Euronet Worldwide, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Unaudited U.S. GAAP results. Euronet provides electronic payments, ATM and POS processing, prepaid digital products, and money transfer services.
Financial performance
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $527.8 million | $691.9 million | $1,111.7 million | $1,269.4 million |
| Operating income (loss) | $(101.3) million | $117.9 million | $(69.7) million | $174.0 million |
| Net income (loss) attributable to Euronet | $(115.8) million | $68.2 million | $(113.9) million | $102.7 million |
| Diluted EPS | $(2.22) | $1.25 | $(2.15) | $1.90 |
| Operating cash flow | Not separately provided | Not separately provided | $178.6 million | $56.7 million |
Q2 revenue declined 24% year over year; first-half revenue declined 12%. The company reported operating and net losses in both 2020 periods, compared with profits in 2019. The $104.6 million goodwill impairment was non-cash and contributed materially to the losses. Other Q2 expense was $5.5 million, versus $18.6 million a year earlier; first-half other expense was $33.0 million, versus $24.1 million.
Segment trends: Q2 EFT Processing revenue fell 66% to $78.5 million, with a $56.6 million operating loss versus $76.5 million income. Money Transfer revenue fell 5% to $262.9 million, with a $55.2 million operating loss versus $35.3 million income. epay revenue increased 2% to $187.6 million and operating income was $18.0 million, up 3%. The impairment was allocated $21.9 million to EFT Processing and $82.7 million to Money Transfer.
Cash flow and investment: First-half operating cash flow was $178.6 million; investing activities used $48.6 million, including $45.5 million of property and equipment purchases. Financing activities used $241.0 million, including $240.7 million for share repurchases. Cash, cash equivalents and restricted cash decreased $138.8 million to $1,678.6 million.
Liquidity and debt
At June 30, 2020, cash and cash equivalents were $864.9 million, ATM cash was $410.5 million, and working capital was $1,114.8 million, compared with $1,284.8 million at year-end 2019. The current ratio was 1.78. Management reported $1,275.4 million of available cash including ATM cash, plus $947.9 million available under the revolving facility after letters of credit. The company had no revolving-credit borrowings and was in compliance with debt covenants.
Debt carrying value was $1,101.5 million: $444.5 million of 0.75% convertible notes due 2049 and $673.9 million of 1.375% senior notes due 2026, before considering other obligations and unamortized issuance costs. Management stated there were no significant long-term debt principal payments until March 2025. The $1.0 billion unsecured credit facility expires in October 2023.
Material changes, outlook and risks
- COVID-19 effects: Travel restrictions, border closures, shelter-in-place orders and temporary agent or retail closures reduced activity across all three segments. EFT was particularly affected by lower high-margin cross-border and DCC transactions; Money Transfer volumes also declined. epay’s digital media growth partly offset lower retail activity.
- Cost response: Management renegotiated third-party contracts and ATM lease costs, reduced travel, cut planned capital spending and expanded ATM winterizations. It said it retained employees during the pandemic.
- Goodwill and leases: The interim impairment assessment resulted in a $104.6 million non-cash goodwill charge. Management noted further impairment could occur if forecasts or market conditions worsen. A lease-term reassessment removed $211.9 million of right-of-use assets and matching lease liabilities from the balance sheet as short-term leases.
- Outlook: No specific earnings or revenue guidance is provided in the supplied filing text. Management estimated 2020 capital expenditures of approximately $50–$55 million, reduced because of COVID-19. It expected operating cash, cash on hand and credit availability to be sufficient for debt, leasing and capital expenditure obligations, while cautioning that refinancing or equity issuance might be needed if resources prove inadequate.
- Currency and operating risks: About 70% of revenue is generated in non-U.S.-dollar currencies. Management estimated a 10% exchange-rate fluctuation could affect annualized reported net income and working capital by about $8–$13 million, and total comprehensive income by about $107–$112 million through translation effects. Other risks include renewed restrictions, agent receivable defaults, competition, regulation, technology and payment-network changes, and access to funding.
- Other items: The company repurchased $239.8 million of shares in the first half; no repurchases occurred in Q2. It reported $74.6 million of standby letters of credit and bank guarantees, plus ATM cash and performance guarantees. Management said no pending legal or regulatory proceedings were expected to have a material adverse effect.
Key facts investors should verify
- Whether transaction volumes, especially cross-border ATM/DCC and money transfers, recover as restrictions change—and the effect on segment margins.
- Whether agent and merchant receivables remain collectible and whether additional credit-loss provisions or goodwill impairments are required.
- How management’s $50–$55 million 2020 capital-spending estimate and liquidity outlook compare with subsequent results and cash requirements.
- The status of share repurchases, remaining authorization, and the effect of repurchases on liquidity and share count.
- Debt terms, credit-facility availability and covenant compliance, along with foreign-exchange exposure and hedge positions.
- The financial and reporting effects of ATM lease terminations, renegotiations and the short-term lease treatment.