Euronet Worldwide, Inc. — Q3 2021 Form 10-Q
Business context and reporting period. Euronet provides electronic payment processing, prepaid digital content distribution and global money transfer services through EFT Processing, epay and Money Transfer. This unaudited report covers the three and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods. Amounts below are in U.S. dollars.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $816.6 million | $664.4 million | $2,183.9 million | $1,776.1 million |
| Operating income (loss) | $114.5 million | $66.1 million | $155.1 million | $(3.6) million |
| Net income (loss) attributable to Euronet | $73.9 million | $40.2 million | $73.9 million | $(73.6) million |
| Diluted EPS | $1.37 | $0.76 | $1.37 | $(1.40) |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $304.3 million | $220.4 million |
- Revenue increased 23% in both the quarter and year-to-date periods. Quarterly operating income rose 73%; year-to-date results moved from an operating loss to profit.
- Calculated consolidated gross profit (revenue less direct operating costs) was $332.1 million in Q3 2021 versus $256.8 million; gross margin was approximately 40.7% versus 38.7%. For nine months, gross profit was $794.1 million versus $659.0 million; margin was approximately 36.4% versus 37.1%.
- Q3 segment revenue and operating income: EFT Processing $227.1 million and $63.2 million; epay $238.3 million and $26.0 million; Money Transfer $353.5 million and $37.5 million. EFT and epay operating income increased year over year; Money Transfer operating income declined 21%.
- Cash and cash equivalents were $1,048.5 million at September 30, down from $1,420.3 million at year-end 2020. The company also reported $669.7 million of ATM cash and $3.6 million of restricted cash. Cash, cash equivalents and restricted cash in the cash-flow reconciliation totaled $2,033.9 million.
- Total debt obligations were $1,213.3 million before debt issuance costs, versus $1,456.3 million at December 31, 2020. Working capital was $1,395.5 million; the current ratio was 1.85. The company reported $918.9 million available under its revolving credit facility and compliance with debt covenants.
- Cash from investing activities was $(71.0) million, including $66.1 million of property and equipment purchases. Financing cash flow was $(216.3) million, principally reflecting net repayment of revolving-credit borrowings. The reported decrease in cash and restricted cash was $65.6 million, including an $82.7 million adverse foreign-exchange effect.
Material changes and management commentary
- Management attributed improved results mainly to higher transaction volumes and easing COVID-19 restrictions. EFT benefited from ATM reactivations and a recovery in cross-border DCC and surcharge activity, though tourism-related volumes remained below pre-pandemic levels.
- epay revenue growth reflected more transactions, particularly digital media, while revenue per transaction declined as lower-revenue mobile transactions grew. Money Transfer revenue increased, led by U.S. outbound and international-originated transfers; higher agent commissions and staffing costs weighed on quarterly profitability.
- The prior-year nine-month comparison included $106.0 million of goodwill and acquired-intangible impairment charges. No such charges were recorded in the 2021 nine-month period; the 2020 charges included impairments in EFT and Money Transfer.
- Foreign-currency translation losses were $59.9 million for the first nine months of 2021, contributing to comprehensive income attributable to Euronet of only $14.0 million despite $73.9 million of net income.
Outlook, risks and contingencies
- Management estimated 2021 capital expenditures of approximately $100 million to $105 million. It expected operating cash generation, cash on hand and available credit to meet debt, lease and capital expenditure needs, while noting refinancing or equity issuance might be needed if resources proved insufficient.
- A proposed €300 million acquisition of Piraeus Bank’s merchant-acquiring business in Greece was targeted to close in late 2021, subject to regulatory approvals, commercial agreements and customary conditions. Euronet expected to use cash on hand.
- COVID-19 restrictions, travel recovery and consumer access to physical networks remained uncertain. Management cited exposure to competition, partner and contract terms, regulation, cybersecurity and processing interruptions, and compliance requirements across payments and money transfer.
- Approximately 73% of nine-month revenue was generated outside the U.S. Management estimated that a 10% currency-rate movement could affect annualized reported net income and working capital by approximately $155 million to $160 million, and could have a non-cash comprehensive-income impact of approximately $115 million to $120 million. A stronger U.S. dollar would generally be adverse.
- Commitments included $85.3 million of standby letters of credit and bank guarantees, plus specified ATM cash and customer-performance guarantees. The company reported no known significant indemnification claims and no legal or regulatory proceedings it believed would materially harm its financial condition or results.
Important facts for investors to verify
- Whether the recovery in travel-related EFT transactions and high-margin DCC and surcharge activity continued after Q3, and how much remained below pre-pandemic levels.
- Whether the Piraeus acquisition closed, its final financing and terms, and the expected effect on liquidity and earnings.
- How much of reported cash is operationally restricted or deployed as ATM cash, and whether working-capital movements are sustainable given settlement timing.
- Whether growth in epay and Money Transfer transactions translates into improved margins amid lower-revenue transaction mix, higher agent commissions and increased staffing costs.
- Actual foreign-exchange exposure and mitigation, debt repayment capacity, facility availability, and progress against the stated capital-expenditure estimate.