Euronet Worldwide posts strong third quarter

Euronet reports the following consolidated results for the third quarter 2013 compared with the same period of 2012:

Revenues of $360.6 million, a 14% increase from $316.4 million (13% increase on a constant currency(1) basis).
Operating income of $55.3 million, a 129% increase from $24.2 million (135% increase on a constant currency basis).
Adjusted operating income(2) of $36.0 million, a 49% increase from $24.2 million (45% on a constant currency basis).
Adjusted EBITDA(3) of $53.8 million, a 26% increase from $42.6 million (24% increase on a constant currency basis).
Net income attributable to Euronet of $47.9 million or $0.92 diluted earnings per share, compared with net income of $14.6 million or $0.28 diluted earnings per share.
Adjusted cash earnings per share(4) of $0.56, a 33% increase from $0.42.
Transactions of 582 million, a 1% decrease from 589 million.

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

"Our new quarterly record of $0.56 adjusted cash earnings per share, which is 33% growth over last year, is a reflection of our consistent high-quality earnings expansion," stated Michael J. Brown, Chairman and Chief Executive Officer. "Again this quarter, all three segments contributed to this growth. EFT exceeded our expectations achieving a new seasonally high result, driven by value added products and better performing ATMs. Money Transfer results remained strong led by balanced growth from the U.S. and outside the U.S. together with continued network expansion. And, epay delivered another solid quarter generating growth from prepaid mobile products in the U.S. and sales of non-mobile content, particularly in Germany."

Segment and Other Results

The EFT Processing Segment reports the following results for the third quarter 2013 compared with the same period of 2012:

Revenues of $83.6 million, a 29% increase from $64.9 million (28% increase on a constant currency basis).
Operating ine on a constant currency basis).
Operating income of $44.6 million, a 208% increase from $14.5 million (219% increase on a constant currency basis).
Adjusted operating income of $25.3 million, a 74% increase from $14.5 million (69% on a constant currency basis).
Adjusted EBITDA of $31.6 million, a 51% increase from $20.9 million (47% increase on a constant currency basis).
Transactions of 304 million for both periods.
Operated 17,795 ATMs as of September 30, 2013, a 2% increase from 17,370.

Revenue, adjusted EBITDA and operating income expanded as a result of increased demand for value added products, brown label ATMs in India and network expansion. Operating income also reflects a non-cash gain related to the reduction of contingent consideration on an acquisition. Adjusted operating income has been presented to exclude this non-cash accounting gain.

Transactions were flat and ATMs expanded 2% versus the same quarter last year as a result of growth in Serbia, Pakistan, Greece, Romania, China, India and Poland, largely offset by declines stemming from the previously announced contract termination by IDBI bank in India. The IDBI agreement had contributed a substantial number of transactions and ATMs, but added minimal revenue or operating profit. Excluding the termination of the contract in India, transactions and ATMs would have grown 10% and 13%, respectively.

Revenue, adjusted operating income and adjusted EBITDA growth outpaced transactions and ATMs due to seasonally higher sales of value added products which earn a higher margin per transaction relative to other EFT products.

The epay Segment reports the following results for the third quarter 2013 compared with the same period of 2012:

Revenues of $182.6 million, a 6% increase from $171.6 million (6% increase on a constant currency basis).
Operating income of $12.1 million, a 20% increase from $10.1 million (19% increase on a constant currency basis).
Adjusted EBITDA of $16.1 million, a 7% increase from $15.1 million (6% increase on a constant currency basis).
Transactions of 269 million, a 3% decrease from 277 million.
Point of sale ("POS") terminals of approximately 636,000 as of September 30, 2013, a 1% increase from approximately 631,000.
Retailer locations of approximately 291,000 as of September 30, 2013, a 4% decrease from approximately 304,000.

Revenue, operating income and adjusted EBITDA increases reflect growth in non-mobile content sales, particularly in Germany, expansion from sales of value added products in the U.S. and the November 2012 acquisition of ezi-pay in New Zealand. Partially offsetting this growth were declines in Australia and the Middle East, as well as start-up costs in Turkey and Russia. The increase in operating income also includes a benefit from lower intangible amortization expense due to the value of certain intangible assets being fully amortized. Excluding the benefit of reduced intangible amortization expense, operating income growth was consistent with revenue and adjusted EBITDA growth.

Transactions declined 3% year-over-year as a result of fewer low-margin transactions from the Middle East, partially offset by growth in the U.S., India and Germany. Retailer locations declined due the rationalization of sites in the U.S. with marginal volume.

The Money Transfer Segment reports the following results for the third quarter 2013 compared with the same period of 2012:

Revenues of $95.3 million, a 19% increase from $80.0 million (17% increase on a constant currency basis).
Operating income of $7.5 million, a 21% increase from $6.2 million (21% increase on a constant currency basis).
Adjusted EBITDA of $12.0 million, a 10% increase from $10.9 million (10% increase on a constant currency basis).
Total transactions of 8.9 million, an 11% increase from 8.0 million.
Network locations of approximately 207,000 as of September 30, 2013, a 22% increase from approximately 170,000.

Revenue, operating income and adjusted EBITDA growth was driven by an 11% increase in total transactions. Transactions increased as a result of sales efforts and continued expansion of the network, which grew 22% compared with the same quarter last year. Operating income and adjusted EBITDA growth was partially offset by costs incurred to launch digital products.

Money transfers grew 17% in the quarter, with increases across all send markets. U.S.-initiated transfers increased 17% year-over-year, including a 14% increase in transfers to Mexico and a 19% increase to non-Mexico locations. Non-U.S. transfers grew 18%.

Corporate and Other reports $8.9 million of expense for the third quarter 2013 compared with $6.6 million for the third quarter 2012. The increase in corporate expense is primarily attributable to short- and long-term incentive compensation expense related to improved Company performance and one-time prior year related contingencies.

Balance Sheet and Financial Position

Unrestricted cash on hand was $244.5 million as of September 30, 2013, compared to $189.9 million as of June 30, 2013. Cash increased primarily as a result of cash flows generated from operations and working capital changes related to the timing of settlements within our epay and money transfer businesses, partially offset by debt payments. Total indebtedness was $250.1 million as of September 30, 2013, compared to $295.5 million as of June 30, 2013.

Guidance

The Company currently expects adjusted cash earnings per share for the fourth quarter 2013, assuming foreign currency exchange rates remain stable through the end of the quarter, to be approximately $0.57.