Greetings, and welcome to the Euronet Worldwide Fourth Quarter and Full Year 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a 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, Takia. Good morning and welcome everyone to Euronet's quarterly results conference call. We'll present our results for the fourth quarter and full-year 2016 on this call. We have our Chief Executive Officer, Mike Brown; our Chief Financial Officer, Rick Weller 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 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 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'll turn the call over to our CFO, Rick Weller.

Thank you, Jeff. Good morning and thank you everyone for joining us today. I will begin my comments on Slide 5. We finished the year delivering fourth quarter revenue of $520 million, operating income of $58 million, and adjusted EBITDA of $83 million. Our adjusted EPS for the fourth quarter was $0.99, an 8% increase year-over-year and in line with the revised guidance we gave in late November. The impact from FX rates despite additional headwinds, and the India cash constraint we talked about, was largely in line with our expectations, and Mike will provide you with more of an update on India, the India cash situation in a few minutes. We finished the quarter with $2 million to $3 million more ATM operating expenses than anticipated largely due to the exceptional fourth quarter ATM deployments. But that impact was covered by favorable tax rates driven by favorable transaction related country profit mix. Next slide, please. Slide 6 shows our three-year transaction trends by segment. EFT transactions grew 31% driven by expansion of our ATM network in Europe, the October acquisition of UK-based ATM provider YourCash, and transaction growth in India. The growth in India was the result of a higher volume of low margin POS transactions processed in India, which was partially offset by fewer ATM withdrawals following the demonetization announced in November. So while the loss in cash withdrawals was detrimental to our earnings, we had assets in place to benefit from the greater number of cards being introduced, albeit those transactions came in at a much lower rate than ATM cash withdrawal. As we see the cash situation stabilize in India, we believe, we are in a good position to benefit from customer needs for both increased cash withdrawal and increased POS transactions. epay transactions grew 1%…

Thank you, Rick. As I reflect back on 2016, I'm extremely proud of our accomplishments. Our business continued to deliver 20% plus growth in a year that included tumultuous global events such as the British vote to exit the EU, the contentious elections in the U.S., and the India demonetization of the two most popular cash denominations just to name a few. These results are made possible by the willingness of our teams to work harder not only to compete but to win in this environment. There are so many examples of company's failing or even folding under pressure, but I'm proud that we have teams that not only don't fail but thrive when the pressure gets tough. Rick often tells me that the results will speak for themselves. So let me share with you a few of our accomplishments this year. We converted XE to our HiFX platform a significant milestone for the future of our money transfer business. We acquired YourCash, a good ATM business with presence in markets adjacent to our legacy ATM business. Each of our three segments, each of the three contributed to bottom-line growth. We processed 3.3 billion transactions, we added more than 3,000 high-value ATMs across our legacy business, and 4,900 new ATMs from YourCash acquisition. We were responsible for $84 billion in cash across our three business segments and we delivered a 21% growth in adjusted EPS the fourth year that we have achieved more than a 20% growth in earnings. The achievements realized on these metrics are only part of what was another successful year for Euronet. Embedded within these accomplishments are many smaller achievements which have laid the groundwork for our continued growth in 2017. So let's move on to Slide number 18 and we will talk a little bit…

[Operator Instructions]. And our first question comes from Chris Shutler with William Blair. Your line is now open.

Mike, let's just follow-up on that last comment that you made on double-digit earnings growth. Consensus right now I think is calling for about 13% adjusted EPS growth in 2017. I just want to, I guess take your temperature on that and what could cause you come in below or above that? Thanks.

Well let me just remind you your consensus for the last four years has been in that same kind of like 13% to 15% range and we consistently deliver numbers in excess of that. So I would tell you that we are just lined up really nicely for this year. Like I said, I mean one of the biggest things is in our largest segment right now is the EFT business and we are starting out the year with higher operating costs because we've got lot more ATMs kind of in the bag already put in, in the fourth quarter. So we are excited that we to hit a big number of new ATMs this year we don't have to try quite so hard. In fact our goal for this year is in the 3,000 plus range. We had 2,000 for a number last year, this year it's around 3,000. So I think we just got to hope that foreign currencies don't go haywire on it that the India demonetization continues to abate and that we can just continue to do what we do in all three segments. I mean we have kind of covered it all, we don't see any like large risks out there per se. But it's just lots of block and tackle work and that's what our guys are very good at despite when somebody throws him a curve ball or a media hits them in their head like with the demonetization. So that's kind of where we are.

Okay, that helps. So you feel comfortable with where you are at with Walmart and how that will play into the earnings?

Yes.

Okay. And then the on the ATMs, Mike, I think you added 3,157 high-value in 2016, what is the total base of high-value ATMs right now. Is it like 20,000 where you guys at?

It's around 17,000.

17, okay got it. And of those ATMs added this year and particularly in the fourth quarter, can you give us some sense of geography?

Well obviously we are not putting any new ones in India. So they are basically all in Europe.

Okay.

We don't have any money to sell, that's our inventory in ATMs and we didn't have any money to fill them with, so we weren't added any new ones in India.

Okay. And then just lastly on India for Q1 what are you guys modeling in for the -- I guess the operating income hit you'll take in Q1 from India and what was it in Q4?

Well as I pointed out, Chris, we had about $6 million from those three things using rough numbers about half of that was India, and then the other half was kind of split between the other two items. And we use similar numbers for the Indian impact going into the first quarter.

Okay, that's helpful. Thanks a lot.

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

Good morning, Rayna.

With the cash situation in India stabilizing do you expect people to play catch-up on taking on money in the second quarter that they couldn't over the last few months and do you see any specific benefits either at XE or your money transfer business in India from that?

Well it's hard for us to gauge whether that's going to happen. As I understand, you are there on a waiting not long ago may be you could add some folks, we don't know. But here is the fact, I mean we've got those millions of new cards that have been issued and we still have the same 200,000 ATMs that we had before the crisis. So with these new cards being issued, they're going to use ATMs, they're going to use POS terminals which we make money on both. So I would imagine we would have some positive pressure but I just don't know we will have to see how it plays.

And, as Mike said, there are cards issued but keep in mind those aren't credit cards, those are debit cards. That means that there is a bank account behind that. That means that they probably got money electronically going into the bank account and what we typically see across all markets as people initially open an account, they generally have tendencies to draw money out and follow their customary practices of managing their personal budget in a cash basis rather than in electronic basis. So another close to 20 million accounts where money is going in, we feel pretty confident that we will see that money circulate through ATMs.

And with the fact that the vast majority of all shops and you might call retailers in India are cash based don't even have a POS terminal, the only way these 19 million new debit cardholders are going to be able to buy anything is by taking the money out of an ATM and then go into use it with cash at those retailers.

That's really helpful. Do you expect any impact to your business from Ant Financial's announcement that it will be acquiring MoneyGram?

We've been, you first of all -- let's put money transfer let's put everything in perspective. If you take a look at the top three players in the business which is Western Union, which is significantly bigger than Ant or MoneyGram and MoneyGram which is called two, two-and-a-half times as big as us. The three of us only control about 25% of the world's domestic remittance. So and those guys are in the kind of the 6% range. We compete with both MoneyGram and Western Union and the 75% of the rest of the market every single day is really money transfer is a highly competitive kind of bare-knuckle fistfight kind of market. So we would expect that we will do well as we always have done well. And depending on what the reasons were that AS Boston they may be focusing more on the digital side and more on the Chinese corridor or something like that and may actually provide opportunities for us, we don't know.

Great. And can you update us on the potential for ATM interchange increases across Europe, what are you seeing there?

We don't see any potential as we sit this minute, okay. There people have been discussing it, banks are not held in very high esteem by the political constituencies in Europe, and to add higher domestic interchange rates might end up with a consumer backlash. We've seen lots of populism and you know that kind of thing across all -- across the political spectrum all across the world. So my bet is we won't see much this year.

Okay. And just a final one from me, what do you expect the tax rate for GAAP earnings to be in 2017 and your $0.73 EPS outlook for the first quarter, what kind of FX that this item play?

The FX would be at roughly today's rate, okay, so assuming that they remain stable through the rest of the quarter. And as I mentioned we finished the year with about 21% effective cash earnings tax rate. And then we would expect for next year that it's a little higher than that because we will get -- we think we will get little stronger mix of profits from some of the higher tax rate jurisdiction markets that we are in. But that's kind of the general zip code that we're in.

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

Hey good morning, thanks for taking the questions.

Good morning, Andrew.

So Mike you and I think appropriately so really emphasize the digital efforts in money transfer. And I just wonder how you think about your opportunity there especially as the growth continues in terms of how much of that business do you think is additive to the cash business, what are the risks or outlook for cannibalization and how does the interplay between pricing and volume work from a long-term revenue growth standpoint?

Let's start with your first question. When you look in digital this is basically what we Ria started with when we bought them eight years ago. I mean Ria was really a cash remittance business almost all cash-to-cash okay. And in fact that's the wide majority of all domestic remittance from all providers around the world, okay. But we recognized that there is also a different country of people who are either paid through direct deposit or want to do a digital transaction and so that's why we made these inroads and investments into the digital side. So it's really kind of a -- it's a new market as opposed to may be cannibalizing our current market. I do believe that over time a number of the cash people will change to digital as they become more comfortable in their new environment. But understand that population growth in all Western countries is driven virtually all by immigration and these immigrants come from cash-based economy. So as every time you get one person who now switches from doing a cash-to-cash transaction to doing a digital-to-cash transaction to his family. For every one of those guys you have got another immigrant who enters the country and is used to cash-to-cash. So that's the reason why for us we get the kind of good news all around it the world because we can see both our digital and non-digital growing. And you look at our digital business it is significant and it sure doesn't hurt to have XE with 4.3 billion page views a year and 50 million downloads as a digital magnet for more transactions and we are just beginning to scratch the surface on what we can do with that asset.

That's helpful, thanks. As a follow-up on XE do you think 2017 is the year where you see higher conversation monetization to the extent that that can grow a lot faster now that it's integrated with HiFX or is that going to take a while?

I think we will start to see that in 2017. I think 2018 might be it's true coming out year but we have got, I mean, we are already doing quite well we've had great sign-ups with, because we had to do re -- we have to re-KYC everybody and depending on the jurisdiction and so forth there is a lot of noise and effort in the first several months afterwards. But we are going to improve that website and our customers' journey considerably this year, so we will see improvements through the year and I think a lot, we hope that most all that done by the end of this year. So we will see a good 2018.

Thank you. Our next question comes from Peter Heckmann with Avondale. Your line is now open.

Pardon me, with the continued increase in prepaid non-mobile content as a percentage of the total and that's creating a bit of a mix shift, are we in a position now where we might see kind of mid-single-digit top-line organic growth out of epay or we still in a environment where the declines in the mobile business are kind of keeping us around the flat line?

Well I think Pete; you could see that we will probably be just a little bit more guarded to see that we see a little bit of a subsiding of it. But you're right the math works in our favor now because we've got more than nicely more than 50% now and so as we continue to add that non-mobile product we put a lot of good interesting non-mobile product in there gaming, software, et cetera that that's done nicely and has great markets out there. So maybe that's a bit of a finance kind of guide to me that would say let's continue to see how it goes but the math is working in our direction and our team is continued to add more non-mobile products. So may be this year gives us a chance to have a little bit more of a breakout. As you can see in our operating income, we are able to nicely leverage that to the bottom-line. So we did get some good op income growth on a year-over-year basis. So if we can see that we get that kind of mid-single-digit growth numbers out of that business it will be just incredibly helpful to us for the full-year.

Great, great. And it appears that you rollout of Netflix prepaid coincided with real strong International growth at Netflix, is that something I mean -- is that something that can be material or material contributor to growth or is it just kind of one of a list of things that's helping you drive prepaid content?

Right now I would to be conservative like my CFO; I say right now it's one of a list. But as it becomes more and more successful and more and more accepted hopefully that won't be the case. So we've got so many things, it's both the entertainment side like you said the streaming stuff like Netflix and some of the local guys that we have and then gaming is another big growth area for us we believe this year.

Okay. Last question I'll get back in; you noted an Amazon prepaid deal in the U.S. was that a competitive takeaway or is that basically a new opportunity?

It was a new opportunity.

Thank you. Our next question comes from Mike Grondahl with Nortland Securities. Your line is now open.

Yes guys, congratulations on the quarter. Couple of questions, the 1,100 core ATM deployment in the fourth quarter, was it simply you found the good sight so you put them in kind of timing or how would you describe it?

When we were smaller we used to consciously not press so hard even though we could find the size we used to consciously not press so hard in the first and the fourth quarters because we know there were going to be a drag on our OpEx you've got and that's the problem with putting an ATM you got to pay rent 12 months a year even though you're make a lion's share of your profit in quarters two and four. But since we have gotten bigger and bigger and our site selection has gotten better and better, we have got more empirical data on picking site-by-site than any company in the world. And so we just said, go for it. Go out there and find as many freaking sites as you can and put them in as fast as you can as long as they are good. And so we are able to do that, you saw as we really accelerated through the third quarter and continued that high pace of acceleration into the fourth quarter. And the first quarter we will find out how many ATMs we put in, my bet is we won't match fourth quarter just because of the seasonality and install and concrete setting and bad weather et cetera. But the point is we are putting in good profitable ATMs as fast as we can find them and we don't time it.

Got it. So there is some carryover momentum to 1Q, okay?

Well, yes, because we are basically kind of starting the year and just with the winterized ones you have got an idea these are and have the traffic locations in the summer time. I mean we've got 500 more of those than we had last year. So we are going to turn those babies on around Easter and then we start presence of money.

Good. Can you spend a minute your cash kind of talk about the integration and the high-level opportunity there. I mean is it taking an individual or an average your cash ATM from like X to Y in terms of profits, what are you trying to accomplish?

Well that, most -- the book of their business is still in the UK, the UK is highly competitive, lower margins for ATM. Now they did use third-parties for some of their services which we can now do internally. So we are going to have to take all those over through this year, so that's going to improve the margin some. I don't believe that the YourCash UK based ATM will ever match the profitability on a per ATM basis as the ones that we have across Continental Europe. But that's the ones in the UK but let's not forget they have got a very nice stay in the Netherlands and in Belgium and so we are hoping that those two countries particularly will continue to drive their business.

Got it. And then you mentioned the I think it was millions of new debit cards in India, do you have a year-end number compared to a year-end 2015 numbers, just so we can get a feel of that growth and may be where you think that number goes?

Mike, we have it somewhere in the bowels of our organization but I don't have it at the top of my head right now.

No problem, we can follow-up later. Thanks a lot guys.

Thanks.

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

Good morning, Mike. Question on higher ATM operating cost that called out in one European market, just looking for a little bit color on that. And then just thinking about kind of the puts and takes on the drivers of the margins for the EFT segment, India headwind your cash lower but kind of ramping. And then you've got the high-value add ATM addition. So just kind of thinking can we expect to have margins in the segment expand again I understand the seasonality for some fourth quarter but like on a full-year basis can we expect margin expansion out of the segment.

Yes, I think we can. We've demonstrated over the last several years that we've expanded it. As I mentioned in my comments we if you kind of perform out of their some of the India impact we saw yet margin expansion this year. And so, yes, I would expect that we would. And as it relates to the higher cost in the European market it was across a few categories but in things in like security, some card organization cost, and cash supply cost not one particular item but it just happened to come in one particular market.

Got it. Thanks for that. And then I was hoping in money transfer, I was hoping to get a little bit of color on how much the high FX leads transition to Ria. How much that helps EBITDA in the fourth quarter or revenue or just if we could get some just kind of some sizing of the benefit to that?

Yes, we didn't get much in the quarter because we had the cost to get it up and going and stuff like that. Like we said in the past we would have expected that business to bring us in somewhere in the macro ballpark of about $6 million annually or so in operating profit. We really only had it effectively in the business for one month based upon the termination agreement that we negotiated with the prior processor. So it really didn't have much of a bottom-line benefit for us in the fourth quarter. And so, as Mike said, now that we've got it effectively transition we'll start to seeing that come to the table for us in 2017.

Thanks. And then last question just wanting to get a little bit of color on the process with Walmart renewal on money transfer and kind of the things that kind of think about in terms of the process to be extent that you can't kind of at a high-level just kind of talk about the process and the contract. Should I think that's kind of a -- just a key question that kind of comes up and just hoping you could just give an update and your thoughts there?

Well, I mean at the end of the day we've got a great relationship with them, we just added the new band as you know. We are in the negotiations to extend that contract. We wholly believe that we will be able to extend it from all the information and contract back and forth et cetera that we have. But we really don't go into it much past that. We just kind of remind you exactly three years ago when we start -- when we did this kind of we'd actually signed the contract in February for a go live on the 20 or 22 of April. So we're kind of right and it's a lot easier to renew than it is the same first time. So Walmart basically seems to be right on track with their -- with how they sign contracts. So we're not worried about that. They've been a good partner, we've been a good partner for them and so just kind of keep your eyes on our announcements when we renew it, we will let you know.

All right. Thanks a lot, Mike.

Thank you. Our next question comes from Josh Elving with Feltl & Company. Your line is now open.

We're losing, Josh. Operator we are at five minutes after the hour so we'll take one more question from whomever pops-up.

Our next question comes from Alex Veytsman with Monness, Crespi, Hardt. Your line is now open.

Good morning guys. Good execution here. Just wanted to ask you on the EFT business looks like, very good revenue growth the quarter I believe it's like 20% constant currency. Yet some transactions were much faster I think which you cited as that you had kind of a larger number of low value debit card transactions and these low margin ATMs. I'm just curious kind of going forward as far as modeling 2017 and even 2018 numbers how should we think about the average size of those transactions, will they stay on kind of the low-end and will the transaction growth kind of continue to outpace revenue or will they actually kind of go up over time?

Well the thing that throws everybody's numbers off here is what we do in India because everything there is tighter, lot more transactions at lower domestic interchange fees and lot more POS transactions at much, much lower values. So I would expect it to be roughly the same. But we will just have to see what happens if we get may be what these nearly 20 million new cards in India that will push lot more POS transactions that are 120 of the value per transaction of an ATM transaction there and that might skew it a little bit, I probably wouldn't focus too much on profit per transaction. I just focus on may be kind of like gross profit per ATM and these kind of high-value ones. So that's really the trick that's where the big money comes from. As we mentioned we only make several hundred thousand dollars per year on these contracts with these two banks that we have in India that we do just switch it. So and yes they have thousands of thousands of ATM transactions per month. So it really screws up the numbers. I wouldn't focus too much on that. I'd focus more on the kind of the high-value and then divide that number of ATMs and our total Op profit might be a better way to do it.

Got it, got it. And then just kind of slightly shifting gears but staying within EFT for the YourCash, YourCash acquisition, how much of a quarterly run rate are you expecting for each of these big orders in 2017?

We had said that we expected about $0.08 a share in terms of incremental cash or adjusted EPS. So if you take that number we would expect that to be reasonably even throughout the year, the UK business for YourCash wasn't nearly as seasonally impacted as what the rest of our business is. But I think if you use that number, you can kind of back into what that Op income contribution would be from YourCash.

Okay. That's helpful. Thank you very much. I will go back to the queue.

Okay.

All right, thank you, operator and thank you everyone for joining today. We look forward to talking to you in about another quarter. Thank you very much. Bye-bye.

Ladies and gentlemen, thank you for your participation in today's conference. This does concludes the program and you may now disconnect. Everyone have a great day.