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Euronet Q2 net income rises

29 July 2009  |  1591 views  |  0 Source: Euronet Worldwide

Euronet Worldwide ("Euronet" or the "Company") (NASDAQ: EEFT), a leading electronic payments provider, today announced its second quarter 2009 financial results.

Euronet's consolidated second quarter 2009 financial highlights included:

  • Revenues of $248.6 million, compared to $264.5 million for the second quarter 2008.
  • Operating income of $18.0 million, compared to $17.3 million for the second quarter 2008.
  • Adjusted EBITDA(1) of $33.7 million, compared to $34.6 million for the second quarter 2008.
  • Net income of $15.6 million, or $0.30 diluted earnings per share, compared to net income of $5.9 million, or $0.12 diluted earnings per share, for the second quarter 2008.
  • Adjusted cash earnings per share(2) of $0.30, compared to $0.32 for the second quarter 2008.
  • Transactions of 378.0 million, compared to 342.4 million in the second quarter 2008.

The reconciliation of non-GAAP items is included in the attached supplemental data.

Euronet generates approximately 75% of its revenues from non-U.S. operations; therefore, the Company's reported results can be impacted by significant changes in the value of foreign currencies relative to the U.S. dollar. Throughout the first half of 2009 there has been an improvement in the exchange rate of most foreign currencies relative to the U.S. dollar, however, when compared to the second quarter 2008, most foreign currencies declined significantly relative to the U.S. dollar. Accordingly, Euronet's second quarter 2009 results have been significantly impacted by currency exchange rates when compared to the second quarter 2008. Applying average foreign currency exchange rates from the second quarter 2008 to the second quarter 2009 results, the Company's second quarter 2009 revenues, operating income and adjusted EBITDA would have been higher by approximately $43.7 million, $5.0 million and $7.1 million, respectively, resulting in year-over-year improvements of 11%, 33% and 18%, respectively. This growth was driven by profit improvement in India, Poland and Germany in the EFT Processing Segment, Australia, Germany and the U.S. in the Prepaid Processing Segment and continued growth in transfers from non-U.S. locations in the Money Transfer Segment.

Segment and Other Results

The EFT Processing Segment reported the following results for the second quarter 2009:

  • Revenues of $45.6 million, compared to $52.4 million for the second quarter 2008.
  • Operating income of $9.8 million, compared to $9.0 million for the second quarter 2008.
  • Adjusted EBITDA of $14.3 million, compared to $14.0 million for the second quarter 2008.
  • Transactions of 179.3 million, compared to 168.6 million for the second quarter 2008.

The Segment's results were significantly impacted by fluctuations in foreign currency exchange rates. Applying average foreign currency exchange rates from the second quarter 2008 to the second quarter 2009 results, second quarter 2009 revenues, operating income and adjusted EBITDA would have been higher by approximately $11.9 million, $2.4 million and $3.6 million, respectively, resulting in year-over-year improvements of 10%, 36% and 28%, respectively. Profits grew faster than revenue due to Euronet's cost and infrastructure leverage, particularly on owned ATM networks in Poland and Germany, and on Euronet's shared network in India - Cashnet. Compared to the second quarter 2008, transaction levels on the Cashnet network increased 165%.

The EFT Processing Segment ended the second quarter 2009 with 9,336 ATMs operated compared to 10,160 ATMs at the end of the second quarter 2008, and up 131 ATMs from the first quarter 2009. The year-over-year comparison was impacted by previously announced customer contract terminations, partially offset by expansions in owned and outsourced ATMs in several markets. As of June 30, 2009, Euronet operates ATMs primarily in Hungary, Poland, Germany, Croatia, the Czech Republic, Greece, Romania, Slovakia, Serbia, Montenegro, Ukraine, Bulgaria, India and China.

The Prepaid Processing Segment reported the following results for the second quarter 2009:

  • Revenues of $145.2 million, compared to $152.6 million for the second quarter 2008.
  • Operating income of $12.1 million, compared to $11.4 million for the second quarter 2008.
  • Adjusted EBITDA of $15.7 million, compared to $15.6 million for the second quarter 2008.
  • Transactions of 194.2 million, compared to 169.5 million for the second quarter 2008.

The Segment's results were significantly impacted by fluctuations in foreign currency exchange rates. Applying average foreign currency exchange rates from the second quarter 2008 to the second quarter 2009 results, second quarter 2009 revenues, operating income and adjusted EBITDA would have been higher by approximately $27.7 million, $2.4 million and $2.9 million, respectively, resulting in year-over-year improvements of 13%, 27% and 19%, respectively. Profits grew faster than revenues due to Euronet's leverage and continued success in increasing market share, primarily in Australia, Germany and the U.S.

The Prepaid Processing Segment processes electronic point-of-sale prepaid transactions at approximately 470,000 point-of-sale terminals across approximately 232,000 retailer locations in Europe, Asia-Pacific, North America and the Middle East.

The Money Transfer Segment reported the following results for the second quarter 2009:

  • Revenues of $57.8 million, compared to $59.5 million for the second quarter 2008.
  • Operating income of $2.7 million, compared to $2.6 million for the second quarter 2008.
  • Adjusted EBITDA of $7.8 million, compared to $7.7 million for the second quarter 2008.
  • Transfer transactions of 4.5 million, compared to 4.3 million for the second quarter 2008.

The Segment's results were significantly impacted by fluctuations in foreign currency exchange rates. Applying average foreign currency exchange rates from the second quarter 2008 to the second quarter 2009 results, revenues, operating income and adjusted EBITDA would have been higher by approximately $4.1 million, $0.2 million and $0.6 million, respectively, resulting in year-over-year improvements of 4%, 12% and 9%, respectively. Profits grew faster than revenues due to the leveragability of Euronet's cost structure, together with favorable mix. Growth in transactions and profits were driven by transfers from non-U.S. locations, partially offset by the impact of a 20% year-over-year decline in transfers from the U.S. to Mexico largely because of the weakened economy.

The Money Transfer Segment operates a network of approximately 79,200 locations serving more than 100 countries.

Corporate and other reported $6.6 million of operating expenses for the second quarter 2009, compared to $5.7 million for the second quarter 2008, due primarily to increased professional fees.

The Company's unrestricted cash on hand was $160.5 million as of June 30, 2009 compared to $158.7 million as of March 31, 2009. Cash generated by operations was partially offset by reductions in debt of $16.9 million. The Company's total debt was $337.2 million as of June 30, 2009, reduced from $354.1 million as of March 31, 2009.

The Company expects adjusted cash earnings per share for the third quarter 2009 to be $0.32, assuming foreign currency exchange rates remain stable through the end of the quarter.

We believe that adjusted EBITDA and adjusted cash earnings per share provide useful information to investors because they are indicators of the strength and performance of our ongoing business operations, including our ability to fund capital expenditures, acquisitions and operations and to incur and service debt. While certain of these calculations are used to more fully describe the results of the business, others are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the operating performance and value of companies within the payment processing industry.

The Company's management analyzes historical results adjusted for certain items that are non-operational and non-recurring. Management believes the exclusion of these items provides a more complete and comparable basis for evaluating the underlying business unit performance. The attached schedules provide a full reconciliation of these and other non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure.

(1) Adjusted EBITDA is defined as operating income, excluding depreciation, amortization, share-based compensation expenses and other non-operating or non-recurring items. Although depreciation and amortization charges are considered operating costs under U.S. GAAP, these expenses primarily represent non-cash current period allocations of costs associated with long-lived assets acquired in prior periods. Similarly, expense recorded for share-based compensation does not represent a current or future period cash cost.

(2) Adjusted cash earnings per share is defined as diluted U.S. GAAP earnings per share excluding the tax-effected impacts of: a) foreign exchange gains or losses, b) discontinued operations, c) gains or losses from the early retirement of debt, d) share-based compensation, e) acquired intangible asset amortization, f) non-cash interest expense, g) non-cash income tax expense, and h) other non-operating or non-recurring items. Adjusted cash earnings per share includes shares potentially issuable in settlement of convertible bonds or other obligations, if the assumed issuances are dilutive to adjusted cash earnings per share.

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