Shares of ATM operator Cardtronics (NASDAQ:CATM) slumped on Monday, after four of the largest banks in Australia each removed all direct transaction charges on their ATM networks. Cardtronics operates 10,200 ATMs in Australia, compared with 12,400 ATMs operated by all four banks combined. Cardtronics stock was down about 11% at market close.
The Commonwealth Bank of Australia (CBA), Australia and New Zealand Banking Group, Westpac Banking Corporation, and National Australia Bank Limited announced on Saturday that all transaction fees on their respective ATM networks would be removed, immediately in the case of CBA, and by October in the case of the other three banks.
In an SEC filing, Cardtronics disclosed that more than 80% of its revenue in Australia comes from direct charge fees paid by cardholders. The introduction of more than 12,000 free-to-use ATMs, more than one-third of all ATMs in Australia, could have a negative impact on Cardtronics' business in the country.
During the first six months of 2017, Australia and New Zealand generated $64.5 million of revenue for Cardtronics, of which $53.2 million was surcharge revenue. Total revenue during this time was $742.7 million, and total surcharge revenue was $324.0 million. Adjusted EBTIDA from Australia and New Zealand was $12.7 million during this time, about 8% of the company's total.
Cardtronics is still determining the potential outcome of this move: "The company is currently evaluating the impact that this market development in Australia will have on its ATM transaction volumes and associated revenues in the near term, as well as potential strategic implications for a broader market adoption of surcharge-free models in Australia similar to those in other markets in which the company operates."
With Australia and New Zealand accounting for a meaningful percentage of revenue and adjusted EBITDA, investors are right to push down Cardtronics stock on this news. Exactly how big of an effect this will have on Cardtronics' business remains to be seen.