Euronet Worldwide, Inc. (“Euronet” or the “Company”) (NASDAQ: EEFT), a leading electronic payments provider, reports second quarter 2012 financial results.
Euronet reports the following consolidated results for the second quarter 2012 compared with the same period of 2011:
- Revenues of $302.4 million, an 8% increase from $279.8 million (18% increase on a constant currency(1) basis).
- Operating income of $19.9 million, a 6% increase from $18.8 million (19% increase on a constant currency basis).
- Adjusted EBITDA(2) of $39.0 million, a 4% increase from $37.4 million (16% increase on a constant currency basis).
- Net income attributable to Euronet of $5.7 million or $0.11 diluted earnings per share, compared with net income of $11.9 million or $0.23 diluted earnings per share.
- Adjusted cash earnings per share(3) of $0.39, compared with $0.35.
- Transactions of 570 million, a 13% increase from 503 million.
"I am pleased our business delivered very strong second quarter earnings with consolidated constant currency revenue and operating income growth of 18% and 19%, respectively," stated Michael J. Brown, Euronet's Chairman and Chief Executive Officer. "While we are working through challenges in the epay Segment, our EFT and Money Transfer businesses posted exceptionally strong results through their constant currency operating income growth of 29% and 42%, respectively, and are poised for continued growth as we head into the second half of the year."
Segment and Other Results
The EFT Processing Segment reports the following results for the second quarter 2012 compared with the same period of 2011:
- Revenues of $58.3 million, a 16% increase from $50.4 million (35% increase on a constant currency basis).
- Operating income of $10.3 million, a 12% increase from $9.2 million (29% increase on a constant currency basis).
- Adjusted EBITDA of $16.6 million, a 14% increase from $14.5 million (32% increase on a constant currency basis).
- Transactions of 291 million, a 25% increase from 233 million.
- ATMs operated of 17,048 as of June 30, 2012, a 41% increase from 12,058.
Revenues, operating income and Adjusted EBITDA increased in the second quarter as a result of ATM network expansion across Europe and India, transaction growth in nearly every market, increased sales of value added products and the purchase of 51% of the outstanding shares of the Euronet Middle East (ENME) joint venture during the first quarter 2012.
Transactions grew 25%, driven by increases in India, Pakistan, Poland, Romania, the Company's European cross-border acquiring product and ENME. Revenues grew at a faster rate than transactions due to increased sales of value added products, which earn more revenue per transaction than traditional EFT transactions. Deployment of brown label ATMs in India and expansion in Europe drove an increase of 1,434 ATMs in the quarter.
The epay Segment reports the following results for the second quarter 2012 compared with the same period of 2011:
- Revenues of $166.7 million, a 7% increase from $156.5 million (15% increase on a constant currency basis).
- Operating income of $10.1 million, a 25% decrease from $13.5 million (22% decrease on a constant currency basis).
- Adjusted EBITDA of $15.3 million, a 15% decrease from $17.9 million (9% decrease on a constant currency basis).
- Transactions of 272 million, a 3% increase from 264 million.
- Point of sale ("POS") terminals of approximately 617,000 as of June 30, 2012, a 5% increase from approximately 588,000.
- Retailer locations of approximately 297,000 as of June 30, 2012, an 8% increase from approximately 276,000.
The epay Segment's revenue growth was largely due to the third quarter 2011 acquisition of cadooz. Consistent with the prior quarters, the segment was negatively impacted by the previously announced change in mobile operator strategy in Brazil and mobile operators going direct with retailers in Australia last year. Additionally, the weak economy in Spain adversely impacted the prepaid business in that market this quarter. The earnings declines in Brazil, Australia and Spain in the second quarter offset growth from increased sales in Germany and the U.S. and continued demand for non-mobile content, particularly in Germany.
The Money Transfer Segment reports the following results for the second quarter 2012 compared with the same period of 2011:
- Revenues of $77.5 million, a 6% increase from $73.0 million (12% increase on a constant currency basis).
- Operating income of $6.7 million, a 34% increase from $5.0 million (42% increase on a constant currency basis).
- Adjusted EBITDA of $11.3 million, a 13% increase from $10.0 million (19% increase on a constant currency basis).
- Total transactions of 7.4 million, a 21% increase from 6.1 million.
- Network locations of approximately 158,000 as of June 30, 2012, a 19% increase from approximately 133,000.
Revenues, operating income and Adjusted EBITDA expanded due to a 21% increase in total transactions, which are driven by continued agent sales successes together with the addition of more payout network locations. U.S. initiated transfers increased 11% versus the same quarter last year, including an 11% increase in transfers to Mexico. Non-U.S. initiated transfers increased 9%, despite the difficult European economy. Non-money transfer transactions increased 93%.
Corporate and other reported $7.2 million of expense for the second quarter 2012 compared with $8.9 million for the second quarter 2011. The decrease in expense versus the prior year is primarily attributable to lower short-term incentive and stock-based compensation accruals based on company performance.
Balance Sheet and Financial Position
Unrestricted cash on hand was $178.6 million as of June 30, 2012, compared to $180.7 million as of March 31, 2012. Cash decreased as a result of debt repayments, capital expenditures and taxes paid partially offset by cash generated from operations. Total indebtedness was $321.4 million as of June 30, 2012, compared to $337.2 million as of March 31, 2012. Included in indebtedness at June 30, 2012, are $171 million principal amount of convertible bonds which provide holders an option to require the Company to purchase the debentures at par in October 2012. Because the convertible price per share is significantly greater than the current trading value of the Company's stock, we expect the bond holders to exercise their option. To that end, we plan to use cash from the balance sheet together with available capacity on the Company's committed revolving line of credit to purchase the bonds.
The Company currently expects adjusted cash earnings per share for the third quarter 2012 to be approximately $0.41, assuming foreign currency rates remain stable through the end of the quarter.