Euronet Worldwide, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited, U.S. GAAP. Euronet provides electronic payment processing, prepaid payment distribution and global money transfer services through EFT Processing, epay and Money Transfer segments.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $787.2 million | $718.5 million; up 10% |
| Operating income | $45.6 million | $36.7 million; up 24% |
| Net income attributable to Euronet | $20.1 million | $8.2 million; up 145% |
| Diluted EPS | $0.39 | $0.16 |
| Operating cash flow | $3.3 million | $5.7 million |
| Capital expenditures | $18.6 million | $23.8 million |
Net income was $19.8 million before $0.3 million attributable to noncontrolling interests. Interest expense rose to $10.1 million from $6.1 million, reflecting higher Credit Facility rates; the reported rate was 5.97% at March 31, 2023 versus 1.29% a year earlier. Foreign-exchange losses narrowed to $1.1 million from $5.5 million. The effective tax rate was 46.5%, compared with 67.4%.
Cash and cash equivalents were $1,065.8 million at quarter-end, while ATM cash was $627.2 million and restricted cash was $12.7 million. Cash, cash equivalents and restricted cash as defined in the cash flow statement totaled $1,937.8 million, including ATM and settlement cash. Working capital was $1,436.2 million and the current ratio was 1.75. Management reported $715.9 million available under the revolving Credit Facility.
Total debt obligations were $1,654.6 million before $11.8 million of unamortized issuance costs; carrying value was $1,642.8 million. Debt includes $479.1 million drawn on the revolving facility, $525.0 million of 0.75% convertible notes due 2049 and €600 million of 1.375% senior notes due 2026. The company was in compliance with debt covenants at quarter-end.
Material changes and segment performance
- EFT Processing: Revenue rose 32% to $192.2 million and operating income improved to $6.9 million from a $6.3 million loss. Transaction volumes rose 38%; management attributed the improvement mainly to increased travel and transaction activity. Currency movements reduced segment revenue by approximately $11.7 million.
- epay: Revenue increased 1% to $237.4 million; operating income rose 5% to $27.5 million. Transaction volumes grew 14%, while revenue per transaction declined with a higher share of lower-revenue mobile transactions. Currency movements reduced revenue by approximately $10.2 million.
- Money Transfer: Revenue increased 6% to $359.4 million, but operating income declined 2% to $32.6 million as operating costs grew faster than revenue. Transactions increased 12%; revenue and operating income per transaction declined amid a changed transaction mix. Currency movements reduced revenue by approximately $10.1 million.
Consolidated revenue growth was supported by higher volumes, particularly in EFT, and improved gross profit. Higher salaries and benefits, selling and administrative costs, and interest expense partly offset the gains. Foreign currency translation contributed $20.8 million of other comprehensive income, compared with a $21.1 million loss in Q1 2022.
Cash flow, outlook and key risks
Operating cash flow was modest despite higher earnings, primarily because of working-capital timing across settlement processes. Cash used in investing activities was $18.1 million, versus $356.9 million in Q1 2022, which included the Piraeus Bank merchant acquiring acquisition. Financing activities used $4.4 million; share repurchases were $29.2 million in cash flow reporting. Cash and restricted cash decreased $53.1 million, including a $33.9 million adverse foreign-exchange effect.
Management estimated 2023 capital expenditures of approximately $100 million to $110 million and said operating cash generation, cash on hand and available borrowing capacity are expected to fund debt, lease and capital expenditure needs. No full-year revenue or earnings guidance is provided in the filing text.
Key exposures include foreign-exchange volatility, rising inflation and expenses, higher borrowing costs, economic and geopolitical conditions (including the war in Ukraine and related sanctions), travel patterns, competition, technology and cybersecurity disruption, regulation and compliance, and the renewal and profitability of customer and partner contracts. Management estimated that a 10% currency fluctuation could have a combined annualized impact of approximately $125 million to $135 million on reported net income and working capital, and a noncash impact of approximately $110 million to $115 million on comprehensive income. The company also highlighted seasonality, including stronger EFT tourism demand typically in Q3 and lower Money Transfer activity typically in Q1.
Commitments include $85.6 million of standby letters of credit and bank guarantees, plus disclosed ATM cash and customer performance guarantees. The company reported no known significant claims under these guarantees and no legal or regulatory proceedings management believes would materially adversely affect consolidated results or financial condition. The filing reports no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether revenue and earnings growth persist after the travel-related recovery and the normal seasonal changes in segment activity.
- Whether operating cash flow improves, given the quarter’s low cash generation relative to reported net income and working-capital timing effects.
- How higher variable borrowing rates and foreign-exchange movements affect interest expense, reported results and liquidity.
- Progress against the $100 million to $110 million 2023 capital expenditure estimate, and availability under the Credit Facility after borrowings and letters of credit.
- Whether segment margins—particularly Money Transfer—recover amid higher operating expenses and lower revenue or income per transaction.
- Potential changes in contingent obligations, regulatory or legal matters, and the company’s exposure to ATM cash, cybersecurity and counterparties.