Greetings, and welcome to the Euronet Worldwide First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a remainder, this conference 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, Kath. Good morning and welcome, everyone, to Euronet's quarterly results conference call. We will present our results for the first quarter 2016 on this call. We have Mike Brown, our Chief Executive Officer; Rick Weller, our Chief Financial Officer; and Kevin Caponecchi, the CEO of the 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 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 economic conditions in specific countries or regions, technological developments affecting the market for the company's products and services; foreign currency exchange rate fluctuations; the effects of any breaches in the security of our computer systems, the ability to renew existing contracts at profitable rates; changes in fees payable for transactions performed over our networks, 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.

Thanks, Jeff. Good morning and thank you to everyone for joining us today. I will begin my comments on Slide 5. We delivered another quarter of double-digit growth with revenue of $437.9 million, operating income of $41.9 million, and adjusted EBITDA of $64.9 million. Our adjusted cash EPS was $0.69, a 23% year-over-year increase, and $0.01 ahead of our guidance. This result includes a small benefit from share repurchases which was essentially offset by headwind from foreign currency exchange rates since we gave guidance in February. On a year-over-year basis FX headwinds impacted cash EPS by approximately $0.025 per share. As we said in our press release, this was the 13th consecutive quarter of double-digit cash EPS growth. This was another very strong quarter for Euronet in which all three segments contributed to the double-digit growth. Next slide, please. On Slide 6, we show our three-year transaction trend by segment. EFT transactions grew 23% with increases across Europe and India. As has been the case for the last several quarters, this 23% growth reflects a substantial loss of a number of transactions from the terminations of an unprofitable contract in China. If not for this terminations, transactions would have grown 32%. I would point out however that 13 or about one-third of this 32% percent pro-forma growth was from the 2,600 low margin ATMs we onboarded in India. Epay transactions grew 1% with increases in Germany, India, Turkey, Australia, Poland and the Middle East, partially offset by mobile decline in Brazil, North America, and the UK. We'll have to work hard to replace the loss of volume, mobile volume, and until then we would expect some softness in the epay segment revenues. However, operating income should remain consistent year-over-year due to the continued growth in non-mobile offsetting declines in mobile.…

Thank you, Rick. And thank you to everybody who is joining today. First, I'll start on a lighter note, and that is the reflection of our 2015 Annual Report. As you can see the graphics of our PowerPoint template draw from the illustrations in our 2015 Annual Report, the cover slide features a world map on top of a euro and Indian rupee note, as well as Malaysian ringgit coin representing our global presence, our geographical expansion, and our foreign currency exchange rate expertise. A 28% reported and 50% constant currency EPS growth in 2015 was another crushing year for us. So starting off strong in Q1 is certainly encouraging. Now on to the significance of the first quarter; delivering this 23% cash EPS growth to start the year is simply outstanding, especially given the seasonally pronounced impact of the first quarter. As many of you know, in the first quarter customers make fewer cash withdrawals and buy less content after the holiday season, and money transfer customers make fewer transfers during the winter months. So to deliver a 23% growth is a true testament to the focus and the dedication of our team to deliver more products and services across our market. These strong first quarter results are great start to the year in which we will continue to execute on our strategy to add more content, more devices, and more channels in more markets around the world. Now let's move on to Slide number 12 and we'll talk a little bit about EFT. Slide 12, as we've told you in the past, the first quarter is always a weaker quarter for the EFT segment and this year was not any different. However, compared with the first quarters of previous years this was a strong start for our EFT…

Thank you. [Operator Instructions] Our first question comes from the line of Mike Grondahl with Northland Securities. Your line is open, please go ahead.

Thanks guys, and congrats on a typical seasonal challenged quarter, you guys outperformed nicely. Mike, where did that outperformance come kind of based on your expectations going into the quarter?

Well, actually pretty much hit every everywhere where we thought it was, I mean we headed out pro forma bid in the EFT and money transfer, and epay was about where we expected it. So I'm just happy to see guys hitting and exceeding their numbers.

Sure, great. In India, it seems like the 2,600 ATMs you're picking up, are giving you entry into the public market where like 77% of the ATMs exist. Are you currently in any discussions for any of those public sector banks ATMs?

I'll let -- I know part of the answer but I'll let Kevin answer.

Mike, this is Kevin. Yes, we're discussion as Mike suggested these public sector banks are using technology that's quite dated and they're looking through either replace the switch with a new solution or they're evaluating outsourcing those ATMs. And we're in discussions with other public sector banks.

Yes, I understand. Like I said, I can't emphasize, over three quarters of all the ATMs of the market are public sector banks and those guys have been basically just closed down. And somebody had to kind of get ourselves, get our feet where we wanted these. They always start low margin to begin with and then you try to wrap around other services to make more money.

Got you. Do you have a goal this year, how many ATMs…

No, not really a goal but you know the nice thing is, we will not sign one of these deals unless we're making money. And so -- or at least that's the general rule. So this one is making money for us, next one's we expect would do the same thing. So they're all incremental, we've been in India now for 10 years so we've got lots of infrastructure, our guy running it there in India, Himanshu, is a very bright guy and he's got a really strong team behind him. So I really think that market hasn't fully taken advantage of all that we have to offer.

Okay. And then on money transfer, the Walmart, Chile pilot, that seems to be your first piece of business with Walmart outside of the U.S., is that correct?

That is correct.

Can you talk about the filing?

Well, it's the fillers, I mean they have almost 400 stores down in Chile. We're piloting handful of stores right now. If all goes well for both parties, we could expand that to more stores. So it's the second deal that we've signed with Walmart and I think it's just -- I mean, with Walmart, these guys are big, very professional retailers. And our focus is, keep our nose down, work really hard and just keep them happy. And that's what we do and then overtime perhaps other deal will come our way.

Got it. And lastly, Mike, your money transfer volume continues to be very strong. Is – obviously, you're taking share but you could you talk about where you're taking share globally? Is the pie still growing? I mean how is the output justified…

Here is just two things and then I've got to cut you off as I've got to let other people talk but these are good questions. So with respect to money transfer, when it comes to our baseline they call it the non-Walmart business. We're taking it from everybody, obviously we're growing hell lot faster than the world market is for domestic remittance. So obviously, I don't know exactly who but we're taking it from the market. With respect to the Walmart to Walmart deal, we firmly believe that as we have put in really what Walmart could be proud of, which is an everyday low price to their customers, we've dropped the pricing so significantly in this particular U.S.-U.S. corridor that I think the pie is growing. And so here more people can now afford to make domestic remittance when here therefore they didn't want to spend $50 or $60 or $70, they spend $600 or $700.

Got it. Thank you.

Thank you. Our next question comes from the line of Chris Shutler with William Blair. Your line is open. Please go ahead.

Hey guys, good morning.

Good morning, Chris.

So I just wanted to follow-up on the public sector banks in India, it's pretty interesting. Mike, what is the -- what does or will the competition look like there for those types of outsourcing deals and what would you expect the unit economics to look like relative to other Indian machines or Central and Eastern Europe?

Yes, so…

I know it's early.

To funniest part about -- the interesting part about India is, everybody and their brother claims they can do ATM outsourcing or something for banks. There is a lot of low competitors. Because we've been there for 10 years, we're already driving and doing full outsourcing to a number of the private sector banks right now. We've got a great reputation. And so I imagine it's going to be competitive but we're happy to just compete. And by the way, these don't get our -- we do a driving contract in Europe, there is a lot to it. So there is a lot of pieces, so we might be managing the security and maintenance under the cash forecasting and organizing the cash builds and all this stuff. Well, this is just driving and switching. So this is really just computer work.

Okay. And then on epay, maybe you could just dive into that segment a little bit more. I know you did some in the prepared remarks but given the sense of how much the mobile versus the non-mobile gross profit is growing today. Just what the outlook is, sounds like, you're expecting relative stability in the near-term but -- what would you -- how would you characterize the opportunity to reaccelerate epay into the upper single double-digit EBITDA growth in the medium term?

Chris, we're currently seeing mid to upper single-digit declines in the mobile sector and we're fortunate to see some really nice strong growth rate in the non-mobile which is as you can see in the results that has given us the ability to continue to grow that operating income. And as we said in our notes there, we would expect to see a little bit of softness here until we -- really trying to gain continued momentum in the non-mobile there. So it's kind of hard to really predict when that might happen, we have seen some positive signs in certain markets. And again, I would just come back and say that we've got great momentum going on our non-mobile which has given us the ability to work through mips change. So I think sometimes there is just always a lot of focus on the non-mobile part of it but you know we've got a product that -- let's call it is going through a maturity curve. And we're really fortunate that we have access at over 300,000 retailers with over 600,000 terminals that we distribute our product in. Together with a whole host of digital fronts that we distribute our product and that's really been the champion behind being able to grow this non-mobile into good strong double-digit basis. So as we continue to make that change out, I think we'll start to see some movement there but for the time being we'll be a little bit cautious on how aggressive we might expect that to be growing.

Okay. You would characterize the mobile top-up businesses, the declines there as steady or are they accelerating a little bit or how would you characterize the headwinds?

No, I would say steady, I haven't seen necessarily acceleration but probably as with a lot of people, we would like to think that when we see a flattening in a particular part of the business it's a trend that we love to hang on to there, but it's not really changed but it's continued like I say in that single to upper single-digit rate.

Chris, this is Kevin. It's principally driven by mobile operators competing with one another and just continuing to give more for less. And you see that in the advertising on TV etcetera. So that's pretty that -- that promotional activity for mobile operators is pretty consistent. And it's proportional, all of us can only eat so much data, text and voice.

Okay. So just a continuation that sounds like. And then just one more quick one, just on the pinned EFT. Mike you talked about the move into Ireland, I'm guessing it's very small at this point but maybe just give us a sense how big the launch is and who the competitors are and why you're moving into that market?

I've send out a little email every my company because on St. Patrick's Day we went live with our first three ATMs. We just have a handful now but we're going to -- it's the same modus operandi, we do at each of our new launches, we start with handfuls of ATMs, get them out there, make sure we get it all working right. We assess the market and we continue to put out more ATMs where we can make them profitable. So more on that later.

Okay, thanks guys.

Thank you. Our next question comes from the line of Rayna Kumar with Evercore ISI. Your line is open, please go ahead.

Good morning. With your Walmart money transfer pilot in Chile were you setting prices relative to competition?

You know what Rayna, I don't even have that…

This is Jeff. Rayna, we consistently throughout our business are slightly better than the leading brands that are out there because as Mike mentioned earlier in our comment there. We provide a great quality product with lots of payout opportunity and we do it at a little better price. So it's a little better price but it's not different than what we have traditionally practiced around the world.

Got it, that's very helpful. With the 26% Asian location growth that we saw this quarter, I think it was the highest we've seen in at least the last two years. Where do you think are the other markets that you can add?

There is a lot. I mean the reality as we still need more in Africa. We still need more in the Middle East which is why we've bought IME because that gives us a head start in the Middle East. Asia, we could use more. Now we're pretty strong in places like Pakistan, Bangladesh, Sri Lanka, in Southeast Asia but we need to do more in India. So there is still lot of work for us. We've got a team that crisscrossing the world every single day, and talk about nose to the grindstone, they just hammer it out and add more ubiquity to payout which gives us access to more and more immigrants because of what like we said in the prepared remarks, if you don't have a payout location that's close to where the family -- your mom lives and you're sending her money, then you're going to use a different provider.

Understood. Can you update us on the potential for each campaign or change increases across Europe?

Okay. I'll tell you -- this is -- we're trying to figure this stuff out too. We do know that it appears as surcharge, maybe allowed in Austria and Spain under certain conditions, that's kind of new over the last few months. Germany is considering surcharge for different kinds of cards than they have in the past, everything seems to be very, very fluid, nobody seems to quite know what's going on. But we'll be able to -- I think within a quarter two we'll be able to solidify that but this is a combination of card organizations, regulators, consumer groups, everybody's kind of buying to be the guy who determines what the new rules are. So it's very fluid.

I think one other point I would make on this is that, you hear a lot of discussion about decreases in interchange, especially in the card world. And you have to understand that in the card world what these really are is just electronic transactions that are forcing the different networks. In the ATM world, there is a lot of cost it takes to keep an ATM in place. And the banks that you were seeing over there, the banks are essentially saying, I cannot run and make an ATM network available to customers with low interchange rates because as we've shared with you before, it costs almost a $1,000 a month to run an ATM, this is a real bank quality ATM, not a small type of a desktop ATM but a real bank quality ATM that you provide a whole host of services, a whole range of value-added products. And to keep those things up and going, and rent, and all that type of stuff, it's about a $1,000 a month. And so the banks are essentially saying, guys, we need enough money to profitably or at least breakeven run our ATM network to serve the customers of the bank. And so that's why I think when Mike says it's quite fluid is, these folks are engaging in the discussion to see how they can most efficiently operate their business because it is very, very different than card interchange.

When Rick says card, he means POS.

Yes.

Got it. Thank you.

Thank you. Our next question comes from the line of Peter Heckmann with Avondale Partners. Your line is now open. Please go ahead.

Good morning everyone. Rick, just a follow-up on your comments on epay. Did you say just qualitatively that the net effect we should think about maybe modest revenue declines but with modest growth in EBIT dollars given that continued mix shift to higher margin transactions?

I would say you heard it just the way we expected you to.

Yes, perfect. Okay. And then within money transfer, great transaction growth there. You're seeing that I calculate at the average fee per transaction moving down consistent. And I assume that's mostly mix but are there any quarters where you would call out either new competitors or different dynamics in pricing?

No, nothing that we really see there across the board, Pete. I would also just mention that the Asia Pacific transactions generally are a bit lower on the price side than you might see out as the U.S. and the European type transactions. So that adds into the mix a little bit there that brings that number that you've seen, that's overall an average lower kind of a number there. But nothing really different on the competitive price front out there that we've seen.

Great, that's helpful. And then just last question, a clarification, in Chile, on the pilot, I assume that's a Ria branded pilot?

Yes, it is.

Got it. All right, thanks. Have a good one.

Thanks, Pete.

Thank you. Our next question comes from the line of Jason Deleeuw with Piper Jaffray. Your line is now open. Please go ahead.

Thanks, good morning and nice work on the quarter.

Thank you, Jason.

Just a quick question -- you're welcome. Quick question on the Walmart, Chile store, just to be totally clear, are those transactions from U.S. Walmart's to Walmart's in…

No, no, that's not it at all. These are immigrants into Chile from other, probably surrounding South American countries. Chile has got one of the stronger economies in South America and so you see people coming from Peru and other countries around there, going into Chile for jobs and then basically send him back home money. So this has no connection to the U.S. Walmart other than it's both [ph].

Great, thanks. And then switching to EFT, with the growth in India, the mix we have going on with outsource versus owned ATMs and some other factors. How should we think about the segment margins? They were up year-over-year in this last quarter and this is seasonally slow period, and we've had some ATMs moving around but can we still expect EFT segment margins to expand going forward?

Yes, I think that's probably reasonable, we'll say the same to expand.

In fact on instance, as Mike pointed out earlier, these Indian ATMs are essentially driving our business, it's driving. So whatever revenue comes in the top goes all the way to the bottom because there isn't any other kind of real operating kind of cost out there to do that. The only difference you'll see is when you do the mathematics of your average operating income per ATM just because like we said, they're going to be pretty marginal on the contribution.

We really increase the denominator.

But our margin should continue to expand.

And just to reiterate for everybody. Driving agreements, we love them. We don't have any CapEx, we don't have any OpEx. We usually -- we leverage that on top of current infrastructure. So as Rick said, you add a driving contract, no matter what you charge and those are very lucrative agreements for us, high margin.

And then for the ATM growth for the remainder of the year, I believe the target was 2,000 ATMs and my sense is that's kind of outside of what you've done in India. Are you still targeting…

Yes, we're not counting the Indian one in that but we did something like 530 or whatever the number was for this quarter, net about all the other things going on. So we're definitely on plan to deliver 2,000+ for the year and we hope that our site selectors can find another 1,500+ great sites this year.

We didn't think that the 2,600 Indian ATMs gave us the right to do our victory dance.

All right, thanks a lot.

Thank you.

Thank you. Our next question comes from the line of Alex Veytsman with Monness, Crespi, and Hardt. Your line is now open. Please go ahead.

Good morning, congratulations on a strong quarter. My question is around Walmart to Walmart, just wanted to understand in the second half of the year a little better, what kind of growth rates should we be envisioning for the second half of the year?

You know, everybody asked that, we asked that around the table here. We don't really know. We are into kind of uncharted territory, first of all, the historicals of Walmart prior to us getting there are confidential between Walmart and it's other suppliers. All we can gather is it appeared as -- as I mentioned, because we're on the low end of the price elasticity curve, more and more people are using the service, and more and more people are finding out about it every day. So that's very difficult for us to know how big the pie can get because the pie has never been this big before. So we'll just have to see, where we still see growth, we're still happy.

How about across border, I mean what are some of the possibilities there?

Well, across the border with Walmart in particular, do you mean?

Walmart to Walmart, potential growth?

That's upto Walmart and whenever they have their strategy and if they choose us as their supplier, with give you more updates but as of this right now we only have the domestic piece, and we're excited about doing that and doing that really well.

Got it, thank you.

Thank you. Our next question comes from the line of Tim Willi with Wells Fargo. Your line is open. Please go ahead.

Good morning guys, Alan [ph] for Tim.

Hey Alan, how are you?

Good. A couple quick questions on transfer. So just to touch on the development in Russia, is that something you see as a longer term opportunity to gain market share?

Absolutely. I mean, we have -- to be frank, we've got kind of weak payout in Russia. So every time we add more payout it's better, it's good for us, it was -- it's a 15th or 16th largest remittance market in the world and we've got rather spotty coverage. So I'm happy that we added these new sites and hope to add more.

Okay, great. And then secondly, could you just give us some update on the economics around IME and the plans for growth specifically in Southeast Asia?

Well, there is no economics other than they've exceeded our expectations since we bought them with their -- just their intrinsic growth. We still haven't done the full integration between our two systems so that all of our agents can access all of their agents, and their locations and vice versa. That's in process. And so that will add some growth. In the meantime, these guys are just kind of ripping it up on their own, so they're doing a good job, growing in Southeast Asia. In the Middle East, they've added these corridors that we just did not have before. And so we're excited to add our brand and our size and girth to what they have had so that we can amplify that a bit.

Okay, great. Thanks, Mike.

Thank you. And that does conclude today's Q&A portion of the call. I'd like to turn the call back over to CEO, Mike Brown, for any closing remarks.

Thank you, operator. No real closing remarks. I do thank you to everybody who has spent some time on the phone with us today. We look forward to a good Q2 and certainly, a good rest of the year. Thank you very much.

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