Euronet Worldwide Inc. announced its first quarter 2007 financial results.
Euronet’s first quarter 2007 financial highlights included:
– Consolidated revenues of $170.4 million, compared to $147.0 million for the first quarter 2006.
– Adjusted EBITDA of $21.9 million, compared to $21.0 million for the first quarter 2006.
– Operating income of $12.1 million, compared to $12.3 million in the first quarter 2006.
– Net income of $9.6 million, or $0.24 diluted earnings per share, compared to net income for the first quarter 2006 of $9.4 million, or $0.24 diluted earnings per share.
– The first quarter 2007 net income included a foreign exchange gain of $0.4 million, share-based compensation expense of $1.9 million, a tax-effected non-recurring arbitration loss of $0.9 million, and a gain from discontinued operations of $0.4 million; excluding these items, adjusted earnings per share was $0.28. Cash earnings per share was $0.31, derived by adding back $1.7 million to adjusted earnings per share for the tax-effected amortization of acquired intangible assets. The first quarter 2006 net income included a foreign exchange gain of $1.6 million and share-based compensation expense of $1.9 million; excluding these, adjusted earnings per share for the first quarter 2006 was $0.24 and excluding $1.5 million for the tax-effected amortization of acquired intangible assets cash earnings per share was $0.28 per share.
– A total of 270.2 million transactions processed in the first quarter of 2007, compared to 199.5 million transactions processed in the first quarter of 2006.
Segment and Other Results
Beginning in the first quarter 2007, Euronet combined its Software business with its EFT Processing Segment to better reflect the alignment of the software resources with the strategic success of the EFT business. The Segment results reported below have been restated for prior periods to reflect the combination of the EFT Processing and Software segments for comparative purposes.
The EFT Processing Segment reported the following results:
– First quarter 2007 revenues of $42.0 million, compared to $36.0 million for the first quarter 2006.
– First quarter 2007 adjusted EBITDA of $11.0 million, compared to $11.2 million for the first quarter 2006.
– First quarter 2007 operating income of $6.9 million, compared to $7.8 million for the first quarter 2006.
– Transactions processed for the first quarter 2007 of 130.7 million, compared to 103.1 million transactions processed for the first quarter 2006.
The EFT Processing Segment completed the quarter with 9,182 ATMs owned or operated compared to 7,613 ATMs at the end of the first quarter 2006. The EFT Processing Segment’s revenue growth was primarily the result of the addition of ATMs under outsource management agreements together with the related transactions processed over those and other ATMs under management. The incremental adjusted EBITDA and operating income generated by this growth was offset by a $1.2 million non-recurring arbitration loss related to a claim by a former cash supply company related to the provision of cash during the fourth quarter 1999 and the first quarter 2000. Additionally, the EFT Processing Segment’s adjusted EBITDA and operating income were partially offset by incremental investments the Company has made to position itself for expanding card processing opportunities across Europe, investments to expand in additional Eastern European markets and the effect of certain rate concessions granted by the Company in prior periods to extend contracts through 2011.
Euronet owns and/or operates ATMs in Hungary, Poland, Germany, Croatia, the Czech Republic, the United Kingdom, Greece, Romania, Slovakia, Albania, Serbia, Montenegro, Ukraine, India and China.
The Prepaid Processing Segment reported the following results:
– First quarter 2007 revenues of $128.4 million, compared to $111.0 million for the first quarter 2006.
– First quarter 2007 adjusted EBITDA of $12.7 million, compared to $12.3 million for the first quarter 2006.
– First quarter 2007 operating income of $8.8 million, compared to $9.0 million for the first quarter 2006.
– Transactions processed of 139.5 million in the first quarter 2007, compared to 96.4 million processed in the first quarter 2006.
The year-over-year improvement in revenue was primarily attributable to transaction growth. Operating income was slightly down as a result of start-up investments related to the money transfer product together with the expiration in the second quarter 2006 of exclusive mobile operator commissions in Spain as reported in previous quarters. If the impacts of the Spanish prepaid business and the money transfer product were excluded, the Prepaid Segment would have improved revenue by 20% and operating profits would have improved by 12%. In February 2007, the Company completed the acquisition of a U.K. based prepaid processing business that contributed approximately 5% of the segment’s quarterly revenue growth, but had a neutral impact on the segment’s operating income. If the acquired business’s results had not been included in the segment’s results for the quarter, the Prepaid Segment would have reported slightly improved operating income margins compared to the fourth quarter 2006.
The Prepaid Processing Segment processes electronic point-of-sale prepaid transactions at more than 356,000 point-of-sale terminals across more than 186,000 retailer locations in Europe, Asia Pacific, Africa and the U.S.
Corporate and Other had $3.6 million of operating expenses for the first quarter 2007, compared to $4.4 million in the first quarter 2006. The decrease was attributable to lower professional fees, share-based compensation and incentive compensation in the first quarter of 2007.
The Company’s unrestricted cash on hand was $419.5 million as of March 31, 2007 as compared to $321.1 million as of December 31, 2006. Euronet’s total indebtedness was $353.5 million as of March 31, 2007, as compared to $373.5 million as of December 31, 2006.
On April 4, 2007 the Company announced the completion of the acquisition of Ria Envia, Inc. (“RIA”) for $380 million in cash, 4,053,606 shares of Euronet common stock, 3,685,098 contingent value rights and 3,685,098 stock appreciation rights. The $380 million in cash was funded through cash from the Company’s balance sheet and the net proceeds of a $190 million seven-year secured term loan.
The results of RIA will be included in Euronet’s consolidated results beginning in the second quarter and will be reported as a separate business segment. Previously, the Company reported that it expected the RIA acquisition to be $0.07 to $0.13 dilutive to its 2007 adjusted earnings per share and $0.20 to $0.25 accretive to its 2008 adjusted earnings per share. Despite improving Mexican money transfer trends, the Company believes it is too early to conclude on a recovery of money transfers to Mexico. For 2007, the Company currently expects the results of the acquired business to be at the high end of the dilution range. For 2008, the Company’s previous expectations of $0.20 to $0.25 accretive earnings per share have not changed. On a cash earnings per share basis, the Company currently expects the RIA acquisition to be accretive by approximately $0.03 to $0.08 in 2007 and $0.40 to $0.45 in 2008, subject to recovery of transfers to Mexico.
Euronet also announced that it expects adjusted earnings per share for the second quarter 2007 to be approximately $0.21 to $0.22 per share, in which RIA is expected to be dilutive by approximately $0.08 per share in the second quarter. After exclusion of the tax-effected amortization of acquired intangible assets from adjusted earnings per share, the Company expects cash earnings per share to be approximately $0.29 to $0.31 per share, including RIA. These expectations do not include approximately $1.0 million to $1.5 million for anticipated restructuring charges to integrate the Company’s existing money transfer business with RIA.
In December 2004 and October 2005, the Company issued $140 million and $175 million, respectively, in convertible debentures. These debentures are potentially convertible into approximately 4.2 million and 4.3 million shares, respectively, of the Company’s 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. The assumed conversion of the December 2004 debentures was dilutive for the first quarter 2007 and for the first quarter 2006. Accordingly, for the first quarter 2007 and for the first quarter 2006, 4.2 million contingently issuable shares have been assumed to be outstanding for the period, and $0.7 million and $0.8 million, respectively, in related interest charges and amortization of debt issuance costs have been added back to income available to common shareholders to determine diluted earnings per share for the first quarter 2007 and the first quarter 2006. The assumed conversion of the October 2005 debentures was not dilutive for the first quarter 2007 or for the first quarter 2006. The Company expects the December 2004 debentures to continue to be dilutive in future periods. The impact of the October 2005 debentures on future earnings per share may become dilutive if earnings per share continue to increase.
We believe that adjusted EBITDA, adjusted earnings per share and 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. These calculations 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, not necessarily ongoing in nature or that are incremental to the baseline of the business, and management believes the exclusion of these items provides a more complete basis for evaluating the underlying business unit performance.
Adjusted EBITDA is defined as operating income excluding depreciation, amortization and share-based compensation expenses. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent a non-cash current period allocation of costs associated with long-lived assets acquired in prior periods. Similarly, the expense recorded for share-based compensation does not represent a current or future period cash cost.
Adjusted earnings per share is defined as diluted GAAP earnings per share excluding the impacts of a) foreign exchange gains or losses, b) discontinued operations, c) debt restructuring charges, d) share based compensation and e) other non-operating or unusual items that cannot be accurately projected.
Cash earnings per share is defined as diluted GAAP earnings per share excluding the impacts of a) foreign exchange gains or losses, b) discontinued operations, c) debt restructuring charges, d) share based compensation, e) tax-effected intangible asset amortization and f) other non-operating or unusual items that cannot be accurately projected.
The attached schedules provide a full reconciliation of these and other non-GAAP financial measures to a corresponding GAAP financial measure.
About Euronet Worldwide
Euronet Worldwide is an industry leader in processing secure electronic financial transactions. The Company offers outsourcing and consulting services, integrated EFT software, network gateways, electronic prepaid top-up services to financial institutions, mobile operators and retailers, as well as electronic consumer money transfer and bill payment services. Euronet operates and services the largest pan-European group of ATMs and operates the largest Indian shared ATM network. Euronet is also one of the largest providers of prepaid processing, or top-up services, for prepaid mobile airtime. Additionally, with the completion of the acquisition of Ria Envia Inc. in April 2007, Euronet has established itself as the third-largest global money transfer company. The Company has processing centers located in the U.S., Europe and Asia, and processes electronic top-up transactions at more than 356,000 point-of-sale terminals across more than 186,000 retailers in Europe, Asia Pacific, Africa and the U.S. With corporate headquarters in Leawood, Kansas, USA, and 26 worldwide offices, Euronet serves clients in approximately 100 countries. Visit the Company’s web site at www.euronetworldwide.com.
For complete details on Euronet’s latest results visit CardData ([www.carddata.com]).