Euronet Worldwide Reports Third Quarter 2011 Financial Results

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October 25, 2011 08:57 PM Eastern Daylight Time 

LEAWOOD, Kan.--(BUSINESS WIRE)--Euronet Worldwide, Inc. (“Euronet” or the “Company”) (NASDAQ: EEFT), a leading electronic payments provider, reports third quarter 2011 financial results.

“After adjusting for the German ATM rate change announced in the first quarter, revenues and adjusted EBITDA would have grown in all segments when compared to the third quarter 2010. This growth trend is the direct result of our focus on distributing more products in more markets.”

Euronet reports the following consolidated results for the third quarter 2011:

• Revenues of $299.5 million, a 15% increase from $260.2 million for the third quarter 2010 (7% increase on a constant currency⁽¹⁾ basis).
• Operating income of $20.1 million, a 1% decrease from $20.3 million for the third quarter 2010 (11% decrease on a constant currency basis).
• Adjusted EBITDA⁽²⁾ of $37.6 million, a 2% increase from $36.9 million for the third quarter 2010 (6% decrease on a constant currency basis).
• Net loss attributable to Euronet of $3.2 million or $0.06 diluted loss per share, compared to income of $21.0 million or $0.41 diluted earnings per share, for the third quarter 2010.
• Adjusted cash earnings per share⁽³⁾ of $0.37, compared to $0.34 for the third quarter 2010.
• Transactions of 524 million, compared to 431 million for the third quarter 2010.

See the reconciliation of non-GAAP items in the attached financial schedules.

"We are pleased with the trend of increasing sequential cash EPS from $0.30 in the first quarter to $0.35 in the second quarter and now to $0.37 in the third quarter," said Euronet's Chairman and Chief Executive Officer, Michael J. Brown. "After adjusting for the German ATM rate change announced in the first quarter, revenues and adjusted EBITDA would have grown in all segments when compared to the third quarter 2010. This growth trend is the direct result of our focus on distributing more products in more markets."

Segment and Other Results

The EFT Processing Segment reports the following results for the third quarter 2011:

• Revenues of $50.2 million, a 2% increase from $49.1 million for the third quarter 2010 (3% decrease on a constant currency basis).
• Operating income of $9.0 million, a 14% decrease from $10.5 million for the third quarter 2010 (20% decrease on a constant currency basis).
• Adjusted EBITDA of $14.2 million, an 8% decrease from $15.4 million for the third quarter 2010 (14% decrease on a constant currency basis).
• Transactions of 247 million, compared to 199 million for the third quarter 2010.
• ATMs operated of 12,668 as of September 30, 2011, compared to 10,519 as of September 30, 2010.

The benefit from developing value added products in new and existing countries, renegotiating vendor contracts, expanding into new markets and increasing ATMs under management has partially offset the year-over-year impact of the previously announced German ATM rate change implemented in the first quarter of this year. Had it not been for the rate change, the Segment's revenue and adjusted EBITDA would have improved 8% and 9%, respectively, year-over-year.

Transaction growth of 24% was primarily attributable to the Company's European cross-border acquiring product and Indian, Polish and Pakistani operations.

The epay Segment reports the following results for the third quarter 2011:

• Revenues of $174.3 million, an 18% increase from $148.0 million for the third quarter 2010 (9% increase on a constant currency basis).
• Operating income of $13.3 million, a 12% increase from $11.9 million for the third quarter 2010 (3% increase on a constant currency basis).
• Adjusted EBITDA of $17.7 million, a 10% increase from $16.1 million for the third quarter 2010 (2% increase on a constant currency basis).
• Transactions of 271 million, compared to 227 million for the third quarter 2010.
• Point of sale ("POS") terminals of 591,000 as of September 30, 2011, compared to 541,000 as of September 30, 2010.
• Retailer locations of 282,000 as of September 30, 2011, compared to 266,000 as of September 30, 2010.

Revenue growth in the epay Segment was primarily driven by the September 2011 acquisition of cadooz, a German market leader for vouchers, rewards and incentives, and the full quarter benefit of the September 2010 epay Brazil acquisition.

Operating income and adjusted EBITDA increases were mainly the result of the acquisition of epay Brazil and transaction increases in several markets driven by increased demand for mobile and non-mobile products. The third quarter 2011 profit contributions from cadooz were offset by professional fees incurred in connection with the acquisition. Operating income also benefited from full amortization of certain intangible assets related to the epay UK acquisition, which is excluded from the computation of adjusted EBITDA. These improvements more than offset transaction declines in the U.K. and Australia, which were mostly driven by economic and competitive pressures, lower cost call plans and the impact of certain large retailers entering into direct agreements with two mobile operators in Australia.

The Money Transfer Segment reports the following results for the third quarter 2011:

• Revenues of $75.1 million, a 19% increase from $63.1 million for the third quarter 2010 (13% increase on a constant currency basis).
• Operating income of $4.8 million, a 30% increase from $3.7 million for the third quarter 2010 (16% increase on a constant currency basis).
• Adjusted EBITDA of $9.9 million, a 13% increase from $8.8 million for the third quarter 2010 (5% increase on a constant currency basis).
• Total transactions of 6.1 million, compared to 5.4 million for the third quarter 2010.
• Network locations of 140,000 as of September 30, 2011, compared to 104,000 as of September 30, 2010.

Revenue grew as a result of transaction growth of 13%, driven by expansion of the origination and payout networks as well as 39% growth in non-money transfer transactions, such as check cashing and bill payment. Money transfers from Europe and other foreign countries increased 15% and transfers from the U.S. increased 8%, including a 2% increase in transfers from the U.S. to Mexico. This quarter's year-over-year growth in transfers from the U.S. to Mexico marks the first reported increase since 2007. Profit expansion was due to revenue growth and full amortization of certain intangible assets related to the 2007 acquisition of Ria, partially offset by increased operating costs for store and agent expansion.

Corporate and other reported $7.0 million of expense for the third quarter 2011 compared to $5.8 million for the third quarter 2010. The increase in year-over-year corporate expense is attributable to higher stock- and cash-based incentive compensation expense and professional fees.

Balance Sheet and Financial Position

The Company's unrestricted cash on hand was $180.9 million as of September 30, 2011, compared to $225.5 million as of June 30, 2011 and total indebtedness was $322.5 million as of September 30, 2011, compared to $295.6 million as of June 30, 2011. The decrease in cash of $44.6 million from June 30, 2011 was primarily the net result of the Company's acquisition of cadooz, share repurchases and operating free cash flows produced during the third quarter 2011. Total debt was increased to fund short-term corporate and Money Transfer Segment cash requirements.

As reported in August 2011, the Company closed its amended and expanded five-year credit facility, increasing the capacity of the revolving credit facility from $100 million to $275 million and decreasing the remaining amount owed on the term loan from $126 million to $80 million. Other amendments include flexibility to repurchase common stock and convertible debt. During the third quarter 2011, the Company purchased 0.8 million shares of its common stock and repurchased $3.6 million in principal value of convertible debentures.