Euronet Worldwide, Inc 10-Q for FY2020 Q2

Euronet Worldwide, Inc. (EEFT)

10-Q 2020-08-06 For: 2020-06-30

Added on April 05, 2026

About this 10-Q

Euronet Worldwide, Inc filed this 10-Q on August 6, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $527.8M; down 23.7% from $691.87M a year earlier
Net loss: $115.8M; compared with net income of $68.15M a year earlier
Diluted EPS: -$2.22; compared with $1.25 a year earlier

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Delaware		74-2806888
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
11400 Tomahawk Creek Parkway, Suite 300
Leawood,	Kansas	66211
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	EEFT	Nasdaq Global Select Market
1.375% Senior Notes due 2026	EEFT26	Nasdaq Global Market

Large accelerated filer þ	Accelerated filer	o
Non-accelerated filer o	Smaller reporting company	☐
	Emerging growth company	☐
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

		Page

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019	2
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019	3
	Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2020 and 2019	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	6
	Notes to the Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	42
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	45
	Signatures	#


	As of
	June 30, 2020			December 31, 2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	864,871		$	786,081
ATM cash	410,459			665,641
Restricted cash	28,050			34,301
Settlement assets	892,676			1,013,067
Trade accounts receivable, net of credit losses of $4,524 at June 30, 2020 and $3,892 at December 31, 2019	114,755			201,935
Prepaid expenses and other current assets	240,946			217,707
Total current assets	2,551,757			2,918,732
Operating right of use lease assets	158,716			377,543
Property and equipment, net of accumulated depreciation of $428,909 at June 30, 2020 and $410,243 at December 31, 2019	355,279			359,980
Goodwill	624,253			743,823
Acquired intangible assets, net of accumulated amortization of $161,861 at June 30, 2020 and $204,853 at December 31, 2019	127,108			141,847
Other assets, net of accumulated amortization of $50,136 at June 30, 2020 and $46,788 at December 31, 2019	144,422			115,741
Total assets	$	3,961,535		$	4,657,666
LIABILITIES AND EQUITY
Current liabilities:
Settlement obligations	$	892,676		$	1,013,067
Trade accounts payable	90,966			81,743
Accrued expenses and other current liabilities	306,371			294,557
Current portion of operating lease liabilities	53,106			127,353
Short-term debt obligations and current maturities of long-term debt obligations	875			6,089
Income taxes payable	34,472			52,583
Deferred revenue	58,532			58,588
Total current liabilities	1,436,998			1,633,980
Debt obligations, net of current portion	1,100,619			1,090,939
Operating lease obligations, net of current portion	100,542			241,977
Deferred income taxes	55,782			56,067
Other long-term liabilities	54,934			55,361
Total liabilities	2,748,875			3,078,324
Equity:
Euronet Worldwide, Inc. stockholders’ equity:
Preferred Stock, $0.02 par value. 10,000,000 shares authorized; none issued	—			—
Common Stock, $0.02 par value. 90,000,000 shares authorized; 62,934,954 issued at June 30, 2020 and 62,775,762 issued at December 31, 2019	1,259			1,256
Additional paid-in-capital	1,204,985			1,190,058
Treasury stock, at cost, 10,646,423 shares at June 30, 2020 and 8,554,908 shares at December 31, 2019	(703,657		)	(463,704		)
Retained earnings	902,671			1,016,554
Accumulated other comprehensive loss	(192,522		)	(164,890		)
Total Euronet Worldwide, Inc. stockholders’ equity	1,212,736			1,579,274
Noncontrolling interests	(76		)	68
Total equity	1,212,660			1,579,342
Total liabilities and equity	$	3,961,535		$	4,657,666


	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019				2020		2019
Revenues	$	527,803	$	691,867		$	1,111,710	$	1,269,376
Operating expenses:
Direct operating costs	350,011		393,811				709,467		747,644
Salaries and benefits	90,952		98,550				192,192		191,345
Selling, general and administrative	53,315		53,842				114,108		101,989
Goodwill impairment	104,554		—				104,554		—
Depreciation and amortization	30,242		27,767				61,058		54,407
Total operating expenses	629,074		573,970				1,181,379		1,095,385
Operating (loss) income	(101,271)		117,897				(69,669)		173,991
Other income (expense):
Interest income	161		513				728		856
Interest expense	(8,884)		(10,029		)		(18,117)		(18,228	)
Loss on early retirement of debt	—		(8,903		)		—		(9,831	)
Foreign currency exchange gain (loss), net	2,495		(121		)		(16,311)		3,087
Other gain (loss)	697		(29		)		728		(4	)
Other expense, net	(5,531)		(18,569		)		(32,972)		(24,120	)
(Loss) income before income taxes	(106,802)		99,328				(102,641)		149,871
Income tax expense	(8,931)		(31,323		)		(11,372)		(47,287	)
Net (loss) income	(115,733)		68,005				(114,013)		102,584
Net loss (income) attributable to noncontrolling interests	(71)		148				130		112
Net (loss) income attributable to Euronet Worldwide, Inc.	$	(115,804)	$	68,153		$	(113,883)	$	102,696

(Loss) earnings per share attributable to Euronet Worldwide, Inc. stockholders:
Basic	$	(2.22)	$	1.28		$	(2.15)	$	1.95
Diluted	$	(2.22)	$	1.25		$	(2.15)	$	1.90

Weighted average shares outstanding:
Basic	52,234,465		53,212,759				52,920,784		52,546,647
Diluted	52,234,465		54,702,459				52,920,784		53,945,770


	Number of Shares Outstanding	Common Stock		Additional Paid-in Capital			Treasury Stock
Balance as of December 31, 2018	51,819,998	$	1,198	$	1,104,264		$	(391,551	)
Net income
Other comprehensive loss
Stock issued under employee stock plans	130,136	3		5,194			(1,756		)
Share-based compensation				4,490
Issuance of convertible notes, net of tax				71,660
Repurchase and conversions of convertible notes, net of tax	6			(42,917		)
Balance as of March 31, 2019	51,950,140		1,201		1,142,691			(393,307	)
Net income (loss)
Other comprehensive income
Stock issued under employee stock plans	41,856				1,740			(46	)
Share-based compensation					6,003
Redemptions and conversions of convertible notes, net of tax	2,488,243		50		22,400
Balance as of June 30, 2019	54,480,239	$	1,251	$	1,172,834		$	(393,353	)


	Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance as of December 31, 2018	$	669,805	$	(151,043	)	$	169		$	1,232,842
Net income	34,543					36			34,579
Other comprehensive loss			(16,156		)	(29		)	(16,185		)
Stock issued under employee stock plans									3,441
Share-based compensation									4,490
Issuance of convertible notes, net of tax									71,660
Repurchases and conversions of convertible notes									(42,917		)
Balance as of March 31, 2019		704,348		(167,199	)		176			1,287,910
Net income (loss)		68,153					(148	)		68,005
Other comprehensive income				12,149			12			12,161
Stock issued under employee stock plans										1,694
Share-based compensation										6,003
Redemptions and conversions of convertible notes										22,450
Balance as of June 30, 2019	$	772,501	$	(155,050	)	$	40		$	1,398,223


	As of
(in thousands)	June 30, 2020		December 31, 2019
Settlement assets:
Settlement cash and cash equivalents	$	340,915	$	282,188
Settlement restricted cash	34,256		49,168
Accounts receivable	426,056		574,410
Prepaid expenses and other current assets	91,449		107,301
Total settlement assets	$	892,676	$	1,013,067
Settlement obligations:
Trade account payables	$	349,721	$	504,667
Accrued expenses and other current liabilities	542,955		508,400
Total settlement obligations	$	892,676	$	1,013,067


(in thousands)	Acquired Intangible Assets		Goodwill		Total Intangible Assets
Balance as of December 31, 2019	$	141,847	$	743,823	$	885,670
Decreases:
Acquisition	—		(474)		(474)
Amortization	(11,236)		—		(11,236)
Impairment	—		(104,554)		(104,554)
Other (primarily changes in foreign currency exchange rates)	(3,503)		(14,542)		(18,045)
Balance as of June 30, 2020	$	127,108	$	624,253	$	751,361


	As of
(in thousands)	June 30, 2020		December 31, 2019
Accrued expenses	$	247,955	$	246,699
Derivative liabilities	51,905		41,935
Current portion of capital lease obligations	6,511		5,919
Deferred income taxes	—		4
Total	$	306,371	$	294,557


							Gross Amounts Not Offset in the Consolidated Balance Sheet
As of June 30, 2020	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts Presented in the Consolidated Balance Sheet		Financial Instruments			Cash Collateral Received			Net Amounts
Derivatives subject to a master netting arrangement or similar agreement	$	71,590	$	—	$	71,590	$	(41,843)		$	(9,737)		$	20,010

As of December 31, 2019
Derivatives subject to a master netting arrangement or similar agreement	$	54,765	$	—	$	54,765	$	(34,935	)	$	(7,362	)	$	12,468


									Gross Amounts Not Offset in the Consolidated Balance Sheet
As of June 30, 2020	Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts Presented in the Consolidated Balance Sheet			Financial Instruments		Cash Collateral Paid		Net Amounts
Derivatives subject to a master netting arrangement or similar agreement	$	(51,905)		$	—	$	(51,905)		$	41,843	$	917	$	(9,145)

As of December 31, 2019
Derivatives subject to a master netting arrangement or similar agreement	$	(41,935	)	$	—	$	(41,935	)	$	34,935	$	827	$	(6,173	)


		Amount of Gain Recognized in Income on Derivative Contracts (a)
	Location of Gain Recognized in Income on Derivative Contracts	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)		2020		2019				2020		2019
Foreign currency exchange contracts - Ria Operations	Foreign currency exchange (loss) gain, net	$	(460)	$	(2,126	)	$	(223)	$	334


•	Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.


•	Level 2 – Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.


•	Level 3 – Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the inputs that market participants would use in pricing.


		As of June 30, 2020
(in thousands)	Balance Sheet Classification	Level 1		Level 2		Level 3		Total
Assets
Foreign currency exchange contracts	Other current assets	$	—	$	71,590	$	—	$	71,590
Liabilities
Foreign currency exchange contracts	Other current liabilities	$	—	$	(51,905)	$	—	$	(51,905)


2)	Through the epay Segment, the Company provides distribution, processing and collection services for prepaid mobile airtime and other electronic payment products in Europe, the Middle East, Asia Pacific, the U.S. and South America.

	For the Three Months Ended June 30, 2020
(in thousands)	EFT Processing		epay		Money Transfer		Corporate Services, Eliminations and Other		Consolidated
Total revenues	$	78,488	$	187,563	$	262,863	$	(1,111)	$	527,803
Operating expenses:
Direct operating costs	62,465		144,056		144,589		(1,099)		350,011
Salaries and benefits	21,289		15,191		49,059		5,413		90,952
Selling, general and administrative	9,515		8,635		33,172		1,993		53,315
Goodwill impairment	21,861		—		82,693		—		104,554
Depreciation and amortization	19,934		1,651		8,577		80		30,242
Total operating expenses	135,064		169,533		318,090		6,387		629,074
Operating income (expense)	$	(56,576)	$	18,030	$	(55,227)	$	(7,498)	$	(101,271)

	For the Three Months Ended June 30, 2019
(in thousands)	EFT Processing		epay		Money Transfer		Corporate Services, Eliminations and Other			Consolidated
Total revenues	$	231,946	$	184,160	$	276,783	$	(1,022	)	$	691,867
Operating expenses:
Direct operating costs	105,568		140,427		148,834		(1,018		)	393,811
Salaries and benefits	21,339		14,998		52,713		9,500			98,550
Selling, general and administrative	10,745		9,424		31,731		1,942			53,842
Depreciation and amortization	17,778		1,756		8,159		74			27,767
Total operating expenses	155,430		166,605		241,437		10,498			573,970
Operating income (expense)	$	76,516	$	17,555	$	35,346	$	(11,520	)	$	117,897

	For the Six Months Ended June 30, 2020
(in thousands)	EFT Processing		epay		Money Transfer		Corporate Services, Eliminations and Other		Consolidated
Total revenues	$	224,313	$	360,474	$	529,097	$	(2,174)	$	1,111,710
Operating expenses:
Direct operating costs	150,001		274,130		287,498		(2,162)		709,467
Salaries and benefits	43,380		30,888		102,923		15,001		192,192
Selling, general and administrative	20,456		17,473		71,754		4,425		114,108
Goodwill impairment	21,861		—		82,693		—		104,554
Depreciation and amortization	40,256		3,495		17,148		159		61,058
Total operating expenses	275,954		325,986		562,016		17,423		1,181,379
Operating income (expense)	$	(51,641)	$	34,488	$	(32,919)	$	(19,597)	$	(69,669)


	For the Six Months Ended June 30, 2019
(in thousands)	EFT Processing		epay		Money Transfer		Corporate Services, Eliminations and Other			Consolidated
Total revenues	$	377,649	$	360,274	$	533,364	$	(1,911	)	$	1,269,376
Operating expenses:
Direct operating costs	189,344		273,952		286,238		(1,890		)	747,644
Salaries and benefits	40,770		29,751		103,869		16,955			191,345
Selling, general and administrative	19,831		17,476		60,840		3,842			101,989
Depreciation and amortization	34,420		3,541		16,297		149			54,407
Total operating expenses	284,365		324,720		467,244		19,056			1,095,385
Operating income (expense)	$	93,284	$	35,554	$	66,120	$	(20,967	)	$	173,991


	Total Assets as of
(in thousands)	June 30, 2020		December 31, 2019
EFT Processing	$	1,394,600	$	1,914,144
epay	801,003		962,671
Money Transfer	1,517,809		1,560,136
Corporate Services, Eliminations and Other	248,123		220,715
Total	$	3,961,535	$	4,657,666


•	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 June 30, 2020, the balance of such cash used in the Company's ATM networks for which the Company was responsible was approximately $512 million. 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;


•	Euronet 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;


•	Euronet has entered into agreements with certain third parties, including banks that provide fiduciary and other services to Euronet or to 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.


	As of June 30, 2020
Maturity of Lease Liabilities (in thousands)	Operating Leases (1)
Remainder of 2020	$	26,198
2021	42,182
2022	29,304
2023	20,294
2024	13,105
Thereafter	26,319
Total lease payments	$	157,402
Less: imputed interest	(3,754)
Present value of lease liabilities	$	153,648


Lease Expense (in thousands)	Income Statement Classification	Three Months Ended June 30, 2020		Three Months Ended June 30, 2019		Six Months Ended June 30, 2020			Six Months Ended June 30, 2019
Operating lease expense	Selling, general and administrative and Direct operating costs	$	21,045	$	33,113	$	54,233	$	63,573
Short-term and variable lease expense	Selling, general and administrative and Direct operating costs		12,281		12,320	20,961			18,889
Total lease expense		$	33,326	$	45,433	$	75,194	$	82,462


Lease Term and Discount Rate of Operating Leases	As of June 30, 2020
Weighted- average remaining lease term (years)	4.8
Weighted- average discount rate	2.1	%


Other Information (in thousands)	Six Months Ended June 30, 2020		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities (a)	$	53,869	$	62,935
Supplemental non-cash information on lease liabilities arising from obtaining ROU assets
ROU assets obtained in exchange for new operating lease liabilities	$	52,764	$	157,914


•	trends affecting our business plans and financing plans and requirements;


•	the adequacy of capital to meet our capital requirements and expansion plans;


•	our expectations regarding the closing of any pending acquisitions;