Overcoming what Euronet Worldwide Inc. executives called regulatory, competitive and economic pressures, the international electronic funds transfer company on Feb. 20 reported strong fourth-quarter transaction growth and revenue increases.
The company overcame pressures from regulated ATM-fee reduction in Germany the past year, though those regulations did cut into Euronet earnings margins, Rick Weller, chief financial officer, told analysts during a Feb. 21 conference call to discuss the quarter’s earnings.
The Leawood, Kan.-based company benefited from revenue and transaction growth in electronic funds transfers in markets around the world, with much of the increase generated from the Czech Republic, Romania, India, Pakistan and cross-border acquiring in Europe, Weller noted.
Growth in funds transfers from the United States, Europe and Canada combined with “continued momentum from other value-added transactions” such as mobile top-up, check-cashing, bill payment and prepaid debit cards to aid fourth-quarter results, Weller added.
The company’s Sept. 20 purchase of Cadooz Holding gmbH, a German company specializing in corporate payment vouchers and loyalty/rewards programs, helped offset the ATM regulations in that country and kept earnings on the positive side, Weller noted.
Mike Brown, Euronet chairman and CEO, told analysts that Euronet agreements with other companies and the introduction of new products during the year also helped offset the year’s challenges.
“Last year, we mentioned significant challenges facing our EFT business related to German rate reductions,” Brown said. “I’m happy to report that one year later, we have nearly overcome the gap created by Germany because of new products we have been telling you about during the year.” (Effective in January 2011, the German government reduced allowable surcharges at an ATM to 4.95 euros from a high at some institutions of 10 euros, while private banks agreed to a flat rate of 1.95 euros per withdrawal.)
Euronet announced in November it had received approval from the Financial Service Authority of the United Kingdom to acquire ATM and credit card transactions throughout most of Europe without the requirement of a sponsor bank, a move Euronet officials believed would speed up the process of deploying ATMs (see story).
In December, Euronet continued its expansion of e-payment processing in Europe with the acquisition of Romania-based Smart PayNetwork SA (see story).
“With the acquisition of Smart PayNetwork, we added 734 ATMs and 2,560 point-of-sale terminals throughout Romania,” Brown said.
As he did during a third-quarter earnings conference call, Brown noted U.S. funds transfers to Mexico continue to grow, showing a 10% increase in the fourth quarter compared with a year earlier.
“This is the first double-digit growth in transfers to Mexico that we have seen in several years, and I feel it represents the long, anticipated recovery of this important corridor,” Brown said.
Epay’s agreement with Zynga Game Network Inc. in August provided a key new product for the year, Brown noted (see story).
Euronet reported revenues rose 12.5% for the three-month period ended Dec. 30, to $319.4 million from $283.8 million. Net income was $11 million, which compared with a fourth-quarter loss of $61.4 million a year earlier.
The company’s EFT Processing segment reported fourth-quarter revenue of $54.3 million, up 7.1% from $50.7 million a year earlier. Transaction volume rose 22.4%, to 257 million from 210 million.
Euronet’s epay segment reported revenues of $191.2 million, up 13.9% from $167.9 million a year earlier. The total number of transactions processed rose 19%, to 1.06 billion from 891 million. The unit processed transactions initiated from 615,000 point-of-sale terminals, up 9.2% from 563,000. Total retailer locations rose 6.2%, to 293,000 from 276,000.
The company’s Money Transfer unit generated $74 million in revenues, up 13.1% from $65.4 million. Total funds transfers reached 6.6 million, up 18% from 5.6 million.
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