Euronet Worldwide, Inc. (EEFT) Q1 2015 Earnings Report, Transcript and Summary

Welcome to the Euronet Worldwide First Quarter 2015 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Mr. Jeff Newman, Executive Vice President and General Counsellor for Euronet Worldwide. Thank you. Mr. Newman, you may begin.

Thank you, Kat. Good morning and welcome, everyone, to Euronet's quarterly results conference call. We'll present our results for the first quarter 2015 on this call. We have Mike Brown, our CEO; Rick Weller, our CFO and Kevin Caponecchi, Executive Vice President and CEO of our epay division on the call. Before we begin, I need to make our forward-looking statements disclaimer. Statements made on this call that concern Euronet's or it 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 technological developments affecting the market for the company's products and services; technological issues associated with the operation of our complex processing systems, including security breaches, changes in ATM and other transaction fees and changes in laws and regulations affecting the company's business, including immigration laws and anti-money laundering regulations. 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 our CFO, Rick Weller.

Thank you, Jeff. Good morning and welcome to everyone on the call. I will begin my comments on slide 5. As you can see on this slide, we had a very strong first quarter, with double-digit growth across all metrics. In fact, this is the strongest start we've had to a year, in both reported and constant currency earnings growth, in more than five years. We achieved revenue of $395 million, operating income of $32 million and adjusted EBITDA of $52 million. Our cash earnings per share was $0.56, a 22% increase from the $0.46 in the first quarter 2014. While 22% cash EPS growth is certainly impressive, this $0.56 includes a foreign currency translation headwind of approximately $0.06 a share as compared to last year. Adjusted for currency, our cash EPS would have grown 35% on a year-over-year basis, reflecting a yet more exceptional growth than the remarkable 22%. This $0.56 also includes more than $0.005 of FX headwind since we gave guidance in February which was more than offset by tax benefits. Next slide, please. On this slide, we have provided the year-over-year and sequential changes for currencies where we do most of our business. With such dramatic fluctuations in rates over the last six months to a year, I'd like to take a minute and provide a few observations about the impact of foreign currency fluctuations on our results. With approximately 70% of our total revenue earned outside the U.S., the weakening of foreign currencies to the U.S. dollar had a significant impact on our financial results. For the first quarter, the fluctuations created a headwind on our consolidated revenues and operating income compared with the prior year by 12% and 15%, respectively. You will not see these foreign currency fluctuations on the face of our GAAP financial statement, so we provided constant currency dollar comparisons for key metrics to exclude the impact of translation math and to help understand the underlying performance of our business. We do have a line item on our P&L titled Foreign Currency Gains or Losses. This account largely reflects the non-cash gains and losses that do not naturally eliminate with inter-company accounting related to inter-company loans. With that back drop, let's review the real impact of foreign currency fluctuations on the business. First, the operating expense supporting the business is largely matched against the revenue generated, thereby giving us a natural hedge on all our operations other than the free cash flow we generate. We then look to the uses of our locally generated free cash flow. We do not have significant U.S. dollar demands, so we generally leave a majority of our free cash flows in the local currencies to fund growth opportunities within the existing business and acquisitions such as the UK British pound-based HiFX acquisition we completed last May. Second, as we've shared with you before, these fluctuations can have a positive impact on our business, particularly at HiFX and to a lesser extent in our immigrant money transfer business, as people tend to transact more during periods of FX volatility. As we look forward, consistent with the first quarter, if foreign currencies remain similar to today's rates for the remainder of the year, we would expect to see similar FX impacts on our comparative financial results for the rest of 2015. Next slide, please. On slide 7, our three-year transaction trend by segment is presented. EFT transactions grew 1%, with growth across Europe offset by declines in China and India. As we continue to focus our ATM and POS network expansion on higher-value locations versus higher-volume locations, we will continue to see revenue and margin expansion outpace transaction growth rates. Epay transactions increased 14% year over year, driven by growth in India, Australia, Germany and the Middle East. Growth was partially offset by declines in Brazil, Poland and the UK. Transaction growth outpaced revenue growth, primarily as a result of increased transactions in India and the Middle East which earn a much lower revenue per transaction than transactions in our other markets. Money transfers grew 72%, driven by continued organic growth, including the successful launch of the Walmart2Walmart product and the acquisition of HiFX. This represents the 16th consecutive quarter of double-digit money transfer growth and while Walmart2Walmart and HiFX contributed to this phenomenal growth, our core business continued to grow at double-digit rates. Other money transfer segment transactions, such as international mobile top-up, bill pay and check cashing transactions, grew 2%. The combination of money transfers and other transactions resulted in total transaction growth for the segment of 58%. We clearly benefit from the higher money transfer growth rate in that we earn significantly more margin per transaction than other non-transfer transactions. Next slide, please. Based on my earlier comments on the relative change in foreign currencies, we will move to slide 9 and discuss our results on a constant-dollar basis. I'm now on slide 9. Our EFT segment had another solid quarter, delivering 14% constant currency revenue growth, 4% operating income growth and 8% adjusted EBITDA growth. These increases were driven by a 12% expansion in our ATM networks and more POS dynamic currency conversion transactions. As you may have seen in our press release, EFT growth in the quarter was tempered by our proactive amendment and extension of the contract with one of our largest European customers. The transaction volumes for this customer have grown significantly to the point where they had outgrown the original contract expectation. While we could have allowed this agreement to run its course for the remaining two years, we leveraged the strength of the performance of the segment and we proactively amended the agreement. This resulted in reduced pricing in exchange for an extension to the agreement now running through the next five years which will allow us to take advantage of even greater growth opportunities in the future. Had we not restructured this agreement, revenue would have grown 18% and operating income would have grown 23%, reflecting the continued strong growth profile of the EFT business. And I'll also reiterate that what we've been saying now for a couple years; the first quarter seasonality will be more pronounced, primarily as driven by the EFT segment. Epay had a strong first quarter, delivering 9% revenue growth, 18% operating income growth and 11% adjusted EBITDA growth. This growth was driven by increased non-mobile transactions across our markets, partially offset by certain mobile declines. Overall, good and improving results for epay this quarter. Epay is off to one of the best starts to the year that we've seen in a number of years. Money transfer revenue, operating income and adjusted EBITDA grew 65%, 303% and 169%, respectively. These phenomenal growth rates are driven by a combination of strong organic growth, including the successful April 2014 launch of Walmart2Walmart and the May 2014 acquisition of HiFX. Generally speaking, we saw consistent pricing and margins across all three segments, with mix accounting for subtle movement in revenue and margins per transaction. The strength of this quarter can clearly be seen in the constant currency growth numbers covering this page. Next slide, please, slide 10. You can see that we continue to strengthen our balance sheet in the quarter. Cash was up a little, thanks to our operations and debt remained largely the same. Overall, this was a strong start to 2015, with excellent contributions from all three segments. With that, I'll turn it over to Mike.

Thank you. Excuse me. Thank you, Rick and welcome everybody who's joining us today. As Rick mentioned, we had an outstanding first quarter, delivering constant currency growth of more than 20% in all consolidated financial metrics. This year, our teams worked extremely hard to overcome not only the traditional seasonal challenges we typically experience in the first quarter, but also significant foreign currency headwinds. I am particularly pleased with these results because they were made possible by strong contribution from all three segments. Our new PowerPoint template features graphics from our 2014 Annual Report which you all should be receiving here shortly which celebrated the success of Euronet's first 20 years while looking forward to our bright future. The coins on the front cover represent the global currencies on which our company was founded and our history of bringing financial payment convenience to more people around the world. The more modern design reflects Euronet's continued innovation and our position among the best technology partners in the payments industry. With strong opportunities for growth in each segment which we will highlight in the coming slide, I am excited for where we're going to be going in 2015. Now please jump to slide number 13. EFT delivered another solid quarter. Our team is extremely focused and continues to add more products on more ATMs in more countries. The strong start gave us the ability to proactively amend and extend our agreement with one of our largest European customers which will provide greater opportunity for us in the next five years. Let me just step back on this. Rick talked about it a little bit, but give you a little bit more color on this particular contract extension, because the numbers are pretty big. Over the last two years, one of our long-standing card-processing customers has grown remarkably. Kind of blew us away. Due to bank consolidation, they're acquiring a number of banks in their markets. We've got two more years left on this contract and we're making just great money. But we decided now that we wanted to proactively extend that contract for five years rather than waiting for the next two years and perhaps having this bank decide to go internal or to go to a different competitor. So what we did was, is we sat down with them, we looked at where their business was now and where we expect it to go in the future, because they have other accusations of banks in their sights. We did not have any competition for this. The bank itself still has further upside, with other potential acquisitions it might do. Timing was not particularly wonderful for us, because we're doing this and it hits us straight in our margin line exactly in Q1 which is our weakest quarter for EFT on top of it. Because don't forget, in Q1, our costs are pretty much fixed and constant throughout the year, but our revenues are weaker. You've seen the strong revenue getting stronger through Q2, Q3 as the biggest one and then Q4. So that was the reasoning behind our extension. We're happy that we've got this contract for the next five years and we'll be looking forward to its continued growth. Now let's move onto slide number 14. As you can see, we had a very active quarter, signing several new agreements and launching quite a few new products. I won't go into details on each of these agreements, but we'll highlight a few. First of all, we continued to expand our acceptance of China UnionPay. This quarter we UnionPay acceptance to our Euronet-branded ATMs in Poland, Romania, Italy and the Czech republic. We signed an ATM driving debit card management and gateway services agreement for Commercial Bank International in Dubai. We signed a switching agreement with Aegean Airlines which will allow them to use their POS terminals inflight. Finally, we signed an agreement with Creacard, the largest provider of prepaid cards in France, to issue and distribute three types of prepaid cards; corporate expense, key money and general purpose reloadable cards. Now let's move on to the next slide. On slide number 15, I continue to be excited about the value proposition our EFT team brings to the financial institutions around the world. Many banks around the world are slow to sign outsourcing agreements for their ATM networks for a number of reasons; however, many major financial institutions have acknowledged and trust, our market-leading expertise to deliver value-added services which mean revenues, to their ATM networks. From the U.S. to Europe to Asia, we have become the global leader in value-added service distribution to banks and we now have signed agreement with banks in 16 different countries to offer value-added products on more than 165,000 ATMs which don't even include the almost 21,000 ATMs that we currently operate ourselves. As you may remember from our recent press release, we also signed an agreement to launch value-added services on the Elan Financial Services ATMs in the United States. In the first quarter, we signed an agreement with BPCE Group, France's third largest bank group, to add value-added services to their network of approximately 17,000 ATMs. We expect to start rolling out these ATMs with our products in the second half of this year and continue through 2016. We also signed an agreement with the State Bank of India, the largest bank in India, to launch value-added services on their network of approximately 55,000 ATMs. We're currently working on integration and expect to have these fully live in the next several months. These recent value-added service agreements include a large number of ATMs - as you can see, 165,000 - so I'd like to take a minute to explain the dynamics of these deals. Through these agreements, we provide banks with the technical capabilities to put more value-added content on their ATMs through a connection to our data processing center and content distribution center. So while we do not operate these ATMs, they can provide nice opportunities for the banks to enhance their revenue stream. We're pleased with the confidence the banks have shown us and believe these agreements will contribute nicely to achieving our growth goals this year and in future years. Back to the highlights. Pure Commerce continued to make progress, adding new retailers. In the first quarter, they brought live Heinemann Asia Pacific in Sydney, adding to our list of duty-free shops around the world. To give you another example of our value-added product portfolio, in Poland we completed a coupon campaign with Lux Express, a Polish bus service. Customers received a coupon for discounted bus fare with each cash withdrawal made. We ended the quarter with 20,863 ATMs, adding 499 ATMs in the quarter, with the largest increases coming from India and Poland. I just wish we would have got one more, so I could have said 500 and made it even. As you can see, we continued to see great opportunities for growth across our entire EFT business. So let's now move on to slide number 17 and we'll talk about epay. Epay had a very, very strong quarter. We saw more balanced growth with expansion across most markets, driven by our strategy to add more content and more retailers across more countries. Let's move on up to slide number 18. Here you can see that we launched processing of e-vouchers, mobile top-up and bill payments for Zain in Saudi Arabia. Zain is Saudi Arabia's second-largest mobile operator and a nice addition to our mobile business in this country. In the U.S., we signed an agreement with CITGO, a leading U.S. fuel store franchise chain. Epay will now be the recommended prepaid partner for more than 5,000 CITGO locations across the U.S.. We also renewed our agreement with the UK Post Office to continue mobile top-up and non-mobile content distribution through more than 11,000 POS terminals across the UK Post Offices. The Post Office locations are in high-volume locations for prepaid customers and we're pleased to keep this distribution within our networks. On to slide 19. Here we see some of the highlights from our non-mobile business. In Germany, we expanded our relationship with both Microsoft and MSH, Germany's leading electronics provider, by launching Microsoft Office across all MSH stores. This is our first distribution of Microsoft Office in Germany. This distribution also further expands on the strategy I have previously shared with you to move the PIN activation from the CD to the point of sale, eliminating the need for packaging and distribution of our software content partners. We continued our expansion of Google Play across our markets. In Germany, we added Google Play and Steam, the gaming site, to 400 E-Plus locations and in Austria we added Google Play to 1800 Austria Post locations. Finally, in Russia we launched EA Sports, representing our first launch of EA Sports content. We're excited to add this new content to our portfolio. Overall, I am very pleased with the performance of our epay segment in the first quarter. They did an outstanding job. Now let's move onto slide number 22 and we'll talk about money transfer. Well, I don't know, on slide number 22, you take a look at these graphs. What more can I say. We had over 300% constant currency operating income growth. Other than this, it was just a phenomenal quarter for our money transfer segment. These results are a testament to our teams out doing work to get another location and another country with another customer and the highlights of the next page certainly backs this up. We had a good quarter from HiFX, with good transaction volume, stimulated by the foreign currency fluctuations that Rick spoke about. We're also pleased that the process to launch HiFX U.S. is under way. We still expect this service to launch in the second quarter and we will provide additional details in the coming weeks. Let's move on to slide number 24. Before I wrap up money transfer, I'd like to tell you a little about our most recent award for the Walmart2Walmart product. Payments.com, a leading web site in the payment space, awarded Walmart and Ria with their 2015 Best Cash Innovation award. We're proud to power the Walmart2Walmart product and are pleased with the acceptance of the product by consumers in the U.S.. Overall, our money transfer segment had an outstanding quarter, with strong growth driven by their continued focus on adding more locations in more products in more countries. Now, finally, let's move on to slide 25 and we will wrap up this quarter. We achieved adjusted cash EPS of $0.56, $0.02 ahead of our guidance and a 22% increase over Q1 2014 which also equates to a 35% increase adjusted for foreign currency which reflects the strength of our underlying business. EFT posted solid results through continued ATM expansion and increased value-added services on both the ATM and POS terminals. Epay delivered double-digit operating income growth for the second consecutive quarter, driven by increased sales of non-mobile products. Money transfer realized triple-digit operating income and adjusted EBITDA growth, driven by continued organic growth in the existing Ria businesses, including the addition of Walmart2Walmart, as well as from the acquisition of HiFX. Our balance sheet continues to strengthen, with good free cash flow generation. Finally, we expect our Q2 2015 adjusted cash EPS to be $0.70, assuming foreign currency exchange rates remain consistent. With that, we'll be happy to take any questions. Operator, will you please assist?

[Operator Instructions]. And our first question comes from the line of Mike Grondahl of Piper Jaffray. Your line is open.

In terms of the potential of France, India and Elan ATMs, can you give us an example of what some of the services are you're enabling on those ATMs? Is it a revenue per transaction model? Help us understand that better.

Okay. First of all, we've been doing this kind of thing for quite a number of years. In fact, our very first product like this was for Ceska sporitelna which is the Czech savings bank owned by Erste. We have on their maybe 2,000 ATMs, we've allowed them to do mobile top-ups. So here we're connected to each of the mobile operators. We provided that content and we would provide, to their switching centers, the PINs once they were purchased and then their customer could basically top up his ATM. That's one of the services. We also do this with DCC, we do this with advertising, we do this with Apple iTunes and other kinds of content. So basically, through epay and EFT connections, we have connections to all kinds of what you might call digital or virtual content which can be sold through a number of channels. We're really the only people on the planet punching this through the banking channel. You remember that we did the same thing through the internet banking sites - mobile banking sites of the Post Savings Bank in Switzerland. We announced that about 18 months ago. This is more of the same, but our numbers are getting have friggin' big, with lots of ATMs signed up, that we thought it might be worthwhile to share that with you to see where it's growing. Now, I want to be kind of careful here. Don't start multiplying those ATMs out like you multiply our ATMs out to see what the potential can be, because not all their ATMs are located in great consumer spots to do those kinds of transactions, but it's great coverage in the market and we're excited to provide that service to them. And then you asked about how does the revenue work? It works one of two ways. One is it could be a revenue split between the content provide - usually it's kind of a revenue split thing. So either the content provider or DCC generates some amount of revenue total from the customer and then we would split that with the bank who owns the ATM and, in essence, that footfall.

Got it. One follow-up to that. The services that you listed, are you putting all of those--

No, no. It depends on the bank, Mike. Every bank's got its own little hot spot of what it wants to see. Okay?

Okay.

Some want the mobile top up. Some want the Apple iTunes because they think that makes them look cool. Others and most of them are quite interested in DCC, because it's easy money and we're the masters of that on the planet. So those are three examples and there could be - there are other ones, too. Bill pay's another one we they do in some markets, where people pay their utility bills. So it depends on the bank and what they want to sell to their customers. We try to pitch them everything that we can and sometimes it just takes a while to get more products on there.

How should we think about money transfer margins going forward? And then any progress on potentially new retailers for money transfer?

You want to talk about margins?

Yes. Well, Mike, I think margins going forward is like the comment I made earlier in the delivery and that is we've seen pretty consistent margins and revenues per transactions, money transfer as well as across the rest of our business and so we don't expect, at this point, to see any real difference in it going forward. I would be quick to say there's always competitive responses that you see out in the marketplace, but really, on a year-over-year basis, there was very little difference and we don't see any kind of necessarily telltale signs that says it's going to be much different for the balance of the year.

Got it. Any update or progress on the pipeline of new retailers?

We're talking but no, nothing to announce yet.

Thank you. Our next question comes from the line of Alex Veytsmen of Monness, Crespi and Hardt.

I just wanted to get more color on the second quarter guidance, the $0.70. If you could give us more color around your FX expectations as well as where do you expect the core strength to be, whether it's continued reattraction from money transfer as well as epay and EFT? Any additional color you could provide would be helpful.

First of all, you know, we said we were going to do $0.70. That's our hope and expectation for Q2. I'd like to point out that, that's a 21% increase over last year and we've got at least a $0.10 currency head wind built into that based on where Q2's numbers were for foreign currency and if it stays the same for the whole quarter. If you kind of do the math on that to say that on a constant currency basis, we could have hit $0.80 or exceeded $0.80, that's a 38% constant currency potential growth rate for Q2 this year over Q2 last year. And where is it going to come from? It's going to come across the board. As you know, Q1 is particularly weak with EFT, so it's going to start coming on strong in Q2 and it'll reach its crescendo in Q3. We'll see strong growth there. In money transfer, we continue to see good organic growth there, HiFX continues to do good. I'll tell you, I don't know the exact numbers yet for April for Walmart-2-Walmart, but if you take the first three weeks and you multiply that up to get an estimate for the full month, April will be our largest Walmart-2-Walmart month in our history, even bigger than the Christmas December. Epay just continues to - they just work it out. They put more products on more retailers on more markets. That's what I've been saying for 15 quarters now. You can see that as we add more and more of this non-mobile content, it's got nice margin involved and you can see the results where we had just an outstanding epay quarter in Q1. So it's really across the board and I'll be kind of happy to get the seasonality and everything else behind me with respect to Q1.

Thank you. Our next question comes from the line of Peter Heckman of Avondale. You're line is open.

I wanted to ask, on the money transfer side, it seems as if we're seeing some more venture capital money being attracted to this space, although it appears to be primarily in the online space. Are you seeing anything there in terms of new start-ups or recently funded companies that appear to be attacking the market in an area where you play or is it, again primarily in the online space?

Well, first of all, you've got to understand, the offline area, we have probably 10,000 competitors worldwide. Lots of little guys you've never even heard of, okay? And a few that you have heard of. So there's always little competitors coming in that I really - I won't say I don't pay attention to, but they're just always coming. On the online side, there's always new guys with new ideas in the online segment because for a while there, there was really only two players of any significance and they kind of price their services there even on an online fashion in a little bit of an oligopoly-like position, where they were strongly priced, even though it was online. So there will be more competitors there and there will be probably more challenges there for some of the big guys, but we're happy because we're doing just fine ourselves.

Just remind me, just from a being aware standpoint, on Greece, can you remind me how much revenue, roughly, is coming from Greece? And then as regards to the cash that in the ATMs, you own that cash, right and so to the extent that there are further problems there, can you quantify the amount of cash in the ATMs I would assume it's relatively immaterial, but I just want to make sure.

Clearly Greece, from our standpoint, probably constitutes less than 10% of our consolidated revenues and profits, so we have a nice business in there and - but again, it's not a significant volume of our total business. In some respects, you could argue that if Greece were to flip out of the euro, it might even have a positive impact on us, given that some of the business that we do in Greece relates to ATM withdrawals, some of those transactions end up being DCC transactions. If that would be the case, it would take Greece to an entire island currency which would only drive up the number of transactions that we could make a better spread on. So in some respects, it could be quite helpful to our business. With respect to the cash in our machines, that number is going to vary depending upon the season there, but we would have in the ballpark of probably $20 million to $25 million in cash in there as we speak. That is cash that's on our balance sheet.

Lastly, in terms of the mix on the epay side again, can you remind us where we stand here in terms of mobile/non-mobile as a percent of gross profit?

Yes, Pete, I think what you are - this is Kevin - what you are asking is the mix between what we call non-mobile and mobile and on a constant currency basis, we finished the quarter at about 42% non-mobile.

[Operator Instructions]. Our next question comes from the line of Chris Shutler from William Blair.

A couple quick ones on this contract amendment which you spoke to. Just curious, was it in the DCC business--

No. No, no. It's card processing. Totally different.

What country did that happen in, Mike?

We're not sharing that, just for competitive reasons. But it was in Europe and we're really, actually really thrilled with what we've been able to accomplish on extending this huge contract for another five years. So we're happy. Bad timing for Q1 but it's good for - because they continue to grow and grow and grow. So we got that tiger by the tail for the next five years.

All right. And then on the BCPE and State Bank of India, obviously big numbers in terms of ATM additions there. I guess, is there DCC in there that you are going to be adding?

Yes. In both of them.

Any way for us to think about kind of the profitability of those machines versus the rest of the value-added fleet?

We don't know. Here's what I would tell you just in general. The number - there are more foreign visitors who come to France than any country in the world, okay? So that's helpful. Certainly quite a bit less, though, in India. So even though you only might have 55 - three times as many in one place than the other, that doesn't mean we'll garner three times the transactions.

Sure.

I would mention that - I'm sorry, Chris - to underscore what Mike said, we're not putting out a quantification, but you asked on help with the margin there, well, the beauty of this business is these are essentially connected into our data centers. We don't have to run - as Mike said, we're not driving the machines. We're not running the machines, so whatever transactions we get off of these relationships will be very high margin transactions for us.

Yes. There is really not much operating costs on our side associated with it at all.

And then of the over 165,000 ATMs that you do have outside of the ones that you operate, most of those agreements, I think, have been signed in the last, probably, three to five years, I'm guessing. There's certainly some others out there, other companies that offer things like DCCs. Just curious, how many of those DCC contracts that you've had renew in recent quarters? How has the competitive environment been upon on renewal and the pricing environment?

DCC's kind of new so we haven't had much on the renewal side.

Okay.

So we'll probably, in a couple of years, when we're signing three- and five-year deals, then we'll see more of those things come up. They're nice lucrative deals. I imagine upon renewal, we'll have a little bit of competitive pressure, because we'll have taught them how to make a lot of money, but for the time being, most all of these contracts, I mean, it's just amazing. You won't see DCC in France almost anywhere in the whole friggin' country. Just a whole opportunity for us to go after what we're very good at doing.

Last one. Thanks for taking all of the questions. For Rick, you mentioned the FX loss of $13 million in the quarter which you add back into the cash earnings. I know currency has been volatile, but that was a big number, certainly relative to what we've seen over the course of the last year, even into fourth quarter last year. I just want to make sure we're clear on exactly how that line works, the mechanics of it and why you add it back?

For example, if we've got a U.S. dollar loan to our foreign operations, let's just say that it's $100 million loan. It's on our U.S. books as $100 million, but on a foreign entity's books at - initially goes over, but let's say that their books are in euro, okay? So they are going to record it as $100 million but in euros, so if the euro was at, let's say, $1.15 to the dollar, then they're going to record it on their books at something less than $100 million euros, okay? So then if the euro weakens to the dollar, what they'll do is they'll recognize a loss on their books but the $100 million on the U.S. books will remain the same. So then when we sum all those numbers together and you go to eliminate it, because you have a loss on one book and nothing on the other, that loss then hangs up and that's what hangs up on that FX gain/loss line. So that's why we say it's a non-cash loss or gain number. You'll notice as the currencies move up or down that line will move up or down and because we're not-- that essentially is the way we capitalize our international operations. There's not an immediate return of that money to the U.S. to pay off that loan.

Thank you. We have a follow-up question from the line of Mike Grondahl. Please go ahead.

Two things, any non-mobile content that you guys want to call out as having a good quarter? And then secondly, just any update on kind of the tax rate and how to think about that?

Sure, Mike. This is Kevin. Probably the one that I would be willing to call out is, we have a good relationship with Microsoft and we've been working with Microsoft across Europe to deploy converting their Microsoft office product to a [indiscernible] product. In this earnings call, we announced that we launched Microsoft office into MSH which is essentially the largest electronic retailer in Germany and sells a disproportionate amount of office software in the country. So the non-mobile growth in epay was across the board. It was not concentrated with any one brand, but Microsoft office in Germany stood out as one of the bigger successes that we had.

On the tax there, Mike, we've kind of said before it's kind of like the upper-20%s range there. As I said earlier, we recognize or benefited from, some improved tax rates in the first quarter so for the balance of the year, I would say we would be in the mid- to upper-20%s tax rate. A little bit of benefit.

Thank you. I'm showing no further questions at this time. I would now like to turn the call back over to Mike Brown, CEO for any further remarks.

Okay. Thank you, Kat. Thank you, everyone, for joining us on the call. We'll look forward to seeing you roughly in 90 days. Have a nice day.

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