Euronet Worldwide, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Euronet provides electronic payment processing, prepaid products and global money transfer services through EFT Processing, epay and Money Transfer segments. Figures are in U.S. dollars unless noted.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1,004.0 million | $931.3 million | $2,730.3 million | $2,493.1 million |
| Operating income | $167.0 million | $168.5 million | $335.2 million | $306.3 million |
| Net income attributable to Euronet | $104.2 million | $97.8 million | $210.4 million | $163.3 million |
| Diluted EPS | $2.05 | $1.87 | $4.07 | $3.10 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $507.4 million | $448.7 million |
- Q3 revenue increased 8%, while operating income decreased 1%; nine-month revenue rose 10%, operating income 9% and net income attributable to Euronet 29%.
- Q3 other expense was $19.8 million, including $15.0 million interest expense and $8.8 million net foreign-exchange loss. Nine-month interest expense was $39.1 million, up from $26.6 million.
- For the first nine months, investing cash use was $74.6 million, including $69.1 million of property and equipment spending. Financing cash use was $208.3 million, including $325.4 million of share repurchases. Cash, cash equivalents and restricted cash increased $52.5 million, after a $172.0 million adverse currency effect.
Segments and material changes
- EFT Processing: Q3 revenue rose 8% to $345.8 million, but operating income fell 10% to $104.8 million. Management cited higher transaction volumes and travel, offset by higher costs and weaker mix of profitable international ATM transactions, including effects related to Croatia’s euro adoption and inflation-related pressure on European travel spending. Nine-month operating income increased 10%.
- epay: Q3 revenue rose 6% to $264.5 million; operating income declined 3% to $28.3 million. Growth in mobile and digital branded payments was partly offset by higher costs and less promotional campaign activity than in the prior-year quarter. Nine-month operating income increased 4%.
- Money Transfer: Q3 revenue rose 8% to $395.9 million and operating income increased 32% to $53.7 million. Higher international-originated, U.S. outbound and digital transactions supported results. Nine-month operating income increased 16%.
- Approximately 75% of revenue is generated in currencies other than the U.S. dollar. Currency translation reduced Q3 comprehensive income; the nine-month translation adjustment was a $30.1 million loss, versus a $209.9 million loss in the prior-year period.
Liquidity, debt and capital allocation
- At September 30, working capital was $967.6 million, down from $1,372.6 million at year-end 2022; the current ratio was 1.38 versus 1.58. Management attributed the working-capital decline primarily to share repurchases.
- Cash and cash equivalents were $1,074.4 million; ATM cash was $603.5 million. The filing reports $2,043.3 million of cash, cash equivalents and restricted cash across its cash-flow reconciliation, including cash associated with ATM and settlement activity.
- Debt carrying value was $1,713.1 million: $113.5 million drawn on the revolving credit facility, $525.0 million of 0.75% convertible notes due 2049, $634.2 million of 1.375% senior notes due 2026, and $450.0 million of short-term uncommitted ATM-vault-cash facilities. The latter facilities were fully drawn and mature no later than November 2023 and June 2024, respectively.
- The $1.25 billion revolving facility had $1,080.2 million available, after borrowings and letters of credit. The company stated it was compliant with debt covenants and had no significant long-term principal payments until March 2025.
- The company repurchased $325.4 million of shares in the first nine months, including $296.1 million in Q3. It established a new $350 million repurchase authorization in September 2023, subject to a seven-million-share limit and expiration in September 2025.
Outlook, risks and contingencies
- No specific revenue or earnings guidance is provided. Management estimated 2023 capital expenditures of approximately $100 million to $110 million and expects operating cash flow, cash on hand and available financing to cover debt, lease and capital spending needs.
- Management noted inflationary pressure on costs and potential effects on discretionary spending, travel and money-transfer send amounts. It also identified exposure to interest-rate changes and foreign-exchange movements. A 10% change in relevant currencies was estimated to affect reported net income and working capital by approximately $180 million to $190 million on an annualized basis, and comprehensive income by approximately $100 million to $110 million through translation of certain non-current balances.
- Other disclosed risks include geopolitical conflict and sanctions, regulation and licensing, competition, technology and cybersecurity disruptions, reliance on commercial partners and the ability to renew contracts. Management reported no legal or regulatory proceedings it believed would have a material adverse effect and no significant claims under disclosed guarantees or indemnities.
- Off-balance-sheet and contingent exposures include $83.6 million of standby letters of credit and bank guarantees, $10.9 million of guarantees for ATM cash, and approximately $51.0 million of customer performance guarantees. The company reported no related liabilities recorded for these guarantees as of quarter-end.
Important facts for investors to verify
- Whether revenue growth translates into sustained operating-profit growth, given Q3 operating income declined despite higher revenue.
- The amount, cost and refinancing or repayment plans for the $450 million of short-term uncommitted facilities, particularly the facility maturing by November 30, 2023.
- How continued share repurchases affect liquidity, working capital and share count relative to investment and debt needs.
- The sensitivity of future results to currency movements, interest rates, inflation, travel patterns and changes in transaction mix.
- Whether the stated 2023 capital-expenditure estimate and liquidity expectations remain current; this filing provides no specific earnings or revenue guidance.