STRATEGIC PARTNERS
October 15, 2002
LEAWOOD, Kansas -- Although Euronet Worldwide has posted revenue gains quarter after quarter, amounting to $64.1 million for 2001, profitability continues to evade the company. It reported a net loss of $5.9 million in 2001, an improvement over 2000's net loss of $35.3 million.
According to a report in the Kansas City Business Journal, part of Euronet's plan to make it into the black includes re-evaluating its future ATM deployment in the UK. Newly-installed ATMs throughout Western Europe have not reached the transaction levels expected and are not producing a return on investment, according to information filed with the Securities and Exchange Commission.
Euronet Chairman and CEO Michael Brown told the Journal that Euronet plans to generate long-term profits with several contracts signed between late August and late September that will build on Euronet's outsourcing and data processing services for ATMs it does not own.
According to Euronet, the outsourcing contracts with Bayerische Hypo-und Vereinsbank AG (HVB), ABK/USAID, Tatra Banka and a fourth unidentified customer will increase Euronet's annual outsourcing revenue by approximately 45 percent in 2003 as compared with annualized 2002 outsourcing revenue and will add between up to 520 bank-owned, Euronet-driven ATMs to Euronet's network.
Once the ATMs are rolled out, Euronet expects the contracts to provide revenue of approximately $5.8 million a year.
According to Euronet's Aug. 14 quarterly report: "We believe the shift from a largely proprietary, Euronet-owned ATM network to a more balanced mix between proprietary ATMs and customer-owned ATMs is a positive development and will provide higher marginal returns on investments."
Franco Turrinelli, a Chicago-based analyst for William Blair & Co. LLC, agreed that this is the right move because it allows the company to generate profits without investing much capital.
Euronet capped off the third quarter with its Oct. 4 announcement that it had opened a new data processing center in Budapest, Hungary that should triple its transaction processing capability in Europe.
As Euronet gears up for the end of the year, its leaders are also changing the way they communicate with Wall Street, according to the Journal report. Brown said that he and other top executives plan to personally communicate the company's direction to analysts and investors.
That message coincides with the recent departure of Serri Helm, who was Euronet's director of corporate communications and investor relations. She had acted as the conduit between analysts and company directors. There are no plans to fill the position, Brown said.
Jeff Baker, a principal with U.S. Bancorp Piper Jaffray Inc. in Minneapolis, told the Journalthat Euronet would do itself a favor by being more forthcoming about its future plans.
"The company hasn't traditionally given a depth of guidance to Wall Street. They're just not giving numbers," he said.
William Blair & Co's Turrinelli agreed that Euronet's future has been difficult to assess, given the little information Wall Street has been given.
"By the general standards ... I think the company does have a very rigid interpretation of the disclosure rules," he told the Journal.
The late summer announcements of new business came later than expected for Wall Street. Brown said several contracts were expected to be signed in the first or second quarter but got pushed back for various reasons.
Like other companies in the data processing business, Euronet's Nasdaq-traded stock has suffered. It hit a 52-week high of $22.20 a share in January, then tumbled to less than $5 a share in mid-October.
With the new contracts, however, Brown said he thinks Euronet "can't help but break even for the year."
U.S. Bancorp Piper Jaffray's Baker will reserve judgment until Euronet's new business shows up on the balance sheet. "I don't think we've seen anything yet," Baker told the Journal. "The company has to execute."
