Greetings, and welcome to the Euronet Worldwide First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode and later we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. It is 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, Amanda. Good morning and welcome everyone to Euronet's quarterly results conference call. We'll present our results for the first quarter 2017 on this call. We have Mike Brown our Chairman and CEO; Rick Weller our CFO; and Kevin Caponecchi CEO of our epay division on the call. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the first page of the PowerPoint presentation we'll be making today. Statements made on this call that concern Euronet's or its management's intensions, expectations or predictions of future performance are forward-looking statements. Euronet's actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors that are listed on the first page of our presentation. Euronet does not intend to update those 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 CFO Rick Weller.

Thank you, Jeff. And good morning and thank you all to those of you that have joined us here today. I will begin my comments on slide five. We begin the year delivering revenue of $473.4 million, operating income of $41.3 million, adjusted operating income of $42.5 million and adjusted EBITDA of $67.8 million. Adjusted operating income, adjusted EBITDA and adjusted earnings per share exclude approximately $1.2 million in cost incurred related to the proposed MoneyGram acquisition. Now to the first quarter, first quarter adjusted EPS was $0.73, a 6% increase year-over-year and in line with the guidance we’ve provided in early February. And if not for the Indian cash demonetization impact would have been in the double-digit range. The $0.73 includes about a penny of headwind from share dilution on our convertible bonds as we saw a nice appreciation in our stock price over the last few months. You may also noticed the lower first quarter tax rate, we had anticipated the lower rate in our guidance as we knew that we would see increased operating expenses from the elevated ATM deployment levels in the seasonally lowest first quarter. While we factored into our guidance a slightly more favorable tax rate for the quarter compared to the full year. The rate was a bit more favorable than estimated, which served to offset the headwind in the -- from the additional convertible share dilution. Next slide please. Slide six shows our three year transaction trends by segment. EFT transactions grew 27% from the expansion of our ATM and POS networks in Europe, the October 2016 acquisition of YourCash and the transaction growth in India. As was the case in the fourth quarter, the transaction decline in India from fewer cash withdrawals as a result of the demonetization were more than…

Thank you, Rick. We will start on slide number 13 now. During the quarter we launched an independent ATM network in Slovakia. This is now our 23rd country with an independent ATM network. In Hungary we launched a debit card issuing agreement with Loyal Bank for their new money plus cards product. These cards add to the growing portfolio Loyal Bank is building to promote financial services across Europe. We also launched the recycler outsourcing agreement with Broker Consult, we told you about several quarters ago, Broker Consult is a finance firm in the Czech Republic and through our ATM recycling capabilities they will now be able to offer their customers deposits and withdrawal capabilities at their branches. In Poland we continue to expand our ATM deposit network Raiffeisen and Alior banks had extended their agreements to include participation in our deposit network, banks often utilize this service for their merchant clients so need to deposit funds outside of working hours. However Alior’s agreement has been extended so that individual can also deposit cash into our Euronet machines making access to banking services more convenient than ever. Slide 14, by now most of you have probably heard me talk about our ability to leverage our ATM to offer new products and services. In January we were able to use our ATM and recycler technology to collect donations during the Great Orchestra of Christmas Charity event in Poland. This is one of the largest charity events in Europe and in the picture here on the slide you can see the Euronet zone in the middle of the event where customers could withdraw money from their account or deposit cash to make a donation what a great opportunity to showcase our product diversity and superior technical capability. During the quarter we also…

Thank you. [Operator Instructions] Our first question comes from the line of Chris Shutler from William Blair. You may proceed.

Hey, guys good morning.

Good morning, Chris.

So firstly just talk about epay for a second, I just wanted to clarify I guess on the higher expenses maybe you can just dive into that a little bit more, I know you mentioned non-mobile customer campaign, product launches, higher advertising cost, but just what drove the increase and should that expense trajectory normalize over the course of the year?

Well I think it will be a little bit tempered as we go throughout the year because of some of the increased numbers here as we try to start the year with the launching of some new products. And some building the momentum especially earlier in the year because of the anticipated fourth quarter kind of numbers there. But it will taper off a little bit but not dramatically it was even further pronounced by the fact that last year we had a little bit of benefit on the side of some expense there where we recovered some advertising dollars from some of the brand partners there. So it kind of made a little bit difference in the math, but it won’t make a material difference on a go forward basis Chris.

Okay. And then on the revenue side in epay I thought the accounting related issue that you had about a year ago what have rolled and you would have been through that this quarter. So I am a little surprised that revenue growth is still negative so maybe just talk about that?

Well Chris if you just kind of take a look back to the last four or five years there’s something like that. We’ve typically had a first quarter decrease in our revenues on a year-over-year basis, which is the kind of cumulative effect of the mobile declines that happened throughout the year. And then the step down in the first quarter, which is even though mobile is less pronounced than the non-mobile product it still has a lighter first quarter. So you kind of just get the cumulative effect of all that going into the first quarter. And then as we said our non-mobile products are seasonally strongest in the fourth quarter. So there wasn’t any kind of impact of let’s call it accounting or it really wasn’t accounting it was because of a shift from transaction types from being more commission based to being revenue or transaction based. But it was really kind of consistent with the prior trend and as we said we were anticipating that as we continue to build that non-mobile product that it’ll replace that by the time we get to the fourth quarter.

Okay, great. And then lastly Mike maybe just walk us through high level your thoughts on each of the three segments and what you’re thinking in terms of the type of constant currency revenue and op income growth that we could see this year?

Well we don’t really delineate that, I’ll just tell you that things that are kind of interesting with all three and what’s going to drive this year. So we’ll start with EFT kind of our legacy business 43 or something percent of our EBITDA Last year. I mean that as usual is going to be driven by new ATM adds. There is really isn't same-store sales growth there is only new adds of ATM. And we continue to put these ATMs in great locations, we have a larger staff starting this year than we did last to go out and find these good location. As you know we put in over 3,000 ATMs last year. So that's why we set a bogey this year for at least 3,000 more. And we're putting them in now as we speak as fast as we can because the big quarter is really started Easter and then go all the way through the end of the second quarter. So that's just going to be more of the same, great locations, we'll probably open up a couple of another little markets in Europe too with a little luck. But mostly it's going to deeper into our current markets because we've figured out how to make these things work when we go into a new markets we'll put in about 20 ATMs into that market and double check all our assumptions to make sure we're accurate we'll put in 100 to 150 the next year and then we'll really starting to blow it out in the third year. We're in that kind of blow out most of that right now in a number of our countries in Europe, so we're excited about that. We really know what to do how to make them profitable and we'll…

Alright, thank you.

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

Hi, good morning guys. Thanks for taking the question.

Good morning.

Good morning, Andrew.

I’m wondering Mike, if you can sort of recap for us your view of your next competitive position in the money transfer space should Ant manage to close the MoneyGram acquisition. We’ve got a lot of questions about, does that make MoneyGram a more viable competitor or is it changed your strategy, I wonder if you could just kind of walk through your thoughts on that?

Well, I mean the reality is Ant Financial is more of a digital play more in Europe they would like to have a footprint in the United States. I really don’t expect the comparative dynamics to change too much, their strengthen is in Asia. As we know MoneyGram is a nice -- would be nice asset for us to own it’s of kind just there, it seems like their way to get a foothold into the United States. I really don’t expect the competitive dynamics to change much. We’ll kind of have to see what happens.

And I mean the other thing I would point out is that where we’ve really been doing the toe-to-toe fighting in most all of our market is with the smaller more nimble if you will competitors every market that we’re in has got a half of dozen or more. I mean in some market there is up to 20, some competitors that we compete with and these are all the smaller really scrappy kind of guys. So, we’ve been in that market, we’ve been in those kinds of strong competition environments. The entirety of Ria’s existence. So I have another party that's in that process certainly add to the let’s call it the mix, but it fundamentally is it doesn’t change our mix of those 20 some guys that we are competing with in the market out there every day.

And let’s not forget the market here and Rick alluded to it, but if you add up ourselves and MoneyGram and Western Union the three of them control less than 25% of the world’s remittance. So, therefore 75% is up for grab and that's what we’ve been focusing on that's how we’ve gotten stronger and stronger and bigger and bigger over the last year as we really focus on the reset of those people.

Right, okay. That helps a lot. And then with regard to the new Walmart deal and your terms with Walmart as well as the lower consumer pricing. Could you talk about just sort of the timing it certainly seems like there is demand elasticity so that more pricing should drive faster growth. But over what period would you expect that? And so in other words would we see a meaningful slowdown in Money Transfer revenue in the second quarter and then a gradual recovery in the back half, what’s the interplay between those dynamics?

I think we don’t know that exactly, but if you take a look at the last time through, we’re expecting to do advertising to get this out to accelerate the success of this. So, certainly we’re going to see a step-down in Q2 compared to last year’s Q2 and probably a bit in Q3. But when you have pricing as good as what we’re announcing I think it’s just kind of drag more people into the stores or more people who are in the stores doing maybe their money transfers in a different way. They’ll start to use this method. If you think about it let’s say you wanted to send money to your sister in the next day over, and you’ve got a bank account and your sister may have a bank account as well. So you could write a check, you could mailer the check, the check takes two days to get their five day to clear. And so kind of like 10 calendar days later your sister is got the money in her hand. Or now for a very reasonable fee you can go to Walmart, walk up to the counter, do it right there and within 15 seconds it’s available to your sister. So very cheap pricing, immediate gratification, it’s exactly what America loves.

And I would add to that too as well, Mike said we’d have a little bit of step down here I think it’s kind of in terms of what point in time because on a year-over-year basis essentially the math on the rate change is largely replaced by the year-over-year growth. As we’ve said before, we’ve continued to see very nice double-digit growth in this product here along with all of our other money transfer products here. And so from a year-over-year perspective we don’t expect this to see a dip in the process because we’ve essentially grown through it already. And with a fair wind at our back if there’s even more demand coming from the customer attraction to simplicity, to ease and to a better price we could possibly do better. But I think just simply on a year-over-year basis we’ve largely grown through that. And so -- and then secondly the second quarter is our largest money transfer quarter because it’s got Mother’s Day in there too. So I think all that kind of says this was actually a good quarter for this to take effect. And hopefully coming out of the second quarter we’ll see more of that momentum increase as we go into third and fourth.

Okay, appreciate that Rick. And then one more if I may, Mike just with regard to ATM deployments you’re off to a good start how would you handicap the likelihood that come in ahead of your 3,000 new ATM deployments this year?

Well I can only tell you that I’ve given you a number for five years running and have beaten every time.

Fair enough, thanks.

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

Hey, thanks guys and congratulations on the quarter. Could you give a little bit more detailed update on XE and kind of the integration in the testing and learning that you’re doing there?

Okay, so XE has done -- first of all on November 1st we took over from a contract with the competitor and we started immediately taking all the customers who are coming through the XE website and we’ve basically following them over the HiFX or to realmoneytransfer.com. Most of them are the high-end people so mostly all going to HiFX. So because of the regulations we began immediately doing new KYC know your customer certifications of all those customers. And so for the next couple of months we’re basically just KYC and everybody who’s coming across and making that putting them in a position where they can make some transaction. And we’ve now are on a run rate pretty much where we were with our competitors as far as number of transactions. What we have realized though is that our user experience although have mimicked the kind of it smelled a lot, looked a lot, like what the customers were used to, we’re pretty well convinced that that user journey wasn’t the most efficient one. So we’re improving that as we speak and ways to market to that. So I think this year is going to be a building year for improvements so that we can really see a pop because I want to not just take over and pick up the $6 million or $8 million that we were losing in commissions to a competitor, but I’d like to exceed that. And so the work we’re going to do this year is to focus exactly there. So I mean so far everything is good, but I think there’s a lot more as we’ve dug into it there’s even more upside than we anticipated.

Got it. And then you mentioned the POS DCC deal with first Hawaiian Bank in Asia Pacific and then I think a Thailand bank could you explain that a little bit more what you’re doing there and you kind of said it was the first outside of Europe I think?

Yes so in Europe we’ve got with the PSE licenses we’ve got full acquiring capabilities in Europe, kind of souped in that. So we can do DCC, we can do acquiring or we can do all the processing everything. We’ve not been able to do that yet in the U.S. because there wasn’t a license mechanism available to do so. We can now do full acquiring with First Hawaiian Bank kind of souped [ph] in that same kind of thing like we do in Europe, but [indiscernible] can do it and we're certified to do that in the U.S. with all the card types. So we'll of course do it for First Hawaiian assets there and their merchants that they have both in Asia and in the U.S. But the nice thing is now we've got a working system we can deploy this with other partners across the U.S. So kind of now the U.S. is in our site to do more POS DCC acquiring.

Got you. And then just lastly, if the administration ends up proposing like a 10% repatriation tax, do you see that as a benefit for you guys with all that cash overseas, or how do you think about that?

No, I think this is -- this might apply to other companies quite a bit more than us. When you take a look at our biggest revenue producing countries in the world they are -- they would be Germany, India, France, Italy, those kind of countries. And they all have very high tax rates. So the differential between those tax rates and the U.S. tax rates are very small. So the reason that the money has been kept overseas with the exception of paying back loans and so forth is because most -- we've got three quarters of our business overseas, and we always keep our eyes open for acquisitions overseas. There is no reason to move profits even though the differential in tax might just be 1% or 2% to bring it back to the U.S. just so that we could then redeploy it back again in Europe and risk a foreign exchange spread going the wrong way two times. So we really don't have our repatriation game like some people do who are in very low tax rate jurisdictions and kind of organize themselves around that. We generate and our earnings in those higher tax rate countries, most of our earnings in the higher tax rate countries, and we pay taxes there.

And further to that as Mike mentioned, if you brought it back, if we just turn around and then probably use it outside the United States and if you think of our last several acquisitions, you'll quickly recall that they were in jurisdictions like Malaysia, the UK. So those are currencies that are not USD not United States. So it really speaks more to where we do business as oppose to needing to bring back money to the U.S.

Yes we've got a substantial business of course in the U.S. doing a good 25% of our business. But we started in Europe and so we still have a very strong and then went international from there. So we have a very strong international business. So it's kind of crazy just to move money to look good. We're certainly not -- we're not planning any kind of tax gaming here.

Got it, hey thanks a lot guys.

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

Good morning.

Good morning, Rayna.

Just digging further into the Walmart renewal, do you still view money transfer revenue and EBITDA still growing double-digits?

Yes, absolutely.

Excellent. And could you just discuss the trends you saw in cross border pricing in the quarter and your expectations for cross border for the next 12 to 18 months.

No significant difference in the pricing or the margins that we saw during the quarter. And We're not aware of anything that would particularly change that particular dynamic. I would reflect back over the last 10 years that we've owned Ria we've over those years the pricing has come in which isn't any different than in the ATM business and the epay business. And what I would have said 10 years ago is that over the longer period of time, we would expect that the pricing continue to come in. But we're fortunate to be in a business that has just fundamental secular growth and we're a more scrappier fighter kind of a guy out there and we're able to replace those and have consistently replace those. So we don't -- we haven't seen anything on the price front. We don't expect anything really different than the historical perspectives and we expect our growth to be obviously well better than what would happen on any kind of price front there.

Great, thank you. And finally if you can just help us think of the impact from the 1,100 European ATMs that were winterized at the end of the March and that will be reactivated in the second quarter if you can just help us quantify the impact on revenue and earnings in the EFT segments?

Well I guess you could call that kind of like manner from heaven okay. And it’s going to be -- well I mean here’s the deal the single most expensive component of running an ATM network is either rent or the cash delivery to it. And so what we do basically when we’re in those kind of warmer climates in Southern Europe where there’s lots of tourist during the summer time and there’s virtually zero people in the winter time kind of we put a tarp over that ATM, we close it down we still have to pay rent, we still have to pay telecom, but we don’t have to pay money delivery cost, which are like I said probably the most expensive single component. And so what we have now is we had all those 1,100 all through Q1 we’re paying part of their expense, their monthly expense but now we’re going to have revenues to offset and our expenses will go up some because we have to pay money delivery. But that’s what I'm saying it’s like we’re not very much more expense we’re going to get all the revenue. So it’s going to be a real pop and that’s just what’s happen every year then I think as we’ve done this so many years we kind of got this one down. Rayna I’ll probably not answer your question as directly as how do you get the math there to do that in terms of the quantification. But just draw the attention back to last year if you look at our EFT segment last year our revenue in the second quarter was 33% over the first quarter and our revenue in the third quarter was then yet another 32%, 33% over the second quarter. Those two quarters as we’ve said before are seasonally stronger quarters and each of those quarters in the prior year reflected a dewinterization if you will of ATMs that came out of winterization in the first quarter and then begin posting transactions in the second quarter. So we think that that similar kind of a trend will continue and if you take a look at even how the numbers have been estimated by the analyst and things like that, we think that that it looks as if the market generally understands and follows that seasonality and this 1,100 coming out of winterization will only further contribute to giving us greater confidences that those similar trends will be the case as we go into this second and third quarter this year.

That’s very helpful, thank you.

Thank you. Our next question is from the line of Alex Veytsman of Monness, Crespi, Hardt. Your line is open.

Good morning, guys.

Good morning, Alex.

Just a couple of modeling questions first of all on epay I believe transactions declined 4% this quarter just wanted to see if you could provide some insights into kind of how we should be thinking about modeling throughout the year? I know there is a sea of component, but also love to know if the geographic dynamics were you saw declines in Middle East, North America and then some offsets in various European markets if that kind of dynamics will continue throughout the year. Thank you.

Yes I think that probably is the best way to answer is like Mike did earlier, Mike said he would expect to see that a little bit more in the flattish kind of zone there and really kind of similar to last year that we see a little bit more of that exceeding the expectations in the fourth quarter as we get the real benefit of those non-mobile products. With respect to the differences on the countries by geography really probably the only one I would call out that that was a little different there was the one in Turkey where we saw the benefit of some additional promotional effects that we benefited from in the prior year, we would probably not expect to see repeating of that. So that’s probably the only a kind of thing I would expect to see going forward in the next quarter there. So -- and it’s not unusual to see that we’ve got a little bit different mix of what the pluses and minuses are especially in the mobile business as we go throughout the year there. But Kevin anything there.

Yes the only other thing I would add this is Kevin is year as we articulated previously the margin on non-mobile is stronger than the margin on mobile. So, we can replace the margin loss from mobile with fewer non-mobile transactions. And so you have to take into account, the decline as Rick articulated in 1Q is primarily driven by the continued decline on mobile. And then as the quarter goes -- as the year goes toward the fourth quarter, which is our seasonally strong this quarter in epay, we can make up the margin loss with proportionally less transactions.

And the only other I would just observe in the first quarter here on a constant currency basis the revenues declined a percent year-over-year and transactions were down 4% as you observe and we mentioned in there that some of declines were from the like Middle East. We saw a little bit stronger decline in those transactions, but those are the lowest value transactions that we have in all of our business. And so that really accounted for more of a differential between the 4% transaction decline and the 1% revenue decline.

Got it, got it, that's helpful. And then really quickly on the $1.2 million MoneyGram related charge you took for 1Q do you anticipate any more bidding related expenses in the second quarter?

Yes, we would expect some more as you know the final offer that we had made or the last week was in the month of obviously the month of April or so. There would be a continuation of some of that as we go into the second quarter.

Got it, that's helpful. Thank you, guys.

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

Thank you and good morning. Just want to understand kind of the headwinds to the second quarter guide, it sounds like India is about a $0.01 per share, but is it fair to say that the Walmart pricing impact is a bigger more magnitude impact in terms of the headwind for the second quarter guidance?

Yes, I think India was probably maybe a little stronger than $0.01, but you are in the zip code, okay. And clearly the Walmart impact would bigger than that. We haven’t specifically talked about it, but it as we said it was factored into arriving at the second quarter numbers. But it would be fair to say that the Walmart impact probably fell into the few penne a share impact. And I’ll kind of stop at that point of quantification, there is a fair bit of range around the word few though.

Okay. I appreciate that, thanks. And then when we just think about the Money Transfer segment margins, it sounds like so we’re going to have lower pricing, there will be some probably acceleration in transaction growth that will probably ramp as the year progresses. And it also sounds like you are planning at increasing the marketing spend kind of out of the gate here. So, can we -- should we think about I know you are still assuming double-digit money transfer revenue and EBITDA growth for the year, but could we see the margins dip lower kind of in the next quarter here just kind of early out of the gate as you ramp up the marketing?

I think we could see it dip just marginally lower, I don’t expect it to be like 100 basis points, but it could be in the let’s call it 30 to 50 basis point range. But then when I kind of take a look at the full year, I’m expecting that our Money Transfer business will continue to show a little bit of margin improvement on a year-after-year basis. Because as we noted, we do expect to see some volume recovery coming out of the pricing change, which as Mike said again we’re seeing that customers are really coming into the category that this is replacing other modes or methods of payment. And so it’s not just competitive take but it’s also as Mike to the other 75% of the market that's not represented by the brand names that you can think of we’re really getting into that other stream of transaction payment. And then I'll also eco a point that Mike made as it relates to the XE business, that business is coming in here we're expecting it together with HiFX to continue to grow and benefit our business, and it will help us expand those margins too. So in summary a little bit of contraction in the second quarter not much, but then that more than replaced and I would expect to see a little bit of expansion on a year-over-year basis.

And maybe Jason I'll give you a little -- one more point to give you an idea of how we can come up with it. When you look at our Walmart-2-Walmart, start by Ria product we've had out now for three years it's okay. So for the last 12 months before this pricing change we've been growing that business strong double-digits. The growth that we’ve seen in that business without a pricing incentive would more than offset the new pricing and over a year would more than offset the pricing differential that we've now given to consumers. So if you think about it, we were growing at -- growing in double-digits without a pricing incentive and now we have a bigger pricing incentive plus more marketing. And that's why we're pretty bullish on the number of transactions that we think will come our way. So it is just like there is a step down and everything stays flat we were growing before the step down in pricing. And then now you add these other two things to and send customers to come our way, which is more marketing to make people aware of the new pricing and maybe just aware of the product and they might not have been aware of it before.

Great thanks, that's very helpful appreciate that guys. And then just last one, I guess depending on your outcome with MoneyGram, there could be a lot of dry powder that Euronet still will have. So just kind of thinking what are your thoughts maybe it's still too early because it's before we learn the outcome of MoneyGram, but what are your thoughts on uses of dry powder because you will have considerable amount of cash and be underlevered. So just kind of...

Yes I think nothing really is changed there since kind of my standard answer really is very appropriate and that's that we're always looking for acquisitions. This is a big one this would have taken all our powder and then some. And if it doesn't go then we've got a whole lot left as you suggest. So we'll look for acquisitions and we have a few and there is always if the market doesn't treat us well there is always stock buyback as well. So those are the two places over the last five years we've used our money we'll continue to do that.

And as Mike said, we at any given time probably have three or four different candidates on the evolution table to take a look at. And it’s just really a matter of whether or not they achieve our objectives and can be done for the valuation expectation that we have. So it really then gets down to a volume of and a size of transaction that fits within our current strategy.

Yeah we've been -- we've actually been evaluating several other acquisitions alongside the MoneyGram one during this entire time. So we're not really serial thinkers. You never know when the good one is going to pop up. So you've got to kind of run parallel process be looking at 2 or 3 all the time all the time.

And we're in markets around the world, so we probably have the opportunity to see more opportunities out there than maybe someone else might just because we're in -- we operate in nearly 50 countries.

And do you -- are you looking across all three businesses?

Always. Yes.

Great, thanks a lot guys.

Okay, I think that we've got to make that be our last call, it's little pass the top of the hour. I want to thank everybody for taking your time with us and I look forward to talking to you after a good second quarter in about 90 days. Thank you very much.

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