Sign in

    Euronet Worldwide Inc (EEFT)

    Q3 2024 Earnings Summary

    Reported on Feb 17, 2025 (Before Market Open)
    Pre-Earnings Price$99.09Last close (Oct 23, 2024)
    Post-Earnings Price$99.04Open (Oct 24, 2024)
    Price Change
    $-0.05(-0.05%)

    What went well

    • Euronet's Money Transfer segment is growing over four times faster than the overall market, with U.S. outbound and international originated transactions growing 12% and 14%, respectively. This indicates significant market share gains and supports continued strong growth.
    • Digital money transfers are showing significant momentum, with 58% growth in new customers in the third quarter. Additionally, digital transactions are slightly more profitable than bricks-and-mortar transactions, enhancing margins.
    • Positive regulatory developments in Europe allow Euronet to implement domestic access fees in 10 new countries, which is expected to increase profitability in the EFT segment. This leverages their extensive ATM network and the trend of bank branch closures to capture a larger share of transactions.

    What went wrong

    • International ATM transactions are declining by approximately 0.7% and expected to decline 1% per year, indicating headwinds for EEFT's EFT segment revenue growth. The company acknowledges this decline and relies on expansion into new markets to offset it, which may not fully compensate for declines in mature markets.
    • EFT margins may not return to pre-COVID levels due to significant cost increases over the last 4-5 years. The company's merchant services business, which has lower EBITDA margins (25%) compared to pre-COVID segment margins, is expected to hold down overall segment margins, potentially impacting profitability.
    • High marketing costs are necessary to sustain growth in the digital money transfer business, with an increase of $2 million in marketing spend compared to the same quarter last year. Additionally, many customers are "one-and-done", raising concerns about customer retention and the sustainability of growth in this segment.

    Q&A Summary

    1. Money Transfer Business Outperformance
      Q: What's driving your outperformance in U.S. to LatAm transfers?
      A: We are growing market share, with transactions up over 4x faster than the whole market. Despite potential weaknesses in specific corridors, we continue to gain share, aided by strategic partners like PLS. Excluding declining Walmart cash-to-cash transactions since COVID, our money transfer business is performing exceptionally well.

    2. EFT Segment Margins Outlook
      Q: Can EFT margins rise above the high 30% range?
      A: We don't expect to return to pre-COVID margin levels due to significant cost increases over the last 4–5 years. While we find opportunities to add access fees and may see momentum on interchange rate increases, we're cautious about driving margins higher. Our merchant acquiring business, with EBITDA margins of about 25%, has grown significantly but holds segment margins down somewhat.

    3. Digital Money Transfer Growth
      Q: How is your digital money transfer business performing?
      A: Our digital money transfer business is growing rapidly, with 56% growth in new customers this quarter. Customers are sticky; some who joined 5 or 6 years ago are still transacting. Digital transactions are slightly more profitable than bricks-and-mortar ones, despite higher marketing costs. Overall, we're growing 4x faster than the market, leveraging both our strong bricks-and-mortar presence and our digital product.

    4. PLS Financial Deal Significance
      Q: What makes the PLS Financial deal strategic?
      A: We have an exclusive agreement with PLS, replacing a competitor's exclusivity. Although PLS has 200 locations, they are among the biggest check cashers in America, handling huge volumes. PLS focuses on customers who rely on services like check cashing and money transfers, leading to significantly higher transaction volumes than typical agents.

    5. Domestic Access Fees Expansion
      Q: Can you frame the opportunity in expanding domestic access fees in Europe?
      A: We're seeing positive industry movement towards making access fees available or increasing interchange. Banks can't afford low interchange rates (e.g., in Poland, costs are $0.80 per transaction but interchange is only $0.30), leading to ATM shutdowns. This trend allows us to gain a bigger piece of the pie as bank branches close and increases our profit per transaction, bolstering our confidence in continued growth and rising margins.

    6. epay EBIT Growth and Promotions
      Q: Should we expect 8–10% EBIT growth in epay this year?
      A: Yes, aided by heavier promotional activity in the fourth quarter. While promotions are irregular and can cause quarterly volatility, campaigns this year are lining up to be strong. It's prudent to view epay's performance on an annual basis due to the lumpiness of promotions.

    7. epay Investments and Direct Deals
      Q: What investments are you making in epay, like with GTA?
      A: We're diversifying epay away from reliance on third-party content by introducing our own products, such as gift cards YouChoose in the U.K. and Prezzy in New Zealand. We're also developing solutions like compliance products and a closed-loop gift card issuing platform. For the first time, we're selling Grand Theft Auto directly to consumers via a direct deal with the publisher, offering better margins than selling through platforms.

    8. International ATM Transactions Outlook
      Q: Can you sustain growth in international ATM transactions?
      A: International transactions are down by only 0.7%, so roughly flat. We're expanding into new markets where tourists are underserved, finding niches to outperform. With 25% of European bank branches closing in the last 5 years, competition for transactions decreases, allowing us to gain more market share.

    Related Publications