Euronet Worldwide, Inc. (EEFT) Q3 2022 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and thank you for standing by. Welcome to the Euronet's Worldwide Third Quarter 2022 Earnings Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Scott Claassen, General Counsel. Sir, please begin.

Thank you. Good morning everyone, and welcome to Euronet's quarterly results conference call for our third quarter 2022. On this call, we have Mike Brown, our Chairman and CEO; and Rick Weller, our CFO. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the second slide of the PowerPoint presentation we'll 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 the second slide of our presentation. Except as may be required by-law, Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any update. In addition, the power point presentation includes a reconciliation of the non-GAAP financial measures we'll be using during the call to their most comparable GAAP measures. Now I will turn the call over to our CFO, Rick Weller.

Thank you Scott, and thank you to everyone who is joining us this morning. I will begin my comments on Slide 5. On a consolidated basis, we produced revenue of $931 million, operating income of $168 million and adjusted EBITDA of $212 million. We delivered adjusted EPS of $2.74, a 55% increase from $1.77 in the third quarter of last year. These strong double-digit improvements in all metrics were driven by double-digit constant-currency growth from all three segments, including a strong rebound in domestic and international cash withdrawal transactions in the EFT segments as the strong demand for travel continued following the lifting of COVID restrictions across the globe. Next slide please. Slide 6 presents our balance sheet compared to the prior quarter. As you can see, we ended the quarter with $967 million in unrestricted cash and $1.7 billion in debt. The decrease in cash is largely from the repayment of debt and the impact of foreign currency fluctuations on cash partially replenished by cash generated from operations of $157 million. Next slide please. In Slide 7 now. Here we present our results on an as-reported basis for the quarter. I'd like to point out that since we last spoke to you in July, we continue to see a strengthening of the U.S. dollar against most of the significant currencies where we do business. Similar to last quarter, many of the currencies in our most significant market declined in the 10% to 20% range versus the U.S. dollar compared to the prior year. To normalize the impact of these currency fluctuations, we have presented our results on a constant-currency basis on the next slide. Slide 8. The strong improvements in EFT revenue, operating income and adjusted EBITDA were the result of increased domestic and international withdrawal transactions, driven by improving trends from the easing of COVID restrictions across the globe, together with the addition of good performance from the acquisition of the Piraeus Bank merchant acquiring business in March of this year. On a year-over-year basis, revenue and gross profit per transaction also expanded as a result of improving international transactions, which generate more revenue per transaction than domestic transactions. epay revenue grew 18%, operating income grew 29% and adjusted EBITDA grew 24%, driven by continued expansion in mobile and digital branded payments together with continued growth of the digital distribution channel. Also included in these third quarter results is a significant benefit from the loyalty reward programs offered by certain large retailers, which were recognized in the third quarter of this year while similar programs were largely recognized in the earlier quarters of 2021. Revenue and gross profit per transaction were consistent on a year-over-year basis. Money transfer revenue, operating income and adjusted EBITDA grew 11%, 23% and 29%, respectively. This growth was the result of 14% growth in U.S. outbound transactions, 12% growth in international oriented originated money transfers of which transfers initiated largely in Europe grew 10%, and transfers initiated in the Middle-East and Asia grew 23%. In addition to these impressive growth rate, xe transactions grew 21% partially offset by a 13% decline in the U.S. domestic business. These growth rates include 40% growth in the direct-to-consumer digital transactions. Revenue and gross profit per transaction as well as our average send amount were largely consistent with - on a year-over-year basis. And as you can see across all segments, this third quarter posted margin expansion, both year-over-year and sequentially. Moreover, I'd like to note that we have not yet seen any significant pressure from inflation in revenue or gross profit in any of our segments. We have only seen moderate impacts on higher SG&A expenses, primarily salaries. We continue to be watchful about how inflation may impact our business going-forward. However, to-date the business has shown great resilience in light of the current inflationary conditions. Regarding FX pressure, I mentioned earlier that we have seen currency declines in the 10% to 20% range on a year-over-year basis. For that matter, these similar declines relate to the 2019 FX rates as well. The pressure continued -- certainly intensified during this quarter with currencies weakening against the U.S. dollar anywhere from 5% to 13% with some of the more significant declines coming at the end-of-the quarter. Despite the impact of these FX rate changes since we provided guidance in late July, we continue to expect our full-year 2022 adjusted EPS to be in the $6.30 to $6.40 range, given current FX rates. As I conclude my comments, I'd like to reiterate that we are extremely pleased that each of our segments produced double-digit constant-currency growth across revenue, operating income and adjusted EBITDA in the third quarter. This is a true testament to the resilience of our business, driven by our geographic and product diversity as well as our best-in class technology platforms. Taking into account the full FX impact on next year's results, including the accelerated FX declines we've seen in the latter part of the third quarter, we believe that this momentum will still allow us to produce mid to upper teens earnings growth rates for the full-year 2023. For perspective, if we were to apply current FX rates to our 2019 earnings, we would see that they would have been approximately 11% lower. Accordingly, next year's earnings growth would reflect a nearly 20% earnings growth over 2019 earnings with comparable FX rates. Moreover, increases in interest rates will have another 5% to 6% impact next year compared to 2019 earnings. Accordingly, if you adjust for FX and interest rates, you can see that our underlying business is robust and continues to grow very nicely. This gives us confidence in our expectation that we can continue our long history of compounded double-digit earnings growth well into next year and beyond. With that I'll turn it over to Mike.

Thank you Rick, and thank you everyone who is joining us today. I'd like to take a minute to focus on what Rick just said. We delivered double-digit constant-currency growth across revenue, operating income and adjusted EBITDA in all three of our segments with killer constant-currency growth were accounts in operating income and EBITDA. This is further evidence that our business is resilient and that our model works. Consumers across the globe, not only want to travel, but can't wait to travel and they still want to use cash when they finally arrive at their destination. In epay there is growing demand for mobile and branded digital payments content and consumers and businesses want and need to send cross-border payments. In fact, I'd like to remind you that our epay and money transfer businesses continued to grow during COVID. So these strong double-digit results are not on-top of a down period, but rather in addition to all the growth that has happened over the last 2.5 years. Moreover, when we finish this year we will expect to see epay and Money Transfer both grow constant-currency revenues more than 35% over 2019. Now, that's impressive. We achieved these results because we have a strong balance sheet in the geographic and product diverse business that helps us navigate economic pressures. So while we cannot control the variance of COVID, inflation, interest rates or labor shortages and the travel and hospitality industry, we are really good at executing on the things that we can control. And over the last 25 years, our business has continued to deliver growth through various economic cycles. As we think about how the third quarter unfolded, I'll tell you that have played out in-line with what we anticipated when we spoke in July. We saw very strong demand for travel which was capped though by passenger restrictions and staffing issues at airports and hotels across the world. And our review of the summer travel season, the European Tourism Association found that on average, European international arrivals were about 26% behind the pre pandemic levels, consistent with what we had seen in the Americas and Africa while arrivals in Asia-Pac and Asia-Pacific area still lag 2019 by approximately 72%. They also validated our data, but the travel recovery across Europe was not homogeneous. For example, the travel in Greece was 2% higher than 2019 levels, but in Portugal the travel lagged 2019 by 10%. In Spain and France, travel lagged by 25% and in the Nordics and Eastern Europe, international arrivals lagged 2019 by closer to 40%. These are largely consistent with the recovery that we saw in the international cash withdrawals across our ATM business, validating that post COVID people still want and need cash when they travel. When looking-forward, we have certainly seen mixed travel projections for 2023. Euro Control recently published a report stating that they now expect 2023 travel recovery rates to be around 92% of 2019 levels. The European Tourism Association was more bullish, stating that they still see pent-up demand for travel spilling over into 2023, due to unused travel credits from 2020, especially from the North American market, and they believe that the stars are aligning for Europe to have a very strong travel season in 2023. We can all debate what next year might look like and will all likely been wrong. What I will tell you is that even if we only get 92% of 2019 travel levels, that is still nearly a 25% improvement from last year. I remain bullish on the growth potential for Euronet because number one, we believe that we continue to see improvement in the global travel trends. We have plans to expand our ATM estate to half a dozen new markets. We will continue to introduce new products in epay, we continue to expand our best-in class Money Transfer network and we have significant opportunities in the pipeline for both our REN and Dandelion products. Now let me give you some more details so you can really see why starting with our EFT segment on the next slide. If you don't mind please move to Slide number 11. Here you can see that we continue to expand our EFT business. This quarter we launched a new independent ATM network in Estonia, making access to cash more convenient for travelers and local. We continue to our expansion outside of Europe with the acquisition of 500 non-branch ATMs from the Bank of Philippine Islands. These 500 ATMs position us as a catalyst of ATM consolidation with our superior technology, operational services and extended presence globally. This is another important step-in our growth strategy and further diversifies our ATM network outside of Europe. In Spain, we signed a network participation agreement with Mediolanum Bank in Spain. This is the 15th network participation agreement in that country covering 73 banks across the country. Our U.S.-based Dolphin team signed outsourcing agreements with 15 credit unions in the U.S. and on U.S. military bases in Germany. And our Merchant Services business in Greece continues to grow. This quarter, we signed a reselling agreement with Epsilon Net, a leading software company in Greece covering more than 100,000 small-to-medium sized businesses. We also added approximately 3,000 new merchants including a large supermarket chain that you've heard of Carrefour together with McDonald's, Odeon Cinemas and Hereon Energy in Greece. Outside of Greece, we were able to add 770 new merchants through our Inova tax-free and pure commerce relationships. Finally, we continue to add more ATMs to our portfolio. During the quarter, we added 529 Euronet owned ATMs bringing our total to more than 1,800 ATMs installed so far this year. We also added 164 new outsourcing machines and we seasonally deactivated 936 machines as the travel season began to wind-down. As we mentioned to you last quarter, we are facing some challenges in the ATM supply-chain, which has slowed down some of our ATM expansion, but we are working with new ATM manufacturers and expect that we can continue to add more ATMs next year as the travel -- as travel continues to recover. To sum it up, in EEFT I hear four questions frequently. The first one, when travelers go to new places do they still need and have use of cash and the answer is yes. Number two, do you expect 2023 to bring 2019 volume well, I guess from everything we see not quite, but probably close to maybe 92% to 95% of 2019. Remember, even hitting that number could result in a 25% growth in EFTs travel-related transactions for 2023. How much is the Ukraine war hurting our business? Well we have seen some pockets where the impacts are significant in certain markets, the impact to our overall business has not been significant. We believe that the number of central European travelers will still be muted in 2023, but we saw a late recovery of other key markets such as Germany, making us more optimistic for next year. Number four, has inflation infected your EFT volumes? We have seen no evidence so far, but we are keeping a watchful eye on. We continue to be pleased with the rebound in our EFT business. As you can see, we continue to diversify our EFT product portfolio with new products and new markets, which we expect to continue to pay-off as more normal travel patterns resume. Now let's go on to Slide number 12 and we'll talk about epay. I am particularly excited about this quarter epay results. During the first-half of the year, we saw a lighter than expected results as certain of our large customers deferred their loyalty reward promotions to the third quarter. You can see that in these results that those campaigns came home and support our confidence that epay can produce strong growth rates for the full-year. Further boosting our confidence in our epay business are the new agreements you can see on this slide. They continue to expand our mobile and branded digital payment offering. During the quarter, we launched T-Mobile activation program here in the US and in the independent dealer channel. You may remember during the last call, we mentioned that we had launched Apple's new gift card across 15 market. As a reminder, this is an everything Apple gift card, which can be used for hardware products, apps, accessories, games and much, much more. The launch has been well-received across Europe and we believe this supports epay's continued growth outlook. We also launched Disney Plus physical and digital gift cards across Germany and Austria. In addition to the physical distribution, we continue to expand our digital distribution portfolio. During the quarter, we further expanded our relationship with Apple by launching Apple content on Flipkart, a large mobile wallet in India. And we launched mobile top-up on FamPay, a neobank app for teenagers in India. Finally, we continue to sign new agreements that we expect will deliver results in the coming year. So now let's go on to Slide number 13 and talk about Money Transfer. Our network now reaches 509,000 locations, surpassing the size of our physical network before we shut-down more than 20,000 locations earlier this year in Russia, Belarus and Tajikistan. In addition to the 0.5 million physical location, we now have 454 million wallet accounts and can reach more than 3.6 billion bank accounts across the 188 countries and territories. Importantly, our account deposit network continues to gain the trust and adoption of our customer. We saw accelerated trains in the account deposit with transaction growth of 28% during the quarter and the principal transferred amount to accounts reaching 34% of our total international outbound volume. These figures demonstrate the importance of building the right network with the right products for today's customer preference. During the quarter, we launched 14 new correspondents in 12 countries including cash pickup service at Islamic Bank of Afghanistan, our first partner in that country. We also launched cash pickup at IFIC Bank in Bangladesh and [indiscernible] Bank in Tunisia that will provide full coverage for bank deposit services for consumer payments and remittances and corporate payments. We also signed an agreement with Travelex in the UK to add Ria Money Transfer in over 200 locations across the country. Just as we have grown our physical network to the second-largest in the world, we also continue to rapidly expand our digital network. During the quarter, our direct-to-consumer digital transactions grew by 40%, accelerating from 37% growth in the second-quarter of this year. And we continue to add new offerings that we believe will allow us to maintain this growth. This quarter, we launched our digital money transfer offering, the Ria Money Transfer app in two new countries, Portugal and Switzerland. We expanded our wallet network by adding service to five new digital wallets and been in the Ivory Coast, Liberia, Cambodia and Pakistan. And we added wallet functionality to our digital products in Malaysia, allowing customers to send funds directly to their mobile wallet. Finally, we signed the bulk payment service agreement for Bank Reservas in the Dominican Republic and we added corporate payments in 12 new countries. We are pleased that our Money Transfer business produced strong double-digit constant-currency growth rates in the quarter. And with all of the activity on this page, we expect these growth rates to continue into 2023. Now let's move on to slide number 14 and talk about our technology products starting with Dandelion. Slide 14. Our Dandelion network continues to grow, our real-time payments network connect to bank accounts in 103 countries and territories and we can now land corporate payments in 118 countries and territories. This expansion has not only resulted in a 44% year-over-year revenue growth, but it is getting the attention of potential partners. Our pipeline of bank prospects is now up to 70 banks. About half of these are global or regional banks, including 15 of the top 50 banks in the world. Another 20 represent National Bank and the remainder are still evenly split between local banks and neobank. We believe our Dandelion value proposition is attractive to banks compared with the legacy swaps and correspondent banking rails due to its speed, transparency and predictability of the payment together with the access to alternative payment channels, including mobile wallets and cash. In addition to traditional banks, the team has continued to explore partnerships with national and regional switches. These switches are beginning to see bilateral agreements with other national switches, but struggle with a lack of interoperability, governance and variant technologies, among other things. Dandelion can be a one-stop shop to service cross-border payments for all of their bank members. Finally, our pipeline also includes non-bank prospects. Right now, we are working with 55 non-bank prospects across various MSPs, fintech payments and payroll companies. This is a very significant sales pipeline and while these agreements take a little longer to negotiate to sign, we are confident that these customers understand the value of Dandelion. What that -- what it can bring to their businesses and we anticipate that we will have some exciting announcements in the coming quarters. And let's not forget where we are in the lifecycle of this new endeavors. In 2019 through '22, we repurposed our C2C family remittance product to be able to handle B2B payments, which require much more sophisticated compliance, regulations and licensing. This by the way is a never-ending task. While we were already producing revenues and healthy growth, in October 2021, we announced this product to the market to enhance our sales leads. Sharing that we would be ready for prime time in Q2 of this year. In March of 2022, we are ready with 81 countries in real-time. So to have so many leads in process at this early-stage confirms our belief that we are quickly being known as the modern generation of B2B real-time cross-border payments. Now let's go on to Slide number 15 and I'll give you an update on REN. Slide 15. This slide can -- highlights our continued momentum in selling our REN platform across the globe. On the heels of our successful implementation of REN in Mozambique, I am very pleased to announce that we have signed an agreement with the African electronic trade group called AD Trade to develop a new pan-African payments cross-border switch using our REN payments platform. The switch will serve as the financial foundation for an initial 44 of the 54 possible countries in the African Continental Free Trade Area that connects a population of about 1.4 billion people. Utilizing Euronet's REN payments technology, the switch will enable Central Bank, regional processors, financial institutions and small and medium-size enterprises to easily make transactions with each other in real-time and bring new banking benefits and capabilities to African citizens. So yes you heard that right, Euronet's REN platform is going to be the real-time cross-border payments which across Africa. This is a tremendous win for our REN team and we look-forward to updating you on our progress in the coming quarters. In the Philippines, we signed an agreement with advanced intelligent group to provide issuer processing services for another new digital bank. Euronet will be deploying its REN foundation to support card lifecycle management, transactions switching, card scheme connections among other services. This is our second digital banking deal in the Philippines following our successful launch with Union Digital Bank earlier this year. These digital banks just love our tech stack. In India, we signed an agreement with Axis Bank, the largest private sector bank to provide them with prepaid processing, including lifecycle management and interchange processing for domestic and foreign cards from Euronet's private cloud. This bank is among the leading prepaid issuers in the country and they have a large card base in transacting and transacting customers which will be migrated to our prepaid platform as part of the program. This win signifies our graduation into the large bank category, bidding competition for major global players in the space and validates our platform's capabilities to handle large volumes many complexities in multiple levels of regulation. As you can see our pipeline for REN continues to strengthen as entities around the world are beginning to see the benefit of our scalable and flexible technology. We have now signed agreements, which we expect to contribute a 125 million in revenues over the next six years and we look-forward to even more good news in the fourth quarter. Now let's go to Slide number 16, and we'll wrap-up the quarter. Ladies and gentlemen, as I reflect on this quarter and more broadly on the diversity of our business, I'd say that by any measure when you have all three segments producing constant-currency double-digit growth rates, it's an outstanding quarter and consistent with what I've been telling you the business has the capabilities to do. And while I am extremely proud of these results, I'd be remiss not to remind you of our history. Our businesses have all consistently produced strong growth rate through all sorts of economic cycles in weird economic events. Over the last couple of years, two of the three segments produced growth during COVID and we have endured recessions and even unusual events like countries demonetizing their currency. And as they say history oftentimes is a good predictor for the future and while we don't discount the real impact of inflation and potential recession in the economy, we are confident that our products are in demand. We believe that the diversity of our products and our geographies together with our market expansion plans for EFT, our new products and channel deployment plans and epay in our network expansion in Money Transfer will enable us to continue to grow as we always have. We delivered a great third quarter and I'm really excited about our prospects for next year. With that we would be happy to take questions. Operator, will you please assist.

Yes sir. [Operator Instructions] Our first question or comment comes from the line of Andrew Schmidt from Citi. Your line is open.

Hi Mike, and Rick good morning thanks for taking my questions here. I want to start off, just a quick confirmation in terms of the 2023 outlook or early outlook, just want to confirm, you said mid to upper teens adjusted EPS growth. And then if that is correct, maybe you could talk about some of the key variables that are assumed in that, particularly your assumption as it relates to high-value ATM transaction recovery. I know Mike, you said 92% plus, but I wasn't sure if that was travel for high-value transaction recovery. I'll leave it there, guys? Thanks a lot.

Okay. I think it's probably three of the big ones in there. On the travel recovery, as Mike said, some new information has come out. So our expectation is that, that will be kind of in that low 90s range that 90% to 92% kind of range there. So if we see a more robust travel next year, it will just be that much more beneficial to us. But in that kind of low 90s number, okay? The second - and that's on the international travel there because those are the real risk value transactions. The second important part in the map is the FX rates. And we've not tried to outthink what will happen in the future. We just use what's there today. So - as you can see, unfortunately, the euro is trading sub value to par on the dollar. The pound is at about $1.10, $1.11. And again, if you take a look at those numbers back to 2019, those are fairly compressed. But that's - we've assumed that the current FX rate numbers. The other piece that moves the map is interest rates. And we've kind of read the signals from the Fed. We've got another 125 basis points in our numbers even following this most recent lift. So we'll kind of see how that shakes out. Maybe we won't see as much in the next two bumps, but we've assumed a 75 bp bump in December and November, I get, in November and then another 50 bp bump in January.

Got it, thank you for that. And just quickly, maybe to talk about just the high-value transaction trended as the third quarter progressed. And I know I think you were targeting the revised target was mid to upper 60s. Just curious if there's any update to that and just..?

I think - we're pretty much.

We're trending well to that?

Yes, Andrew we pretty much hit that on the nail on the head, something between 68% to 70%, which is about - I think with 68%. I think that was the number we might even used on the last call where it was trending. We saw a significant, I don't know, compression in the number of travelers coming from England, which is our single largest source of international cross-border transactions. Those numbers were down quite a bit. So and you can read that and all the travel stuff. I mean we compared the exits out of the - out of the London airports compared to prior year, and they were down I think it was 28%. Is that right?

Yes.

Yes, they're down 28% from prior year. So if the Brit start traveling again next year, that will be very lucrative for us.

And what I would just follow with is, as Mike said look, the predictability of this is probably anyone's guess as to what the exact number is. But - as we've take a look at our ATM transactions and we've looked at the flight data, and we've looked at this across multiple countries where there's varying degrees of flights leaving and different landing rates in different countries, we've seen a nice correlation between those. So it gives us the confidence and continues to see - we've seen this really kind of almost since the pandemic has started to recover, if you will, is that there is good correlation between our ATM international cash withdrawals and those flights. So we believe strongly that if the flights are moving, if the people are moving, our transactions will follow.

Thank you very much guys.

Thank you, Andrew.

Yes, thank you Andrew. Next question operator?

Yes, thank you standby. Our next question or comment comes from the line of Andrew Jeffrey from Truist. Mr. Jeffrey, your line is open.

Hey guys good morning. I think it was my name. Anyway, I appreciate the color, Mike, in terms of what you're seeing in international travel and demand for cash at ATMs. One of the questions we're starting to get more and more with the emergence of tap and pay and generally, the use of cards in Europe is kind of how you sustain growth and whether you worry about an accelerated shift to electronic payments from cash? I know you're expanding into new markets, which is going to be really helpful. But could you just sort of help us with an overview of how you think about the relevance of the ATM business broadly over time?

Well - listen, there will continue to be more and more kind of noncash or tap and pay kind of alternatives as time goes on in the more advanced countries to places like Europe, okay? And we recognize that. But we also recognize that most people are using cards for most everything they travel with right now, whether they tap it or they swipe it or they insert it. So we do expect some pressure on - due to this. However, there's countervailing pressures as well. One is for the little bit of cash that you may need on vacation to tip the bell boy or to buy a beer or something like that. The places you can get this cash from are dwindling because the European banks are closing branches like [indiscernible]. I mean they're closing somewhere between 8% and 10% of the branches per year every single year. So if you're an international tourists and you're in a new country. You're going to get you're a little bit of cash that you use from the first ATM, you kind of trip over when you're on vacation, okay? And with more and more branches closing, there's a higher likelihood they'll trip over my ATM versus the bank's ATM. So those are the countervailing - they kind of fighting each other in Europe. But now let's look at the rest of the world. The rest of the world is still cash-based and the new markets that we're going into, Egypt, the Philippines we'll be announcing probably another one or maybe two new markets next quarter. These are all very cash-based markets. Our experience there is that these ATMs are twice as profitable as our European ones anyway because there's just - in these markets, there's just a much higher. There is a very few POS terminals, much higher percentage of your vacation spend will be with cash. So we still - EFT is going to be - robust for quite a while. I think we've got a very long runway with this as we expand around the world.

Okay that helps a lot. I appreciate that color, I think for investors too and then yes?

I don't disagree what these people who say that I'm not like put my head in the sand. There will be non-cash alternatives, but we see time-and-time again, all our data points to a little bit of cash is used on somebody's vacation and the new markets we're going into are extremely lucrative.

Yes I mean I know I always use cash, but on vacation - avoids the uncomfortable interaction with taxi drivers like which I don't speak to whatever the case may be. Money transfer, you're doing great, obviously, globally. U.S., and again, I appreciate the quantification of the drag on the U.S. business. Anything you can do about that? Any reason you think that abates or is this just - is this a structural drag on your money transfer growth?

No, I think [technical difficulty] well, if you look at our U.S. business over the last many years, we've been growing kind of double digit in transactions in the U.S. for a long time. We do have that still have a little bit of that drag from Walmart on the domestic Money Transfer business, the cash to Walmart product. But now Walmart is starting to really take off nicely with both their international outbound and specifically, they're single product that they call Walmart-to-Walmart Mexico product, which is done by us. It's another kind of white-labeled product of us powered by Ria. And so that continues to garner a lot more transactions. These are transactions that would go from a Walmart here in the U.S. and be paid out in a Walmart in Mexico. So every quarter, this is a little bit less of a drag because the numbers go down on the domestic what we lose domestically is starting to reduce and then what we're gaining on the international outbound continues to grow. But you look at the overall number of money transfer, they're pretty darn impressive, particularly, and that's in the bricks and mortar. I mean, look what all our competitors are doing. I mean, I mean we're not -- they're not even in our ballpark. And then on top of that, we've got the 40% growth in our digital transactions.

Yes. And I'd just also mention that while we would prefer to have not lost over some of the domestic. It's down to a low single-digit kind of a number here. So it's a piece of our mix, but it's not an important piece of our mix.

Perfect. Thanks Rick.

Our next question or comment comes from the line of David Togut from Evercore. Mr. Togut, your line is open.

Thank you so much. Rick, you called out an incremental 5% to 13% revenue headwind from the strengthening dollar since you gave guidance on the Q2 call in late July, and yet you've kept the $6.30 to $6.40 an EPS guide. So what parts of your business are performing ahead of your expectation versus the guide you gave in late July?

I wouldn't call out any particular one. I think like we saw in the third quarter here, we saw a nice good even consistent growth across our business. So I wouldn't say that it's coming from any particular one, just a good fundamental growth that we're seeing out there.

Got it. And then what's embedded in the mid- to high teens EPS growth guide for 2023 in terms of the revenue and earnings outlook for each of your 3 businesses.

Well, we haven't -- we wanted to try to give them more a bit of a view on what next year was, especially -- and I think it is very significant here on what has happened on FX rates and to another degree the interest rates. And so we just wanted to try to really maybe help you understand that. We've not published what we think each of these numbers are going to be on a segment basis. But I think that our thesis continues to be the same in that we see all 3 of our businesses as being double-digit earnings growers, okay? I think that on the revenue side, epay will be maybe a little bit lighter on the revenue growth, but still get us into double-digit earnings growth. Money Transfer. I kind of feel that moving up into the lower teens kind of number. So call that 12 teen, 13 or something like that, kind of feels pretty right. And as Mike said, even getting to the lower end of the 90s on the travel recovery, that's a 25% improvement over those high-value travel numbers of EFT. And so EFT naturally will produce very strong double-digit numbers next year. So that gives you maybe a little bit of a perspective on what we expect in the growth rates of those businesses. And I would say that that's consistent with what we've been saying for some time, and we've consistently seen that come home in our results there.

Got it. Just a final question. Any specific callouts on key R&D investments in 2023 and more broadly, how you're managing expenses in this environment.

With respect to the R&D, I mean, we are a high-tech shop. I mean, we spend a lot of money on R&D. And that's why we've got the tech stacks that continue to win more and more business. But we don't whine about it. I mean we don't say, "Oh, we're spending this much more on R&D this year, just to make your future better and use that as an excuse for bad results today. We will continue to do so. And as we move forward in the with REN and Dandelion.

Yes. But we don't have any kind of what I'd call outsized expectations of, let's call it, ramped up or incremental investment spend for next year. that's always potentially subject to change if we win a really important significant opportunity or something like that. But I think, as Mike characterized, it's kind of business as usual.

Got it. Thank you very much.

Our next question or comment comes from the line of Darrin Peller from Wolfe Research. Mr. Peller, your line is open.

Thanks for all the details you managed through all these macro headwinds. When we think about 2023, the 92% travel recovery, I just want to first of all be clear that you believe you can track that now. I mean because the headwinds you see in certain markets being whether it's Eastern Europe or the U.K. craziness or any other sort of idiosyncratic factors to Euronet, is that going to allow you to go back and track to the market, 92% or are there any changes we should keep in mind on that front? And then just on the same segment for a minute, Mike, maybe just revisit the investments needed to build out this business and whether or not internationalization into Asia is going to cost more. Is the margin structure really what I'm getting is the margin structure able to get back to what it used to be.

Okay. So let's - when you look at the margin structure that sounds like - we do have some increases in some of our costs, but our margin is a direct result of less transactions. I mean we have very lucrative transactions. When we do that next big international cross-border transaction, we're going to bring 90% of that -- 80% to 90% of that revenue straight to the bottom line. So you can see with that only hit and call it, 68% or 70% of those transactions this year versus '19, that's going to affect our margins considerably. So as we get closer to 100%, you're going to see the margins go up, and that just is going to happen with that flow through. And with respect to the cost of going into these new markets, we're pretty darn good. Rick and I kind of losing track. We might be in 25, 30 markets with our ATMs right now. And as we go into new markets, even in Asia, it doesn't cost us any more than what we do today. And so - you won't see any like big ramp-up. What you do will see because those markets are very heavily cash based. They're just much more profitable on a per ATM basis.

And Darrin, I'd add to Mike's comments on the margins here. I mean, we take a look at now compared to 2019. I think there's, really only two things that would soften our margins a bit, okay? 2019 was a great year. I think in our EFT segment, we were in about a 33% operating margin range. Since then, one of the things we had is we - we moved shifted a little bit more to our own ATMs. We had a couple instances where some large groups of ATMs from banks were taking back in-house upon acquisition of those banks. And in those cases, while we will ultimately - well, what we essentially did is increase the number of deployed ATMs, we will ultimately make more money from those, but mathematically, the margin will be a little bit lighter. So I would expect that to have a little bit of a pull-in on that margin. And the second thing is, as you know - inflation here, inflation is coming into the business. We mentioned that we've got some higher expenses there. Unfortunately, in the payments world, rarely do you have the opportunity to take prices up. We would love to be able to do that. But I don't see that there's, many opportunities to increase the prices. And so, we'll have to use volume to kind of grow through that. But it will make a difference on the mathematical calculation of the margin. So I would expect that, that EFT margin will be a little inside of what that 33 was in 2019.

All right, that's very helpful. Just one follow-up I'm trying to figure out the best question there's a bunch. But first, technically speaking, Piraeus, what was that in terms of the impact on transactions or on - revenue if you can help us? And then Mike, if you could just quickly give us a thought on the Africa win for REN. It does sound really interesting. I don't know the timing of it or the magnitude of what it could be if you have any sense on that?

Well, on all these REN deals, you really never know until you get there. We do have very nice revenues that are guaranteed based upon minimum number of transactions. Actually, Kevin is here. You know Kevin Caponecchi is with me, and he oversees that. Do you have anything a little bit more color, Kevin?

Yes. So the good news, Darrin, is that from a technical perspective, it's very similar to the project that we did for SIMO already in Africa. So the lift in terms of a technical deployment is going to be easier than the previous projects, so we can leverage what we've already delivered. Our timing for it is we're starting the development and if we fund the development as we speak. It will be sometime the first - the first country will go live sometime towards the end of next year. So from, a revenue and operating profit standpoint, it's kind of a 2024 play. But it has the potential to be quite meaningful because as Mike said, there's a minimum guarantee component and then there's a transaction - a per transaction component. And so, if the transactions meet anywhere close to what the forecast of AE Trade is, it will be a really nice project for us.

Thanks guys and just Piraeus, if you have any quick numbers?

Yes - on Piraeus, yes we added in the ballpark of $30 million of revenue in the third quarter here because of Piraeus. Piraeus, if you recall when we announced it, we said that they have about $80 million to $90 million in annual revenue. And I would also just point out that Piraeus has a bit of a seasonal effect where their third quarter, just like our ATM business because a lot of tourists go to Greece, obviously, is better than what the other three quarters of the year is. So that gives you a perspective. But I would say in the ballpark of about a third of their revenue comes in the third quarter. And then it's maybe in around the 20% kind of range in the first quarter and then balance between the third and the fourth. But that gives you an idea of what was in the third quarter for Piraeus. And Darrin you want to have a glance.

Thanks guys.

Thank you.

Okay operator, I think we're pretty close to the top of the hour. So I think I'll let Darrin's question be the last question. Unless - do we have time for one more? No, no I'm telling - I'm being told we have time for one more question.

Our final question will come from the line of Ken Suchoski from Autonomous Research. Mr. Suchoski, your line is open.

Hey good morning Mike and Rick, thanks for taking the questions. I wanted to ask about the outlook. It looks like EBITDA was largely in line with our expectations, but the 4Q EPS outlook, if you just do the implied NAFTA on it was maybe a little bit light. So I was just wondering if you could talk about what's driving that. It seems like there might be some kind of below the line items?

Yes, I mean that's kind of a hard question for me to answer since I'm not the guy who drives the models that come up with what the consensus numbers are out there. What I would have to say is there's a little bit more interest expense in there. And then typically, we will have a little bit better tax rate in the fourth quarter. But it's really hard for me to give you a good answer on that because I think I would have to be familiar with the math that arrives at the consensus numbers. But at the end of the day, I don't see anything being really unusual or different out there. It might just be some math at the margin here.

And one thing we have noticed is that the - the people who follow as the analysts that follow us don't quite follow the FX as tightly as they should. And so what you find is if the dollar continues to strengthen, everybody leaves their models the way they were. But when you translate our 75% of our profits all come from overseas. So when you translate that back to dollars it's certainly negatively affected when the dollar strengthens. So that's one of the things that you might keep in mind. And I would say that as just a general guide to all the analysts on the call.

Okay all right we'll have to do that in the FX model. I think if I heard you correctly, I think you guys talked about - next year growing earnings in this like mid to upper teens range. Is that a reported EPS figure so if I run the math, I think I'm shaking out at like, call it, 725, 750 in the EPS next year. So is that how you're thinking about it? And does that earnings growth figure include any share repurchases?

We assume no share repurchases in that. And I would tell you that your calculator works in a similar fashion as mine does. So it sounds like you're pretty close.

Okay all right, thanks a lot appreciate it.

And with that, I think we'll end today. Thank you, everyone, for joining. Do appreciate your time.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.