Euronet Worldwide Reports Second Quarter 2008 Financial Results

Euronet Worldwide Reports Second Quarter 2008 Financial Results 182 KB

Supporting Materials:

LEAWOOD, KANSAS, USA July 30, 2008 Euronet Worldwide, Inc. ("Euronet" or the "Company") (NASDAQ: EEFT), a leading electronic payments provider, today announced its second quarter 2008 financial results.

Euronet's second quarter 2008 financial highlights included:

Consolidated revenues of $264.5 million, compared to $233.4 million for the second quarter 2007.
Adjusted EBITDA of $34.6 million, compared to $29.9 million for the second quarter 2007.
Operating income of $17.3 million, compared to $15.3 million in the second quarter 2007.
Net income of $7.8 million, or $0.15 diluted earnings per share, compared to net income for the second quarter 2007 of $8.5 million, or $0.17 diluted earnings per share.
Diluted cash earnings per share from continuing operations of $0.32, compared to $0.28 for the second quarter 2007 (see reconciliation of diluted cash earnings per share in the attached schedules).
Transactions of 342.4 million, compared to 310.9 million for the second quarter 2007.

Segment and Other Results

The EFT Processing Segment reported the following results for the second quarter 2008:

Revenues of $52.4 million, compared to $42.0 million for the second quarter 2007.
Adjusted EBITDA of $14.0 million, compared to $12.7 million for the second quarter 2007.
Operating income of $9.0 million, compared to $8.7 million for the second quarter 2007.
Transactions of 168.6 million, compared to 146.9 million for the second quarter 2007.

The year-over-year increases in revenues, operating income and Adjusted EBITDA were primarily attributable to the expansion of our ATM network. The EFT Processing Segment ended the second quarter 2008 with 10,160 ATMs owned or operated compared to 9,858 ATMs at the end of the second quarter 2007. In the second quarter 2008, an ATM processing services agreement with a customer in the U.K. expired and was not renewed. The number of ATMs operated at the end of the second quarter 2008 reflects the decrease of these 2,376 ATMs. Moreover, in the second quarter the Company continued to incur significant expenses to develop and deploy its cross-border merchant acquiring business. Operating income and Adjusted EBITDA reflect a total reduction of $1.9 million and $1.8 million, respectively, when compared to the prior year related to the Company's net operating costs of the cross-border merchant acquiring business and the expiration of the U.K. customer contract. Excluding these two items, operating income margins would have improved in line with the increase in revenues.

Beginning in the second quarter 2008, we are classifying the operations of Euronet Essentis Limited ("Essentis"), a U.K. software entity previously included in the EFT Processing Segment, as discontinued operations because the Company has decided to sell the business. This is the result of the Company's decision to narrow the focus of its investments and resources on its transaction processing businesses. As required by U.S. GAAP, the results of the discontinued Essentis operations have been removed from the results from continuing operations for all periods presented.

As of June 30, 2008, Euronet owns and/or operates ATMs primarily in Hungary, Poland, Germany, Croatia, the Czech Republic Greece, Romania, Slovakia, Albania, Serbia, Montenegro, Ukraine, Bulgaria, India and China.

The Prepaid Processing Segment reported the following results for the second quarter 2008:

Revenues of $152.6 million, compared to $142.2 million for the second quarter 2007.
Adjusted EBITDA of $15.6 million, compared to $13.7 million for the second quarter 2007.
Operating income of $11.4 million, compared to $9.8 million for the second quarter 2007.
Transactions of 169.5 million, compared to 160.2 million for the second quarter 2007.

The Prepaid Processing Segment processes electronic point-of-sale prepaid transactions at approximately 397,000 point-of-sale terminals across approximately 200,000 retailer locations in Europe, Asia Pacific and the U.S.

Growth in revenues, operating profits and operating margins in the Prepaid Processing Segment for the second quarter 2008 compared to the second quarter 2007 was primarily attributable to organic transaction growth and the containment of commensurate increases in other operating expenses, while allowing for investments in a number of new markets, including Italy.

The Money Transfer Segment reported the following results for the second quarter 2008:

Revenues of $59.5 million, compared to $49.2 million for the second quarter 2007.
Adjusted EBITDA of $7.7 million, compared to $6.2 million for the second quarter 2007.
Operating income of $2.6 million, compared to $1.4 million for the second quarter 2007.
Transactions of 4.3 million, compared to 3.8 million for the second quarter 2007.

The results for the second quarter 2007 include a charge of $0.9 million for integration and restructuring charges stemming from the combination of RIA Envia, Inc. ("RIA") with our previous money transfer business and exclude the results for the four days prior to the April 4, 2007 acquisition of RIA.

On a pro forma basis, the growth rate of revenues exceeded the transfer growth rate largely as a result of a 42% increase in transfers from non-US locations, offsetting a 7% decline in transfers to Mexico. While transfers to Mexico declined, gross profit on transfers to Mexico was the same as the prior year as a result of the Company's focus on higher margin transfers.

Corporate and other reported $5.7 million of operating expenses for the second quarter 2008, compared to $4.6 million for the second quarter 2007. This increase is primarily the result of increased share-based compensation related to awards made to new employees, including those in the Money Transfer Segment.

The Company's effective tax rate from continuing operations decreased to 26% for the second quarter 2008 from 36% for the second quarter 2007. The decrease was principally attributable to the resolution of uncertain tax positions resulting from the successful completion of tax audits and certain benefits stemming from planning and structuring of the RIA acquisition.

The Company's unrestricted cash on hand was $255.6 million as of June 30, 2008 as compared to $237.1 million at March 31, 2008. Euronet's total indebtedness was $487.1 million as of June 30, 2008, compared to $498.5 million as of March 31, 2008.

Euronet also announced that it expects diluted cash earnings per share from continuing operations for the third and fourth quarters 2008 to be approximately $0.33 and $0.36, respectively.

We believe that Adjusted EBITDA and diluted cash earnings per share provide useful information to investors because they are indicators of the strength and performance of our ongoing business operations, including our ability to fund capital expenditures, acquisitions and operations and to incur and service debt. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the operating performance and value of companies within the payment processing industry.

The Company's management analyzes historical results adjusted for certain items that are non-operational, not necessarily ongoing in nature or that are incremental to the baseline of the business, and management believes the exclusion of these items, as well as the inclusion of pro forma results, provides a more complete and comparable basis for evaluating the underlying business unit performance.

Adjusted EBITDA is defined as operating income excluding depreciation, amortization and share-based compensation expenses. While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent non-cash current period allocations of costs associated with long-lived assets acquired in prior periods. Similarly, the expenses recorded for share-based compensation does not represent a current or future period cash costs.

Diluted cash earnings per share is defined as diluted GAAP earnings per share excluding the impacts of a) foreign exchange gains or losses, b) discontinued operations, c) debt restructuring or early debt retirement charges, d) tax-effected share-based compensation, e) tax-effected acquired intangible asset amortization and f) other non-operating or unusual items that cannot be accurately projected. Further, diluted cash earnings per share includes shares potentially issuable in settlement of convertible bonds or other obligations, if the assumed issuances are dilutive to cash earnings per share.

Pro forma financial information is not intended to represent, or be indicative of, the results from operations or financial condition that would have been reported had the related transaction been completed as of the beginning of the periods presented. Moreover, the pro forma financial information should not be considered representative of future results of operations or financial condition.

The attached schedules provide a full reconciliation of these and other non-GAAP financial measures to a corresponding GAAP financial measure.

Euronet Worldwide will host an analyst conference call on Wednesday, July 30, 2008, at 9:00 a.m. U.S. Eastern Time to discuss these results. To listen to the call via telephone, dial 877-407-9210 (USA) or +1-201-689-8049 (non-USA). The conference call will also be available via webcast at http://www.investorcalendar.com/IC/CEPage.asp?ID=131749 or www.euronetworldwide.com. Participants should go to the Web site at least 5 minutes prior to the scheduled start time of the event to register. A slideshow will accompany the webcast.

A webcast replay will be available beginning approximately one hour after the event at http://www.investorcalendar.com/IC/CEPage.asp?ID=131749. To dial in for the replay, the call-in number is 877-660-6853 (USA) or +1-201-612-7415 (non-USA). The account number is 286 and the conference ID number is 290404. The call and webcast replay will be available for one month.

About Euronet Worldwide, Inc.

Euronet Worldwide is an industry leader in processing secure electronic financial transactions. The Company offers payment and transaction processing solutions to financial institutions, mobile operators and retailers which include comprehensive ATM, POS and Card outsourcing services; card issuing and merchant acquiring services; software solutions; consumer money transfer and bill payment services; and electronic distribution for prepaid mobile airtime and other prepaid products. Euronet operates and processes transactions from 42 countries.

Euronet's global payment network is extensive including 10,160 ATMs and approximately 53,000 EFT POS terminals which are under management in 21 countries; a growing portfolio of outsourced debit and credit card services and card software solutions; a prepaid processing network of 397,000 point-of-sale terminals across approximately 200,000 retailer locations in 14 countries; and a consumer-to-consumer money transfer network of approximately 71,600 locations serving approximately 100 countries. With corporate headquarters in Leawood, Kansas, USA, and 35 worldwide offices, Euronet serves clients in approximately 130 countries. For more information, please visit the Company's Web site at www.euronetworldwide.com.

Statements contained in this news release that concern Euronet's or its management's intentions, expectations, or predictions of future performance, are forward-looking statements. Euronet's actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors, including: technological developments affecting the market for the Company's products and services; foreign exchange fluctuations; and changes in laws and regulations affecting the Company's business. These risks and other risks are described in the Company's filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Copies of these filings may be obtained by contacting the Company or the SEC. Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances.