Euronet Worldwide, Inc. (NASDAQ: EEFT), a leading electronic payments provider, announced consolidated revenues of $137.4 million for the third quarter ended September 30, 2005.
These results compare to $99.9 million for the third quarter ended September 30, 2004. Consolidated operating income for the quarter was $13.8 million, compared to $10.0 million for the third quarter 2004. Adjusted EBITDA (operating income plus depreciation and amortization) was $19.6 million for third quarter 2005, compared to $14.2 million for the third quarter 2004.
Net income for the third quarter 2005 was $10.2 million, or $0.26 diluted earnings per share, compared to a net income of $6.0 million, or $0.17 diluted earnings per share, for the third quarter 2004. The third quarter 2005 net income included a foreign exchange translation gain of $0.9 million. Excluding this gain, and considering the dilutive effect of the convertible debentures issued December 2004 as described below, diluted earnings per share were $0.24 and net income was $10.1 million. Net income for the third quarter 2004 included a foreign exchange translation gain of $0.4 million and a loss of less than $0.1 million on early retirement of debt; excluding these items, diluted earnings per share were $0.16, and net income was $5.6 million.
The EFT Processing Segment posted third quarter 2005 revenues of $26.3 million, compared to $20.9 million reported for the third quarter 2004. Operating income for the third quarter was $6.6 million, compared to the prior year's third quarter of $4.2 million. Third quarter 2005 Adjusted EBITDA was $8.8 million, compared to $6.5 million for the third quarter 2004. The EFT Processing Segment processed 94.4 million transactions in the third quarter 2005 compared to 70.1 million transactions for the same period last year. The segment completed the quarter with 6,841 ATMs owned or operated, compared to 5,404 ATMs at the end of the third quarter 2004. The improved results of the third quarter 2005 over the same quarter last year are largely attributable to the continued growth in ATMs under management in our European and Indian markets, together with transaction growth from those ATMs and other managed ATMs. Euronet owns and/or operates ATMs in Hungary, Poland, Germany, Croatia, the Czech Republic, U.K., Greece, Romania, Serbia, Slovakia, Albania and India.
The Prepaid Processing Segment reported third quarter 2005 revenues of $107.7 million, compared to $75.4 million reported for the third quarter 2004. Operating income for the third quarter 2005 was $9.2 million, compared to the prior year's third quarter results of $7.7 million. Adjusted EBITDA for the third quarter 2005 was $12.5 million, compared to $9.3 million for the third quarter 2004. Total transactions processed by the Prepaid Processing Segment in the third quarter 2005 were 94.6 million, compared to 59.8 million prepaid transactions processed in the third quarter 2004. The Prepaid Processing Segment processes electronic point-of-sale prepaid transactions at more than 218,000 point-of-sale terminals across more than 109,000 retailers in Europe, Asia Pacific, Africa 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 third quarter's year-over-year revenue improvements were the result of a continuation of transaction growth together with benefits of acquisitions completed after the third quarter of 2004. Operating income in the third quarter 2005 included approximately $0.4 million in operating losses related to a recently acquired money transfer company, TelecommUSA. Moreover in the third quarter 2004, the Prepaid Processing Segment benefited from stronger than average sales of Transact's POS terminals, which contributed approximately $0.7 million in gross margin. The quarterly Adjusted EBITDA and operating income improvements were generally correlated to the increases in revenues after considering the $0.7 million stronger than average sales of Transact's POS terminals in the third quarter 2004 and the inclusion in the third quarter 2005 of the operating losses of the recently acquired money transfer and bill payment business. Depreciation and amortization included approximately $1.8 million for amortization of intangible assets assigned for purchase accounting related to the acquisitions in the Prepaid Processing Segment.
Corporate Services and Other had $2.9 million of operating expenses in the third quarter 2005, compared to $2.5 million for the third quarter 2004, primarily due to increases in professional fees, largely driven by professional fees related to acquisition analysis, and salary expense resulting from overall company growth.
All segments included, transactions processed in the third quarter 2005 were 189.0 million, compared to 129.9 million processed in the third quarter 2004. This increase was primarily due to increases in the EFT Processing Segment's ATMs operated and managed, combined with continued growth and acquisitions in the Prepaid Processing Segment.
The company's unrestricted cash on hand was $52.8 million and $50.3 million as of September 30, 2005 and June 30, 2005 respectively. Euronet's total indebtedness was $164.0 million at September 30, 2005 compared to $178.7 million at June 30, 2005. The decrease of $14.7 million was primarily related to third quarter 2005 repayments of draws on the company's $50 million revolving credit agreement. The second quarter draws accommodated certain month-end trade payables at June 30, 2005.
In December 2004, the company issued $140 million in convertible debentures that, if converted in the future, would have a potentially dilutive effect on the company's stock. The debentures are potentially convertible into approximately 4.2 million shares of common stock, subject to adjustment. As required by EITF 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share," regardless of whether the conditions upon which the debentures would be convertible into shares of the company's common stock have been met, if dilutive, the impact of the contingently issuable shares is included in the calculation of diluted earnings per share under the "if converted" method. Unlike previous quarters, the assumed conversion of the debentures was dilutive for the third quarter 2005. Accordingly, for the third quarter 2005, 4.2 million contingently issuable shares have been assumed to be outstanding for the period and $0.8 million in interest charges and amortization of debt issuance costs have been excluded from income available to common shareholders to determine diluted earnings per share.
In October 2005, the company completed the sale of $175 million aggregate principal amount of its 3.50% Convertible Debentures due 2025 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Euronet intends to use the net proceeds of the offering for general corporate purposes, which may include share repurchases, acquisitions of non-US entities or other strategic investments. There was no impact to the third quarter 2005 as the issuance was completed in October. The impact on future earnings per share is expected to be dilutive if earnings per share continue to increase, and, accordingly, 4.3 million shares would be included in the calculation of diluted earnings per share.
Euronet announced that the Compensation Committee of its Board of Directors, consistent with emerging corporate trends, has reconsidered the use of stock options as an element of long-term management incentive compensation, and has decided to award restricted common stock rather than options to purchase common stock. In this regard, the committee recently approved the award of certain restricted shares to non-executive management and is currently considering an award to executive management. The aggregate non-executive and executive awards are estimated at approximately 500,000 shares and will generally vest over seven years. The company estimates the recurring quarterly expense of these awards commencing in the fourth quarter 2005 to be approximately $0.5 million, or approximately $0.01 per diluted share.
Euronet also announced that it expects diluted earnings per share for the fourth quarter 2005 to be approximately $0.25, inclusive of the approximate $0.01 per share cost of the restricted stock awards discussed above. 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 that Euronet cannot reasonably project.Download the document now 41.3 kb (Adobe Acrobat Document)