Euronet’s strong recovery continues – EFT revenues up 41%

Euronet’s impressive recovery continued in Q3 as resurgent international travel boosted revenues and profits. The company processed 48% more transactions than a year earlier with average profit per transaction up 25%. Euronet is headquartered in Kansas but does most of its business outside the US

Total group revenue in Q3 was $931m, 14% higher than the same period in 2021. In addition to the rebound in travel, sales were also boosted by the acquisition of Piraeus Bank’s merchant acquiring business in March 2022 and “a significant volume increase in low-priced payment processing transactions in Asia Pacific.”

Michael Brown, Chairman and CEO said, “Consumers across the globe, not only want to travel, but can’t wait to travel and they still want to use cash when they finally arrive at their destination.” The travel recovery has been patchy. Happily for Euronet, Greece outperformed. International arrivals were up 2% in Greece on 2019 levels although total European inbound travel remains down 26% on pre-pandemic numbers. 

Euronet comprises three divisions. The ePay and money transfer units grew sales in low single digits but EFT (which includes ATM processing and merchant services) once again had a stand-out quarter. EFT grew revenues 41% to $319m with total transactions up 48% at 1.7bn.

The new Greek operation seems to have made a positive start. It contributed $30m to EFT revenues and is winning ISVs partnerships and marquee corporate accounts. For example, Euronet has signed a resale agreement with EpsionNet, a local software company with “more than 100,000 customers” and added 3,000 new merchants including Carrefour, McDonalds, Odeon and Heron Energy. Outside Greece, Euronet signed and onboarded 770 new merchants during Q3 through its Innova Tax Free and Pure Commerce business units.

While some commentators fear for the future of ATMs as customers shift spending to cards, Euronet remains optimistic. Michael Brown explained that travellers still need some cash and, with banks closing branches at an increasing pace, they will get money from the “first ATM you trip over when you’re on vacation… and there’s a higher likelihood they’ll trip over my ATM versus the bank’s ATM.

Euronet continues to expand its footprint as the leading independent ATM operator. The company finished the quarter with 51,437 ATMs, up 8% despite “facing some challenges in the ATM supply-chain, which has slowed down some of our ATM expansion.”

Total operating income was up 47% to $168m driven once again by a strong EFT performance which demonstrated strong operational leverage in growing income 85% to $116m. Margins expanded from 27.8% to 36.4% boosted by a 25% increase in operating income per transaction to 6.3c. As international travel recovers, Euronet’s search for high value transactions can sometimes push pricing a little too far. I found a Euronet ATM in Malta last month charging 9.5% commission for DCC. 

Total adjusted EBITDA, the company’s preferred measure of profitability, was up 36% to $212m. EFT again outperformed with EBITDA increasing 63% to $140m. Michael Brown said “we spend a lot of money on R&D. And that’s why we’ve got the tech stacks that continue to win more and more business. But we don’t whine about it. I mean we don’t say, “Oh, we’re spending this much more on R&D this year, just to make your future better and use that as an excuse for bad results today.”

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