Greetings. And welcome to the Euronet Worldwide Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] It is now my pleasure to introduce your host, Mr. Scott Claassen, General Counsel for Euronet Worldwide. Thank you. Mr. Claassen, you may begin.

Thank you. Good morning. And welcome everyone to Euronet’s quarterly results conference call. We will present our results for the third quarter 2021 on this call. We have Mike Brown, our Chairman and CEO; Rick Weller, our CFO; and Kevin Caponecchi, the 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 second slide of the PowerPoint presentation we will be making today. 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 that are listed on a second slide 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. In addition, the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures we will be using during the call to their most comparable GAAP measures. Now, I will turn the call over to our CEO, Mike Brown. Mike?

Thank you, Scott, and thank you everyone for joining us today. I will begin my comments on slide number five. I am so glad to be here talking to you today about these exciting double-digit consolidated growth rates, especially given the uncertainty of border openings, uneven vaccination efforts and increasing virus spread due to the Delta variant, which were all in the mix throughout the quarter. As I have reflected on these results a few key highlights stood out for me. First, we were able to achieve consolidated third quarter 2021 revenue that topped the same quarter in 2019, which is particularly impressive given that EFT is still being heavily impacted by the COVID travel restrictions. This means that the revenue from epay and Money Transfer has grown significantly, supporting our view that we will emerge from the pandemic stronger than when we entered. Second, our Money Transfer network now has surpassed the 0.5 million physical network locations and our Money Transfer app now reaches 20 countries. Third, epay recorded its fifth consecutive quarter of double-digit adjusted EBITDA growth, primarily from the continued strength of mobile and digital media sales through our digital distribution channels. And our EFT transactions rebounded at a very strong pace as European borders were reopened to fully vaccinated passengers from inside of Europe and select countries outside of Europe. Moreover, we have seen some elongation in the travel season due to the pent-up demand for travel after nearly 18 months without it. All of these achievements were made possible by our strong balance sheet, which has afforded us the ability to maintain our dedicated workforce, to continue to invest in our industry-leading REN payments platform, as well as our digital networks in both epay and Money Transfer, and also take advantage of the strategic opportunities…

Good morning and thank you everyone for joining. I will begin my comments on the balance sheet on slide 12. As Mike mentioned, we were able to achieve third quarter 2021 consolidated revenue above 2019 levels. The mix of revenue is changed, but to achieve more than 2019 levels, while still in the midst of this pandemic was only possible because of the strength of our balance sheet, which allowed us to invest in our digital and physical networks, and take advantage of opportunities. As you can see we ended the quarter with more than $1 billion in cash. The sequential increase is the result of cash generated from operations during the quarter of nearly $120 million. ATM cash increased in line with borrowings on the revolving credit facility to fund the seasonally higher ATM cash needs for the peak travel season. Next slide, please? I am on slide 13. For the third quarter we achieved revenue of $816 million or 104% over the third quarter 2019 revenue, with one segment still significantly impacted by COVID related restrictions. Now that’s impressive. We also achieved operating income of $114 million and adjusted EBITDA of $155 million. Those better than expected consolidated growth rates were the result of outperformance of our EFT segment, where we saw international transactions rebound at a faster pace than expected as borders were partially reopened to fully vaccinated individuals, those with a negative COVID test or the COVID recovered travelers. We delivered adjusted EPS of a $1.77, a 58% increase over the $1.12 in the third quarter last year. Next slide, please. Slide 14 shows our three-year transaction trends by segment. EFT transactions grew 29% as a result of more domestic and international cash withdrawal transactions together with a continued benefit of a significant volume increase in…

Thanks, Rick. I’d like to close by emphasizing that all of these highlights were accompanied by a very strong set of financial results, which show that Euronet emergence is not only as a leading fintech, but it further demonstrates our rapid evolvement into being -- becoming a fintech enabler. We have been able to transform ourselves because REN our modern, flexible and powerful technology together with our global reach and our strength -- and our strong portfolio of assets. We have built the most powerful and broad reaching Money Transfer networks in the world. It appears that travelers are coming back. We expect this to continue as vaccination rates continued to improve and but as therapeutics come to the market now and because economies need travelers. And epay continues to develop digital distribution and merchant solutions that can directly compete with acquirers today. We have a lot to be proud of and even more to be excited about. With this quarter now closed, I look forward to telling you more in next quarter. And finally as we alluded to in the second quarter investor update call, we continued to make great progress in introducing new ways to leverage our collective existing assets into new B2B product offerings. We are crossing the Ts and dotting the Is. So I hope to be talking to you more about some exciting things in the near future, stay tuned. With that, we will be happy to answer your questions. Operator, will you please assist?

Thank you very much. [Operator Instructions] Your first question comes from the line of Andrew Schmidt from Citi. Your line is open.

Hey, Mike. Hey, Rick. Thanks for taking my questions. Good to see the step-up in earnings power here and the significant expansion use cases across the platform. It’s good to see. I just want to start off with just a clarification question. Rick, I think, you mentioned, the expectation at least right now on a preliminary basis, understanding it’s still a little bit early, the 2022 earnings would be similar to 2019. Are you referring to adjusted EBITDA, operating income, net income, just as a quick clarification there to start-off?

I was really kind of going down to the adjusted cash EPS number, Andrew, kind of to rattle it all the way down the income statement.

Perfect. Super helpful. And then when we talk about 80% and 90% of transactions recovered versus 2019 in EFT, how does that translate to EBITDA, because I know there’s some mixed assumptions that need to be made in terms of domestic versus cross-border and other products in that segment. So what’s the right way to think about that in terms of translating EBITDA as a percentage of 2019 bases?

Well, it’s real -- I will let Rick get right down to the nuts and bolts, but the reality is, our most profitable transactions are cross-currency transactions, right? And so when you saw that our cross-currency international travelers, so anybody like going into Europe from outside of Europe is a cross-currency guy, right? And those are our most profitable transactions, but those only recovered this year, 40%. When we saw our intra-European recovery in the neighborhood of 60%, 70% and 80%, depending up on their domestic or international, so those are really profitable transactions. That’s the only difference, really if you get down to it between 2019 and this last quarter. So if we can get more people going overseas flights, we will really be cooking next year.

To kind of add to Mike’s comments, it gets to be some rather, let’s just call it, evolved -- involved or complicated math, let’s say, more fully answer your question. But from a really macro perspective, I think, as we have shared with folks before, the richness of these transactions come into our P&L at about a, let’s call it, roughly an 80% margin rate. And so, you can see that if we can move the needle a bit on the volume of these transactions, and certainly, you could see in our third quarter results that as these transactions come in better than expected, they contribute nicely to the bottomline. And then, if you kind of do a little bit of macro kind of math and looking at that next year number and kind of seeing where our epay and Money Transfer business has grown, you can see that that kind of margin leverage comes through on EFT to be able to get us to a 2019 earnings kind of level. So, I guess, the -- in summary, I would be with the view that that the way you should think about it is, as we see those transactions come through, they are going to come through with some very rich margin levels and really nicely contribute to that bottomline.

Very helpful. And then, it’s great to have an EPS baseline out there for 2022, but it’s obviously still little bit early. But -- so I would imagine that you probably take a good level of conservatism in here. It just makes sense to be prudent. But if you can just sort of clarify that a little bit, is there a level of conservatism that’s taken here just, because we are not even in 2022...

Well, we have -- we have to. We have to, Andrew, because we just -- we don’t know and we do know that when Americans want to travel abroad, it takes a lot more thought preparation and kind of whom to do that than if you are just flying within Europe. And it’s a lot easier for us…

Yeah.

… to go to New York than it is for us to go to Rome. So we bake that in there. We don’t know it could be better. All of us are going to watch the tracker on how many across ocean reservations are being made, but that will change things markedly. And if you look at the average revenue per transaction of anything that is cross currency, we have probably make -- we make about a little over $1 on a -- on an international interchange transaction. We might make $2 or $3 on a surcharge transaction. But when we get to make a spread on foreign currency, I mean, those transactions could be $5 to $10. So you can see it doesn’t take too many of those transactions…

Yeah.

…but really pop the top off.

Right. So it sounds like its more prudent expectations about mix in 2022.

It’s all about mix. It’s 100% about mix.

Yeah.

Exactly.

Absolutely. Perfect. Well, thanks a lot, guys. It’s great to see the progress. I will jump back in queue, but cracking the quarterly results. Thanks a lot.

Next question, Operator?

Yes. Your next question is from Andrew Jeffrey with Truist. Your line is open.

Hi. Good morning. I appreciate you taking the question. Mike, a question on Money Transfer and a question on epay. Can you talk a little bit about the investments you are making in the Money Transfer segment and how you think you are going to be able to monetize these connected wallets and the connected bank accounts and can you give us a little color on the volume that’s going to bank accounts. But can you talk about, I guess, one, specifically, where you are investing, and two, whether or not you think monetization of some of these digital accounts and deposit -- account deposit in particular Money Transfer can drive yield and drive growth?

Well, I mean, you saw our numbers just over this last quarter where our account deposit transactions grew 31% during the quarter versus prior year and account deposit volume now represents at almost 30% of our total volume. So what that’s telling you is this huge asset that we have with basically 4 billion digital ways to drop money into an account or a wallet has accelerated our growth. And you have seen also the huge growth in our direct acquired app Money Transfer transactions as well. So the deal is, if you want to grow into the future, everybody goes digital, digital, digital, but you have got to have the endpoint. And that’s our magic right now as we continue to build out those endpoints both for consumers and in the future we have been mentioning this before where we intend to repurpose those for B2B kinds of transactions, because that market is many, many times bigger than the family remittance markets. So having this head start, having the world’s leader lead in that area is going to be an asset and that’s worth making investments in.

Andrew, I would go on to elaborate on some of the technology comments, Mike made is that, we have built a wonderful platform of technology that is easy to connect to. And no different than some of the fintech players that we mentioned that we have signed agreements with is, there’s lots of folks out there building things in the garage so to speak on ways to meet customer needs more efficient, eloquent ways to get to the customers. And when they do that they then need to make payments around the world that’s at least some of their opportunity and we have got the best network in the world. The other important part about it is not just the ease of integrating to our technology is that we cover all the payment a mean, it’s not just that you can send it to a card account or you can send it to a bank account, we can send it to wallet accounts, you can pick it up in cash, we can put it into crypto if we want to, okay. We can move the money any way that somebody wants to be able to receive it and we can get it to damn near everyone, anyone in the world. I mean the -- it’s a little bit of that the few corners of the world that you can’t, but we have got truly the most impressive network. So how we monetize it is a combination of several of those things and it really starts with our technology being able to integrate into that technology, which then opens up and exposes the opportunity for all of our assets to be taken advantage of.

I mean we really like the fact that a lot of companies are out there, very well-funded, attracting customers with their, you might call, their mousetrap to attract customers and do transactions. But all of them need a payment methodology and we handled the whole thing, soup to nuts, compliance and everything. So and then remember, on a REN technology, we are putting our REN tech into both banks and central banks to do real-time payment. So as the world moves towards RTP systems, I mean, who’s got the expertise? We do. We are installing that stuff. Right now in that piece of the business that is one big advantage we have in our company that we are not just a Money Transfer company, we are a technology company and that we are enabling people to do that. So these things really work hand in glove and give us just an edge over everybody else.

Okay. That’s helpful. And I guess to put a finer point on it, should we expect to see all that translate into better yield, Rick? I mean, it’s one of the questions we get when we think about the tension between traditional or legacy Money Transfer, say, cash-to-cash versus digital. I mean, do we start to tip over to better unit economics at some point here?

Yes. Because, I mean, as Mike said, as you focus on B2B and you move up that market it’s -- they get to be bigger transactions, the cost --our cost to terminate one of those transactions is rather small. And so there’s opportunity where if you take a look at what the, let’s say, just average achievement on sending money. And I am not talking about per se remittance money, but moving money around the world is in excess of 1% of the money moved. So you can easily now start seeing that if you move a $10,000 or $20,000 or a $50,000 transaction and you have got 1% or even a 0.5%. Those are nice transactions. So, yes, it really does contribute to the ability to leverage the bottomline margins for this business.

All right. Thanks. Appreciate that, guys.

Yeah.

We have a question from Darrin Peller with Wolfe Research. Your line is open.

Thanks, guys. Yeah. The…

I didn’t hear what your name was. Who is this?

Hey. It’s Darrin. It’s Darrin Peller with Wolfe.

Oh! Darrin. Oh! Okay. Hi, Darrin.

Hey, Mike. When we -- guys when we look at the normalized potential of the business now, so you talked about the magnitude of improvement we have seen in epay and Money Transfer through the last one and a half, two years. Just give us a sense of what you think based on the different trends around challenger banks requiring more and banks pushing back on needing more opening up surcharging rules new governments? I mean what would you say in a normal world is the size of the EFT business versus 2019 from a revenue and profitability standpoint? Because we can figure out, we can see the acceleration on the Money Transfer and the epay sides of the business. I am curious what a normal sized business could look like for you if one day you have got…

Well, take a look, I mean it is taking us about eight years to build out Europe and you saw the profits that Europe generated in 2019 for doing those kind of transactions and maybe that was around $300 million in EBITDA. Well, now that Visa has changed its rules and allowed us to accept similar kinds of transactions not just like we do in Europe, but everywhere in the world, where there’s a Visa card or a MasterCard card. I mean the whole rest of the world is our oyster. Wherever there’s a tourist on this planet I should go after them. Give me some sand and a beach and I will be there. So as I look at this, there could be every bit of another $300 million or more out there to go after and we are just beginning to do that. We are live with just one country in Southeast Asia right now that we will be announcing. At some point in time we had 150 ATMs there before COVID hit and they are extremely profitable ATMs. So we know that we -- that we have got something that works. We will be announcing other countries in the coming quarters and so the whole -- our challenge is just get ourselves expand it. We have got licenses in these countries. We know how to manage all the sub-pieces of delivering the money to the ATMs and reconciling and all that stuff. So there is -- it’s big. That’s probably people keep saying, well…

Yeah.

…how long will it take you to get back to 2019 levels, I can -- we will get there. The question is, what are you going to look like in 2022 or 2023 or 2024 or 2025…

Right.

…and maybe we are twice that big.

We have invested in those markets…

And we continued to invest. Yes, we are.

Okay.

Had we not? We were actually on this whole idea long before two years before Visa even started to change its rules, because we felt like they were going to have to. So as they change where we are now getting the licenses in some of these new markets and they will be very lucrative for us.

Yeah. When we think about the epay and Money Transfer segments being somewhere around 40% or maybe more than that versus higher than 2019 levels already trending that way at least for 2022, again the EFT side of the business is kind of the question given the profitability level there and so if we were to normalize, I remember the estimates were expected to be somewhere around 20% higher for 2022 pre-COVID than there -- than the street estimates are now and probably 30% higher than what you just said if it’s similar to 2019? So I guess the bottomline question is, do you envision a normal scenario and can you move fast enough on all the redeployment on ATMs to make that happen if we get real resurgence on travel?

Oh! Absolutely. And in fact, they are already there. The ATM, we have added more ATMs than we had in 2019 and all we got to do is turn them on now. Some of the ones that we have got closed are just -- they are just not cash, they are cashed out. But they are technically live and we can respond not quite instantly, but pretty darn fast.

Got it.

Yeah. I mean it’s…

Just one quick…

…when you say, normal, like, it’s always hard to compare what normal is, but if you look at our at our 2019 revenue numbers for the EFT segment and using your assumption or your stated assumption of, if we get back to travel at the same levels? Well if -- I would tell you that if we were at the same travel levels as 2019, no restrictions, full movement of people that we would with our current set of assets, it’s quite likely that our revenue numbers would exceed 2019 numbers for EFT. Because we have taken some, let’s call them, some of these outsourced ATMs that were brought back in-house because of some acquisition. Those one out and we have continue to replace them with our own ATMs and opening up in new countries that we have seen spectacular results out of. So my sense is that we -- if we had no travel restrictions, as you said, and it was back to business as normal, our number for revenue on that EFT segment would exceed 2019’s number.

Okay. Okay. All right. My last quick follow-up more a little more pointed on the Money Transfer segment, given the volatile you have had in the last couple of days on competition concerns and pricing. So to be clear, I mean, you have Wai’s [ph] out there lowering price and you have Facebook and others trying new things with lower price alternatives potentially. And so, you guys are already generally lower, do you consider yourself already a generally lower priced than others in the industry and lower margin and higher commission payout. I am curious how you think you would stack up in a world where some competitors have to lower?

Well, first of all, you got to remember, this is a dog-eat-dog business, it is the family remittance business. We are out there competing every day on every street corner and on the digital side. So that doesn’t really bother us, and actually, if you take a look at our numbers and you kind of dig deep into our numbers, there’s been some kind of squirrely things that have happened because of COVID and we had a lot of good currency volatility last year that allowed us to make money. But as Rick said in his early part of this discussion, the reality is, our -- we haven’t really felt much pricing pressure. So this idea that all of a sudden we are under the gun on pricing I don’t think is accurate.

Yeah. I mean, as we said, we see pockets of pricing pressure all the time. I mean, this is a competitive world and we operate around the globe. So there’s always going to be someone that’s offering something for free or something else like that and we have to respond to that. And our response comes in different market, ways we deliver the products. When Mike mentioned that, we are doing nearly a third of our business is paid out to bank accounts now. That’s a more efficient way to pay out on and gives us some better economics on that type of stuff. And so it -- since 2007, we have been out there and competing and we have always generally been a better value play than the bigger guys in the market out there. So we have kind of, let’s say, already been at a more competitive point. As you know, and I have not yet found a business that can survive with just given all of its product away free. Somewhere you have to be able to make money. We have often seen where new entrants will come in at a very, very compelling free offer. But at some point reality has to set in and you have got to be able to make money in this business, because there’s cost of compliance. Maybe some of these folks aren’t doing compliance, right? It’s cost of compliance. It’s cost of building out a network. It’s cost of competing every day. So we see it out there, but we respond to it every day.

And let’s not forget even just looking at the family remittance market, we have about 5.5% to 6% of that. So, we look at it as there’s 94% to go. We have got a big market out there.

Great. Thanks, guys.

And we will take one more question, I think, Operator, before we are going to have to end it.

Okay. Your last question is from Mike Grondahl with Northland Securities. Your line is open.

Hey, guys. Congrats on Jalin and Marker Trax. Could you kind of help us understand the revenue model a little bit there like per ATM or per transaction? How do you envision that working?

Yeah. So -- this is Kevin. So we have got two revenue models associated with REN. One is our traditional software and license model, and the other is a transaction revenue share model. In the case of Jalin, it’s more the traditional software license model. In the case of Marker Trax it is a revenue share related to transactions.

Got it. Got it. That’s…

In a lot of our installations, we kind of want to especially into these places that are putting in real-time payments or connecting the real-time payment engines we are a little bit more transaction-based than a software-based because the transactions are low, we can kind of grow -- the expense can grow along with the assets.

Yeah. A lot of the fintechs we are working with Mike prefer a transaction based, because they want to preserve a capital. So we are finding a lot of great opportunities to get them in low with a transaction model and then share in the profitability as they grow we get to grow, which we really like, because we believe in the partners that we are picking with regards to providing the technology stack.

I mean, on average we would say that our bias is always going to be toward transaction based, because we also think that it’s very lined up with the partners we are dealing with. We are kind of going into it with more skin in the game, more risk taking if you will at the beginning of the transaction, because we are not walking out of there with a big software fee and then we benefit on the growth of it. So I think that our interests are more aligned with the partners when we have a transactional based process and it certainly helps them get into the business easier if they don’t have to write a big cheque, and as Kevin said, use a lot of pricey capital to be able to get the business going.

The Marker Trax thing, we put out a press release about it a week or so ago, and then Mike referenced it in his -- in a review. We are particularly excited about that because they are playing in such a large market, hundreds of billions of dollars. That that market hasn’t changed in decades and there’s a push to try to move to cashless. And in our opinion these Marker Trax guys have got a great vision for the industry and where it’s going, and we couldn’t be more thrilled to be part of it and act as our technology service provider. I think that’s got a lot of potential.

Got it. And just lastly as a follow-up with Marker Trax, do you guys know like how many casinos your product is in and what that rollout might look like?

We do. We are not at liberty to discuss it, but I will tell you Mike that, the list is greater than our ability to implement.

Got it. That’s helpful. So thanks guys.

The sales pipeline is extremely strong and we are having to pick and choose, because there’s more opportunities to deploy than we have the capability right now to deploy it into.

Good to hear. Thanks, guys.

Excellent.

All right. Well, with that last question, I want to like to thank everybody once again for joining us on the call today. We will look forward to giving you an updates in another 90 or so days. Thank you very much.

This concludes today’s conference call. Thank you for joining. You may now disconnect.