Euronet Worldwide reports second quarter 2004 financial results

Net income for the second quarter 2004 was $4.4 million, or $0.13 fully diluted earnings per share, compared to a net loss of $2.8 million, or a loss of $0.10 per share, for the second quarter 2003. The second quarter 2004 net income included a foreign exchange gain of $0.3 million and a loss of less than $0.1 million on the early retirement of debt. Excluding this gain and loss, earnings per share were $0.12, or $4.1 million. Net income for the second quarter 2003 included foreign exchange translation loss of $3.1 million. Excluding this loss, earnings per share were $0.01, or $0.3 million.

Management analyzes historical results adjusted for certain items that are not necessarily ongoing in nature and that are incremental to the baseline of the business or non-operational in nature. Generally, these items include gains or losses associated with the sale of business assets or operations, market development costs, foreign exchange translations, discontinued operations, early debt retirement and other similar items as discussed in this press release. Management believes the exclusion of these items provides a better basis for evaluating the underlying business unit performance. The attached schedules provide a full reconciliation of any such non-GAAP financial measures.

The EFT Processing Segment posted second quarter 2004 revenues of $18.0 million, compared to $12.2 million reported for the second quarter 2003. Operating income for the second quarter was $3.1 million, compared to the prior year's same quarter of $1.2 million. Second quarter 2004 Adjusted EBITDA was $4.9 million, compared to $3.1 million for the second quarter 2003. The EFT Processing Segment processed 54.1 million transactions in the second quarter 2004 compared to 27.1 million transactions for the same period last year. The segment completed the quarter with 5,097 ATMs owned or operated, compared to 3,120 ATMs at the end of the second quarter 2003. The improved results of the second quarter 2004 over the same quarter last year are largely attributable to the continued growth in ATMs under management, primarily in our India, Poland and Romania markets, together with transactional growth from those ATMs. Euronet owns and/or operates ATMs in Hungary, Poland, Germany, Croatia, the Czech Republic, U.K., Greece, Romania, Slovakia, Kosovo, India, and Egypt.

The Prepaid Processing Segment reported second quarter 2004 revenues of $65.6 million, compared to $32.2 million reported for the second quarter 2003. Operating income for the second quarter was $6.3 million, compared to the prior year's second quarter results of $2.7 million. Adjusted EBITDA for the second quarter 2004 was $7.7 million, compared to $3.7 million for the second quarter 2003. Total transactions processed by the Prepaid Processing Segment in the second quarter 2004 were 54.6 million, compared to 22.8 million prepaid transactions processed in second quarter 2003. The Prepaid Processing Segment processes electronic point-of-sale prepaid transactions at more than 162,000 point-of-sale terminals across more than 68,000 retailers in Europe, Asia Pacific and the U.S. As previously announced, the company intends to expand its Prepaid Processing Segment both domestically and internationally through internal sales and promotional efforts as well as, if appropriate, acquisitions.

The Prepaid Processing Segment's second quarter's year-over-year revenue improvements were the result of a continuation of strong growth from the company's e-pay group, combined with the November 2003 acquisition of transact Elektronische Zahlungssysteme GmbH (transact), a German prepaid processor, and the company's U.S. prepaid operations, which were initiated in September 2003 with acquisition of Austin International Marketing and Investments, Inc. (AIM), with the January 2004 acquisition of Prepaid Concepts, Inc. (Precept) and further expanded with the May 2004 acquisition of Electronic Payment Solutions (EPS), an electronic point of sale company operating primarily in the southern U.S. The quarterly Adjusted EBITDA and operating income improvements were generally correlated to the increases in revenues. Depreciation and amortization included approximately $1.0 million for amortization of intangible assets assigned for purchase accounting related to the acquisitions in the Prepaid Processing Segment.

The Software Solutions Segment reported $3.4 million in revenues, compared to $3.8 million in revenues for second quarter 2003. Software backlog at June 30, 2004 was $5.9 million, compared to $4.5 million at March 31, 2004. Operating income for the Software Solutions Segment was $0.3 million, compared to $0.4 million for the second quarter 2003.

The Corporate and Other Segment had $2.4 million of expenses in second quarter 2004, compared to $1.5 million for the second quarter 2003, primarily due to increases in professional fees, insurance and salary expense resulting from overall company growth and annual compensation increases.

All segments included, transactions processed in the second quarter 2004 were 108.7 million, compared to 49.9 million processed in the second quarter 2003. This increase was primarily due to the EFT Processing Segment implementation of ATM outsourcing agreements in India, Romania and Poland, combined with continued growth and acquisitions in the Prepaid Processing Segment.

The company's unrestricted cash on hand was $32.0 million as of June 30, 2004 as compared to $19.3 million at March 31, 2004. The increase in unrestricted cash was primarily due to the contribution of $10.8 million in Adjusted EBITDA for the quarter as well as proceeds from the exercise of employee stock options and employee stock purchases, offset by interest and taxes paid. Euronet's total indebtedness was $70.3 million as of June 30, 2004, compared to $62.1 million at March 31, 2004. This increase in indebtedness was primarily the net result of approximately $9.6 million in new capital leases entered into primarily in connection with our ATM outsourcing agreement in Poland and a draw of $2.5 million on our bank line of credit used for purchase of inventory of mobile air time (known as PINs) for our growing prepaid processing businesses. This increase was offset by the repurchase of $4.8 million of the company's 12 3/8% senior discount notes during the quarter. At June 30, 2003 the balance outstanding of 12 3/8% senior discount notes was approximately $32.3 million and acquisition indebtedness was approximately $15.5 million.

Euronet also announced that it expects earnings per share for the third quarter 2004 to be $0.02 to $0.03 better than the second quarter 2004. This increase does not take into consideration the effects of foreign exchange gains or losses, gains or losses on the early retirement of debt, discontinued operations, and other non-operating or unusual items as Euronet cannot reasonably project the amount of these items.