for Allpoint's volume over time?

Ed West -- Chief Executive Officer

Yes. No, that's a great point, Andrew. We've been fortunate to really have a lot of relationships on the fintech side, the neobank and continue to expand that through this quarter as well. And interestingly, as you know, many of those -- some have been focused on more of a underbanked community as well.

In some of those key partnerships, we've seen actually continued month in, month out growth during this period of time as they've continued to grow and their engagement with Allpoint has continued to grow. So some of those that have been very focused have actually had some very nice performance in that area. So we think that a key area for us, unfortunately, we have a great value proposition for them. The nationwide access, surcharge-free access with Allpoint, cash in and cash out capabilities now with Allpoint+ where they can take, since they don't have the branches, we can be a great distribution partner for those.

And I think it also exhibits the opportunity with other digital providers. As we talked about thinking about us in our locations as that digital physical access point, mobile-enabled, to be able to now have cash in, cash out locations as we further roll out Allpoint+. So to your point, that's actually been -- several of those we've seen as a bright spot in some of the performance.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

OK. I appreciate that. And then I know the call is getting a little long. I might just ask on gross margin, Gary, can you just help us understand -- you mentioned the cost takeouts.

Can you help us understand sort of what gross margin trends might look like? And how much sort of variable expense you have on your costing instructions?

Gary Ferrera -- Chief Financial Officer

Yes. We haven't really provided anything on gross margin. We were very focused on the EBITDA number, because that probably everybody's top of mind. But when you think about the fixed versus variable, obviously, a lot of those variable expenses are part of the gross margin calculation.

Because that's less of the SG&A around it. So it's probably a little bit higher on average for the variable than when you go all the way to the bottom line in EBITDA.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Thanks a lot. Thank you.

Operator

And our next question comes from Gary Prestopino from Barrington Research.

Gary Prestopino -- Barrington Research -- Analyst

Hi. Good morning. I'll be quick because the call has gone really long. But Gary, did I get this right? Did you say your free cash flow was $22 million in the first quarter?

Gary Ferrera -- Chief Financial Officer

Yes. Adjusted free cash flow was $22.6 million.

Gary Prestopino -- Barrington Research -- Analyst

OK, $22.6 million. Up 10.5%. Okay. And then where do you guys stand on deposit taking ATMs in terms of your North American fleet? Can you give us a number?

Ed West -- Chief Executive Officer

Yes. Gary, we've won you to roll that out. As we put in our plans this year, we expect that, that will nearly double in size this year. That will be kind of the high, call it, 1,800 to a couple thousand locations by the end of the year.

So that's continued on, barring any other significant changes that happened in the market of supply chain but so far continues on. And we see an increasing interest in that as well. And I think based on what's happened here, I think it's going to be that much more valuable. And again, going back to the branch transformation point here, and rolling that out.

Gary Prestopino -- Barrington Research -- Analyst

Great. And then real quickly, some of the questions that I've been getting have delta around that your business model is permanently impaired. And again, these are things we have to deflect as analysts. But we talked about cash being dirty and all that.

But a lot of investors have come back to me and said, people don't even want to touch these ATMs to get cash out. In terms of mobile enablement or just being able to tap your card to an ATM, where do you stand there across your North American fleet?

Ed West -- Chief Executive Officer

Some of the newer ATMs that we're rolling out do have the capabilities of being cardless and near-field on that. So that's on a newer basis that's rolling out. But I would tell you, Gary, if you look at the facts and the results, the results that we're reporting out today, what we saw this past quarter. What we see right now going day in, day out, that's just not the case.

The cash interest, cash usage, using our ATMs to the tunes of millions of transactions all over the world. So that's just not the case. But I understand that people put out certain agendas because they have their messages, because they have a different agenda. But we see the contrary to that.

And I think as most citizens will as well, as they get back out into the market.

Operator

And that does conclude the question-and-answer session for today's conference. I'd now like to turn the conference back over to Ed West for any closing remarks.

Ed West -- Chief Executive Officer

OK. Well, thank you all very much. I know we've gone on a little bit longer. We thought helpful just go through everything that we're seeing in the business.

And encouraged about the progress, the results this past quarter, and look forward to speaking to you next quarter. Have a great day. Thank you.

Operator

[Operator signoff]

Duration: 79 minutes

Call participants:

Brad Conrad -- Treasurer and Head of Investor Relations

Ed West -- Chief Executive Officer

Gary Ferrera -- Chief Financial Officer

Alexis Huseby -- D.A. Davidson -- Analyst

Bob Napoli -- William Blair and Company -- Analyst

Tim Willi -- Wells Fargo Securities -- Analyst

Kartik Mehta -- Northcoast Research -- Analyst

Reggie Smith -- J.P. Morgan -- Analyst

Ramsey El-Assal -- Barclays -- Analyst

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Gary Prestopino -- Barrington Research -- Analyst

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