Yahoo Finance Euronet Worldwide Inc (EEFT) Q1 2024 Earnings Call Transcript Highlights: Record Revenues and ...
Revenue: $857 million, a record for the first quarter.
Adjusted Operating Income: $64 million.
Adjusted EBITDA: $109 million, a record for the first quarter.
Adjusted EPS: $1.28, a 47% increase from the previous year's $0.87.
Pro Forma Adjusted EPS: $1.13, excluding tax benefits and duty fee recovery, representing a 30% growth over the previous year.
Net Debt Leverage: Approximately 1x EBITDA.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Record first quarter with revenue of $857 million, adjusted operating income of $64 million, and adjusted EBITDA of $109 million, marking a significant increase across all metrics.
Adjusted EPS reached a record-breaking $1.28, a 47% increase over the previous year, driven by strong performance in international transactions and strategic market expansions.
EFT segment showed robust growth with a 12% increase in revenue, 220% growth in adjusted operating income, and 54% growth in adjusted EBITDA, fueled by higher domestic and international cash withdrawal transactions.
Money Transfer segment revenue grew by 7%, with operating income and adjusted EBITDA increasing by 17% and 10% respectively, supported by a 23% increase in direct-to-consumer digital transactions.
Strategic acquisitions and technology investments, such as the acquisition of Infinitium Holdings, enhance Euronet's market position and product offerings, contributing to long-term growth.
Negative Points
Despite overall growth, the epay segment experienced a slight decline in EBITDA and adjusted operating income by about 2% to 3% due to investments in product and geographical expansion.
Inflationary pressures particularly in the European markets have impacted margins, especially within the epay segment.
The intra U.S. transactions in the Money Transfer segment continue to decline, although at a slower rate, affected by digital payment alternatives like Venmo and Cash App.
The company faces ongoing challenges from regulatory changes and market conditions that could affect surcharge and interchange rates in the future.
While the company is expanding geographically, each new market entry requires significant effort and time due to regulatory hurdles and the need to establish operations from scratch.
Q & A Highlights
Q: Regarding the epay segment, you mentioned inflationary pressures impacting the margin. Where did you see the inflation specifically? And are there other offsets on a go-forward basis? A: Rick L. Weller, Euronet Worldwide, Inc. - Executive VP, CAO & CFO, noted that inflation was more concentrated in European markets where epay has significant business. He mentioned that geographical and product expansion, as well as proprietary products, could improve margins moving forward.
Q: Within EFT, how much more runway is there to optimize the network? A: Michael J. Brown, Euronet Worldwide, Inc. - Chairman, CEO & President, explained that EFT continuously optimizes by relocating lower-performing ATMs and expanding into new markets, suggesting ongoing opportunities for network optimization.
Q: Any update on surcharge or interchange? And what were the total ATMs redeployed in 4Q and 1Q? A: Michael J. Brown mentioned ongoing discussions with regulators about surcharges and interchange fees, expecting changes in the next year or two. Approximately 2,000 ATMs were redeployed across these quarters, contributing to improved profitability by removing loss-making units.
Q: Can you talk about the opportunity to expand your tourist-focused ATMs outside of Europe? A: Michael J. Brown highlighted significant growth opportunities for tourist-focused ATMs outside Europe, particularly in Southeast Asia, North Africa, and south of the U.S. border, emphasizing a strategic focus on these regions.
Q: Most of the Ren business has been outside of the U.S. Can you talk about the opportunities to work with U.S. financial institutions? A: Michael J. Brown and Rick L. Weller discussed ongoing discussions with large U.S. banks, highlighting the banks' interest in Euronet's modern Ren technology to replace outdated systems, indicating potential future expansions into the U.S. market.
Q: Could you help me unpack the drivers of that big 60% incremental EBITDA margin this quarter in EFT? A: Michael J. Brown explained that the significant EBITDA margin was driven by increased transactions and the strategic removal of non-performing ATMs, which significantly reduces costs and improves profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
