Euronet Worldwide, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless noted. Euronet provides electronic payment processing and distribution services through EFT Processing, epay, and Money Transfer. Amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Revenue | $652.7 million | $583.9 million; up 12% |
| Operating income | $10.4 million; 1.6% margin | $31.6 million; 5.4% margin |
| Net income (loss) attributable to Euronet | $(8.7) million; $(0.16) per diluted share | $1.9 million; $0.04 per diluted share |
| Operating cash flow | $(2.6) million | $105.9 million |
| Cash and cash equivalents | $1,145.4 million | $1,420.3 million at December 31, 2020 |
| Debt carrying value | $1,143.8 million, including current maturities | $1,438.4 million at December 31, 2020 |
| Working capital | $1,210.5 million; current ratio 1.76 | $1,510.5 million; current ratio 1.81 at December 31, 2020 |
Investing cash outflow was $18.2 million, including $16.4 million of property and equipment purchases. Financing cash outflow was $269.2 million, primarily reflecting repayment of $270.4 million drawn on the revolving credit facility. Euronet reported $339.9 million of ATM cash in addition to unrestricted cash; it had no revolving-credit borrowings and $941.1 million of facility availability at quarter-end. Settlement assets and obligations were each $960.3 million.
Material changes and segment results
- EFT Processing: Revenue fell 40% to $87.1 million and the segment recorded a $40.1 million operating loss, versus $4.9 million operating income. COVID-related travel restrictions sharply reduced high-margin dynamic currency conversion and surcharge activity; active ATMs declined 13% year over year.
- epay: Revenue rose 40% to $242.3 million and operating income increased 77% to $29.2 million. Growth reflected higher transaction volumes, particularly digital media, and favorable currency translation; revenue per transaction declined.
- Money Transfer: Revenue increased 22% to $324.9 million and operating income rose 59% to $35.4 million, driven chiefly by U.S. outbound and international-originated transfers. Gross margin declined to 43.4% from 46.3%, partly due to higher agent commissions.
- Consolidated operating income declined 67%. Lower EFT results and higher salaries and benefits outweighed growth in epay and Money Transfer. Net foreign-currency exchange losses improved to $4.0 million from $18.8 million, but the company still reported a net loss.
Outlook, risks, and unusual items
- Management estimated 2021 capital expenditures of approximately $105–$110 million and said operating cash, cash on hand, and available credit were expected to cover debt, lease, and capital expenditure needs. The filing provides no earnings or revenue guidance.
- In March 2021, Euronet agreed to acquire Piraeus Bank’s merchant-acquiring business in Greece for €300 million (approximately $360 million). Closing was targeted for late 2021, subject to regulatory approvals, commercial agreements, and customary conditions; management expected to use cash on hand.
- COVID-19 restrictions continued to weigh on travel, EFT cross-border transactions, retail activity, and access to money-transfer agents and stores. Management described mitigation actions including contract renegotiations, reduced travel and capital spending, and ATM deactivations.
- Approximately 72% of revenue was generated in non-U.S.-dollar currencies. Management estimated a 10% exchange-rate fluctuation could affect reported net income and working capital by approximately $45–$50 million annually, and total comprehensive income by approximately $152–$157 million through translation effects.
- The effective tax rate was an unusual negative 236.9%, reflecting, among other factors, unrecognized tax benefits on losses in certain foreign jurisdictions and deferred-tax activity tied to foreign exchange positions.
- At quarter-end, the company was in compliance with debt covenants. It disclosed $87.4 million of standby letters of credit and bank guarantees, as well as ATM cash and performance guarantees; no liabilities were recorded for these guarantees, and management reported no proceedings expected to have a material adverse effect.
Important facts for investors to verify
- Whether travel recovery improves EFT’s high-margin DCC and surcharge revenues, and whether segment profitability rebounds.
- How much of epay and Money Transfer growth reflects durable transaction trends versus currency translation, and the effect of lower-margin transaction mix and agent costs.
- Whether operating cash flow normalizes after the working-capital timing effects cited by management.
- Progress, final terms, regulatory approvals, funding, and integration risks for the proposed Greek merchant-acquiring acquisition.
- Foreign-exchange exposure, COVID-related restrictions, and the implications of the company’s tax-rate volatility and contingent guarantees.