SEC Filing - Euronet Worldwide, Inc.

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eeft-20230930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number: 001-31648

EURONET WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

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)

(913) 327-4200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

On November 2, 2023, Euronet Worldwide, Inc. had 46,121,435 shares of common stock outstanding.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

Table of Contents

		Page

PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	2
	Consolidated Statements of Comprehensive Income (loss) for the Three and Nine Months Ended September 30, 2023 and 2022	3
	Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2023 and 2022	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
	Notes to the Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
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	43
Item 5	Other Information	43
Item 6.	Exhibits	44
	Signatures	45

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

	As of
	September 30, 2023			December 31, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,074.4		$	1,131.2
ATM cash	603.5			515.6
Restricted cash	14.1			7.4
Settlement assets	1,242.3			1,442.7
Trade accounts receivable, net of credit losses of $3.7 and $4.0	300.6			270.8
Prepaid expenses and other current assets	301.5			359.0
Total current assets	3,536.4			3,726.7
Operating right of use lease assets	140.0			149.7
Property and equipment, net of accumulated depreciation of $620.1 and $576.4	327.9			336.6
Goodwill	817.8			828.3
Acquired intangible assets, net of accumulated amortization of $202.4 and $199.2	167.4			188.3
Other assets, net of accumulated amortization of $73.5 and $68.0	173.4			174.0
Total assets	$	5,162.9		$	5,403.6
LIABILITIES AND EQUITY
Current liabilities:
Settlement obligations	$	1,242.3		$	1,442.7
Trade accounts payable	207.0			222.4
Accrued expenses and other current liabilities	469.1			505.8
Current portion of operating lease liabilities	49.1			50.2
Short-term debt obligations and current maturities of long-term debt obligations	450.1			0.1
Income taxes payable	96.5			67.5
Deferred revenue	54.7			65.4
Total current liabilities	2,568.8			2,354.1
Debt obligations, net of current portion	1,263.0			1,609.1
Operating lease obligations, net of current portion	95.1			102.6
Deferred income taxes	28.5			28.4
Other long-term liabilities	65.3			65.0
Total liabilities	4,020.7			4,159.2
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; shares issued 64,205,802 and 64,091,387	1.3			1.3
Additional paid-in-capital	1,293.6			1,251.8
Treasury stock, at cost, shares issued 18,044,759 and 14,269,645	(1,429.7		)	(1,105.8		)
Retained earnings	1,558.7			1,348.3
Accumulated other comprehensive loss	(281.1		)	(251.0		)
Total Euronet Worldwide, Inc. stockholders’ equity	1,142.8			1,244.6
Noncontrolling interests	(0.6		)	(0.2		)
Total equity	1,142.2			1,244.4
Total liabilities and equity	$	5,162.9		$	5,403.6

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in millions, except share and per share data)


		Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022
Revenues	$	1,004.0		$	931.3		$	2,730.3		$	2,493.1
Operating expenses:
Direct operating costs, exclusive of depreciation		576.7			526.0			1,626.4			1,484.9
Salaries and benefits		153.6			134.4			444.9			392.5
Selling, general and administrative		73.9			69.6			224.4			207.6
Depreciation and amortization		32.8			32.8			99.4			101.8
Total operating expenses		837.0			762.8			2,395.1			2,186.8
Operating income		167.0			168.5			335.2			306.3
Other income (expense):
Interest income		4.0			0.6			10.1			0.9
Interest expense		(15.0	)		(11.7	)		(39.1	)		(26.6	)
Foreign currency exchange loss, net		(8.8	)		(15.8	)		(3.6	)		(36.0	)
Other (losses) gains, net		—			—			(0.1	)		0.2
Other expense, net		(19.8	)		(26.9	)		(32.7	)		(61.5	)
Income before income taxes		147.2			141.6			302.5			244.8
Income tax expense		(43.0	)		(44.0	)		(92.5	)		(81.9	)
Net income		104.2			97.6			210.0			162.9
Net loss attributable to noncontrolling interests		—			0.2			0.4			0.4
Net income attributable to Euronet Worldwide, Inc.	$	104.2		$	97.8		$	210.4		$	163.3

Earnings per share attributable to Euronet Worldwide, Inc. stockholders:
Basic	$	2.15		$	1.97		$	4.27		$	3.24
Diluted	$	2.05		$	1.87		$	4.07		$	3.10

Weighted average shares outstanding:
Basic		48,406,473			49,583,317			49,285,143			50,345,293
Diluted		51,470,603			52,751,304			52,446,292			53,688,800

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in millions)


		Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022
Net income	$	104.2		$	97.6		$	210.0		$	162.9
Translation adjustment		(61.0	)		(100.5	)		(30.1	)		(209.9	)
Comprehensive income (loss)		43.2			(2.9	)		179.9			(47.0	)
Comprehensive income attributable to noncontrolling interests		(0.1	)		(0.3	)		(0.4	)		(0.6	)
Comprehensive income (loss) attributable to Euronet Worldwide, Inc.	$	43.1		$	(3.2	)	$	179.5		$	(47.6	)

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited, in millions, except share data)

	Number of Shares Outstanding			Common Stock	Additional Paid-in Capital			Treasury Stock
Balance as of December 31, 2021	51,147,884		$	1.3	$	1,274.1		$	(931.2	)
Net income (loss)	—			—		—			—
Other comprehensive loss	—			—		—			—
Stock issued under employee stock plans	40,173			0.0		2.0			0.2
Share-based compensation	—			—		9.8			—
Repurchase of shares	(639,535	)		—		—			(70.4	)
Adoption of ASU 2020-06	—			—		(74.1	)		—
Balance as of March 31, 2022	50,548,522			1.3		1,211.8			(1,001.4	)
Net income (loss)	—			—		—			—
Other comprehensive loss	—			—		—			—
Stock issued under employee stock plans	31,233			0.0		1.3			(0.1	)
Share-based compensation	—			—		10.2			—
Repurchase of shares	(1,000,000	)		—		—			(104.6	)
Balance as of June 30, 2022	49,579,755			1.3		1,223.3			(1,106.1	)
Net income (loss)	—			—		—			—
Other comprehensive income	—			—		—			—
Stock issued under employee stock plans	13,398			—		0.5			0.2
Share-based compensation	—			—		10.3			—
Balance as of September 30, 2022	49,593,153		$	1.3	$	1,234.1		$	(1,105.9	)

	Number of Shares Outstanding		Common Stock		Additional Paid-in Capital		Treasury Stock
Balance as of December 31, 2022	49,822,707		$	1.3	$	1,251.8	$	(1,105.8	)
Net income (loss)	—			—		—		—
Other comprehensive income	—			—		—		—
Stock issued under employee stock plans	79,859			—		0.5		0.5
Share-based compensation	—			—		14.3		—
Repurchase of shares	(276,400	)		—		—		(28.3	)
Balance as of March 31, 2023	49,626,166			1.3		1,266.6		(1,133.6	)
Net income (loss)	—			—		—		—
Other comprehensive income	—			—		—		—
Stock issued under employee stock plans	30,188			—		1.3		—
Share-based compensation	—			—		12.4		—
Repurchase of shares	(810	)		—		—		(0.1	)
Balance as of June 30, 2023	49,655,544			1.3		1,280.3		(1,133.7	)
Net income (loss)	—			—		—		—
Other comprehensive income	—			—		—		—
Stock issued under employee stock plans	12,548			—		0.6		0.1
Share-based compensation	—			—		12.7		—
Repurchase of shares	(3,507,049	)		—		—		(296.1	)
Balance as of September 30, 2023	46,161,043		$	1.3	$	1,293.6	$	(1,429.7	)

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

(Unaudited, in millions)

	Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance as of December 31, 2021	$	1,083.9	$	(172.6	)	$	—		$	1,255.5
Net income (loss)		8.3		—			—			8.3
Other comprehensive loss		—		(21.1	)		—			(21.1	)
Stock issued under employee stock plans		—		—			—			2.2
Share-based compensation		—		—			—			9.8
Repurchase of shares		—		—			—			(70.4	)
Adoption of ASU 2020-06		33.4		—			—			(40.7	)
Balance as of March 31, 2022		1,125.6		(193.7	)		—			1,143.6
Net income (loss)		57.3		—			(0.2	)		57.1
Other comprehensive loss		—		(88.2	)		(0.1	)		(88.3	)
Stock issued under employee stock plans		—		—			—			1.2
Share-based compensation		—		—			—			10.2
Repurchase of shares		—		—			—			(104.6	)
Balance as of June 30, 2022		1,182.9		(281.9	)		(0.3	)		1,019.2
Net income (loss)		97.8		—			(0.2	)		97.6
Other comprehensive loss		—		(100.4	)		(0.1	)		(100.5	)
Stock issued under employee stock plans		—		—			—			0.7
Share-based compensation		—		—			—			10.3
Repurchase of shares		—		—			—			—
Balance as of September 30, 2022	$	1,280.7	$	(382.3	)	$	(0.6	)	$	1,027.3

	Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total
Balance as of December 31, 2022	$	1,348.3	$	(251.0	)	$	(0.2	)	$	1,244.4
Net income (loss)		20.1		—			(0.3	)	19.8
Other comprehensive income		—		20.8			0.1		20.9
Stock issued under employee stock plans		—		—			—		1.0
Share-based compensation		—		—			—		14.3
Repurchase of shares		—		—			—		(28.3		)
Balance as of March 31, 2023		1,368.4		(230.2	)		(0.4	)		1,272.1
Net income (loss)		86.1		—			(0.1	)		86.0
Other comprehensive income		—		10.0			—			10.0
Stock issued under employee stock plans		—		—			—			1.3
Share-based compensation		—		—			—			12.4
Repurchase of shares		—		—			—			(0.1	)
Balance as of June 30, 2023		1,454.5		(220.2	)		(0.5	)		1,381.7
Net income		104.2		—			—			104.2
Other comprehensive income		—		(60.9	)		(0.1	)		(61.0	)
Stock issued under employee stock plans		—		—			—			0.7
Share-based compensation		—		—			—			12.7
Repurchase of shares		—		—			—			(296.1	)
Balance as of September 30, 2023	$	1,558.7	$	(281.1	)	$	(0.6	)	$	1,142.2

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)


	Nine Months Ended September 30,
	2023			2022
Net income	$	210.0		$	162.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	99.4			101.8
Share-based compensation	39.5			30.3
Unrealized foreign exchange loss, net	3.6			36.0
Deferred income taxes	(5.9		)	12.2
Amortization of debt issuance costs	3.0			2.4
Changes in working capital, net of amounts acquired:
Income taxes payable, net	29.7			9.2
Trade accounts receivable, including amounts in settlement assets	157.1			6.1
Prepaid expenses and other current assets, including amounts in settlement assets	73.8			(205.4		)
Trade accounts payable, including amounts in settlement obligations	(200.0		)	(107.1		)
Deferred revenue	(10.7		)	(11.0		)
Accrued expenses and other current liabilities, including amounts in settlement obligations	110.3			400.9
Changes in noncurrent assets and liabilities	(2.4		)	10.4
Net cash provided by operating activities	507.4			448.7
Cash flows from investing activities:
Acquisitions, net of cash acquired	0.2			(331.4		)
Purchases and proceeds of property and equipment	(69.1		)	(79.4		)
Purchases of other long-term assets	(6.3		)	(5.8		)
Other, net	0.6			0.5
Net cash used in investing activities	(74.6		)	(416.1		)
Cash flows from financing activities:
Proceeds from issuance of shares	3.1			4.4
Repurchase of shares	(325.4		)	(175.3		)
Borrowings from credit agreements	6,294.1			5,924.1
Repayments of credit agreements	(6,177.9		)	(5,581.2		)
Net borrowings (repayments) from short-term debt obligations	—			4.6
Other, net	(2.2		)	(3.1		)
Net cash provided by financing activities	(208.3		)	173.5
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(172.0		)	(413.7		)
Increase/(decrease) in cash and cash equivalents and restricted cash	52.5			(207.6		)
Cash and cash equivalents and restricted cash at beginning of period	1,990.8			2,086.1

Cash and cash equivalents and restricted cash at end of period	$	2,043.3		$	1,878.5

Supplemental disclosure of cash flow information:
Interest paid during the period	$	39.2		$	21.7
Income taxes paid during the period	$	62.0		$	65.7

See accompanying notes to the unaudited consolidated financial statements.

EURONET WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL

Organization

Euronet Worldwide, Inc. (the "Company" or "Euronet") was established as a Delaware corporation on December 13, 1996 and succeeded Euronet Holding N.V. as the group holding company, which was founded and established in 1994. Euronet is a leading electronic payments provider. Euronet offers payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Euronet's primary product offerings include comprehensive ATM, point-of-sale ("POS"), card outsourcing, card issuing and merchant acquiring services, electronic distribution of prepaid mobile airtime and other electronic payment products, and international payment services.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared from the records of the Company, in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the consolidated financial position and the results of operations, comprehensive income, changes in equity and cash flows for the interim periods. The unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2022, including the notes thereto, set forth in the Company's 2022 Annual Report on Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include computing income taxes, estimating the useful lives and potential impairment of long-lived assets and goodwill, as well as allocating the purchase price to assets acquired and liabilities assumed in acquisitions and revenue recognition. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2023.

Seasonality

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.

(2) RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-06, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" which simplifies the accounting for convertible instruments by eliminating certain accounting models when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in-capital. Under this ASU, certain debt instruments with embedded conversion features will be accounted for as a single liability measured at its amortized cost. Additionally, this ASU eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments. The Company adopted this standard on January 1, 2022 using the modified retrospective approach, which resulted in the Company's Convertible Senior Notes Due 2049 being recognized as a single liability. As a result of the adoption of this standard, the Company recorded a $99.7 million decrease to additional paid-in capital, a $56.8 million decrease in debt discounts and a $42.9 million increase in retained earnings. The adoption of this standard also impacted the Company's deferred tax liability by decreasing the Company's deferred tax liability by $15.0 million, decreasing retained earnings by $10.6 million, and increasing additional paid-in capital by $25.6 million. Additionally, the elimination of the treasury stock method increased the number of dilutive shares used in the diluted earnings per share calculation, if dilutive, by 2.8 million shares.

(3) ACQUISITIONS

In accordance with ASC 805, the Company allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired based on fair values. Any excess purchase price over those fair values is recorded as goodwill. The fair value assigned to intangible assets acquired is supported by valuations using estimates and assumptions provided by management. For certain large acquisitions, management engages an appraiser to assist in the valuation process.

On March 15, 2022, the Company completed the acquisition of the Merchant Acquiring Business of Piraeus Bank ("PBMA"). The acquisition includes 205,000 POS terminals at 170,000 merchants throughout Greece, as well as Piraeus Bank’s online merchant acquiring business and expands Euronet’s omnichannel payments strategy where the Company uses its proprietary technology to provide cash, card-based acquiring solutions, alternative payment acquiring, online acquiring, tokenized payment services and other payment products. Additionally, the acquisition includes a long-term commercial framework agreement between Piraeus Bank and Euronet which includes collaborative product distribution, processing and customer referrals.

The purchase price was €317.8 million, or approximately $350.6 million, which includes $331.0 million cash paid at closing, $4.4 million cash paid for surplus working capital and $15.2 million of estimated contingent consideration for a ten-year earn out contingent on performance targets outlined in the commercial framework agreement. The contingent consideration is related to a percentage of the net fee income received during the ten-year period of the commercial framework agreement and there is no contractual maximum amount of consideration under this agreement.

The acquisition has been accounted for as a business combination in accordance with U.S. GAAP and the results of operations have been included from the date of acquisition in the EFT Processing Segment.

The following table presents the final fair value that was allocated to PBMA's Euronet Merchant Services' (EMS) assets and liabilities based upon fair values as determined by the Company. The valuation process to determine the fair values is complete. For the year ended December 31, 2022, the Company made measurement period adjustments to reflect facts and circumstances in existence as of the effective time of the acquisition. These adjustments primarily included an adjustment to the accrued expenses and other current liabilities related to the surplus working capital of $4.4 million and some other immaterial adjustments.

(in millions)	As of March 15, 2022
Other current assets	$	1.8
Settlement assets		77.6
Property and equipment		5.7
Intangible assets		122.5
Total assets acquired	$	207.6

Trade accounts payable	$	(2.1	)
Settlement liabilities		(65.9	)
Accrued expenses and other current liabilities		(1.3	)
Deferred revenue		(0.3	)
Other long-term liabilities		(0.1	)
Total liabilities assumed	$	69.7