Euronet Worldwide, Inc 10-Q for FY2024 Q1
Euronet Worldwide, Inc. (EEFT)
About this 10-Q
Euronet Worldwide, Inc filed this 10-Q on May 6, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $857M
- up 8.9% from $787.2M a year earlier
- Net income
- $26.2M
- up 30.3% from net income of $20.1M a year earlier
- Diluted EPS
- $0.55
- up 41.0% from $0.39 a year earlier
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from |
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(State or other jurisdiction of incorporation or organization) |
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Title of each class |
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Name of each exchange on which registered |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o | ||||
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As of |
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March 31, 2024 |
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December 31,
2023 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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ATM cash |
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Restricted cash |
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Settlement assets |
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Trade accounts receivable, net of credit losses of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Operating right of use lease assets |
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Property and equipment, net of accumulated depreciation of $ |
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Goodwill |
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Acquired intangible assets, net of accumulated amortization of $ |
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Other assets, net of accumulated amortization of $ |
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Convertible notes receivable |
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Total assets |
$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Settlement obligations |
$ |
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$ |
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Trade accounts payable |
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Accrued expenses and other current liabilities |
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Current portion of operating lease liabilities |
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Short-term debt obligations and current maturities of long-term debt obligations |
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Income taxes payable |
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Deferred revenue |
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Total current liabilities |
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Debt obligations, net of current portion |
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Operating lease obligations, net of current portion |
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Deferred income taxes |
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Other long-term liabilities |
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Total liabilities |
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Equity: |
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Euronet Worldwide, Inc. stockholders’ equity: |
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Preferred Stock, $ |
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Common Stock, $ |
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Additional paid-in-capital |
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Treasury stock, at cost, shares issued |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total Euronet Worldwide, Inc. stockholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
$ |
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$ |
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Three Months Ended
March 31, |
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2024 |
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2023 |
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Revenues |
$ |
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$ |
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Operating expenses: |
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Direct operating costs, exclusive of depreciation |
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Salaries and benefits |
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Selling, general and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Operating income |
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Other income (expense): |
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Interest income |
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Interest expense |
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( |
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( |
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Foreign currency exchange loss, net |
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( |
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( |
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Other (losses) gains, net |
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( |
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Other expense, net |
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( |
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Income before income taxes |
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Income tax expense |
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( |
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Net income |
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Net income attributable to noncontrolling interests |
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Net income attributable to Euronet Worldwide, Inc. |
$ |
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$ |
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Earnings per share attributable to Euronet Worldwide, Inc. stockholders: |
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Basic |
$ |
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$ |
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Diluted |
$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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Three Months Ended
March 31, |
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2024 |
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2023 |
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Net income |
$ |
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$ |
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Translation adjustment |
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( |
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Comprehensive income (loss) |
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( |
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Comprehensive income attributable to noncontrolling interests |
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Comprehensive income (loss) attributable to Euronet Worldwide, Inc. |
$ |
( |
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$ |
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Number of
Shares Outstanding |
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Common
Stock |
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Additional
Paid-in Capital |
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Treasury
Stock |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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— | ||||
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Other comprehensive income |
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— |
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— |
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— |
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— | ||||
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Stock issued under employee stock plans |
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— |
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Share-based compensation |
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— |
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— |
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— | |||||
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Repurchase of shares |
( |
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( |
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Balance as of March 31, 2023 |
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( |
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Number of
Shares Outstanding |
Common
Stock |
Additional
Paid-in Capital |
Treasury
Stock |
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| Balance of December 31, 2023 | ( |
) | |||||||||||||
| Net income (loss) | — | — | — | — | |||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||
| Stock issued under employee stock plans | — | ( |
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| Share-based compensation | — | — | — | ||||||||||||
| Repurchase of shares | — | — | — | — | |||||||||||
| Balance as of March 31, 2024 | ( |
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Retained Earnings |
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Accumulated Other
Comprehensive Loss |
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Noncontrolling
Interests |
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Total |
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Balance as of December 31, 2022 |
$ |
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$ |
( |
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$ |
( |
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$ |
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Net income (loss) |
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— |
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( |
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Other comprehensive income |
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— |
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Stock issued under employee stock plans |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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Repurchase of shares |
— | — | — |
( |
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Balance as of March 31, 2023 |
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( |
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( |
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| Retained Earnings |
Accumulated Other
Comprehensive Loss |
Noncontrolling
Interests |
Total | ||||||||||||
| Balance as of December 31, 2023 | $ | $ | ( |
) | $ | ( |
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| Net income (loss) | — | — | |||||||||||||
| Other comprehensive income | — | ( |
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| Stock issued under employee stock plans | — | — | — | ||||||||||||
| Share-based compensation | — | — | — | ||||||||||||
| Repurchase of shares | — | — | — | ||||||||||||
| Balance as of March 31, 2024 | ( |
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Three Months Ended March 31, |
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2024 |
2023 |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Share-based compensation |
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Unrealized foreign exchange loss, net |
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Deferred income taxes |
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Amortization of debt issuance costs |
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Changes in working capital, net of amounts acquired: |
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Income taxes payable, net |
( |
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Trade accounts receivable, including amounts in settlement assets |
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Prepaid expenses and other current assets, including amounts in settlement assets |
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( |
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Trade accounts payable, including amounts in settlement obligations |
( |
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( |
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Deferred revenue |
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( |
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Accrued expenses and other current liabilities, including amounts in settlement obligations |
( |
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( |
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Changes in noncurrent assets and liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Acquisitions, net of cash acquired |
( |
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Purchases and proceeds of property and equipment |
( |
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( |
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Purchases of other long-term assets |
( |
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( |
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Other, net |
( |
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Net cash used in investing activities |
( |
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Cash flows from financing activities: |
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Proceeds from issuance of shares |
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Repurchase of shares |
( |
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( |
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Borrowings from credit agreements |
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Repayments of credit agreements |
( |
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( |
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Repayment of long-term debt obligations |
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( |
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Repayments of capital lease obligations |
( |
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Other, net |
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Net cash provided by (used in) financing activities |
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( |
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Effect of exchange rate changes on cash and cash equivalents and restricted cash |
( |
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( |
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Decrease in cash and cash equivalents and restricted cash |
( |
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( |
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Cash and cash equivalents and restricted cash at beginning of period |
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Cash and cash equivalents and restricted cash at end of period |
$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Interest paid during the period |
$ |
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$ |
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Income taxes paid during the period |
$ |
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$ |
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Euronet’s EFT Processing Segment normally experiences its heaviest demand for dynamic currency conversion ("DCC") services during the third quarter of the fiscal year, normally coinciding with the tourism season. The epay Segment is normally impacted by seasonality during the fourth quarter and first quarter of each year due to higher transaction levels during the holiday season and lower levels following the holiday season. Also, epay sells large loyalty rewards campaigns to retailers, which could be deployed in any given quarter and will impact the activity in that quarter accordingly. Seasonality in the Money Transfer Segment varies by region of the world. In most markets, Euronet usually experiences increased demand for money transfer services from the month of May through the fourth quarter of each year, coinciding with the increase in worker migration patterns and various holidays, and its lowest transaction levels during the first quarter of the year.
| 6 |
In November 2023, the Financial Accounting Standards Board issued a new accounting pronouncement regarding segment reporting. The standard requires that public entities expand reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The Company is required to adopt the new standard for its 2024 annual reporting and effective January 1, 2025 for its interim reporting, using a retrospective approach. Management is currently evaluating the potential impact that the adoption of this standard will have on the Company’s disclosures.
In December 2023, the Financial Accounting Standards Board issued a new accounting pronouncement regarding income tax disclosures. The standard requires that public entities disclose more consistent and detailed categories in their statutory to effective income tax rate reconciliations and further disaggregate income taxes paid by jurisdiction. The Company is required to adopt the new standard for its 2025 annual reporting, using a prospective approach. Management is currently evaluating the potential impact that the adoption of this standard will have on the Company’s disclosures.
(3) ACQUISITIONS
Acquisitions 2024
On February 1, 2024, Euronet acquired Infinitium Group, a leading regional solutions provider with Payments Authentication services, for a purchase consideration of $
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As of |
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(in millions) |
March 31,
2024 |
December 31,
2023 |
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Settlement assets: |
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Settlement cash and cash equivalents |
$ |
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$ |
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Settlement restricted cash |
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Accounts receivable, net of credit losses of $ |
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Prepaid expenses and other current assets |
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Total settlement assets |
$ |
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$ |
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Settlement obligations: |
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Trade account payables |
$ |
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$ |
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Accrued expenses and other current liabilities |
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Total settlement obligations |
$ |
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$ |
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As of |
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(in millions) |
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March 31,
2024 |
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December 31,
2023 |
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March 31,
2023 |
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December 31,
2022 |
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Cash and cash equivalents |
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$ |
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$ |
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$ |
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$ |
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Restricted cash |
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ATM cash |
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Settlement cash and cash equivalents |
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Settlement restricted cash |
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Cash and cash equivalents and restricted cash at end of period |
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$ |
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$ |
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$ |
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$ |
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(5) STOCKHOLDERS' EQUITY
Earnings (Loss) Per Share
Basic earnings (loss) per share has been computed by dividing earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the respective period. Diluted earnings (loss) per share has been computed by dividing earnings (loss) available to common stockholders by the weighted average shares outstanding during the respective period, after adjusting for the potential dilution of options to purchase the Company’s common stock, assumed vesting of restricted stock units and the assumed conversion of the Company’s convertible debt, if such conversion would be dilutive.
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| (in millions) | Three Months Ended March 31, |
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2024 |
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2023 |
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Computation of diluted earnings: |
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Net income |
$ |
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$ |
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Add: Interest expense from assumed conversion of convertible notes, net of tax |
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Net income for diluted earnings per share calculation |
$ |
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$ |
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Computation of diluted weighted average shares outstanding: |
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Basic weighted average shares outstanding |
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Incremental shares from assumed exercise of stock options and vesting of restricted stock units |
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Incremental shares from assumed conversion of convertible debt |
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Diluted weighted average shares outstanding |
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The table includes all stock options and restricted stock units that are dilutive to the Company's weighted average common shares outstanding during the period. The calculation of diluted earnings per share excludes stock options or shares of restricted stock units that are anti-dilutive to the Company's weighted average common shares outstanding of approximately
Euronet issued Convertible Senior Notes ("Convertible Notes") due March 2049 on March 18, 2019. The Convertible Notes currently have a settlement feature requiring us upon conversion to settle the principal amount of the debt and any conversion value in excess of the principal value ("conversion premium"), for cash or shares of Euronet's common stock or a combination thereof, at the Company's option. The Company has stated its intent to settle any conversion of these notes by paying cash for the principal value and issuing common stock for any conversion premium; however, after adopting ASU 2020-06,
Share repurchases
On September 13, 2022, the Company put a repurchase program in place to repurchase up to $
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists entirely of foreign currency translation adjustments. The Company recorded foreign currency translation adjustments of ($
| 9 |
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(in millions) |
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Acquired
Intangible
Assets |
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Goodwill |
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Total
Intangible
Assets |
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Balance as of December 31, 2023 |
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$ |
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$ |
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$ |
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Increases (decreases): |
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Acquisition |
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Amortization |
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( |
) |
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( |
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Foreign currency exchange rate changes |
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( |
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( |
) |
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( |
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Balance as of March 31, 2024 |
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$ |
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$ |
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$ |
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Of the total goodwill balance of $
(7) CONVERTIBLE NOTES RECEIVABLE
The Company loaned a total of $
The Notes are convertible into preferred equity of Koin Mobile, LLC and Marker Trax, LLC at the option of the Company upon the occurrence of certain events including a qualified equity financing, change in control, achievement of profitability or at the option of the Company at maturity, as defined in the Notes.
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As of |
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(in millions) |
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March 31,
2024 |
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December 31, 2023 |
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Accrued expenses |
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$ |
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$ |
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Derivative liabilities |
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| Other tax payables |
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| Accrued payroll expenses |
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Current portion of capital lease obligations |
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Total |
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$ |
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$ |
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The Company records deferred revenues when cash payments are received or due in advance of the Company's performance. The increase in the deferred revenue balance for the three months ended March 31, 2024 is the result of $
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As of |
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(in millions) |
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March 31, 2024 |
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December 31, 2023 |
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Credit Facility: |
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Revolving credit agreement |
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$ |
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$ |
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Notes: |
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Uncommitted credit agreements |
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Other obligations |
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Total debt obligations |
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Unamortized debt issuance costs |
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( |
) |
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( |
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Carrying value of debt |
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||||
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Short-term debt obligations and current maturities of long-term debt obligations |
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( |
) |
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( |
) | ||
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Long-term debt obligations |
|
$ |
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$ |
|
||
The revolving credit facility contains a sublimit of up to $
The Agreement contains customary affirmative and negative covenants, events of default and financial covenants, including (all as defined in the Credit Facility):
| 11 |
On June 26, 2023, the Company entered into an Uncommitted Loan Agreement for $
(11) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to foreign currency exchange risk resulting from (i) the collection of funds or the settlement of money transfer transactions in currencies other than the U.S. Dollar, (ii) derivative contracts written to its customers in connection with providing cross-currency money transfer services and (iii) certain foreign currency denominated other asset and liability positions. The Company enters into foreign currency derivative contracts, primarily foreign currency forwards and cross-currency swaps, to minimize its exposure related to fluctuations in foreign currency exchange rates. As a matter of Company policy, the derivative instruments used in these activities are economic hedges and are not designated as hedges under ASC 815, primarily due to either the relatively short duration of the contract term or the effects of fluctuations in currency exchange rates are reflected concurrently in earnings for both the derivative instrument and the transaction and have an offsetting effect.
Foreign currency exchange contracts - Ria Operations and Corporate
In the United States, the Company uses short-duration foreign currency forward contracts, generally with maturities up to
In addition, the Company uses forward contracts, typically with maturities from a few days to less than one year, to offset foreign exchange rate fluctuations on certain short-term borrowings that are payable in currencies other than the U.S dollar. The Company had foreign currency forward contracts outstanding with a notional value of $
| 13 |
Foreign currency exchange contracts - xe Operations
xe writes derivative instruments, primarily foreign currency forward contracts and cross-currency swaps, mostly with counterparties comprised of individuals and small-to-medium size businesses and derives a currency margin from this activity as part of its operations. xe aggregates its foreign currency exposures arising from customer contracts and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties. Foreign exchange revenues from xe's total portfolio of positions were $
The fair value of xe's total portfolio of positions can change significantly from period to period based on, among other factors, market movements and changes in customer contract positions. xe manages counterparty credit risk (the risk that counterparties will default and not make payments according to the terms of the agreements) on an individual counterparty basis. It mitigates this risk by entering contracts with collateral posting requirements and/or by performing financial assessments prior to contract execution, conducting periodic evaluations of counterparty performance and maintaining a diverse portfolio of qualified counterparties. xe does not expect any significant losses from counterparty defaults.
The aggregate equivalent U.S. dollar notional amount of foreign currency derivative customer contracts held by the Company in its xe operations as of March 31, 2024 and December 31, 2023 was $
|
|
|
Asset Derivatives |
|
Liability Derivatives | ||||||||||||||||
|
|
|
|
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Fair Value |
|
|
|
Fair Value | ||||||||||||
|
(in millions) |
|
Balance Sheet Location |
|
March 31, 2024 |
|
December 31, 2023 |
|
Balance Sheet Location |
|
March 31, 2024 |
|
December 31, 2023 | ||||||||
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Foreign currency exchange contracts |
|
Other current assets |
|
$ |
|
|
|
$ |
|
|
|
Other current liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
As of March 31, 2024 |
|
Gross Amounts of Recognized Assets |
|
Gross Amounts Offset in the Consolidated Balance Sheet |
|
Net Amounts Presented in the Consolidated Balance Sheet |
|
Derivatives Not Offset in the Consolidated Balance Sheet |
|
Net Amounts | ||||||||||
|
Derivatives subject to a master netting arrangement or similar agreement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
As of December 31, 2023 |
|
|
|
|
|
|
|
|
|
| ||||||||||
|
Derivatives subject to a master netting arrangement or similar agreement |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
| 14 |
|
As of March 31, 2024 |
|
Gross Amounts of Recognized Liabilities |
|
Gross Amounts Offset in the Consolidated Balance Sheet |
|
Net Amounts Presented in the Consolidated Balance Sheet |
|
Derivatives Not Offset in the Consolidated Balance Sheet |
|
Net Amounts | ||||||||||
|
Derivatives subject to a master netting arrangement or similar agreement |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
As of December 31, 2023 |
|
|
|
|
|
|
|
|
|
| ||||||||||
|
Derivatives subject to a master netting arrangement or similar agreement |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
See Note 11, Fair Value Measurements, for the determination of the fair values of derivatives.
|
|
|
|
|
Amount of (Loss) Recognized in Income on Derivative Contracts (a) | |||||||
|
|
|
Location of Gain (Loss) Recognized in Income on Derivative Contracts |
|
Three Months Ended March 31, |
| ||||||
|
(in millions) |
|
|
2024 |
|
2023 |
| |||||
|
Foreign currency exchange contracts - Ria Operations |
|
Foreign currency exchange (loss), net |
|
$ |
( |
) |
|
$ |
( |
) | |
|
| 15 |
|
|
|
|
|
As of March 31, 2024 | ||||||||||||||
|
(in millions) |
|
Balance Sheet Classification |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total | ||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
| ||||||||
|
Foreign currency exchange contracts |
|
Other current assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
| ||||||||
|
Foreign currency exchange contracts |
|
Other current liabilities |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
As of December 31, 2023 | ||||||||||||||
|
(in millions) |
|
Balance Sheet Classification |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total | ||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
| ||||||||
|
Foreign currency exchange contracts |
|
Other current assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
| ||||||||
|
Foreign currency exchange contracts |
|
Other current liabilities |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Our reportable operating segments have been determined in accordance with ASC Topic 280, Segment Reporting ("ASC 280"). The Company currently operates in the following
1) Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, the Middle East, Africa, Asia Pacific and the United States. Euronet provides comprehensive electronic payment solutions consisting of ATM cash withdrawal and deposit services, ATM network participation, outsourced ATM and POS management solutions, credit, debit and prepaid card outsourcing, dynamic currency conversion, domestic and international surcharges and other value added services. Through this segment, the Company also offers a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.
| 16 |
2) Through the epay Segment, Euronet provides distribution, processing and collection services for electronic payment products, and prepaid mobile airtime through a network of POS terminals in Europe, the Middle East, Asia Pacific, South America and North America. The epay Segment also provides vouchers and physical gift fulfillment services in Europe.
3) Through the Money Transfer Segment, Euronet provides global consumer-to-consumer money transfer services, primarily under the brand names Ria, IME, AFEX, and xe, and global account-to-account money transfer services under the brand name xe. The Company offers services under the brand names Ria and IME through a network of sending agents, Company-owned stores, Company-owned websites, and mobile applications, disbursing money transfers through a worldwide correspondent network. xe is a provider of foreign currency exchange information and offers money transfer services on its currency data websites. The Company also offers customers bill payment services (primarily in the U.S.), payment alternatives such as money orders and prepaid debit cards, comprehensive check cashing services for a wide variety of issued checks, along with competitive foreign currency exchange services and prepaid mobile top-up. Furthermore, xe provides cash management solutions and foreign currency risk management services to small-to-medium sized businesses.
In addition, the Company accounts for non-operating activity, share-based compensation expense, certain intersegment eliminations and the costs of providing corporate and other administrative services in the administrative division, "Corporate Services, Eliminations and Other." These services are not directly identifiable with the Company’s reportable operating segments.
|
|
|
For the Three months ended March 31, 2024 | ||||||||||||||||||
|
(in millions) |
|
EFT
Processing |
|
epay |
|
Money
Transfer |
|
Corporate Services,
Eliminations
and Other |
|
Consolidated | ||||||||||
|
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
| ||||||||||
|
Direct operating costs, exclusive of depreciation |
|
|
|
|
|
|
|
( |
) |
|
|
|||||||||
|
Salaries and benefits |
|
|
|
|
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|
|
|
|
|
||||||||||
|
Selling, general and administrative |
|
|
|
|
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|
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|
||||||||||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Operating income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
For the Three months ended March 31, 2023 | |||||||||||||||||||
|
(in millions) |
|
EFT
Processing |
|
epay |
|
Money
Transfer |
|
Corporate Services,
Eliminations
and Other |
|
Consolidated | ||||||||||
|
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
| ||||||||||
|
Direct operating costs, exclusive of depreciation |
|
|
|
|
|
|
|
( |
) |
|
|
|||||||||
|
Salaries and benefits |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Operating income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
Total Assets as of | ||||||
|
(in millions) |
March 31, 2024 |
|
December 31, 2023 | ||||
|
EFT Processing |
$ |
|
|
$ |
|
||
|
epay |
|
|
|
||||
|
Money Transfer |
|
|
|
||||
|
Corporate Services, Eliminations and Other |
|
|
|
||||
|
Total |
$ |
|
|
$ |
|
| |
| 17 |
|
|
|
Revenues for the Three months ended March 31, 2024 |
Revenues for the Three months ended March 31, 2023 | |||||||||||||||||||||||||||||
|
(in millions) |
|
EFT
Processing |
|
epay |
|
Money
Transfer |
|
Total |
EFT
Processing |
epay |
Money
Transfer |
Total |
||||||||||||||||||||
|
Europe |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||
|
North America |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Eliminations |
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) | ||||||||||||||||||
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||
The Company's effective income tax rate was
The Organization for Economic Co-operation and Development
(“OECD”) Pillar 2 guidelines published to date include transition and safe
harbor rules around the implementation of the Pillar 2 global minimum tax of
(15) COMMITMENTS
| 18 |
- In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for damage to ATMs and theft of ATM network cash. As of March 31, 2024, the balance of such cash used in the Company's ATM networks for which the Company was responsible was approximately $
- In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for losses suffered by the Company's customers and other parties as a result of the breach of the Company's computer systems, including in particular, losses arising from fraudulent transactions made using information stolen through the Company's processing systems. The Company maintains insurance policies to mitigate this exposure;
- In connection with the license of proprietary systems to customers, the Company provides certain warranties and infringement indemnities to the licensee, which generally warrant that such systems do not infringe on intellectual property owned by third parties and that the systems will perform in accordance with their specifications;
- The Company has entered into purchase and service agreements with vendors and consulting agreements with providers of consulting services, pursuant to which the Company has agreed to indemnify certain of such vendors and consultants, respectively, against third-party claims arising from the Company's use of the vendor’s product or the services of the vendor or consultant;
- In connection with acquisitions and dispositions of subsidiaries, operating units and business assets, the Company has entered into agreements containing indemnification provisions, which can be generally described as follows: (i) in connection with acquisitions of operating units or assets made by the Company, the Company has agreed to indemnify the seller against third party claims made against the seller relating to the operating unit or asset and arising after the closing of the transaction, and (ii) in connection with dispositions made by the Company, the Company has agreed to indemnify the buyer against damages incurred by the buyer due to the buyer’s reliance on representations and warranties relating to the subject subsidiary, operating unit or business assets in the disposition agreement if such representations or warranties were untrue when made; and
- The Company has entered into agreements with certain third parties, including banks that provide fiduciary and other services to the Company or the Company's benefit plans. Under such agreements, the Company has agreed to indemnify such service providers for third-party claims relating to carrying out their respective duties under such agreements.
| 19 |
Most leases include an option to renew, with renewal terms that can extend the lease terms. The exercise of lease renewal options is at the Company's sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease terms. The Company also has a unilateral termination right for most of the ATM site leases. Since the Company is not reasonably certain not to exercise termination options, payments for ATM site leases with termination options subject to the short-term lease exemption are expensed in the period incurred and corresponding leases are excluded from the right of use lease asset and lease liability balances. Certain of the Company's lease agreements include variable rental payments based on revenues generated from the use of the leased location and certain leases include rental payments adjusted periodically for inflation. Variable lease payments are recognized when the event, activity or circumstance in the lease agreement on which those payments are assessed occurs and are excluded from the right of use assets and lease liabilities balances. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Future minimum lease payments
Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) as of March 31, 2024 are:
|
|
As of March 31, 2024 | ||
|
Maturity of Lease Liabilities (in millions) |
Operating Leases (1) | ||
|
Remainder of 2024 |
$ |
|
|
|
2025 |
|
||
|
2026 |
|
||
|
2027 |
|
||
|
2028 |
|
||
|
Thereafter |
|
||
|
Total lease payments |
$ |
|
|
|
Less: imputed interest |
( |
) | |
|
Present value of lease liabilities |
$ |
|
|
(1)
| 20 |
|
Lease Expense
(in millions) |
Income Statement Classification |
Three Months Ended
March 31, 2024 |
|
||||||
|
Operating lease expense |
Selling, general and administrative and Direct operating costs |
$ |
|
$ |
|
||||
|
Short-term and variable lease expense |
Selling, general and administrative and Direct operating costs |
|
|
|
|||||
|
Total lease expense |
|
$ |
|
$ |
|
||||
|
Lease Term and Discount Rate of Operating Leases |
|
As of March 31, 2024 | |
|
Weighted- average remaining lease term (years) |
|
|
|
|
Weighted- average discount rate |
|
|
% |
|
Other Information (in millions) |
|
Three Months Ended
March 31, 2024 |
Three Months Ended
March 31, 2023 |
| ||||
|
Cash paid for amounts included in the measurement of lease liabilities (a) |
|
$ |
|
$ |
|
| ||
|
Supplemental non-cash information on lease liabilities arising from obtaining ROU assets: |
|
|
||||||
|
ROU assets obtained in exchange for new operating lease liabilities |
|
$ |
|
$ |
|
| ||
- our business plans and financing plans and requirements;
- trends affecting our business plans and financing plans and requirements;
- trends affecting our business;
- the adequacy of capital to meet our capital requirements and expansion plans;
- the assumptions underlying our business plans;
- our ability to repay indebtedness;
- our estimated capital expenditures;
- the potential outcome of loss contingencies;
- our expectations regarding the closing of any pending acquisitions;
- business strategy;
- government regulatory action;
- the expected effects of changes in laws or accounting standards;
- technological advances; and
- projected costs and revenues.
Investors are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may materially differ from those in the forward-looking statements as a result of various factors, including, but not limited to, conditions in world financial markets and general economic conditions, including impacts from the COVID-19 or other pandemics; inflation; the war in the Ukraine, and related economic sanctions; military conflicts in the Middle East; our ability to successfully integrate any acquired operations; economic conditions in specific countries and regions; technological developments affecting the market for our products and services; our ability to successfully introduce new products and services; foreign currency exchange rate fluctuations; the effects of any breach of our computer systems or those of our customers or vendors, including our financial processing networks or those of other third parties; interruptions in any of our systems or those of our vendors or other third parties; our ability to renew existing contracts at profitable rates; changes in fees payable for transactions performed for cards bearing international logos or over switching networks such as card transactions on ATMs; our ability to comply with increasingly stringent regulatory requirements, including anti-money laundering, anti-terrorism, anti-bribery, sanctions, consumer and data protection and privacy and the European Union's General Data Protection Regulation, and Second Revised Payment Service Directive requirements; changes in laws and regulations affecting our business, including tax and immigration laws and any laws regulating payments, including DCC transactions; changes in our relationships with, or in fees charged by, our business partners; competition; the outcome of claims and other loss contingencies affecting Euronet; the cost of borrowing (including fluctuations in interest rates), availability of credit and terms of and compliance with debt covenants; and renewal of sources of funding as they expire and the availability of replacement funding and those factors referred to above and as set forth and more fully described in Part I, Item 1A — Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023. Our Annual Report on Form 10-K is available on the SEC's EDGAR website at www.sec.gov, and copies may also be obtained by contacting the Company. Any forward-looking statements made in this Form 10-Q speak only as of the date of this report. Except as required by law, we do not intend, and do not undertake any obligation, to update any forward-looking statements to reflect future events or circumstances after the date of such statements.
| 22 |
Euronet is a leading global financial technology solutions and payments provider. We offer payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Our primary product offerings include comprehensive ATM, point-of-sale ("POS"), card outsourcing, card issuing and merchant acquiring services, software solutions, electronic distribution of prepaid mobile airtime, managed services and other electronic payment products, foreign currency exchange services and global money transfer services. We operate in the following three segments:
1) The EFT Processing Segment meets the needs of financial institutions and
consumers through Euronet-owned and outsourced ATMs and POS terminals combined
with value added and transaction processing services. We deploy and operate our
own ATMs, providing ATM services for financial institutions and providing
electronic payment processing solutions. EFT offers a suite of integrated
electronic financial transaction software solutions for electronic payment and
transaction delivery systems. Transactions processed span a network of 49,290 active
ATMs and approximately 713,000 POS
terminals.
2) The epay Segment provides retail payment solutions and delivers innovative connections between the digital content of the world’s leading brands and consumers. epay has one of the largest retail networks across Europe and Asia for the distribution of physical and digital third-party content, including branded payments, mobile, and alternative payments, partnering with 1,000+ of the world’s leading brands. In addition, through our own products, we have leveraged our technology to solve business challenges, delivering scalable solutions to drive efficiency and effectiveness. Our comprehensive range of consumer products simplifies transactions and provides financial convenience across a wide range of branded payments. epay operates in 60+ countries. We operate a network that includes approximately 808,000 POS terminals that enable electronic processing of prepaid mobile airtime "top-up" services and other digital media content.
3) The
Money Transfer Segment provides global money
transfers and currency exchange information in retail stores, apps, and
websites through Ria Money Transfer, Xe and the Dandelion cross-border
real-time payments network. Euronet’s Money Transfer segment offers real-time,
cross-border payments to consumers and businesses across 198 countries and
territories, enabling banks, fintechs and big tech platforms to integrate an
international payments solution into their own platforms. Ria Money Transfer
offers real-time international money transfers with a special focus on emerging
markets. In addition, Ria offers safe and affordable money transfers through a
global network of cash locations and online, serving over 20 million customers
annually. Xe offers web and app-based currency information and industry-leading
consumer and business cross-border money transfer services. Customers can send
money, buy property overseas, and execute other international payments via the
Xe website or app. Dandelion offers consumer and business transaction processing
and fulfillment with alternative payout channels like bank accounts, cash
pick-up and mobile wallets. Dandelion powers cross-border payments for Xe and
Ria, as well as third party banks, fintechs, and big tech platforms.
We have six processing centers in Europe,seven in Asia Pacific and two in North America. We have 36 principal offices in Europe, 14 in Asia Pacific, 10 in North America, three in the Middle East, two in South America and one in Africa. Our executive offices are located in Leawood, Kansas, USA. With approximately 74% of our revenues denominated in currencies other than the U.S. dollar, any significant changes in foreign currency exchange rates will likely have a significant impact on our results of operations (for a further discussion, see Item 1A - Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023).
SOURCES OF REVENUES AND CASH FLOW
Euronet earns revenues and income primarily from ATM management fees, transaction fees, commissions and foreign currency exchange margin. Each operating segment’s sources of revenues are described below.
EFT Processing Segment — Revenues in the EFT Processing Segment, which represented approximately 25% of total consolidated revenues for the three months ended March 31, 2024 are derived from fees charged for transactions made by cardholders on our proprietary network of ATMs, fixed management fees and transaction fees we charge to customers for operating ATMs and processing debit and credit cards under outsourcing and cross-border acquiring agreements, foreign currency exchange margin on DCC transactions, domestic and international surcharge, foreign currency dispensing and other value added services such as advertising, prepaid telecommunication recharges, bill payment, and money transfers provided over ATMs. Revenues in this segment are also derived from cardless payment, banknote recycling, tax refund services, license fees, professional services and maintenance fees for proprietary application software and sales of related hardware.
| 23 |
epay Segment — Revenues in the epay Segment, which represented approximately 30% of total consolidated revenues for the three months ended March 31, 2024 are primarily derived from commissions or processing fees received from mobile phone operators for the processing and distribution of prepaid mobile airtime and commissions earned from the distribution of other electronic content, vouchers, and physical gifts. The proportion of epay Segment revenues earned from the distribution of prepaid mobile phone time as compared with other electronic products has decreased over time, and digital media content now produces approximately 67% of epay Segment revenues. Other electronic content offered by this segment includes digital content such as music, games, and software, as well as other products including prepaid long distance calling card plans, prepaid Internet plans, prepaid debit cards, gift cards, vouchers, transport payments, lottery payments, bill payment, and money transfer.
Opportunities and Challenges
The global product markets in which we operate are large and fragmented, which poses both opportunities and challenges for our technology to disrupt new and existing competition. As an organization, our focus is on increasing our market presence through both physical (ATMs, POS terminals, Company stores and agent correspondents) and digital assets and providing new and improved products and services for customers through all of our channels, which may in turn drive an increase in the number of transactions on our networks. Each of these opportunities also presents us with challenges, including differentiating our portfolio of products and services in highly competitive markets, the successful development and implementation of our software products and access to financing for expansion.
1) The EFT Processing Segment opportunities include physical expansion into target markets, developing value-added products or services, increasing high value DCC and surcharge transactions and efficiently leveraging our portfolio of software solutions. Our opportunities are dependent on renewing and expanding our card acceptance, ATM, POS and merchant acquiring services, cash supply and other commercial agreements with customers and financial institutions. Operational challenges in the EFT Processing Segment include obtaining and maintaining the required licenses and sponsorship agreements in markets in which we operate and navigating frequently changing rules imposed by international card organizations, such as Visa® and Mastercard®, that govern ATM interchange fees, direct access fees and other restrictions. Our profitability is dependent on the laws and regulations that govern DCC transactions, specifically in the E.U., as well as the laws and regulations of each country in which we operate. These laws and regulations may impact our cross-border and cross-currency transactions. The timing and amount of revenues in the EFT Processing Segment is uncertain and unpredictable due to inherent limitations in managing our estate of ATMs. Our ATM estate is dependent on contracts that cover large numbers of ATMs, and management is complicated by legal and regulatory considerations of local countries, as well as customers' decisions whether to outsource ATMs. Inflationary pressure may impact our business as travelers have less cash available to spend on vacations.
| 24 |
2) The epay Segment opportunities include renewing existing and negotiating new agreements in target markets in which we operate, primarily with digital content providers, mobile operators, financial institutions and retailers. The overall growth rate in the digital media content and prepaid mobile phone markets, shifts between prepaid and postpaid services, and our market share in those respective markets will have a significant impact on our ability to maintain and grow the epay Segment revenues. There is significant competition in these markets that may impact our ability to grow organically and increase the margin we earn and the margin that we pay to retailers. The profitability of the epay Segment is dependent on our ability to adapt to new technologies that may compete with POS distribution of digital content and prepaid mobile airtime, as well as our ability to leverage cross-selling opportunities with our EFT and Money Transfer Segments. The epay Segment opportunities may be impacted by government-imposed restrictions on retailers and/or content providers with whom we partner in countries in which we have a presence, and corresponding licensure requirements mandated upon such parties to legally operate in such countries.
For all segments, our continued expansion may involve additional acquisitions that could divert our resources and management time and require integration of new assets with our existing networks and services. Our ability to effectively manage our growth has required us to expand our operating systems and employee base, particularly at the management level, which has added incremental operating costs. An inability to continue to effectively manage expansion could have a material adverse effect on our business, growth, financial condition or results of operations. Inadequate technology and resources would impair our ability to maintain current processing technology and efficiencies, as well as deliver new and innovative services to compete in the marketplace. Recently, inflation has been increasing our cost structure in many parts of the world in which we operate.
| 25 |
Revenues and operating income by segment for the three months ended March 31, 2024 and 2023 are summarized in the tables below:
|
|
|
Revenues for the Three Months Ended
March 31, |
|
Year-over-Year Change |
||||||||||||
|
(dollar amounts in millions) |
|
2024 |
|
2023 |
|
Increase (decrease)
Amount |
|
Increase
Percent |
||||||||
|
EFT Processing |
|
$ |
217.2 |
|
$ |
192.2 |
|
$ |
25.0 |
|
13 |
% |
||||
|
epay |
|
257.1 |
|
237.4 |
|
19.7 |
|
8 |
% | |||||||
|
Money Transfer |
|
384.6 |
|
359.4 |
|
25.2 |
|
7 |
% |
|||||||
|
Total |
|
858.9 |
|
789.0 |
|
69.9 |
|
9 |
% | |||||||
|
Corporate services, eliminations and other |
|
(1.9 |
) |
|
(1.8 |
) |
|
(0.1 |
) |
|
6 |
% |
||||
|
Total |
|
$ |
857.0 |
|
$ |
787.2 |
|
$ |
69.8 |
|
9 |
% |
||||
|
|
|
Operating Income (Loss) for the Three Months Ended March 31, |
|
Year-over-Year Change |
||||||||||||
|
(dollar amounts in millions) |
|
2024 |
|
2023 |
|
Increase (Decrease)
Amount |
|
Increase (Decrease)
Percent |
||||||||
|
EFT Processing |
|
$ |
21.5 |
|
$ |
6.9 |
|
$ |
14.6 |
|
212 |
% |
||||
|
epay |
|
26.6 |
|
27.5 |
|
(0.9 |
) |
|
(3) |
% | ||||||
|
Money Transfer |
|
37.2 |
|
32.6 |
|
4.6 |
|
14 |
% |
|||||||
|
Total |
|
85.3 |
|
67.0 |
|
18.3 |
|
27 |
% |
|||||||
|
Corporate services, eliminations and other |
|
(21.3 |
) |
|
(21.4 |
) |
|
0.1 |
|
(0) |
% |
|||||
|
Total |
|
$ |
64.0 |
|
$ |
45.6 |
|
$ |
18.4 |
|
40 |
% |
||||
| 26 |
Impact of changes in foreign currency exchange rates
Our revenues and local expenses are recorded in the functional currencies of our operating entities, and then are translated into U.S. dollars for reporting purposes; therefore, amounts we earn outside the U.S. are negatively impacted by a stronger U.S. dollar and positively impacted by a weaker U.S. dollar. If significant, in our discussion we will refer to the impact of fluctuations in foreign currency exchange rates in our comparison of operating segment results.
To provide further perspective on the impact of foreign currency exchange rates, the following table shows the changes in values relative to the U.S. dollar of the currencies of the countries in which we have our most significant operations:
|
|
|
Average Translation Rate
Three Months Ended March 31, |
||||||||||
|
Currency (dollars per foreign currency) |
|
2024 |
2023 |
Increase (Decrease)
Percent |
||||||||
|
Australian dollar |
|
$ |
0.6521 |
|
|
$ |
0.6837 |
|
(5) |
% |
||
|
British pounds sterling |
|
$ |
1.2638 |
|
$ |
1.2146 |
|
4 |
% |
|||
|
Canadian dollar |
$ |
0.7400 |
|
$ |
0.7399 |
|
0 |
% |
||||
|
euro |
|
$ |
1.0800 |
|
$ |
1.0725 |
|
1 |
% |
|||
|
Hungarian forint |
|
$ |
0.0028 |
|
$ |
0.0028 |
|
— |
% |
|||
|
Indian rupee |
|
$ |
0.0120 |
|
$ |
0.0122 |
|
(2) |
% |
|||
|
Malaysian ringgit |
|
$ |
0.2114 |
|
$ |
0.2281 |
|
(7) |
% |
|||
|
New Zealand dollar |
|
$ |
0.6056 |
|
$ |
0.6296 |
|
(4) |
% |
|||
|
Polish zloty |
|
$ |
0.2509 |
|
$ |
0.2279 |
|
10 |
% |
|||
| 27 |
The following table summarizes the results of operations for our EFT Processing Segment for the three months ended March 31, 2024 and 2023:
|
|
|
Three Months Ended March 31, |
|
Year-over-Year Change |
||||||||||||
|
(dollar amounts in millions) |
|
2024 |
|
2023 |
|
Increase
(Decrease)
Amount |
|
Increase
(Decrease) Percent |
||||||||
|
Total revenues |
|
$ |
217.2 |
|
$ |
192.2 |
|
$ |
25.0 |
|
13 |
% |
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
|
Direct operating costs |
|
131.1 |
|
119.0 |
|
12.1 |
|
10 |
% |
|||||||
|
Salaries and benefits |
|
31.8 |
|
27.5 |
|
4.3 |
|
16 |
% |
|||||||
|
Selling, general and administrative |
|
9.2 |
|
16.1 |
|
(6.9 |
) |
|
(43) |
% |
||||||
|
Depreciation and amortization |
|
23.6 |
|
22.7 |
|
0.9 |
|
4 |
% |
|||||||
|
Total operating expenses |
|
195.7 |
|
185.3 |
|
10.4 |
|
6 |
% |
|||||||
|
Operating income |
|
$ |
21.5 |
|
$ |
6.9 |
|
$ |
14.6 |
|
212 |
% | ||||
|
Transactions processed (millions) |
|
2,503 |
|
1,837 |
|
666 |
|
36 |
% |
|||||||
|
Active ATMs as of March 31, |
|
49,290 |
|
47,430 |
|
1,860 |
|
4 |
% |
|||||||
|
Average Active ATMs |
|
47,944 |
|
46,275 |
|
1,669 |
|
4 |
% |
|||||||
EFT Processing Segment total revenues were $217.2 million for the three months ended March 31, 2024, an increase of $25.0 million or 13% compared to the same period in 2023. The increase in revenues was primarily due to the increase in domestic and international cash withdrawal transactions resulting from the increase in travel bringing more tourists, the increase in low-value point-of-sale transactions in Europe and low-value payment processing transactions in Asia Pacific. Fluctuations in foreign currency exchange rates increased revenues by approximately $1.3 million for the three months ended March 31, 2024 compared to the same period in 2023.
EFT Processing Segment direct operating costs were $131.1 million for the three months ended March 31, 2024, an increase of $12.1 million or 10% compared to the same period in 2023. Direct operating costs primarily consist of site rental fees, cash delivery costs, cash supply costs, maintenance, insurance, telecommunications, payment scheme processing fees, data center operations-related personnel, as well as the processing centers’ facility-related costs and other processing center-related expenses and commissions paid to retail merchants, banks and card processors.
| 28 |
Gross profit, which is calculated as revenues less direct operating costs, was $86.1 million for the three months ended March 31, 2024, an increase of $12.9 million or 18% compared to $73.2 million for the same period in 2023. Gross profit as a percentage of revenues (“gross margin”) increased to 39.6% for the three months ended March 31, 2024, compared to 38.1% for the same period in 2023. The increase in gross profit was primarily due to the increase in domestic and international cash withdrawal transactions resulting from the increase in travel bringing more tourists, the increase in low-value point-of-sale transactions in Europe and low-value payment processing transactions in Asia Pacific.
Salaries and benefits
Salaries and benefits expenses were $31.8 million for the three months ended March 31, 2024, an increase of $4.3 million or 16% compared to the same period in 2023. The increase is primarily due to an increase in headcount to support the growth of the business and salary increases due to inflationary pressures. Fluctuations in foreign currency exchange rates in the countries in which we employ our workforce increased salaries by approximately $0.3 million for the three months ended March 31, 2024 As a percentage of revenues, salary expense increased to 14.6% for the three months ended March 31, 2024, compared to 14.3% for the same period in 2023.
Selling, general and administrative
Selling, general and administrative expenses were $9.2 million for the three months ended March 31, 2024, a decrease of $6.9 million or 43% compared to the same period in 2023. The decrease was primarily due to a decrease in professional fees and the refund of a duty fee. As a percentage of revenues, these expenses decreased to 4.2% for the three months ended March 31, 2024, compared to 8.4% for the same period in 2023.
Depreciation and amortization
Depreciation and amortization expenses were $23.6 million for the three months ended March 31, 2024, an increase of $0.9 million or 4% compared to the same period in 2023. As a percentage of revenues, these expenses decreased to 10.9% for the three months ended March 31, 2024, compared to 11.8% for the same period in 2023.
Operating income
EFT Processing Segment had operating income of $21.5 million for the three months ended March 31, 2024, an increase of $14.6 million or 212% compared to the same period in 2023. Operating income as a percentage of revenues (“operating margin”) increased to 9.9% for the three months ended March 31, 2024, compared to 3.6% for the same period in 2023. The increase in operating income was primarily due to a decrease in professional fees and the refund of a duty fee paid and expensed during 2023.
| 29 |
|
|
|
Three Months Ended March 31, |
|
Year-over-Year Change |
||||||||||||
|
(dollar amounts in millions) |
|
2024 |
|
2023 |
|
Increase (Decrease) Amount |
|
Increase
(Decrease) Percent |
||||||||
|
Total revenues |
|
$ |
257.1 |
|
$ |
237.4 |
|
$ |
19.7 |
|
8 |
% |
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
|
Direct operating costs |
|
195.1 |
|
178.1 |
|
17.0 |
|
10 |
% |
|||||||
|
Salaries and benefits |
|
24.1 |
|
21.4 |
|
2.7 |
|
13 |
% |
|||||||
|
Selling, general and administrative |
|
9.6 |
|
8.8 |
|
0.8 |
|
9 |
% |
|||||||
|
Depreciation and amortization |
|
1.7 |
|
1.6 |
|
0.1 |
|
6 |
% |
|||||||
|
Total operating expenses |
|
230.5 |
|
209.9 |
|
20.6 |
|
10 |
% |
|||||||
|
Operating income |
|
$ |
26.6 |
|
$ |
27.5 |
|
$ |
(0.9 |
) |
|
(3) |
% | |||
|
Transactions processed (millions) |
|
953 |
|
973 |
|
(20 |
) |
|
(2) |
% |
||||||
epay Segment total revenues were $257.1 million for the three months ended March 31, 2024, an increase of $19.7 million or 8% compared to the same period in 2023. The increase in revenue for the three months ended March 31, 2024 was driven by continued expansion in mobile and digital branded payments. Fluctuations in foreign currency exchange rates increased revenue by approximately $1.2 million for the three months ended March 31, 2024, compared to the same period in 2023.
Direct operating costs
epay Segment direct operating costs were $195.1 million for the three months ended March 31, 2024, an increase of $17.0 million or 10% compared to the same period in 2023. Direct operating costs primarily consist of the commissions paid to retail merchants for the distribution and sale of prepaid mobile airtime and other prepaid products, expenses incurred to operate POS terminals and the cost of vouchers sold and physical gifts fulfilled. Foreign currency exchange rates increased direct operating costs by $1.2 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase in direct operating costs was the result of increase in business activity and inflationary pressure.
Gross profit
Gross profit was $62.0 million for the three months ended March 31, 2024, an increase of $2.7 million or 5% compared to $59.3 million for the same period in 2023. Gross margin decreased to 24.1% for the three months ended March 31, 2024, compared to 25.0% for the same period in 2023. The changes in gross profit and gross margin were primarily due to the shift in the mix of transactions processed.
| 30 |
Salaries and benefits expenses were $24.1 million for the three months ended March 31, 2024, an increase of $2.7 million or 13% compared to the same period in 2023. The fluctuations in salaries and benefits were driven by an increase in headcount to support the growth of the business and salary increases due to inflationary pressures. As a percentage of revenues, these expenses increased to 9.4% for the three months ended March 31, 2024, compared to 9.0% for the same period in 2023. Fluctuations in foreign currency exchange rates in the countries in which we employ our workforce increased salaries by approximately $0.2 million for the three months ended March 31, 2024 as compared to the same period in 2023.
Selling, general and administrative
Selling, general and administrative expenses were $9.6 million for the three months ended March 31, 2024, an increase of $0.8 million or 9% compared to the same period in 2023. As a percentage of revenues, these expenses were 3.7% for both the three months ended March 31, 2024, compared to the same period in 2023.
Depreciation and amortization expenses were $1.7 million for the three months ended March 31, 2024, an increase of $0.1 million or 6% compared to the same period in 2023. Depreciation and amortization expense primarily represents depreciation of POS terminals we install in retail stores and amortization of acquired intangible assets. As a percentage of revenues, these expenses were 0.7% for both the three months ended March 31, 2024, and for the same period in 2023.
Operating income
epay Segment operating income was $26.6 million for the three months ended March 31, 2024, a decrease of $0.9 million or 3% compared to the same period in 2023. Operating margin decreased to 10.3% for the three months ended March 31, 2024, compared to 11.6% for the same period in 2023. Operating income per transaction was $0.03 for both the three months ended March 31, 2024 and the same period in 2023. Changes in operating income and operating margin for the three months ended March 31, 2024 compared to the same period in 2023 were primarily due to the shift in the mix of transactions processed and a decline in the promotional campaign activity this quarter compared to the same period last year.
| 31 |
The following table presents the results of operations for the three months ended March 31, 2024 and 2023 for the Money Transfer Segment:
|
|
|
Three Months Ended March 31, |
Year-over-Year Change | ||||||||||||||
|
(dollar amounts in millions) |
|
2024 |
2023 |
Increase (Decrease) Amount |
Increase
(Decrease) Percent |
| |||||||||||
|
Total revenues |
|
$ |
384.6 |
$ |
359.4 |
$ |
25.2 |
7 |
% |
| |||||||
|
Operating expenses: |
|
||||||||||||||||
|
Direct operating costs |
|
209.4 | 196.3 | 13.1 |
7 |
% |
|||||||||||
|
Salaries and benefits |
|
80.7 |
74.3 |
6.4 |
9 |
% |
|||||||||||
|
Selling, general and administrative |
|
50.0 |
47.7 |
2.3 |
5 |
% |
|||||||||||
|
Depreciation and amortization |
|
7.3 |
8.5 |
(1.2 | ) |
(14) |
% |
||||||||||
|
Total operating expenses |
|
347.4 |
326.8 |
20.6 |
6 |
% |
|||||||||||
|
Operating income |
|
$ |
37.2 |
$ |
32.6 |
$ |
4.6 |
14 |
% |
| |||||||
|
Transactions processed (millions) |
|
40.6 |
37.5 |
3.1 |
8 |
% |
|||||||||||
Money Transfer Segment total revenues were $384.6 million for the three months ended March 31, 2024, an increase of $25.2 million or 7% compared to the same period in 2023. The increase in revenues was primarily due to an increase in international-originated money transfers, U.S. outbound transactions, and direct-to-consumer digital transactions, partially offset by a decrease in U.S. domestic transactions. Revenues per transaction decreased to $9.47 for the three months ended March 31, 2024, compared to $9.57 for the same period in 2023 due to a shift in the mix of transactions processed.
Direct operating costs
Money Transfer Segment direct operating costs were $209.4 million for the three months ended March 31, 2024, an increase of 13.1 million or 7% compared to the same period in 2023. Direct operating costs primarily consist of commissions paid to agents who originate money transfers on our behalf and correspondent agents who disburse funds to the customers’ destination beneficiaries, together with less significant costs, such as bank depository fees. The increase in direct operating costs was primarily due to the increase in the number of international-originated and U.S. outbound money transfer transactions.
Gross profit was $175.2 million for the three months ended March 31, 2024, an increase of $12.1 million or 7% compared to $163.1 million for the same period in 2023. Gross margin increased to 45.6% for the three months ended March 31, 2024, compared to 45.4% for the same period in 2023. The increase in gross profit and gross margin was primarily due to increases in international-originated money transfers, U.S. outbound transactions and direct-to-consumer digital transactions.
| 32 |
Salaries and benefits expenses were $80.7 million for the three months ended March 31, 2024, an increase of $6.4 million or 9% compared to the same period in 2023. The increase in salaries and benefits was primarily driven by an increase in headcount to support the growth of the business and salary increases due to inflationary pressures. As a percentage of revenues, these expenses increased to 21.0% for the three months ended March 31, 2024, compared to 20.7%, for the same period in 2023. Fluctuations in foreign currency exchange rates in the countries in which we employ our workforce increased salaries by approximately $0.3 million for the three months ended March 31, 2024, as compared to the same period in 2023.
Selling, general and administrative
Selling, general and administrative expenses were $50.0 million for the three months ended March 31, 2024, an increase of $2.3 million or 5% compared to the same period in 2023. As a percentage of revenues, these expenses decreased to 13.0% for the three months ended March 31, 2024, compared to 13.3% for the same period in 2023.
Depreciation and amortization
Depreciation and amortization expenses were $7.3 million for the three months ended March 31, 2024, a decrease of $1.2 million or 14% compared to the same period in 2023. Depreciation and amortization expense primarily represents amortization of acquired intangible assets and depreciation of money transfer terminals, computers and software, leasehold improvements and office equipment. As a percentage of revenues, these expenses decreased to 1.9% for the three months ended March 31, 2024, compared to 2.4% for the same period in 2023.
Operating income
Money Transfer Segment operating income was $37.2 million for the three months ended March 31, 2024, an increase of $4.6 million or 14% compared to the same period in 2023. Operating margin increased to 9.7% for the three months ended March 31, 2024, compared to 9.1% for the same period in 2023. Operating income per transaction increased to $0.92, for the three months ended March 31, 2024, compared to $0.87 for the same period in 2023. We improved our operating income and operating margin due to effective cost management.
|
Three Months Ended March 31, |
|
Year-over-Year Change |
| |||||||||||||
|
(dollar amounts in millions) |
|
2024 |
|
2023 |
|
Increase (Decrease)
Amount |
|
Increase (Decrease)
Percent |
| |||||||
|
Salaries and benefits |
|
$ |
18.1 |
|
$ |
18.7 |
|
|
$ |
(0.6 |
) |
|
(3) |
% | ||
|
Selling, general and administrative |
|
3.1 |
|
|
2.6 |
|
|
0.5 |
19 |
% | ||||||
|
Depreciation and amortization |
|
0.1 |
|
|
0.1 |
|
|
— |
|
— |
||||||
|
Total operating expenses |
|
$ |
21.3 |
|
|
$ |
21.4 |
|
|
$ |
(0.1 |
) |
|
(0) |
% | |
| 33 |
Total Corporate operating expenses were $21.3 million for the three months ended March 31, 2024, a decrease of $0.1 million compared to the same period in 2023.
|
|
|
Three Months Ended March 31, |
|
|
Year-over-Year Change |
|
| |||||||||
|
(dollar amounts in millions) |
|
2024 |
|
2023 |
|
Increase (Decrease) Amount |
|
|
Increase
(Decrease) Percent |
|
| |||||
|
Interest income |
|
$ |
5.7 |
|
|
$ |
2.6 |
|
|
$ |
3.1 |
|
119 |
% | ||
|
Interest expense |
|
(14.9 |
) |
(10.1 |
) |
(4.8 |
) |
48 |
% | |||||||
|
Foreign currency exchange loss, net |
|
(12.5 |
) |
(1.1 |
) |
(11.4 |
) |
1,036 |
% | |||||||
|
Other gains (losses) |
|
(0.1 |
) |
|
— |
|
|
(0.1 |
) |
N/A |
||||||
|
Other expense, net |
|
$ |
(21.8 |
) |
$ |
(8.6 |
) |
$ |
(13.2 |
) |
153 |
% | ||||
Interest income
Interest income was $5.7 million for the three months ended March 31, 2024, an increase of $3.1 million or 119% compared to the same period in 2023. This increase was driven by an increase in interest rates on our interest bearing bank accounts.
Interest expense
Foreign currency exchange loss, net
Foreign currency exchange activity includes gains and losses on certain foreign currency exchange derivative contracts and the impact of remeasurement of assets and liabilities denominated in foreign currencies. Assets and liabilities denominated in currencies other than the local currency of each of our subsidiaries give rise to foreign currency exchange gains and losses. Foreign currency exchange gains and losses that result from remeasurement of these assets and liabilities are recorded in net income.
We recorded net foreign currency exchange losses of $12.5 million for the three months ended March 31, 2024, compared to net foreign currency exchange losses of $1.1 million for the same period in 2023. These realized and unrealized foreign currency exchange losses reflect the fluctuation in the value of the U.S. dollar against the currencies of the countries in which we operated during the respective period.
The Company's effective income tax rate was 37.9% for the three months ended March 31, 2024, compared to 46.5% for the same period ended March 31, 2023. The Company's effective income tax rate for the three months ended March 31, 2024 was higher than the applicable statutory income tax rate of 21% as a result of certain foreign earnings being subject to higher local statutory tax rates and the Company’s U.S. deferred tax activity.
| 34 |
|
Subsidiary |
|
Percent Owned |
|
Segment - Country |
|
Movilcarga |
|
95% |
|
epay - Spain |
|
Euronet China |
|
85% |
|
EFT - China |
|
Euronet Pakistan |
|
70% |
|
EFT - Pakistan |
|
Euronet Infinitium Solutions |
|
65% |
|
EFT - India |
Net income attributable to Euronet was $26.2 million for the three months ended March 31, 2024, an increase of $6.1 million or 30% compared to the same period in 2023. The increase in net income was primarily attributable to the $69.8 million increase in revenues, largely driven by successful business operations. The increased revenues led to a $27.7 million increase in gross profit. The increase in gross profit was partially offset by a $12.8 million increase in salaries and benefits expense and increase in foreign exchange currency loss of $11.4.
Working capital
As of March 31, 2024, we had working capital of $970.7 million, which is calculated as the difference between total current assets and total current liabilities, compared to working capital of $1,462.1 million as of December 31, 2023. The decrease in working capital was primarily due to the net effect of the classification of the convertible debt to current liabilities, positive operational results, the Infinitium acquisition completed during the quarter and working capital changes. Our ratio of current assets to current liabilities was 1.33 and 1.54 at March 31, 2024 and December 31, 2023, respectively.
We require substantial working capital to finance operations. The Money Transfer Segment funds the payout of the majority of our consumer-to-consumer money transfer services before receiving the benefit of amounts collected from customers by agents. Working capital needs increase in order to cover weekends and banking holidays. As a result, we may report more or less working capital for the Money Transfer Segment based solely upon the day on which the reporting period ends. The epay Segment produces positive working capital, some of which is restricted in connection with the administration of its customer collection and vendor remittance activities. In our EFT Processing Segment, we obtain a significant portion of the cash required to operate our ATMs through various cash supply arrangements, the amount of which is not recorded on Euronet's Consolidated Balance Sheets. However, in certain countries, we fund the cash required to operate our ATM network from borrowings under our revolving credit facilities, uncommitted credit agreements and cash flows from operations. As of March 31, 2024, we had $599.7 million of our own cash in use or designated for use in our ATM network, which is recorded in ATM cash on Euronet's Consolidated Balance Sheet. ATM cash increased $74.5 million from $525.2 million as of December 31, 2023 to $599.7 million as of March 31, 2024 as a result of the increase in number of active ATMs as of March 31, 2024 compared to December 31, 2023. The Company has $1,236.2 million of unrestricted cash as of March 31, 2024 compared to $1,254.2 million as of December 31, 2023. Including the $599.7 million of cash in ATMs at March 31, 2024, we have access to $2,214.3 million in available cash, and $579.0 million available under the Credit Facility with no significant long-term debt principal payments until March 2025.
| 35 |
|
|
Three Months Ended March 31, | ||||||
|
Liquidity |
2024 |
|
2023 | ||||
|
Cash and cash equivalents and restricted cash provided by (used in): |
|
|
| ||||
|
Operating activities |
$ |
30.0 |
|
$ |
3.3 |
||
|
Investing activities |
(96.8 |
) |
|
(18.1 |
) | ||
|
Financing activities |
81.3 |
|
(4.4 |
) | |||
|
Effect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash |
(47.2 |
) |
|
(33.9 |
) | ||
|
Decrease in cash and cash equivalents and restricted cash |
$ |
(32.7 |
) |
|
$ |
(53.1 |
) |
Cash flows provided by operating activities were $30.0 million for the three months ended March 31, 2024 compared to cash flows provided by operating activities of $3.3 million for the same period in 2023. The net increase in operating cash flows was primarily due to an increase in net income, the effect of exchange rates on balance sheet positions in foreign currencies and other working capital fluctuations.
Investing activity cash flow
Cash flows used in investing activities were $96.8 million for the three months ended March 31, 2024 compared to $18.1 million for the same period in 2023. The increase in cash used in investing activities is primarily due to the $70.0 million of cash paid for the acquisition of Infinitium. Additionally, we used $23.8 million for purchases of property and equipment for the three months ended March 31, 2024 compared to $18.6 million for the same period in 2023.
Cash flows used by financing activities were $81.3 million for the three months ended March 31, 2024 compared to cash flows provided by financing activities of $4.4 million for the same period in 2023. Our borrowing activities on the Credit Facility for the three months ended March 31, 2024 consisted of net borrowings of $82.6 million compared to net borrowings of $24.3 million for the same period in 2023. The increase in net borrowings on the Credit Facility, during the three months ended March 31, 2024, is primarily the result of cash placed in ATMs reactivated in anticipation of the travel season and cash used to complete the acquisition of Infinitium. We received proceeds of $1.4 million and $1.0 million during the three months ended March 31, 2024 and 2023, respectively, for the issuance of stock in connection with our Stock Incentive Plan.
Credit Facility - On October 24, 2022, the Company amended its revolving credit agreement (the “Credit Facility”) to increase the facility from $1.03 billion to $1.25 billion and to extend the expiration to October 24, 2027. The revolving credit facility contains a sublimit of up to $250 million, with $150 million committed, for the issuance of letters of credit, a $75 million sublimit both for U.S. dollar swingline loans and for swingline loans in euros or British pounds sterling. The Credit Facility allows for borrowings in British pounds sterling, euro and U.S. dollars. Subject to certain conditions, the Company has the option to increase the Credit Facility by up to an additional $500 million by requesting additional commitments from existing or new lenders. Fees and interest on borrowings vary based upon the Company's corporate credit rating and will be based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over a secured overnight financing rate, as defined in the agreement, with a margin, including the facility fee, ranging from 1.00% to 1.625% or the base rate, as selected by the Company. The applicable margin for borrowings under the credit facility, based on the Company's current credit rating is 1.25% including the facility fee.
As of March 31, 2024, we had $619.5 million of borrowings and $51.5 million of stand-by letters of credit outstanding under the Credit Facility. The remaining $579.0 million under the Credit Facility was available for borrowing.
Other uses of capital
Capital expenditures and needs - Total capital expenditures for the three months ended March 31, 2024 were $23.8 million. These capital expenditures were primarily for the purchase and installation of ATMs in key under-penetrated markets, the purchase of POS terminals for the epay and Money Transfer Segments, and office, data center and company store computer equipment and software. Total capital expenditures for 2024 are currently estimated to range from approximately 90 million to $100 million. At current and projected cash flow levels, we anticipate that cash generated from operations, together with cash on hand and amounts available under our Credit Facility and other existing and potential future financing will be sufficient to meet our debt (including our uncommitted credit facilities), leasing, and capital expenditure obligations. If our capital resources are not sufficient to meet these obligations, we will seek to refinance our debt and/or issue additional equity under terms acceptable to us. However, we can offer no assurances that we will be able to obtain favorable terms for the refinancing of any of our debt or other obligations or for the issuance of additional equity.
Inflation and functional currencies
Historically, the countries in which we operate have experienced low and stable inflation. Therefore, the local currency in each of these markets is the functional currency. We have seen indications that the current inflationary period will put pressure on our results of operations and our financial position. We have seen some signs of inflation impacting discretionary spend items, such as gaming products, in our epay business, discretionary travel expenditures in EFT, as well as some pressure on send amounts in money transfer. As a consequence of this inflationary period, we expect to see increasing expenses forthcoming. We continually review inflation and the functional currency in each of the countries where we operate.
OFF BALANCE SHEET ARRANGEMENTS.
On occasion, we grant guarantees of the obligations of our subsidiaries, and we sometimes enter into agreements with unaffiliated third parties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement. Our liability under such indemnification provisions may be subject to time and materiality limitations, monetary caps and other conditions and defenses. As of March 31, 2024, there were no material changes from the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2023. To date, we are not aware of any significant claims made by the indemnified parties or parties to whom we have provided guarantees on behalf of our subsidiaries and, accordingly, no liabilities have been recorded as of March 31, 2024. See also Note 15, Commitments, to the unaudited consolidated financial statements included elsewhere in this report.
CONTRACTUAL OBLIGATIONS
As of March 31, 2024, there have been no material changes outside the ordinary course of business in our future contractual obligations from the amounts reported within our Annual Report on Form 10-K for the year ended December 31, 2023.
| 37 |
Interest rate risk
As of March 31, 2024, our total debt outstanding, excluding unamortized debt issuance costs, was $1,941.6 million. Of this amount, $525.0 million, net of debt discounts, or 27% of our total debt obligations, relates to our contingent Convertible Notes that have a fixed coupon rate. Our $525.0 million outstanding principal amount of Convertible Notes accrue cash interest at a rate of 0.75% of the principal amount per annum. Based on quoted market prices, as of March 31, 2024, the fair value of our fixed rate Convertible Notes was $538.0 million, compared to a carrying value of $525.0 million. Further, as of March 31, 2024 we had $619.5 million of borrowings under our Credit Facility, or 32% of our total debt obligations. If we were to maintain these borrowings for one year and maximize the potential borrowings available under the revolving credit facility for one year, a 1% (100 basis points) increase in the applicable interest rate would result in additional interest expense to the Company of approximately $12.5 million. The carrying values of the Credit Facility approximates fair value because interest as of March 31, 2024, was based on SOFR that resets at various intervals of less than one year. Additionally, $646.9 million, or 33%of our total debt obligations, relates to Senior Notes having a fixed coupon rate. Our $646.9 million outstanding principal amount of Senior Notes accrue cash interest at a rate of 1.375% of the principal amount per annum. Based on quoted market prices, as of March 31, 2024, the fair value of our fixed rate Senior Notes was $609.0 million, compared to a carrying value of $646.9 million. An additional $150.0 million, or 8% of our total debt, is related to a short-term uncommitted credit agreement. The credit agreement is due within one year and accrues interest at variable rates. The remaining $0.2 million is related to borrowings by certain subsidiaries to fund, from time to time, working capital requirements. These arrangements generally are due within one year and accrue interest at variable rates.
Foreign currency exchange rate risk
For the three months ended March 31, 2024, approximately 74% of our revenues were generated in non-U.S. dollar countries and we expect to continue generating a significant portion of our revenues in countries with currencies other than the U.S. dollar.
We are particularly vulnerable to fluctuations in exchange rates of the U.S. dollar to the currencies of countries in which we have significant operations, primarily the euro, British pound, Australian dollar, Polish zloty, Indian rupee, New Zealand dollar, Malaysian ringgit and Hungarian forint. As of March 31, 2024, we estimate that a 10% fluctuation in these foreign currency exchange rates would have the combined annualized effect on reported net income and working capital of approximately $120 million to $130 million. This effect is estimated by applying a 10% adjustment factor to our non-U.S. dollar results from operations, intercompany loans that generate foreign currency gains or losses and working capital balances that require translation from the respective functional currency to the U.S. dollar reporting currency.
Additionally, we have other non-current, non-U.S. dollar assets and liabilities on our balance sheet that are translated to the U.S. dollar during consolidation. These items primarily represent goodwill and intangible assets recorded in connection with acquisitions in countries other than the U.S. and our Senior Notes. We estimate that a 10% fluctuation in foreign currency exchange rates would have a non-cash impact on total comprehensive income of approximately $90 million to $100 million as a result of the change in value of these items during translation to the U.S. dollar. For the fluctuations described above, a strengthening U.S. dollar produces a financial loss, while a weakening U.S. dollar produces a financial gain.
We believe this quantitative measure has inherent limitations and does not take into account any governmental actions or changes in either customer purchasing patterns or our financing or operating strategies. Because a majority of our revenues and expenses are incurred in the functional currencies of our international operating entities, the profits we earn in foreign currencies are positively impacted by a weakening of the U.S. dollar and negatively impacted by a strengthening of the U.S. dollar. Additionally, a significant portion of our debt obligations are in U.S. dollars; therefore, as foreign currency exchange rates fluctuate, the amount available for repayment of debt will also increase or decrease.
We use derivatives to minimize our exposures related to changes in foreign currency exchange rates and to facilitate foreign currency risk management services by writing derivatives to customers. Derivatives are used to manage the overall market risk associated with foreign currency exchange rates; however, we do not perform the extensive record-keeping required to account for the derivative transactions as hedges. Due to the relatively short duration of the derivative contracts, we use the derivatives primarily as economic hedges. Since we do not designate foreign currency derivatives as hedging instruments pursuant to the accounting standards, we record gains and losses on foreign exchange derivatives in earnings in the period of change.
| 38 |
For derivative instruments our xe operations write to customers, we aggregate the foreign currency exposure arising from customer contracts, and hedge the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties as part of a broader foreign currency portfolio. The changes in fair value related to the total portfolio of positions are recorded in Revenues on the Consolidated Statements of Income. As of March 31, 2024, we held foreign currency derivative contracts outstanding with a notional value of $1.1 billion, primarily in U.S. dollars, euros, British pounds, Australian dollars and New Zealand dollars, that were not designated as hedges and for which the majority mature within the next twelve months.
The Company is, from time to time, a party to legal or regulatory proceedings arising in the ordinary course of its business.
The discussion regarding contingencies in Part I, Item 1 — Financial Statements (unaudited), Note 16, Litigation and Contingencies, to the unaudited consolidated financial statements in this report is incorporated herein by reference.
Currently, there are no legal or regulatory proceedings that management believes, either individually or in the aggregate, would have a material adverse effect on the Company's consolidated financial condition or results of operations. In accordance with U.S. GAAP, we record a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These liabilities are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case or proceeding.
| 39 |
Except as otherwise described herein, there were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended 31 December 2023, as filed with the SEC.
The following table provides information with respect to shares of the Company's common stock that were purchased by the Company during the three months ended March 31, 2024.
|
Period |
|
Total Number of Shares Purchased |
|
Average Price Paid per Share |
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs (in millions) (1) | ||||||
|
January 1 - March 31, 2024 |
|
- |
|
$ |
- |
|
- |
|
$ |
446.6 |
||||
|
February 1 - February 29, 2024 |
|
- |
|
- |
|
- |
|
446.6 |
||||||
|
March 1 - March 31, 2024 |
|
- |
|
- |
|
- |
|
$ |
446.6 |
|||||
|
Total |
|
- |
|
$ |
- |
|
- |
|
| |||||
During the fiscal quarter ended March 31, 2024, none of the Company’s directors or "officers," as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.
| 40 |
|
Exhibit |
|
Description |
|
|
|
|
|
31.1* |
|
|
|
31.2* |
|
|
|
32.1** |
|
|
|
32.2** |
|
|
|
101* |
|
The following materials from Euronet Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023, (ii) Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2024 and 2023, (iii) Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2024 and 2023, (iv) Consolidated Statements of Changes in Equity (unaudited) for the three months ended March 31, 2024 and 2023 (v) Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2024 and 2023, and (vi) Notes to the Unaudited Consolidated Financial Statements. |
|
104* |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
May 3, 2024
|
By: |
/s/ MICHAEL J. BROWN |
|
|
|
Michael J. Brown |
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
By: |
/s/ RICK L. WELLER |
|
|
|
Rick L. Weller |
|
|
|
Chief Financial Officer |
|
| 42 |
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Michael J. Brown, certify that:
1) I have reviewed this Quarterly Report on Form 10-Q of Euronet Worldwide, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 3, 2024
|
|
|
|
/s/ MICHAEL J. BROWN |
|
|
Michael J. Brown |
|
|
Chief Executive Officer |
|
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Rick L. Weller, certify that:
1) I have reviewed this Quarterly Report on Form 10-Q of Euronet Worldwide, Inc.;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 3, 2024
|
|
|
|
/s/ RICK L. WELLER |
|
|
Rick L. Weller |
|
|
Chief Financial Officer |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Euronet Worldwide, Inc. (the “Company”) for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
/s/ MICHAEL J. BROWN |
|
|
Michael J. Brown |
|
|
Chief Executive Officer |
|
May 3, 2024
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Euronet Worldwide, Inc. (the “Company”) for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
/s/ RICK L. WELLER |
|
|
Rick L. Weller |
|
|
Chief Financial Officer |
|
May 3, 2024