Aided by relatively strong performance from its EFT Processing segment, transaction processor Euronet Worldwide Inc. reported favorable second-quarter revenue and profitability.
Revenues were up 14.6% for the period ended June 30, to $279.8 million from $244.2 million. Net income was $11.9 million; the company reported a $1.5 million loss during the same period last year.
The results also reflect the strengthening of foreign currency exchange rates to the U.S. dollar, the Leawood, Kan.-based company, which generates 75% of its revenue from non-U.S. operations, said in its earnings release.
The company’s EFT Processing segment reported revenues of $50.4 million for the quarter, up 8.4% from $46.5 million a year earlier. Transaction volume grew 18.3%, to 233 million from 197 million, primarily because of growth in the company’s cross-border Indian Cashnet and Polish operations, Euronet said.
“Countries leading the growth included the Ukraine, the Czech Republic, Poland, Romania, China and India,” Rick Weller, Euronet chief financial officer, told analysts during a July 27 conference call to discuss the quarter’s earnings.
Euronet also says it overcame the challenges with Polish and German ATM interchange-rate changes by developing and selling value-added products, renegotiating contracts with service providers, expanding into new markets and increasing ATMs under management (
Robert J. Dodd, an analyst with the equity firm of Morgan Keegan & Co. Inc., also acknowledges the electronic funds transfer unit’s activity as helping improve Euronet’s performance. “Euronet had a very good performance [for the second quarter] particularly in the EFT sector with its ATM outsourcing,” he tells PaymentsSource.
The company had difficulty over the past 12 months as ATM-fee structures were lowered in Germany and Poland, Dodd says The addition of about 1,000 ATMs in countries such as Pakistan, Greece, Croatia, India and China helped boost the unit’s performance, he says.
In Poland, the company experienced strong organic transaction growth driven by both the expansion of ATM deployments and banks’ encouragement to customers to use “off-net” machines because of lower interchange fees, Weller said. “I guess there is a bit of favorableness for our business following the reduced Polish interchange rates,” he said.
Euronet’s epay segment reported second-quarter revenues of $156.5 million, up 13.7% from $137.6 million during the same period last year. The segment processed 264 million transactions, up 29.4% from 204 million. The company unit processed transactions initiated from 588,000 point-of-sale terminals as of June 30, up 14.2% from 515,000 a year earlier.
The company attributes the unit’s revenue and profitability to nonmobile products, the acquisition of epay Brazilian in Brazil, and transaction-volume increases in most markets driven by new customers and an increased demand for mobile and non-mobile products. That growth was offset by declines in transaction volumes in the United Kingdom and Australia, where the “competitive landscapes remain challenging,” Weller said.
Euronet’s Money Transfer unit generated revenues of $73 million, up 21.5% from $60.1 million. The segment processed 6 million transactions funds transfer, up 13.2% from 5.3 million.
The company operated 133,000 funds-transfer network locations as of June 30, up 27.9% from 104,000 a year earlier. Euronet reported a 22% increase in European and other foreign-country funds transfers and a 32% increase in check-cashing and bill-payment volume.
Weller also acknowledged stronger results from U.S.-originated funds transfers. “It’s not a victory yet, but we certainly like the direction it’s going,” he told analysts.
Expenses rose for the company’s Money Transfer segment, caused by the start-up business with 7-Eleven stores. But profitability should go back up after that investment, Dodd says.
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