Euronet swings to FY net profit

Source: Euronet Worldwide

Euronet Worldwide ("Euronet" or the "Company") (NASDAQ: EEFT), a leading electronic payments provider, reports its full year and fourth quarter 2011 financial results.

Euronet reports the following consolidated results for the full year 2011:

  • Revenues of $1,161.3 million, a 12% increase from $1,038.2 million for 2010 (7% increase on a constant currency(1) basis).
  • Operating income of $79.1 million compared to $5.2 million for 2010.
  • Adjusted operating income(2) of $79.0 million, a 3% increase from $76.8 million for 2010 (3% decrease on a constant currency basis).
  • Adjusted EBITDA(3) of $150.2 million, a 5% increase from $143.6 million for 2010 (no increase on a constant currency basis).
  • Net earnings attributable to Euronet of $36.9 million or $0.71 diluted earnings per share (EPS), compared to a loss of $38.4 million or $0.75 diluted loss per share, for 2010.
  • Adjusted cash earnings per share(4) of $1.48, compared to $1.36 for 2010.
  • Transactions of 2,031 million, compared to 1,706 million for 2010.

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

  • Revenues of $319.4 million, a 13% increase from $283.8 million for the fourth quarter 2010 (15% increase on a constant currency basis).
  • Operating income of $23.0 million, compared to an operating loss of $49.8 million for the fourth quarter 2010.
  • Adjusted operating income of $23.0 million, a 6% increase from $21.8 million for the fourth quarter 2010 (8% increase on a constant currency basis).
  • Adjusted EBITDA of $41.7 million, a 6% increase from $39.5 million for the fourth quarter 2010 (9% increase on a constant currency basis).
  • Net income attributable to Euronet of $10.9 million or $0.21 diluted earnings per share, compared to a loss of $60.7 million or $1.19 diluted loss per share, for the fourth quarter 2010.
  • Adjusted cash earnings per share of $0.46, compared to $0.40 for the fourth quarter 2010.
  • Transactions of 550 million, compared to 475 million for the fourth quarter 2010.

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

"I am especially pleased that we posted record adjusted cash EPS in 2011 given theregulatory driven German ATM fee headwind we faced at the beginning of the year," stated Michael Brown, Euronet's Chairman and Chief Executive Officer. "The momentum of our nine percent growth in adjusted cash EPS in 2011 positions us well as we move into 2012."

"In the fourth quarter, all segments delivered solid results over the prior year in the face of regulatory, competitive and economic pressures," continued Mr. Brown. "The Money Transfer and epay Segments posted double-digit growth in revenue, operating income and transactions for the quarter and the EFT Segment would have, if not for the fee reductions in Germany. I am proud of our teams around the world for their determination and resiliency in the face of adversity, and am looking forward to continued growth in 2012."

The fourth quarter adjusted cash earnings per share of $0.46 exceeded the Company's previously announced expectations as a result of favorable tax benefits stemming largely from tax planning initiatives, foreign country tax return true ups and a shift in mix of income to lower tax countries. This increase was somewhat offset by unfavorable foreign exchange rates compared to the dollar

Segment and Other Results
The EFT Processing Segment reports the following results for the full year 2011:

  • Revenues of $199.3 million, a 2% increase from $194.9 million for 2010 (1% increase on a constant currency basis).
  • Operating income of $33.2 million, a 13% decrease from $38.1 million for 2010 (15% decrease on a constant currency basis).
  • Adjusted operating income of $32.9 million, a 14% decrease from $38.1 million for 2010.
  • Adjusted EBITDA of $54.0 million, a 6% decrease from $57.6 million for 2010 (8% decrease on a constant currency basis).
  • Transactions of 943 million, compared to 794 million for 2010.
  • ATMs operated of 14,224 as of December 31, 2011, compared to 10,786 as of December 31, 2010.

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

  • Revenues of $54.3 million, a 7% increase from $50.7 million for the fourth quarter 2010 (16% increase on a constant currency basis).
  • Operating income of $8.9 million, an 8% decrease from $9.7 million for the fourth quarter 2010 (2% decrease on a constant currency basis).
  • Adjusted EBITDA of $14.6 million, a 2% decrease from $14.9 million for the fourth quarter 2010 (5% increase on a constant currency basis).
  • Transactions of 257 million, compared to 210 million for the fourth quarter 2010.

The EFT Processing Segment's full year and fourth quarter 2011 revenues, operating income and adjusted EBITDA reflect the benefit of value added services, ATM growth in Poland, Romania, India, China and Pakistan together with savings from operating efficiencies. These increases were offset by the previously announced ATM fee reductions in Germany and Poland. To illustrate the significance of the EFT Segment's accomplishments in overcoming these fee reductions, removing the net impact of the decline in ATM fees from the segment's 2011 results would have resulted in improved revenue, operating income and adjusted EBITDA of 11%, 23% and 18%, respectively, compared to the prior year.

Transaction growth of 19% for the full year and 22% for the fourth quarter was primarily attributable to ATM expansion in India, entry into Pakistan, and growth of the European cross-border acquiring business. Transaction growth outpaced revenue growth due to the shift in transaction mix to lower yielding transactions in India and the European cross-border acquiring business, combined with the impact of fee reductions in Germany.

The epay Segment reports the following results for the full year 2011:

  • Revenues of $677.1 million, a 13% increase from $598.8 million for 2010 (7% increase on a constant currency basis).
  • Operating income of $56.8 million, compared to an operating loss of $24.1 million for 2010.
  • Adjusted operating income of $57.0 million, a 20% increase from $47.5 million for 2010 (14% increase on a constant currency basis).
  • Adjusted EBITDA of $75.5 million, an 18% increase from $64.1 million for 2010 (12% increase on a constant currency basis).
  • Transactions of 1,064 million, compared to 891 million for 2010.
  • Point of sale ("POS") terminals of approximately 615,000 as of December 31, 2011, compared to approximately 563,000 as of December 31, 2010.
  • Retailer locations of approximately 293,000 as of December 31, 2011, compared to approximately 276,000 as of December 31, 2010.

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

  • Revenues of $191.2 million, a 14% increase from $167.9 million for the fourth quarter 2010 (15% increase on a constant currency basis).
  • Operating income of $16.9 million, compared to an operating loss of $57.7 million for the fourth quarter 2010.
  • Adjusted operating income of $16.9 million, a 22% increase from $13.9 million for the fourth quarter 2010 (22% increase on a constant currency basis).
  • Adjusted EBITDA of $22.1 million, a 20% increase from $18.4 million for the fourth quarter 2010 (21% increase on a constant currency basis).
  • Transactions of 286 million, compared to 260 million for the fourth quarter 2010.

For the full year 2011, revenue, operating income and transaction growth in the epay segment was primarily due to the full year impact of epay Brazil acquired in September 2010, the September 2011 acquisition of cadooz, a leading voucher, rewards and incentive provider in Germany, and increased transaction volume from non-mobile content, primarily in Germany. These increases were partially offset by a decline in transactions stemming from competitive pressures and certain key retailers going direct with mobile operators in the Australian market. Transaction growth outpaced revenue due to a greater mix of lower-yielding transactions in India and the Middle East.

Fourth quarter 2011 growth in revenue, operating income and transactions was also attributed to expansion of non-mobile content, particularly in Germany, and the cadooz acquisition in September 2011. These increases were tempered by volume declines in Australia as described above and in Brazil where a certain mobile operator is modifying its distribution strategy.

The Money Transfer Segment reports the following results for the full year 2011:

  • Revenues of $285.3 million, a 17% increase from $244.7 million for 2010 (13% increase on a constant currency basis).
  • Operating income of $17.1 million, a 29% increase from $13.3 million for 2010 (20% increase on a constant currency basis).
  • Adjusted EBITDA of $37.5 million, an 11% increase from $33.8 million for 2010 (6% increase on a constant currency basis).
  • Total transactions of 24.3 million, compared to 21.1 million for 2010.
  • Network locations of approximately 146,000 as of December 31, 2011, compared to approximately 110,000 as of December 31, 2010.

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

  • Revenues of $74.0 million, a 13% increase from $65.4 million for the fourth quarter 2010.
  • Operating income of $4.5 million, a 15% increase from $3.9 million for the fourth quarter 2010.
  • Adjusted EBITDA of $9.4 million, a 2% increase from $9.2 million for the fourth quarter 2010.
  • Total transactions of 6.6 million, compared to 5.6 million for the fourth quarter 2010.

Foreign exchange rates did not have a material impact on the fourth quarter 2011 money transfer segment results.

Revenue, operating income and adjusted EBITDA for the Money Transfer Segment grew for both the fourth quarter and full year 2011, compared to the same periods in the prior year. The increase was driven by double-digit percentage growth in total transactions, reflecting the segment's continued focus on expanding origination and payout networks in new and existing markets. The segment also benefited from certain intangible assets being fully amortized, which was partially off-set by a weakening European economy and increased operating costs associated with store and agent expansion.

For the year, total money transfers grew 10% over 2010, including 6% from the U.S. and 16% from non-U.S. markets. Non-money transfer transactions, such as prepaid mobile top-up, check cashing and bill payment increased 43% over 2010. For the fourth quarter 2011, total money transfers grew 11% over the fourth quarter 2010, including 11% from the U.S. and 10% from non-U.S. markets. Non-money transfer transactions grew 84% over the fourth quarter 2010. Transfers from the U.S. to Mexico grew 1% for the full year and 10% for the fourth quarter 2011, compared to the same periods in the prior year, indicating the long anticipated recovery of this important corridor.

Corporate and other reported $28.0 million of expense for 2011 compared to $22.1 million for 2010. Fourth quarter 2011 operating expense was $7.3 million compared to $5.7 million for the fourth 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 $170.7 million as of December 31, 2011, compared to $180.9 million as of September 30, 2011 and total indebtedness was $338.8 million as of December 31, 2011, compared to $322.5 million as of September 30, 2011. The decrease in cash of $10.2 million from September 30, 2011 was primarily the net result of fourth quarter acquisitions in Poland and Romania, cash settlement of common stock and convertible bond repurchase commitments at the end of the third quarter offset by cash flows from operations. Total debt increased $16.3 million, primarily to fund year-end Money Transfer Segment cash requirements and capital leases for additional ATMs, or replacement of obsolete ATMs, in Europe.

Other Items

On January 23, 2012, the Company reported a criminal computer security breach of a portion of its European business in late 2011 that comprises less than 5% of the Company's transaction volume, revenue and operating income. The Company took immediate and aggressive measures to ensure the breach was contained and there have been no reports of losses incurred by card issuers since mid-December. The full year and fourth quarter 2011 results include approximately $0.4 million in expenses associated with the Company's response. No claims or losses have been asserted against the Company to date. The Company maintains insurance to limit the financial exposure for response costs, losses by card issuers, fines or penalties from such incidents and does not expect the net financial impact of future costs to be material. 

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