Euronet Worldwide, Inc. (EEFT) Q2 2017 Earnings Report, Transcript and Summary

Greetings and welcome to the Euronet Worldwide Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call maybe 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, Charlotte. Good morning and welcome everyone to Euronet’s quarterly results conference call. We will present our results for the second quarter 2017 on this call. We have Mike Brown, our Chief Executive Officer; Rick Weller, our Chief Financial Officer; and Kevin Caponecchi, Executive Vice President and CEO of our epay division on the call. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the first page of the PowerPoint presentation we will be making today. Statements on this call that concern management’s intensions, 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 that are listed on the first page of our presentation. 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. Now, I will turn the call over to our CFO, Rick Weller. Rick?

Good morning and thank you for joining us today. I will begin my comments on Slide 5. For the second quarter, we delivered revenue of $536 million, adjusted operating income of $71 million and adjusted EBITDA of $99 million. Adjusted operating income, adjusted EBITDA and adjusted EPS exclude cost from two items, first approximately $2.5 million in cost related to the proposed MoneyGram transaction and second a $2.3 million non-cash write-off of intangible assets from the closure of our Pure Commerce office in South Korea. Second quarter adjusted EPS was $1.09 a share, a 12% increase year-over-year and in line with the guidance we have provided in April. This $1.09 includes about $0.02 of headwind compared to last year’s second quarter from share dilution on our convertible bonds as we continue to see a nice appreciation in our stock price over the year. Since our guidance, our share price continued to appreciate and impacted our earnings by about $0.02 to $0.03 a share from additional share dilution, which was offset by FX rate improvements. I would also point out that last year’s second quarter GAAP pre-tax income included a $19 million gain on Visa Europe shares, which we did not include in our adjusted EPS numbers. Next slide please. Slide 6 shows our 3-year transaction trend by segment. EFT transactions grew 26% from the expansion of our ATM and POS networks in Europe, the October 2016 acquisition of YourCash and transaction growth in India. As has been the case for the last couple of quarters, the transaction declines in India from fewer cash withdrawals as a result of the government demonetization were more than offset by a higher volume of low value transactions related to the low margin agreements that we have made in India. And those agreements have made minimal contributions to our overall operating results. epay transactions declined 4%, with declines from mobile transactions in the Middle East, North America, France, India and the UK partially offset by growth in Germany and Poland. Total money transfer segment transactions grew 11%. Money transfers grew 12%, while non-money transfers grew 2%. Consistent with prior quarters, money transfer growth came from most all areas of the money transfer business. Next slide please. Slide 7 presents our results on an as reported basis. The year-over-year changes in currency vary widely with modest 3% to 4% devaluations in the euro and Canadian dollar, more significant devaluations in the Malaysian ringgit and British pound of 7% and 11% respectively, while the Australian dollar, the New Zealand dollar and the Polish zloty appreciated approximately 1% to 2%. To normalize the impacts of these currency fluctuations, we have presented our results adjusted for currency on the next slide. Slide 8 please. For the second quarter, EFT delivered constant currency revenue, adjusted operating income, and adjusted EBITDA growth of 38%, 53%, and 50% respectively. These exceptional results were driven by a 44% increase in ATMs and a 26% increase in transactions, with growth from Europe, India and the acquisition of YourCash. Revenue and gross profit per transaction improved year-over-year and operating margins expanded year-over-year. So, as you can see, the investments we have made to deploy more ATMs are paying off as this was another outstanding quarter for the EFT segment on all fronts: growth, margins and leverage. And finally, this quarter’s EFT segment results included close to $1 million negative impact from the India demonetization, which was roughly in line with our expectations shared with you last quarter. As we entered the third quarter, we anticipate that the situation in India will continue to stabilize. However, it is a fluid environment in India and government policy continues to evolve. Now to epay, epay constant currency revenue growth of 4% was the result of continued growth in non-mobile product sales partially offset by certain mobile declines. Declines in constant currency operating income and adjusted EBITDA were largely the result of non-recurring settlement charges, one item related to the formatting of invoices and the other related to a pre-acquisition employment dispute from more than 10 years ago. Revenue and gross profit per transaction improved in epay on a year-over-year basis, consistent with our focus of adding more high-value, non-mobile content. Now, let’s turn to the money transfer segment. Double-digit constant currency revenue increases were driven by growth across all sectors of Ria’s business together with the conversion of the XE business to the HiFX platform. Revenue and gross profit for money transfer transaction remained stable year-over-year when Walmart to Walmart transactions are excluded. Operating income and adjusted EBITDA declines reflect last year’s benefit of the strong trading patterns in the HiFX business from the Brexit vote. Discounts given in the renewal of the Walmart agreement and certain implementation costs of the Walmart as the agreement in the UK and finally cost to further expand and upgrade Ria’s network, particularly in India. Excluding these items, constant currency operating income and adjusted EBITDA would have grown 17% and 14% respectively, reflecting leverage on revenue growth. Now, to Slide 9. On Slide 9, we compare the June 30 balance sheet to the first quarter. Cash increased compared to the prior quarter due to the additional cash requirements to support the seasonally higher ATM cash withdrawals in the second and third quarters, together with cash flows generated from operations. The significant increase in cash required is directly correlated to the organic deployment of more than 3,000 ATMs in the last year. In similar fashion, the increase in debt is primarily from borrowings to fund the increased cash bills. I also point out that while our leverage ratio at June 30 was a bit higher, on a net debt basis, it remains essentially zero, given that the borrowings during the quarter are simply setting in cash at the ATM. In summary, we had an excellent second quarter and first half of the year in which we have delivered strong earnings while also making investments across each of our segments to deliver strong results in the second half of the year. With that, I will turn it over to Mike.

Thank you, Rick and thank you to everyone who is joining us today. I am on Slide #13 and I will start with the EFT highlights. As I have said this I am here in Kansas, we make hay while the sun is shining. Certainly, the sun is shining of our EFT segment this summer. Looking at the exceptional EFT results, there was plenty of activity in the second quarter. So, I will just hit some of the highlights. In India, we signed an agreement with AU Small Finance Bank to drive their ATMs and offer card management and reconciliation services. We are also pleased to renew agreements with several of our customers. In Poland, we renewed ATM and deposit agreements with Idea Bank, DNB Bank and Citibank. And in India we renewed our brown label ATM agreement with ICICI Bank. Next slide please. We continued to rollout new features – we are on Slide #14 by the way, and product across our independently deployed ATM networks, which make cash access more convenient for the customer. This quarter we expanded contactless card acceptance and cardless payout across more of our ATMs which makes using the ATM faster and more convenient. In Poland we have partnered with TU Europe, European travel insurance provider to offer customers the ability to purchase travel insurance. Customers can choose to purchase the domestic or global insurance option and pay using their debit card on the ATM. Our POS DCC business continues to nicely expand despite the closure of our South Korea office. This quarter we launched in the Hilton, Fullerton Bay and Marriott hotels in Singapore. We also launched POS DCC service with First Hawaiian Bank in Guam, Saipan and Hawaii. Finally, in India we partnered with Thomas Cook, the largest issuer of prepaid cards in Asia to launch their proprietary travel card. As Rick mentioned the impact of demonetization on our results was roughly in line with our previous estimates. The cash supply consistently improved through the second quarter and we saw transactions on our brown label ATMs approach similar levels as in June of last year. We are cautiously optimistic, barring any additional intervention from the Indian government in that situation in India will and as that situation in India continues to stabilize. We finished the quarter with 37,383 ATMs, 44% increase over last year. During the quarter we added 1,171 high value ATMs across Europe and we reactivated 934 seasonal ATMs and added 133 ATMs under our low margin agreements in India. Year-to-date we have organically deployed more than 1,700 ATMs on pace to meet our goal of 3,000 for the full year. As you can see the ATMs we installed a little over last year are ramping up nicely and as the summer travel season begins the benefits of these investments are evident in EFT’s exceptional second quarter results. Now let’s move on to Slide 17 and we will talk epay for a minute. epay remains focused on their strategy to expand our content portfolio and to deliver that content to more retailers and more channels. Non-mobile now makes up more than 55% of our gross profit and as we continue the transition to non-mobile, the epay business will continue to become more seasonal with more earnings being shifted to the fourth quarter. In the United States, we launched new customer activation, along with expanded prepaid mobile distribution from Verizon Wireless into independent retailers. Verizon previously only activated new customers in national retail, so this partnership expands Verizon into new channels. We also expanded our relationship with Google by adding distribution of Google Play cards and digital codes to five new countries across Europe. We introduced our first digital kiosk solution at Rewe, a large German supermarket chain. The digital kiosk complements the traditional gift card mall and expands the display of content while adding customer convenience. Finally, we added distribution of Amazon digital codes into the banking channel in Germany with Postbank and Sparkasse. Overall, this was a solid quarter for epay with good progress made to expand our non-mobile content distribution. Now let’s move on to Slide #20, we will [ph] talk about money transfer. Our Ria’s money transfer network now reaches 324,000 locations in 144 countries, 3% year-over-year increase. As you know in April we renewed our agreement with Walmart and along with that renewal we agreed to a rate reduction. At the same time pricing to consumers across all tiers of the Walmart2Walmart product was reduced. As we expected, we have seen a nice increase in volume at Walmart, including an increase in the percentage of new customers using the product as well as existing customers using the product more frequently. We believe that the volume gains are resulting from increased market share and potentially attracting customers for more traditional payment methods such as cash, checks or money order. The increased volume from these changes reaffirm our shared efforts to improve customer pricing and drive volume as part of our extended agreement with Walmart and we look forward to the next 3 years powering the Walmart2Walmart product. This demonstrates again the customer acceptance and appreciation for Walmart’s everyday low prices strategy. As you probably saw in our press release last month, we launched direct partnership agreements with three of India’s leading cash remittance payouts Paul Merchants, Weizmann Forex and Transcorp, all three of these well-recognized agents have more than 15 years of remittance experience and were previously exclusive with one of our largest competitors. These partnerships will significantly improve Ria’s payout network in India, while also offering improved brand recognition and tremendous convenience for beneficiaries to receive cash remittances. This is a material improvement to our payout network in India where previously, we had to rely on a number of indirect agents, which offers sub-optimal service and pricing and limited our ability to expand our transfers to India. When recognizing that India’s remittance market is approximately $75 billion annually or about 3x the size of Mexico you can more fully appreciate our excitement about this significant achievement of our money transfer team. In addition to these launches in India, we also want launched service with 18 additional correspondents across 17 countries. These new agents are located in strategically important countries like Serbia, Vietnam and Nigeria. We also continued to invest in our digital property. This quarter we launched riamoneytransfer.com in Australia, our third country to go live with our digital family remittance solution. And as expected, we have seen stronger customer activations from the XE conversion. XE will be a really great contributor in the next few years. Overall, this was a great quarter for our money transfer team with another double digit revenue growth quarter, together with two very significant achievements, the Walmart renewal, expansion and upgrade of our network in India. More significantly on top of these greatest accomplishments, our team continued to make good progress in further expanding both our physical and digital presence while at the same time implementing the extension of the Walmart agreement without significant adverse financial results. This is the credit, the strength of the product and the overall money transfer operating performance around the world. Now let’s move on to Slide #21 to wrap up the quarter. First, we delivered a 15% constant currency revenue growth. Second EFT result reflects the benefit of the strong ATM deployments made in the past several quarters, epay continued to benefit from its focus on expanding its non-mobile content portfolio to prepare for the fourth quarter holiday season. Money transfer delivered a strong quarter, implemented the Walmart extension and made investments in our network, particularly in India which position us well for further growth. Our balance sheet remains strong with good cash flow generation. And finally, we expect our Q3 adjusted EPS to be approximately $1.60 per share assuming consistent foreign exchange rates. With that, we will be happy to take questions. Operator, will you please assist.

Certainly. [Operator Instructions] Our first question comes from the line of Pete Heckmann from D.A. Davidson. Your line is now open.

Good morning, gentlemen.

Good morning, Pete.

Had a couple of questions on money transfer, what was the effective date for the contract renewal and the new pricing, I am trying to get a feel for how much of that was reflected in the second quarter?

Almost all of the second quarter had that reflected, Pete.

Okay. And then in….

In the beginning of April, yes.

Okay, okay. And then in terms of go-lives, the timing for the three large direct agents in India and then ASDA units in the UK are those up and running currently or should we expect those to ramp through the back half?

Okay. With respect to the Indian banks, we are rolling them out now, but it also operates kind of location by location. So, we expect the full rollout to be by the end of the year, but we are live with all three of them right now. And that was a significant investment on our part, but it’s an investment and really when it comes down to family remittances, the largest quarter around the planet.

Got it. And as the ASDA units?

Yes, pardon me, what was the second question?

Just on the ASDA units in the UK?

Yes. So, ASDA we are still rolling out there. I don’t have the exact units at the top of my head, but we are still rolling out, because that was originally expected to take until the end of the year as well.

Got it. Okay, that’s helpful. I will get back into queue.

Thank you. Our next question comes from the line of Mike Grondahl from Northland Securities. Your line is now open.

Hey, great. Thanks, guys. Congratulations on the quarter. Hey, Mike. Could you spend a minute or two, the Thomas Cook prepaid card deal, just kind of talk about how you make money there and do you see more deals like that across kind of Europe and Asia?

Yes. And in fact that’s one thing that we have talked to you about over the last couple of years as we have expanded our capabilities both for acquiring and processing travel card, prepaid debit cards, etcetera. And so this is one where we do the processing for them, it’s under their brand, but we would – if you go back over the last several calls we have announced several of them. You might remember that with their cards that we did in Switzerland and Hungary and Poland and we have got other ones in the work. So we will continue to do that. These are all reflected in our EFT division.

Got it. Got it. And when you look at the strengths in the ATM business, it seems like it’s primarily unit-driven which you have been really strong. Are there – is there much services that you are offering changing there or would you say units are the primary driver?

Units are the primary driver. We have mentioned that before. There are some other drivers too. One is if you have increased number of tourists, that doesn’t hurt and we have seen it in an increasing number of tourists throughout Europe that help us in the summer months certainly, but you know really what it comes down to is finding those excellent sites one by one across all these countries. We are live in 23 countries in the EU right now and the EFT team is just crushing it, when it comes to finding good locations in a market, where the average number of ATMs on a per capita basis, is probably 40% of the United States. So, there is still more ramp there to go and we are going to continue to find more sites.

Yes. And I just add to that, that as we have said for years is it’s also the addition of more product to the machine, sure. When we get more machines out there, but as we continue to layer more of those products in there, we have talked about things like having card less based ATM cash withdrawal, depository transactions, lottery or promotional payout type of transactions. And these are all very high value rich margin type of transactions and it just makes our ATMs more attractive to the banks and to other parties as the place to go. So, yes, it is units, but it’s getting more and more and more and more products on there and we are capable we can do that, because we run the ATMs with our own software both in our back office as well as at the ATM. So, it’s a combination of getting the machines out there and getting the products on the machine.

Yes. One of the things that we have added in a couple of countries now, are the ability to buy tickets to summer concerts and clubs and so forth. That’s another example. And then the nice thing about that is if somebody comes to your ATM to buy a ticket, they kind of probably get some cash while they are there or vice-versa, you can advertise the ticket. So, all these things really come down to get more people to your ATMs versus say our bank’s ATM that might be somewhere further away, because all a bank’s ATM can do is basically give you a cash withdrawal.

And so this – just the ticket example that Mike gave here and card less withdrawal transactions, what that really does is that makes our ATMs that much more appealing to a much broader group of customers out there that we see deploying more alternative payment products and things like that. So, we feel good about getting more of those ATMs, because we get more products out there to show each and every customer that walks up.

Got it. You commented on travel, Mike, in Europe and we have done a bunch of work there the last couple of months. Is it – I would like your opinion, but is it sort of a fair conclusion that after many years of okay travel in Europe, this one is shaking up to be kind of a new level of travel, where you are seeing kind of a significant step up. Is that fair?

Yes. Well, we mentioned this on the last call I think, I don’t have the numbers for every one of the countries, but let’s take Greece as our real tourist kind of destination for both Europeans and other people around the world. It did about 27 million tourists last year and is projected to do a million this year. So, that’s an 11% increase. And then – so, those kinds of things, they probably know why is this happening? I think more people just are out traveling maybe they have more disposable income, maybe because the economy is getting a little bit stronger across Europe. But it’s also because the alternative, I thought is positive in people’s minds as they used to be. Lots of Europeans used to save a few bucks by or few euros by going to Egypt or to Turkey or whatever to still have a beautiful kind of summer vacation, but a little bit cheaper. Well, people aren’t going there now, because you go to those places, Tunisia, some of these places, they have all had tourist incidents and it kind of scared some of the people away.

Got it. Thanks, guys.

Thank you. Our next question comes from the line of Andrew Jeffrey from SunTrust. Your line is now open.

Hey, good morning. Thanks for taking the questions. I wonder if you could elaborate a little bit, Mike, on the XE integration and the kind of progress you have seen there and perhaps if you could quantify that for us and then any thoughts about applying some of those leads against the C to C business over the next couple of quarters?

Well, as you know, XE is the most trusted name in currency rates in the world. I mean, last year we had something like $280 million unique IP addresses hitting our website and we have something like 57 million downloads of our app and about 10 million of those are used every single month. So, we have got this huge audience. You are right there is huge funnel of potential leads because about half those customers actually professed interest in saying that they had an imminent cross-border payment need. So, we have got this great big funnel. How do we use it? That’s your question. So, we have integrated well now with HiFX, in fact we were able to take all the transactions that formerly went to a competitor, leads went to a competitor. We are taking all those now. Our sign-ups are coming at a much increased rate than they used to. Our key now is to make sure that we convert them. And this is kind of a work in progress. You try lots of things to increase this conversion. We have several things that are happening now in process. We will be delivering new versions of both our app and our website design between now and the end of the New Year. There are several actually revisions and plan. So, we see this as nothing but a big growth opportunity. We are calling this one digital, which is really our digital approach to doing cross-border payments whether that’s family remittance or high-end things like HiFX. And so the results have been great, because we have had two to three times the number of activations that we have had in the past before we got away from – when we used to be on the competitor and now we are on ourselves. So all this kind of adds up to a lot of potential having seen it all yet to the bottom line, because we have to get people activated and signed up and get them to make that first transaction, but we are very encouraged.

Okay, great. We will look forward to more updates there. And with regard to EFT certainly appreciate the value add and the impact there as well as the low number of ATMs per capita. I wonder if you can just expound a little bit on the runway, if you – can you look out and think about the kind of ATM growth you have seen 3,000 plus machines a year sort of compounding over 5 years, 10 years and then the addition of sort of the high yield services in what inning might we be in terms of this European ATM deployment?

I have said this basically, you talked about that all the time. I mean, you keep wondering how can you do 3,000 plus every year, but every year there are 3,000 plus. So, I don’t know what inning we are in, maybe we are in the second inning, maybe we are in the third inning, but we are certainly not in the eighth inning. And there is just a lot a lot more opportunities and that doesn’t include if everything changes more towards the U.S. model, where every place in Continental Europe been has kind of a surcharge model, more like the U.S. model. That hasn’t come yet, the only two new countries that have been added over the last 3 years with respect to [indiscernible] or Spain and now Austria. So, that would change things considerably as well and it makes you target different kinds of sites. So I mean we did see a lot of expansion in Europe and we also are eyeing expansion outside of Europe. There is a big work out there and we don’t believe we are even scratching the surface yet.

Right. That makes a kind of sense. And it also sounds like it’s safe to say that you are not relying just on DCCs for some of these value-added services, which I guess is encouraging from a long-term consumer value perspective?

That’s just an interesting thing both DCC and just the normal local guys. Once you have got a network built and you continue to find profitable locations, then you look at a country and you might have 1,000 locations. You might have 1,000 ATMs or 2,000 ATMS. Once you have that kind of critical mass, you can then sell other kinds of features too, just with respect to our network across all of Europe, we are able to sell across European advertising strategies and stuff like that, big name customers. And it’s just kind of one success against another.

And in addition to that as Mike said, when you get that volume of ATMs across the country that gives us new opportunities to talk to banks about participation agreements and things like that where their customers can have access to our very conveniently located 7/24 always up machines.

Yes. There is no bank in Europe that has our coverage across the EU, none. And in fact there is no bank that has even half the number of ATMs that we have in Europe. So, as we continue to grow and by the way banks are adding many ATMs, because they fill all, most all these banks in Europe have balance sheet problems that may don’t like to do CapEx. So, while they are sitting there stagnant and in fact the number of branches are being reduced every year in Europe, because they are unprofitable and these banks still have kind of upside down balance sheet. That just means that we become even a higher percentage of the total ATMs in a given market. So, we have kind of got a lot of things working in our favor because of our momentum, our first mover advantage and also the fact like Rick said where we have a single system that’s operated in one country or basically our back office is split between Warsaw and Budapest, which are both over 20 years old with the company. We have that one system that’s multicurrency, multi-language and multi-country that can run any ATM anywhere with all this flexibility. We just really have an advantage over. Nobody has that.

Great. Appreciate it. Thanks.

Thank you. Our next question comes from the line of Chris Shutler from William Blair. Your line is now open.

Hey, guys. Good morning.

Good morning, Chris.

So, on the money transfer what drove the agreement with the three big agents in India? I am just kind of wondering why now and not a year or two ago?

Well, we have been trying for 5 years, Chris. So, you are over there saying why now, I am saying why wasn’t it 5 years ago and the reason was is I think it took these agents a while to understand that the largest money transfer players to India haven’t really increased their volume over the last 5 years. And so they are sitting there looking at their P&L and they are saying how do I make more money, should I hang with this exclusive or not hang with this exclusive. And so we are finally able to kind of beat some sense into them. They realized that we are the up and comer. We are the growth engine for money transfer in the world. And they ended up accepting our, for both.

Got it. And then on Walmart, just based on the kind of the volume trends that you are seeing to-date with Walmart since you renewed the agreement, how should we think about what’s the reasonable expectation for when you will be back to kind of a breakeven per se. Is that a couple of quarters out or is that further than that?

Yes, I’d say that’s probably right, because don’t forget we are talking about mid-teens reduction in RFPs and mid-teens reduction in the price of the consumer. So by definition, we have got to grow a little bit past that a number of transactions to breakeven.

Okay, got it. And then in epay, so the non-mobile piece continues to grow really strongly, can you give us the percentage of gross profit and on that non-mobile growth, maybe just talk about or give us some sense of how much of that is same-store sales versus adding new content providers for new locations, just trying to get a better sense of what’s really driving the underlying growth? I know it’s a bit of everything, but if you could give us some sense of magnitude.

Yes, so the – this is Kevin, Chris. So, the mix continues to be what we have described. So, we don’t give a specific number, but it’s over 55% of the gross margin is now the non-mobile content and that will continue to go in that direction as mobile declines and we add new products. Regarding same-store versus new, most of the growth right now is related to same-store, because it takes just like an ATM, it takes a little time for all the new content to ramp up in volume. The other emphasis that we have got, Chris is increasing our distribution of that non-mobile content, increasingly is going to digital channels. So as consumer behavior changes and as brand partners look to reduce their total distribution costs, digital channels are the best avenue. And because of the strength of our platform, we tend to be very strong versus our competitors as it relates to digital distribution of this non-mobile content.

Got it. Okay, thanks, Kevin. And then just one last one on the EFT segment, you have been adding a lot of high-value ATMs over the last couple of quarters. So, just given you have so many more new ATMs and the business is becoming more seasonal. Just wondering how that kind of factors into the way that you provide guidance, is it becoming tougher to kind of predict on the third quarter or do you feel pretty comfortable with the numbers?

Yes, yes. The nice thing is we have been thick in size and doing this for 20 some years you know. So, when it comes to EFT we can by this time in the third quarter few weeks in and we have got – and looking at Q2’s results, we feel pretty comfortable about where we are with respect to the third quarter, but you are right, it’s growing. And so last year, we have kind of missed a little bit and we overachieved I don’t know we will do that this year, but we feel pretty comfortable.

Okay, thanks.

It is very seasonal and that for people who are kind of new to this understand our biggest quarter for both the company and for EFT, which is 40% plus of our business is the third quarter and thanks to the seasonality of our EFT business. Yes. And definitely we have got – when we look at our business, we have got really a lot of strength in EFT in Q2 and Q3 and then epay comes into its zone in the fourth quarter. And unfortunately, in Q1 kind of everything is not so good. So, we have to get by first quarter to get to the next three.

Alright. Thanks Mike.

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

Thanks and good morning. A question on the EFT business, with the revenue per ATM transaction had increased nicely year-over-year, was up 8% and just want to understand all the drivers there, DCC some of the value added services, is that is that kind of a key driver and I am just trying to get a sense of the sustainability of this level of revenue per transaction or it should even increase from here?

Well, there is a little bit of averaging going on here. Remember, we had bought all those ATMs, those 5,000 ATMs for YourCash last year and we mentioned that their profit per ATM was kind of like half of what our average was in Europe. So as we continue to add more high-value ATMs under our model across Continental Europe, those numbers are twice that average and so you just kind of – you kind of get a weighted cost or weighted average to our favor and that’s one of the things, possibly just finding good sites. We know how to find good sites in multiple countries.

It may sound a little bit repetitive, but it’s all about getting more products out there, getting more agreements signed up with banks and giving more choice to the customer. And so as we put those things out there, like using that ticket example again, not that just made that big of a difference yet, but it’s a good example of putting another product out there and then we are distributing that across that entire fleet then. So we get the really kind of like the multiplicative effect, the network effect if you will of having a bigger network, a very flexible software structure that we can change the screens, we can make an offer, we can – we even make offers to customers for mortgages or for loans, for things like that. I mean we have got a nice complement and it’s just as you put more of that in there you get more benefit from that.

And we can modify that. I have talked about my system, the single system. This can be delivered by ATM, by country, by region, we can we can delineate it any – in which way we want. So it just gives us lots of flexibility, lots of local deals and international deals.

Okay. So i sounds like there were some positive drivers going forward to the revenue per tran [ph], what about the margins, we saw some nice margin expansion in EFT this quarter, is that kind of the way we should be thinking about kind of the rest of the year, we can continue to expand margins in this business?

Yes. We will, but one thing you do need to be a little bit careful of is that as we look forward and we put more and more of these ATMs into Western Europe, the rents are higher there, so we might make the same profit per transaction, but operating costs are higher, so it will look like our margins going down. So it’s nice that the margins have gone up, but it isn’t necessary for us to do that to increase our profit significantly.

But in support of Mike’s comments and I think what we have shared with you before, we expected to see a little margin expansion here in the second quarter and that came home. We would expect to continue to see margin expansion in our EFT segment. And again it’s all the result of getting more products that has that essentially is contributing favorably to the bottom line because we don’t have to have to add the same amount of infrastructure cost across the business. So – and we were particularly pleased this quarter with our margin expansion given the fact that as Mike said, we now have the mix of YourCash ATMs in there that operated at half the margin that our other business did and we still expanded and we had yet some negative drag from the Indian business in there and we continue to expand. So we think that that the network really reflects the dynamics of having good value products that the customers are buying, so more machines, more products, more countries, more margin.

And with respect to YourCash, we are also making improvements there. We will be implementing running their ATMs or part of their ATMs off our platform before the end of the year. These guys are smart. They are figuring out what our model is and which parts of their model and our model work together, so we should see a little bit of margin expansion on their side over the next year as well.

Great. Thanks for all that. And then switching gears to money transfer and the margins there, the revenue is still up 8%, but EBITDA was still down 3%, it sounds like the two key headwinds are the Walmart pricing and then the India network investments, but kind of going forward, India should be less of a headwind or even a tailwind, because it sounds like those investments have been kind of made upfront and then Walmart should be ramping as the year progresses too, so also less of a headwind, so should we think of the margins in money transfer kind of getting better as the year progresses and 2018 can we think about margin expansion again?

Yes. I think that’s a fair statement there. As Mike said though, in India of lighten up all those sites, they didn’t light up day one. We have got to roll those out throughout the year. So it will have some continued expense that goes along with that as well as we bring that live throughout the rest of the year. But generally, your thesis as you articulated is consistent with our expectation in the business, the far that we grow – we get from the initiation of the Walmart renewal gives us more growth on that category. So again I think your thesis is sound.

Great. Thanks and nice work on the quarter.

Thank you very much.

Thank you. Our next question comes from the line of Rayna Kumar from Evercore. Your line is now open.

Good morning.

Good morning Rayna.

What is the average price difference between Euronet’s money transfer offering and Western Union’s and how do you expect that to change over the next 12 months to 18 months?

Okay. So you might break that down for international to the domestic, you know, when it comes like did you mean more at the domestic side with our newer pricing?

I mean more so on the cross border side?

Cross border, we are a bit less expensive and it depends – all this is market-by-market, so that’s the thing you have got to look at. I can’t say well we are at 10% or 15% less, because it really depends on the market and the competitiveness, actually even write-down at a location.

In the very highly competitive markets and channels, you would probably find that we are pretty darn close in pricing, because it’s a very competitive, some markets are very competitive. In other markets that has less competition where they may only be three or four money providers or transfer providers in those countries you are going to see those margins widened out a little bit. So as the general rule of thumb, I don’t think that you can say that on average if X percent it also really makes a big difference in terms of what each of our respective mixes are in those particular countries. So in those highly competitive, it’s going to be very, very little difference and in the less competitive you are going to see double digit differences in the pricing strategy there.

Very helpful. And then secondly as you see the online money transfer market grow, do you expect Euronet to continue to grow money transfer top line double digit and do you have any plan to increase your online money transfer capabilities?

Absolutely, I mean you just saw that we just opened up riamoneytransfer.com for family remittance in Australia. We will open that up to multiple other countries as well. We continue to light up more size for payout to do the same thing, having digital is a major endeavor for us.

As Mike said from the XE customer these 200 million plus uniques that come each year, half of those said that have an eminent cross-border payment need and we know that – we know that 35% of that half said that that they would prefer to have cash based pickup available. So yes, we are going to continue just as we did in the important acquisition of XE, that’s an important and growing part of it. So you will see more in the future.

Thank you.

Thank you. Our next question comes from the line of Josh Elving from Lake Street Capital. Your line is now open.

Good morning. So I wanted to talk a little bit more and see if you could offer up some more thoughts around some of the trends you are seeing in transaction volumes per ATM, if you have some sort of same-store sales metric, I know you referenced a few potential impacts to those numbers with the acquisition, etcetera, maybe just geographically a couple of thoughts are on the trends you are seeing in volumes?

Well, that volumes are kind of as we have seen them, our volumes are highest in India, so when you kind of look at your weighted numbers, you are going to see higher numbers there, there are very little DCC in that market so it will make money off a domestic interchange which is like $0.18 per transaction or something. Those numbers sometimes are 5,000, 6,000, 7,000 transactions a month are the ones in Europe might be a half or a part of that. So I would say, we do see some increase in the volumes, but mostly our total increase in volume comes from more adds.

So I guess I mean per – on a per ATMs, so demand for…?

Yes. I would say that they are roughly stable, increasing slightly probably.

Okay. And then talking a little about DCC, do you have any sense for kind of maybe not necessarily specific take rates, but is use or acceptance of DCC at ATM is that increasing or decreasing or is it stable?

For us it’s increasing actually this year.

For you it’s increasing?

Yes.

Okay. And then with regards to the Pure Commerce closure...?

Let me talk about this and let me tell you maybe why that is, people talk about DCC a lot both on a POS terminal and on the ATM, okay. Now – and there have been cases if you read to the Internet where people are packed off at DCC providers on the POS terminal because the merchant, those terminals are really tiny and the screens on them are really tiny, so it’s not very transparent to the customer what they are choosing. And then not only it takes one or two customers there, right. And as the blog is about just if they choose the wrong thing by accident, because it wasn’t clear and there is a totally different approach with ATMs. ATMs, they have got a big screen, you have got lots of print, you can make this offer really clear to their customer. So, transparency is the key here and you end up where I think that’s the reason why we have stronger opt-in rate on the ATM, because we are giving that customer choice. You don’t have to do it, you can do it if you want to do, if you want to lock in the rate right there and then, otherwise you had to wait until you get some of them to look at his bank statement to see what number of charges his bank has levied against.

Great. Thanks. And then as far as Pure Commerce in South Korea what drove that closure, I mean you are obviously using DCC at ATM, but it was more of a POS?

No, everything in South Korea was POS and we just deem that that market there we couldn’t go forward and be profitable. So we just closed that up.

Okay. And then I guess one last question just you have talked about non-mobile prepaid content, having a big fourth quarter, have you offered any guidance or thoughts around kind of the mix of prepaid revenue in the fourth quarter, I know it’s your strongest quarter...?

Well, if you look at last year’s numbers, the mix was about 5% higher on the non-mobile than the prior quarter. So it wouldn’t surprise me if we see 60%, 60% plus in the fourth quarter as non-mobile, but we will just have to see. We have to load as many products on the shelves as we can for that Christmas holiday season and then see what happens.

Great. Thanks a lot.

Thank you.

Thank you. Our next question comes from the line of Matthew O’Neill from Autonomous Research. Your line is now open. Matthew O’Neill: Good morning. Thanks for taking my question. My first question is around the EFT segment and if you guys are willing to parse at all the contribution from YourCash or give us kind of an organic view given the constant currency acceleration the 38%. And then as a follow-up I was just curious if you had any updated comments around the pending and MoneyGram deal, given the recent retrial for the 75 days extension?

It’s got a whole hand full of questions in there as part of the…

We will let Rick part as deep as he wishes. Rick why don’t you start with the first one here for me? Matthew O’Neill: Organic revenue growth in EFT, so it accelerated to 38% constant currency and I was just wondering may be how much YourCash contributed to that in the quarter?

Yes. You could – we don’t disclose the continuation of that particular number on an ongoing basis. You could go back to what we had disclosed in our previous numbers there, in terms of what we expected as revenue numbers coming from YourCash, but kind in real macro kind of terms of that revenue growth we would have had a single digit percentage of that number came from YourCash. Matthew O’Neill: Okay, that’s helpful. I appreciate it.

fortunately 0057 013: Matthew O’Neill: Got it.

And with respect to the – at MoneyGram potential transaction, we really don’t have any comments other than it’s pretty clear that people other than just ourselves that we believe fervently that there is a national security risk for this transaction going through. We don’t see any way to be able to hive off or protect that data from unscrupulous national interest of the Chinese, so we will just have to see what the CFIUS Committee decides so that the end of the day they are responsible for our national security. Matthew O’Neill: Yes, definitely. And the reason I actually was most curious is that the new way to asking White House Communications Director, Scaramucci of course has his own, I would say SkyBridge business pending effectively [indiscernible] from a Chinese acquirer and so feel like that adds some extra dynamics to the decision theory?

Yes, it’s dynamic. There will be politics involved I have a feeling. Matthew O’Neill: Agreed. Thank you for the time.

Thank you. And at this time, I am not showing any further questions and would like to turn the call back over to CEO, Mike Brown.

Okay. Thank you once again everybody. We are two minutes fast the hour, so two minutes overtime, but thank you one and all for your time and attention today. We will look forward to talking to you in about a month – I mean in three months. Talk to you later. Bye-bye.

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