Euronet Worldwide, Inc. (EEFT) Q1 2013 Earnings Report, Transcript and Summary

Greetings and welcome to the Euronet Worldwide First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call may be recorded. It is now my pleasure to introduce your host, Mr. Jeff Newman, Executive Vice President and General Counsel for Euronet Worldwide. Thank you. Mr. Newman, you may begin.

Thank you, Sam. Good morning, and welcome, everyone, to Euronet's quarterly results conference call. We'll present our results for the first quarter 2013 on this call. We have Mike Brown, our CEO; Rick Weller, our CFO; and Kevin Caponecchi, the President of Euronet Worldwide, on the call. Before we begin, I need to make a disclaimer concerning forward-looking statements. Statements made on this call that concern Euronet's or its management's intentions, expectations or predictions of future performance are forward-looking statements. Euronet's actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors, including conditions in the financial markets and general economic conditions, technological developments affecting the market for the company's products and services, foreign currency exchange fluctuations, the company's ability to renew existing contracts at profitable rates, changes in ATM and other transaction fees, and changes in laws and regulations affecting the company's business, including immigration laws. These risks and other risks are described in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Copies of these filings may be obtained via the SEC's EDGAR website or by contacting the company or the SEC. Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances. The company regularly posts important information to the Investor Relations section of its website. Now I'll turn the call over to Rick. Rick?

All right. Thank you, Jeff, and welcome, everyone, on the call. I will begin my comments on Slide 5. For the first quarter, we delivered revenue of $335.6 million, operating income of $19.2 million, EBITDA of $39.4 million, and we exceeded the guidance we provided by delivering cash earnings per share of $0.38. Aside from strong results across these 4 P&L measures, we also had good growth from all 3 segments. I will discuss the results in more detail when I get to the segment reporting in the coming slides. Next slide, please. On Slide 6, we present the 3-year transaction trends for all segments. EFT grew 3% driven by increases in Poland, Romania, Serbia, China and from our cross border acquiring business. This growth was offset by a decline in India, where a certain government bank decided to in-source their transaction processing. Mike will discuss this agreement in more detail during his comments, but it is important to note that the reduction in transactions did not have an impact on our financial results in the quarter, nor will it have any significant impact in the future. Epay transactions grew 5% in the quarter, largely from growth in the U.S., Germany and India, partially offset by continued declines in the U.K., Australia and Spain. Ria continued to experience strong transaction growth, with total transactions increasing 19% and increases across all regions. Money Transfer transactions grew 18% in the quarter, with U.S.-originated transactions growing 23%. The U.S. growth includes a 26% increase in transfers sent to Mexico and a 21% increase in transfers sent to other LAC corridors. Transfers initiated outside of the U.S. grew 11%, representing 6 years of quarter-over-quarter growth outside the U.S. Next slide, please. On Slide 7, we present our financial results as reported. Foreign currency rates were relatively consistent year-over-year. To give you a better perspective, the euro was stronger by about 0.7%, the Australian dollar weaker by about 1.6% and the Polish zloty strengthened by about 2.4%. Accordingly, the results, whether discussed on a constant dollar or reported basis, are essentially the same. To that end, I'll cover the segment results on a constant dollar basis on the next slide. Here, on Slide 8, you could see all segments posted year-over-year growth for revenue, operating income and EBITDA. EFT grew 28% -- operating EFT revenue grew 28%, operating income increased 12% and EBITDA increased 25%. The revenue and EBITDA growth was attributable to expansion of our ATM networks and increased demand for our value-added service products. The lower operating income growth was the result of approximately $1.4 million of intangible purchase price amortization recorded related to our acquisition of Pure Commerce in early January. The Pure Commerce acquisition had a marginal contribution to the EBITDA growth. Without the impact of the intangible amortization, operating income would have increased by 33%. Operating income margin after excluding the Pure Commerce intangible amortization expanded a bit over the prior year. Epay recorded revenue, operating income and EBITDA growth of 8%, 11% and 5% respectively. These increases were the net result of good prepaid mobile sales in the U.S. and continued expansion of our non-mobile content, particularly in Germany, strong first quarter activations of cadooz vouchers sold in the fourth quarter and some transaction rate volume mix, particularly in the U.S. and cadooz products. All in all, the epay segment had a good quarter, a little ahead of our expectations and off to a solid start for the year. Money Transfer delivered strong growth rates this quarter with 16% for revenue, 40% for operating income and 20% for EBITDA. This expansion was led by network growth of 28% over last year and transaction growth from all regions. Revenue per transaction was down slightly, less than 2% due to a greater mix of transfers to Mexico this year, following a year of growth of nearly 20%. Pricing has been stable, as you can see in the revenue per transfers going south of the border holding constant with that of last year. And finally, operating income margins for the Money Transfer segment as a whole expanded over last year's operating margins. In summary, and after giving -- after excluding EFT's non-cash incremental purchase price amortization, all segments posted year-over-year growth in revenues and operating income, as well as expansions in operating income margins. By all accounts, I think we can say that we hit on all cylinders this quarter, a great start to the year. Let's move to Slide 9. On Slide 9, we present the balance sheet for the quarter. Cash decreased in the quarter primarily due to the acquisition of Pure Commerce and repayment of debt, partially replenished by cash flows generated from operations. We continue to actively manage our balance sheet, lowering our debt and producing free cash flows. Our continued improvement in leverage and strong free cash flows further supports the investment grade rating we reported last quarter. With that, I'll conclude my comments and hand it over to Mike.

Thank you, Rick, and thanks to everybody joining us today. This was a strong quarter for our business, where all 3 segments continued to execute on their strategies. In EFT, we have further expanded our ATM networks and increased the penetration of our value-added services. In epay, we have worked with mobile operators in the U.S. to develop solutions that help them improve visibility and management of their mobile top-up products, and we have increased the presence of our non-mobile content across our markets. Ria delivered solid execution, producing network and transaction expansion worldwide. Our new PowerPoint template features the graphics from our 2012 annual report, which focused on our strong execution during last year. The images of a mechanical clock are used as an analogy for how all the moving parts must work together in order to achieve the desired results. I'm pleased that we continued this theme of strong execution in the first quarter, with all 3 segments contributing to earnings growth. Now let's move on to Slide #13, and we can talk about the specific highlights of the EFT segment. On Slide #13, you can see that we continue to have a strong pipeline of new agreements. Some of these include the launch of our independent ATM networks in 2 additional countries, Serbia and Austria. The hardest part of launching any new country is getting those first few ATMs up and running. These new ATMs are still in the ramp-up process, but we expect these networks to grow as we move throughout the year. We continue to lead ATM advancement in Poland. In the first quarter, we signed a foreign exchange transaction processing agreement with Deutsche Bank. Through this agreement, we will provide euro currency withdrawals for domestic cardholders on approximately 600 Euronet ATMs in Poland. This is our first large-scale launch of automated foreign currency ATMs, and we have the first such ATMs in the Polish market. These ATMs will be deployed in 2 phases, and we intend to launch the pilot phase next week. Additionally, you may remember the agreement with Kraft we mentioned last year, and the agreement with Deutsche Bank we told you about last quarter to enable cardless payouts on our ATMs. This quarter, we continued to expand the cardless payout product in Poland, where we signed new agreements with BPH Bank and Philip Morris, which allowed customers to collect transferred funds or contest winnings at an ATM without presenting the card. Finally, in Asia-Pacific, we renewed an agreement with Standard Chartered Bank, which cover services for the bank in 23 countries throughout the region. This is our largest customer in Asia-PAC region, and we are pleased with this renewal. Next slide, please. Okay, now we're on Slide #14. During this quarter, our agreement with IDBI Bank in India expired. Let me explain what this means to us. As Rick mentioned, the bank decided to in-source the driving of their transactions, which were fully migrated over to their platform in the first quarter of this year. However, we maintain the managed services portion of this agreement with no change to the revenue contribution. This is one of our original contracts in India, and one that we have held for 11 years with substantially the same terms and conditions. Because IDBI Bank is government-owned, when the agreement came up for renewal, they were required to put it out for public bid. These were very low margin ATMs for us to start with, contributing less than $50,000 after tax per quarter. A third party came in willing to provide managed services and further reduced those margins. We made a decision not to pursue the renewal because the commercial terms didn't make sense for our business. So beginning in the second quarter of this year, you will see a reduction of almost 1,600 ATMs in our total ATM count. It is important to note that while this agreement significantly impacts our transaction in ATM numbers, you won't notice much of an impact on our financial results in the coming quarters. On a more positive note, we continue to see strong demand for our value-added services products introducing them on our customers' ATM and POS networks in Serbia, Montenegro, Greece and Hungary. Additionally, just this week, our EFT and epay teams achieved a significant technical milestone, enabling banks to distribute epay content through internet, mobile banking apps and ATMs. The team launched iTunes with 2 banks this week, PostFinance in Switzerland and BNL Bank, a subsidiary of BNP Paribas, located in Italy. Distribution through banks is a new channel for our epay content, and we believe these are the first 2 instances of such distribution in the world. This is a great example of the technical capabilities of both our EFT and epay team. In the quarter, we added 373 ATMs to our network, primarily in India and Poland. This resulted in a 15% increase in total ATMs over the same quarter last year. Although typically weak due to seasonality, this was a very strong quarter for our EFT team, and we expect this momentum to continue in the second quarter. Now let's move on to Slide #16, and we'll talk about epay for a bit. On Slide #16, we show the first quarter financial highlights. I'm very pleased to say that epay returned to growth and contributed to overall earnings expansion in the first quarter. This growth was primarily from 2 sources, sales of our mobile operator solutions in the U.S. and continued expansion of our non-mobile content across our markets. Let's move on to Slide #17, where I will provide additional details. On Slide #17, these are some of the core highlights – or some of the highlights from our core Prepaid business. For several quarters, I've been telling you about the success of our agreement with Boost Mobile here in the U.S. On the heels of that success, last quarter, we announced a similar agreement with T-Mobile, making epay their sole provider of prepaid top-up and commission payments to independent retailers in the United States. We launched this product for T-Mobile in first quarter '13. We are now live in approximately 6,000 retailers, and have seen significant transaction growth throughout the quarter. These solutions have been strong growth drivers here in the U.S., and we are working to introduce value-added solutions to mobile operators in other markets. We continue to increase the distribution of MVNOs, which for those of you who aren't familiar with that term, an MVNO is a mobile virtual network operator. They have their own brand, but utilize a major mobile operator's network for airtime sold. This quarter, we launched Lycamobile in Ireland and the U.K., and we won an exclusive agreement to distribute 2 of Sprint's MVNO brands in the U.S. We also expanded our SIM card distribution. We now sell elite mobile SIM cards in 300 independent retail locations in the U.K. Now let's move on to Slide #18, and we can talk about our non-mobile content. Here on Slide #18, you can see that we continue to have great success with our non-mobile content. To give you an idea, non-mobile content grew 22% year-over-year, such that non-mobile now makes up 29% of our epay total gross margin compared with 25% in the first quarter of last year. We expect that this number will increase as some of our newer content takes hold and we expand our portfolio into new markets. In the first quarter, we launched Microsoft Office using point-of-sale activation in Germany, the U.K., Ireland and France. Germany has traditionally been our strongest non-mobile market, so we think this product has great potential. This quarter, we introduced a gaming mall, which includes Amazon, Sony, Nintendo and Xbox products at independent retailers in the U.K. We're starting to see good traction from our non-mobile content in the U.K. Additionally, cadooz expanded their best choice online shop to the Spanish market. This is our first expansion of cadooz's product outside of Germany. Finally, the same European Payment Services Directive, the PSD license, that has allowed us to expand our ATM network and our EFT division, has now enabled us to become the online payment acceptance provider for Fleurop's German website. Fleurop is one of the world's largest florist associations, like FTD florist networks here in the U.S. We're excited about this new opportunity within the epay segment. I would also like to point out the important contribution of epay to cross-selling successes in other segments. Similar to prior quarters, where we commented on epay's efforts to provide products sold through Ria channels, this quarter, epay's content relationships enabled EFT segment -- our EFT segment, to sell iTunes products into the banking channel, as I mentioned in the EFT review. So while we still face some challenges in a certain epay markets, our strategy remains the same, and that's to introduce additional value-added products to our mobile operators to introduce new products and expand those products into new channels and additional markets. We're off to a good start this year in epay, and we expect the year-over-year growth to continue as we move through the rest of the year. Now let's move on to Slide #20, and we'll talk about Ria. The Money Transfer segment continued its momentum, delivering strong top and bottom line growth in the quarter. The team has worked diligently to add new send and payout locations, which is key to transaction and profit growth. As I am visiting with our investors and analysts, I get asked questions about online money transfers. We are making significant investments in an online solution that will satisfy the needs of our global consumers. We believe the online channel targets a different customer profile, and will be complementary to our agent base. The product is still in development and testing, but I'm excited to give you more information on it in the coming quarters. Next slide, please. We're on Slide #21 now, and we detailed the changes in Ria's network in the quarter. With the addition of bank deposit service in Mauritius, our network now reaches 134 countries. We also added 22,000 locations in the first quarter of this year, bringing the total network locations to about 200,000, a 28% increase over the same quarter last year. Our team has done a great job strengthening our network footprint in top remittance markets and regions. This quarter, we added more than 18,000 new locations in South Asia, including additions in Indonesia, India and Nepal. Early in the quarter, we opened cash pickup service in more than 10,000 PT bank rakyat locations in Nepal, and we've seen strong response from our customers so far. We also launched more than 1,000 reliable finance locations in Nepal. And in India, we expanded our cash pickup to an additional 7,000 locations. We are certainly gaining momentum in this region, and we expect to see strong growth as we continue to expand our payout network throughout the rest of the year. In addition to these launches, we also signed 6 new correspondents. They're not live yet, but we're working on them. These include agreements for 600 locations in Nigeria, 400 locations in Vietnam, 168 locations in Honduras and 119 more locations in Bangladesh. Next slide, please. On Slide #22, you can see the breakdown of our transactions for the quarter. Money Transfer transactions grew 18% this quarter, which compares to a growth of 14% in the first quarter last year, and is just shy of the 20% growth rate last quarter of -- in the December quarter. This is the eighth consecutive quarter Ria has produced double-digit Money Transfer growth. As Rick mentioned, we continue to see strong contributions from the U.S., our largest origination market, where money transfers grew 23% year-over-year. While the Latin American and Caribbean countries continue to represent Ria's largest corridor concentration from the U.S., the transaction growth has been broadly dispersed across nearly all of the top emerging market corridors. Transfers from the U.S. to non-Mexico destinations increased 21%, as Ria produced double-digit transaction growth to 80% of its top 30 corridors from the U.S. in the first quarter. Ria's international send market saw 11% transaction growth, with expansion across every market. While we still see some softness in our 2 largest European markets, Spain and Italy, the first quarter represented the second consecutive quarter of year-over-year growth in those 2 markets, and we see indicators that make us optimistic about both these markets going forward. Non-money transfer transactions continue to deliver solid growth as a result of the continued focus on adding additional products and content to our core Money Transfer capabilities. This quarter, non-money transfer transactions increased 29% over the same quarter last year. This strong growth rate continues to be from products such as mobile top-up, check-cashing and bill payments that agents find to be complementary to their Money Transfer business. Prepaid airtime sales continue to be an important component of Ria's non-money transfer product offering, and Ria is seeing significant growth in markets like Italy and the U.S., where we offer our own branded product, Ria Pinless, which continues to receive great response from our customers. Overall, this was another very strong quarter for our Money Transfer business. We see more opportunities and expect the growth to continue in coming quarters. Now let's move on to Slide #23, and we'll wrap up this quarter. On Slide #23, you can see that we delivered cash EPS of $0.38, exceeding our guidance. All 3 segments contributed to this growth. EFT's contribution was from ATM expansion and continued sales of value added services. Epay began the year with growth momentum through additional sales of prepaid mobile products in the U.S. and non-mobile content, primarily in Germany. Money Transfer continued to realize excellent earnings growth from network expansion and strong transaction growth. Our balance sheet continues to remain strong with lower debt and strong cash generation consistent with the investment grade designation we received last quarter. Finally, we expect our second quarter adjusted cash EPS to be approximately $0.47 assuming consistent foreign exchange rates. With that, I will be happy to answer any questions. Operator, will you please assist us?

[Operator Instructions] Our first question comes from Mike Grondahl of Piper Jaffray.

First question, what was the overall contribution from India? I think it was slightly positive in the fourth quarter, but what was it in the first quarter?

Mike, it remained to be slightly positive. We continued to see good transaction growth from the ATMs that we installed last year, and we again deployed a couple hundred ATMs in the first quarter this year, in the Brown label program. But net-net, we continued to see positive results coming from India.

Okay, great. And then, could you give us a little bit more details, the 2 banks that you rolled-out iTunes with, how does that work? Can you just kind of walk through the mechanics there so we can just kind of understand it? And then what kind of financial impact do you think that'll have?

Yes, Mike, this is Kevin. So the 2 banks actually have very different solutions. One bank in Switzerland has deployed a mobile banking app to be used optionally on a smartphone, and you can purchase your iTunes directly from the mobile banking app. And the funds are withdrawn from the consumer's account, and an iTunes PIN is delivered. So that's method one. The second opportunity was with BNL in Italy. In that bank, we have a contract to do ATMs online and mobile banking, all 3 channels, but the first implementation was on the ATM. So in that case, a consumer will go to an ATM, one of the buttons will say "Other Products", and at that point in time, a consumer can pick from a different selection of face value of iTunes. And again, the funds to pay for that PIN will come directly the consumer's account, and a PIN will be delivered on a receipt.

Okay, okay. That's pretty slick. I mean, do you anticipate you'll be able to roll out these services to other banks?

Yes. So we're in negotiations with some other potential bank partners.

I mean, for the bank, I mean you know the state of most banks are in, they're under financial pressures. To be able to bring a sexy product like iTunes to their customers directly to make some of that margin that we make through the distribution of this from Apple is great for the bank. Apple likes it because it's direct marketing to potential consumers. When you look across the whole European patch, the maturity of gift card malls is not nearly where it is in the U.S., with the exception of maybe Germany that's growing. And so you just can't run down to every store and buy an iTunes card like you can here. So it makes it much more cumbersome for people to do that. So to have the banking channel open is a great new additional way.

Service.

Yes. And you've got to remember, too, an interesting statistic is about 3/4 of all the gift cards for say, Apple or whatever in Europe, are self-use cards. So most people are buying these things for themselves. They're not sticking them in a gift bag at a birthday party. So this is for themselves, so being able to offer this on their mobile banking app, that everybody uses overseas or on their ATMs, are both great marketing channels.

Our next question comes from Greg Smith of Sterne Agee. Gregory Smith - Sterne Agee & Leach Inc., Research Division: Mike, you mentioned that you're seeing some signs of -- that were giving you some optimism regarding Spain and Italy on the Money Transfer side. I wonder if you could just expand on that a bit?

Yes. I mean both of the -- well, the Spain, the economy has been weak for a while, but we're seeing, for whatever reason, we're seeing more money transfers start to come out of Spain. On the Italian site, we've seen -- we've spent a lot of time over last year getting some of our back office stuff organized and just dealing with the changes in that market with respect to kind of a weaker market. But in both cases, in the first quarter, they seem to have come out of the funk. And so we're cautiously optimistic as we go forward, that these 2 markets, which are our 2 largest markets for Money Transfer in Europe, will continue to grow. Gregory Smith - Sterne Agee & Leach Inc., Research Division: Okay. And then, just if you look at your Money Transfer business overall, clearly you're growing much faster than the market. How much of this do you think is market share gains versus just organic growth in the market?

Well, you can look at the same numbers that I look at. In most markets, the number of transactions aren't increasing. But you see us here at the 20-plus percent kind of range in some markets and in the teens in other markets. I mean, this has to come from market share gain mostly. Gregory Smith - Sterne Agee & Leach Inc., Research Division: Okay. And then just last question, in the EFT segment, in the areas where you own your own ATMs, are you seeing or expecting any pressure on interchange rates? Just seems like on the ATM side, those are headed down.

Well, we -- first of all, where we could get the biggest pressures in the markets where we have the most ATMs, and that's already been there, done that with respect to Poland and Germany. In the other markets that we're in, we're concentrating on just say, the crème de la crème kind of sites, where there's a lot of domestic transactions or a lot of tourist transactions, and there is not very good ATM infrastructure around there. So I haven't seen any pressure on the -- we haven't seen in our other markets on the interchange, I would doubt that if there was some in any one of those markets, it's going to bother us too much because we just don't have too many ATMs in any one given market.

Our next question comes from Peter Heckmann of Avondale Partners.

Rick, could you talk a little bit more about the first quarter acquisition of Pure Commerce, talk a little bit about the opportunity with dynamic currency conversion? And if you would, kind of talk about how Pure Commerce can augment what you're already doing within certain European markets with DCC?

Yes. Well, probably, it's easiest to talk about the augmentation because as we've shared with you before, we already do DCC in our business, whether it's on ATMs or on POS. Pure Commerce brings to us a more efficient product delivery platform, some marquee customers around the world, additional operations in places like Korea and Singapore. We're particularly excited about that Asia-Pac kind of market as it relates to DCC because it's one of the more -- one of the larger markets out there for international or cross-border transactions. The merchants that do a lot of business in international trade particularly like it because it gives them the ability to get a little extra margin on their product. So given that it's just right down the fairway with what we already do, it complements our business with respect to additional territory, it gives us great reference, name customers, and it gives us a more efficient customer interface technology. We're excited to see what it'll do out there. We're not at this point interested or willing to talk about what the projections for the earnings would be other than what we put out in our original press release. But we're certainly on track to meet or exceed those numbers as the year marches on.

All right. Well, that's the CFO version. I'll give you the CEO optimism version, okay. We won't tell you about where it could go, but one of the reasons we bought this is because these guys seem to have the best technology for presentation of a DCC transaction to the consumer. It's more transparent, it's more easy and they have higher hit rates than anybody else around there. We really do have the best solution for the retailers. And the retailers are starting to figure that out. So even though DCC, it is complementary, and we're not quite sure how good, good can be, we know that we're sitting on the best technology out there, and we are cautiously optimistic about that.

And then could you, either Mike or Rick, with the bank in India, you talked about 1,600 units. Sounds like they were lower margin units, and you don't expect a lot of financial impact overall, but can you talk about like how much revenue they may have been generating on a per unit basis just from a -- so we can get this right on a modeling perspective?

Let's see. We told you the income was 50,000 after-tax. That's a 35% tax rate country. And if you then gross that up and take it times about 5 or 6, you'll be directionally in the ballpark.

And then the tax rate, I know that's quite a moving target for you guys, a little bit lower than I would've expected in the first quarter, were there any discrete items you can call out? And any commentary about thoughts for full-year tax rate?

No. We would expect the full-year tax rate yet to be a little higher than what it is. As we mentioned in our commentary here, we had good results out of the U.S., whether that was great growth out of Mexican transactions of Ria, our U.S. Prepaid business did better. That business is sheltered through substantial NOLs that we have here in the U.S. We had a good growth out of -- as well out of markets like Poland, those Eastern European countries, some of which have 10% rate. So it was just the favorable mix of good profits from some of those countries that we had lower rates in. I would tell you though, as we move throughout the year, we'll see a little better contributions from markets like Germany that's got a little bit stronger fourth quarter, and some are profiles, Germany is one of the higher tax rate countries. So that's why we would expect to see some of those tax rates a little higher as we go throughout the year. But no onetime items, just favorable mix and good results from those markets.

Okay, that's helpful. And then just one last question. Has the Australian transport project gone live yet? And was there any material amount of revenue in the quarter?

It's gone live on a -- well, a pilot phase. They expanded the pilot to one of their largest ferry routes over there. It didn't have any significant contribution of revenues during the quarter, but the product has been working well and getting good reviews in Australia. So we expect it to continue in its rollout phases. We don't expect meaningful revenue contributions this year. If it all goes well, we should start seeing some benefit next year.

Our next question comes from Chris Shutler of William Blair. Christopher Shutler - William Blair & Company L.L.C., Research Division: So you talked a decent bit in epay about the non-mobile products and the increase in -- that's now 29% of gross profit, but maybe a little bit more detail on the increased prepaid mobile sales in the U.S. It sounds like that's now a decent driver. So just give us some sense of how big of a driver that is relative to the overall improvement in epay? And just what's behind that?

So you've got 2 things that are positive here in the U.S. As Rick mentioned, first of all, we've got sheltered results in the U.S., with respect to any profits generated, either Ria or epay U.S. So you get about 1.5x the bang for the buck, because we're not paying the 30% tax rate. But we've got a really good and unique solution that really nobody's even selling out there to the mobile operators to help them manage their customers and their profits and their independent channel of commission payments and so forth. So we hope that it can continue with other mobile operators in the U.S. It's really the best thing out there to help them manage what they need to do. We're aggressively, as Kevin mentioned, we're aggressively trying to sell this to other mobile operators around the world. And when you nail one like in the U.S. like T-Mobile, that has international presence, at least it gives you a foot in the door as you're pitching this in another country. So it's a combination of a better solution for them, some exclusivities with them, and we hope to sell this into other markets as well. Christopher Shutler - William Blair & Company L.L.C., Research Division: Okay. And can you remind us what's the number -- what's the NOL number right now?

$60 million. Christopher Shutler - William Blair & Company L.L.C., Research Division: $60 million? Okay.

It'll be a while. Christopher Shutler - William Blair & Company L.L.C., Research Division: Yes. And then, in EFT, a couple of questions. So Mike, I think you've talked in the last few quarters about being involved in more conversations with banks regarding some larger outsourcing deals. Just want to get an update there, if that's still the case, or if you're seeing any improvement or degradation?

Yes, we are seeing some. We've gotten close to a couple, and then they haven't gone our way. They either haven't gone. But it's interesting because there's 2 pieces of the one that when we say larger deals, one of the larger deals we just got finished signing and announcing, and that's selling value-added products through a couple thousand ATMs in Italy with BNL, which is the BNP Paribas' subsidiary there. So there's 2 ways we can do this, one is where we actually do the outsourcing for banks, which is, all outsourcing is always a tough sale, and we're working on larger deals like the strategic deals. But there's also the pass-through deals where we're able to offer the bank additional revenue opportunities by us giving them a transaction that they might otherwise not have been able to have access to that would be a revenue generator, much like iTunes as a value-added product on this set of ATMs. So...

The ATM's still managed by the bank, but that unique transaction's then processed by us.

It's kind of like when somebody pushes that button, says I want a EUR 50 iTunes voucher, their internal switch switches it out to our processing center, and we handle all the specifics there and then pass them back the code at the end. So there's 2 ways, one is bigger outsourcing deals. We're still trying to get them. We haven't nailed a huge one yet, but we're talking. And then there's the pass-through deals that seem to be easier because you're not fighting such a political battle within the bank. Christopher Shutler - William Blair & Company L.L.C., Research Division: Okay. And then just the last one in EFT…

Just to add something to that. I think, Rick, we've counted this up, we have about 6,000 ATMs doing pass-through transactions now. Is that right?

Of some value-added product.

And this ranges from -- we've got our very first one we did this with was a large bank in Czech Republic, where we do mobile top-up on their ATMs. They basically pass those transactions to us. We've added things like the iTunes. We do dynamic currency conversion. We've done advertising and several other of our value-added services, we've figured ways to do it where we don't actually have to take over their ATM driving. Christopher Shutler - William Blair & Company L.L.C., Research Division: Okay. And then just the last one in EFT, so if I add back the amortization for Pure Commerce, the operating margin like you said was up a little bit year-over-year. But I think if you look at adjusted EBITDA margin, it looked like it was down a little bit year-over-year. So just curious, a, if that's the case; and then, b, if you are seeing some slight margin compression, just why given that you had thousands of ATMs, which you deployed a few quarters ago, that should be coming up the productivity curve at this point?

Yes. No, Pete, if you -- Chris, I'm sorry, if you look at our revenues and stuff like that for transaction and ATMs, that our margins in all of those categories are up. What's happened there are like on the EBITDA kind of margin there is we've got some of the Pure Commerce revenue that's coming in, that's at -- that still has a fairly substantial SG&A cost structure below that. So that's some revenue without a lot of contributing EBITDA. And then we continue to grow the ATM network in India. And as we said, while we're -- while they are contributing to the profit, the revenue numbers are growing, putting more money on the top line, but not as quickly falling to the bottom line. And that's principally because we put another couple hundred ATMs out this quarter. So I think it's just that, it's that ramp-up that will follow with those then later on this year. So I think it's just the dynamics of the interplay of those pieces of math coming together this quarter. But the fundamental revenues and gross margins per transaction, per ATM are each up for the segment on a year-over-year basis. Christopher Shutler - William Blair & Company L.L.C., Research Division: Okay. So essentially, just the acquisition and mix?

Yes, right.

Our next question comes from Jason Nacca of Sidoti & Company. Jason Nacca - Sidoti & Company, LLC: Yes. So the first -- just actually one question is I'm just looking at Indonesia and the increase in a number of locations, the 10,000, it's quite substantial. Maybe you guys can just walk through and provide some color on that strategy there and the penetration in this region, and essentially how you were able to gain so many locations in that region this quarter?

Almost every one of these announcements, and I tell you I've got to do a kind of a call-out to our correspondent team within Ria. These guys over the last 5 or 6 years have just done a tremendous job opening up brand-new corridors and brand-new payout ubiquity for us. The key to money transfer is twofold. You've got to have agents to collect the money, and you have to have usually banks or some institution like a bank to pay out that money in those kind of emerging economies, where the money goes to. And so you've got to go down to each -- you've got to make calls in each of these countries on some of the biggest banks with large branch networks to convince them to be a payout agent for us, and then set up all the infrastructure and the technical connections to do so. So it's a challenge to keep adding them and you have to add them one by one just like what we have just announced. So if we added 10,000 in Indonesia, I don't have the -- how that's actually broken down. My bet is that's 1 or 2 banks with multiple branches. And then we hook our IT system to their IT system. And then somebody who receives that, if you're in Indonesian immigrant into the U.S. and you want to send money back to your mom who still lives in Indonesia, that she'll be able to walk into one of those branches and pick up her money. So that's kind of how it works. South Asia is big for us. I mean, there's just a lot of South Asian immigrants around the world, so we see that big. We focused a lot not only on the acquisition of the payout banks, but then the compliance, too. We are just like compliance nutso, and we're very aggressive with that. And it has turned into -- once you've got that, like let's say we didn't have any in Indonesia, and we opened up 10,000, all of a sudden Indonesian immigrant community around the world now can use Ria. When heretofore, they would not have been able to because we didn't have payout form.

But I'd also just mentioned that it's not -- when we can get 10,000 locations in a country like that, it's not just as if next month all of a sudden a gush of transactions come in. Because you've got to start now making the customers aware that you've the product, that you can make the distribution. They have to have the confidence that it's a good high-quality product, that it's consistent with the rest of the Ria product out there and the brand reputation we've got. So I would characterize it being like when we bought Ria. The number of payout locations that we have today is more than twice as many as when we acquired Ria. And we've continued to grow that business, and it just keeps growing. You start getting the exponential factor as you grow more payout locations, you grow more received locations, that eventually the momentum builds and a greater awareness is in the community. So we don't expect this to drive next quarter's numbers off the charts, but we expect this to be a great building block for the next several quarters.

[Operator Instructions] Our next question comes from Mike Grondahl of Piper Jaffray.

Mike, a couple follow-ups. Salaries and benefits in the SG&A lines, they were actually a little bit less than where I had modeled. Any benefit to point out there or call out? Are you doing just a little bit better job managing costs? Or can you just give us a sense for that?

Yes, Mike, maybe I'll cover for you. You're probably – it's probably a bit of a result of bottling off of a fourth quarter kind of a jump-off number there. And in the fourth quarter, we have a higher promotion and advertising cost in our epay and in our Money Transfer division. And so moving from fourth quarter to first quarter, because first quarter unfortunately is always our lightest month or quarter in transactions, that we really pull back on that kind of spend in the first quarter. So that was the biggest driver, is promotion and advertising moving from quarter-to-quarter. If you look at our SG&A on a year-over-year basis, it's up about 10%. So you kind of compare that to revenues being up 15%. It's nice to see that the SG&A is not growing as fast as the revenue grows, but it's probably not got that kind of real leverage benefit that you may have seen going from fourth to first.

Okay, got you. And then could you guys just maybe highlight again the 600 ATMs where you're doing FX for Deutsche Bank, can you just kind of explain what you're providing there?

What this is, is these are our current Polish ATMs, 600 of the several thousand that we have in Poland. And what we'll allow is local customers to be able to use their Polish zloty card and actually buy euros. And so we just have an extra cassette of euros in there, and they can buy them with a little bit of an FX spread there. They may be traveling to Europe or whatever reason they might want euros in lieu of zloty.

Okay, so just a convenience thing, good.

Yes.

Good. Mike, what's underperforming at EEFT? What are the areas where you're still working on -- just help us think about that a little bit? I mean, so many things have started working, especially epay overall, but what's underperforming that you're still working on?

Well, we'd still like to have -- I mean, obviously, Brazil is still underperforming due to the mobile operator changes there that we've been talking about the last couple of quarters. We've got new products coming into the U.K., but it's not as strong as the rest of epay, and Spain is not as strong. We've got a little bit of weakness in Australia. Those are our kind of markets. I wouldn't say it's underperforming, but we're spending a lot of time and money at this Brown label in India. The results and the ramp-up look very good on the ones that have been there for a while. So I won't say that's underperforming, but it does take expense, and you have to kind of wait for that ramp-up. But otherwise, I mean we've just -- I mean, this is really one of those kind of hit on all cylinders quarters.

Sure, it seems like it. And then maybe just lastly, what are you most excited about for the next 6 months?

I mean, I think over the next 6 months, EFT's going to continue to hammer it out. I mean, they're just doing a great job, particularly in Europe. I'm looking forward to, like I said, the ramp-up of Brown label growth in India. epay is back in the hunt, and they're out there kind of ripping it up in a number of markets. So I'm looking forward to that one. And I just really can't say enough nice things about Money Transfer right now. They've just been this -- have had the most impressive results of any of the divisions over the last few quarters. So there's an -- I'm kind of excited about all 3.

Mike, it's -- I think we're at an interesting point where our focus on bringing more product to the table other than just the core product is giving us a bit of an exponential interplay of these, whether it's the discussions we talk about putting epay product through banking channels. We've got great banking partners, relationships in the EFT business. Just like we said when we acquired Ria, that those banking relationships would allow us to grow that payout network much more aggressively. And we've been able to do that. So I think we've kind of got a momentum going of these other value-added products that we're bringing into the picture, and it's getting those across our other groups. As Mike said in his comment, the rollout of this iTunes product in the EFT channel was just another example of interdivisional synergies that we're getting. So I think we'll see the next few months will be an exciting part to see those pieces continue to kind of interrelate, interact and bring us net incremental margin off of the same boxes and open more doors.

I think that was, operator, is that I think, the last call. So I'd like to thank everybody for their time this morning, and we look forward to seeing you next quarter. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.