Greetings and welcome to the Euronet Worldwide First Quarter 2018 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 be given at that time. [Operator Instructions]. 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, Takiya [ph]. Good morning and welcome everyone to Euronet's quarterly results conference call. We will present our results for the first quarter 2018 on this call. We have Mike Brown, our Chairman and CEO; and 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 will 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 these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances. In addition the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures that we'll be using during this call to their most comparable GAAP measures. Now I will turn the call over to our CFO, Rick Weller. Rick?

Thank you, Jeff. Good morning and thank you all for joining us today. I will begin my comments on Slide 5. We began 2018 delivering revenue of $550 million, operating income of $45 million and adjusted EBITDA of $75 million. As you may have read in the press release, when adopting the new revenue recognition standard, we reduced revenue by approximately $22 million from what would have been reported under the former standard. Had we not adopted this new standard, consolidated revenue on a constant currency basis would have grown 11%. First adjusted EPS was $0.73, the same as last year and in line with the guidance we provided in early February. On one hand this $0.73 was burdened by about $0.04 of tax compared to the prior year largely as a result of recently enacted tax legislation in the United States together with a stronger mix of earnings this year from countries with higher tax rates. On the other hand, the $0.73 when compared to our guidance includes a couple pennies of tax benefit from a better than expected tax rate stemming from one-time favorable conclusions of open taxiers [ph] in certain countries. However that couple have since benefit was offset by a non-recurring legal settlement in the money transfer segment and a rate decrease we agreed to for sizable Middle East money transfer agent in return for increased volumes we anticipate for the balance of the year. So net-net, against our guidance a couple of pennies of non-recurring headwind in money transfer offset by a couple pennies of non-recurring tax benefit. Bear in mind, that each penny is about $500,000 so all in all with a couple of pennies of foot take here and there. Our quarter shook out pretty much as expected it. And while we always…

Thank you, Rick and thanks to everybody who's joining us today. I'll start on Slide number 13 to cover EFT. In keeping with what makes us successful more products on more devices in more markets, I'm pleased to share with you that we just launched two new independent ATM networks one in Bulgaria and the other in Sweden. We now have independent ATM networks in 28 countries around the world. We continue to expand our presence throughout Europe, through outsourcing agreements with banks in Poland and Greece as well as agreements to deploy ATMs in Spain with two large hotel groups Iberostar and Melia. We also continue to find new opportunities to offer our software solutions across many markets. You can see in the slide we're operating solutions that reach Sri Lanka, Lebanon, Bahamas and Indonesia. These types of opportunities are compelling to our business as they allow us to monetize our key expertise and superior technical solutions in areas that we may now have a physical presence. As you can see in the bottom of the slide we also renewed a network participation agreement with one of our banks in Poland. Next slide please, Slide 14. As I discussed new products launch this quarter. We have grouped them into three categories. Value added services on ATMs, card and POS outsourcing customers and software solutions for bank. We'll start with the value added services on ATMs where we expanded our valued relationship with Piraeus Bank in Greece, through implementing bill payment via credit cards at a self-service kiosk. In addition we launched ticket voucher distribution through our ATMs in Hungary, this is the second market we've introduced ticket vouchers through our ATMs as we started in Spain last year and we're looking to launch similar offerings in new markets later…

[Operator Instructions] our first question comes from the line of Laura Foreman with Goldman Sachs. Your line is now open.

The DCC context what you provide was really helpful and I just wanted to know, could you give us a little bit of insight into some of the high value opportunities you referenced to how you would diversify the ATM business to the overall business away from European DCC. Thank you.

Well as you might remember. Europe accounts for just north of 60% of the total DCC of the company. and we have expressed interest of moving DCC outside of Europe as you might remember. We purchase Pure Commerce about three or four years ago, which provides DCC opportunities all across Asia and Europe and even the United States. So we've had a focus on DCC outside of Europe for a long time and we will continue to make some investments there. We really see the rest of the world as our palette here and there is a lot of opportunity for DCC outside of Europe. So we'll go after that over the next couple of years.

Great and then just one more question from me. It looks like money transfer business is gaining a bit of momentum especially as you wrap the Walmart to Walmart pricing renewal. But can you just comment on money lends Walmart to world product and if you're seeing any competitive pricing pressure in North America there and you know how to think about that relationship with Walmart when the renewal comes up again in two years. thanks.

So with respect there are kind of two sets of competitors Walmart kind of probably has here. One would be its other very big brand competitors. Other grocery store chains and discount houses and so forth and to those, I think that's where this product was probably focused to try to extract customers from its competitors and bring them into Walmart. With respect to us though, our agents are primarily all small bodegas and ethnic kind of neighborhood. So we don't see and we've been in extremely competitive position with both our smaller competitors and our big guys for many years now. So I don't think I'll see much impact at all from the Walmart to world pricing with respect to us. I do imagine though that you'll see some pressure on the two big names particularly Money Gram itself because it's now taken a lot less revenue per transaction from its biggest customer Walmart than it used to.

Got it. Thank you.

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

This is Anthony Cyganovich on behalf of Rayna Kumar. Just a follow-up on that last question, could you talk about how Walmart volumes have come in relative to your expectation and following acceleration of revenue this quarter, do you feel like money transfer revenue growth could further accelerate as the year progresses.

Well you know we initiated the new pricing basically May 1 of last year, it was like April 30 or something like that. so what we believe is that as the transactions continue to grow within Walmart as they have been, by the end of this quarter we should be pretty much back to kind of square one, back to where we were, we'll have much larger volumes but you know same kind of contribution at Walmart. So from that point forward we see growth and margin expansion with that growth as compared to the prior year.

I mean the only other thing as you said continue to accelerate throughout the year. I thought that 17% transaction growth was pretty good acceleration.

These analysts always want more.

And just as a follow-up for me, could you kind of talk about what your expectations are in terms of revenue and margin profile for each segment in the second quarter to go with your EPS guidance?

We don't do that, but as we've said in a longer kind of horizon we continue to believe that we've got good strong double-digit and I'll speak principally on the operating income side that we got good strong double-digit prospects for the EFT. We've got - what I'd characterize is really solid double-digits for the money transfer business and as we've said probably kind of in the mid to upper mid single-digit operating income growth out of epay. So we've let's say consistently talked about that expectation out of our business and I'm quite glad to see that our business continues to produce there. So that's about as much as put out there versus specific revenue kind of growth numbers.

Okay, thank you.

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

Just on the money transfer about the margins, the commentary there. I'm just want to make sure we understand the timing when you're seeing the operating margins will ramp back to the pre-Walmart price cut margins, is that kind of should we think of that like as an run rate exit 2018 type of thing or is that for like the full year 2018? Just want to make sure we think about that correctly.

I would think of it as more of an exit, that's why we use the ramp. We still have a little bit of the impact in the second quarter of the Walmart to Walmart rate change and as Mike said as we anniversary about to square up, but there's a little bit in that month, the first month there. The second thing as Mike said, we've really done a nice job in rolling out these our agents in India, but we still have more work to do and unfortunately in India each agent that we open requires specific approval by the regulators, so that's a time an effort and cost type of thing, then we put some advertising behind that. we're continuing to bring online the ASDA stores, the 400 or so ASDA stores out of the UK and we'll put some promotional activity. So those will be a little bit earlier in the year and then we'll see a little bit more of that come to the bottom line, but we'll start ramping that in the second quarter as we move throughout the year.

Great. Thanks for that. and then I want to just better understand the merchant processing business. just kind of I believe it's mostly Europe focused, but just from a geography standpoint types of merchants that you process, you did an acquisition here with Innova what are you thinking strategically. It's a business that I believe has now grown faster than the overall EFT segment. So but is that a growth opportunity you see for EFT going forward, the merchant processing.

I mean we obviously do or we wouldn't have bought Innova. What we're doing is focusing on unique kinds of merchants that have the needs of this kind of triplet that we have, kind of got of trifecta going here we can provide that merchant additional revenue in those customers additional cost savings by offering them value added tax refunds. We can also because they're obviously a foreign cars there's opportunities for that merchant to make money on DCC and we can do the acquiring as well. so we kind of got the trifecta there, we got to focus on merchants where that's most appropriate.

You may have heard us talk in the past. I won't reiterate any of the names, but we have some very respected large hotel names in our portfolio, some duty free shops in our portfolio and in line with Mike said, those are businesses that would benefit nicely from the triple play product that we now have.

Great. Thank you.

Thank you. Our next question comes from the line of Peter Heckmann of D.A. Davidson. Your line is now open.

I wanted to see, if any of your research in the area of the proposals around DCC have allowed you to perhaps put some sort of brackets around any type of cap that might be implemented over the next several years. I mean is there some feedback that would suggest a potentially minimum level of cap or target [indiscernible].

You know that's kind of the $1,000 question. We really have no idea where the regulators will come out. I can tell you that the banks across Europe are making money on this and it helps their finances. And their rate for DCC range from six to low double-digit and so we'll see that's one point. Also in all that literature in those 100 of pages that you could have read regarding DCC and EBA and all that. They did mention in there that some DCC providers are charging in excess of 30% spread. Okay and they seem to believe that was too much. So I guess I can't tell you where it will fall but it seems like 30% is too much, which is quite a ways outside of our reality and then we'll just have to see what happens.

All right, that's fair. That's fair. We'll stay tuned in there. And then just on the software opportunity you talked a little bit more about that. you talked about upgrading your capability in the 10-K. do you think there's a significant opportunity from an upgrade cycle from existing software customers or new business opportunity from upgrading from other providers?

We do and also believe we've got new technology right now that will be able to sell into the types of banks that we've been unable to sell our product into here [indiscernible]. Based upon the scalability and the new technology that we have, so we see software over the next several years as a growing piece of our business.

One of the important parts about our internally developed proprietary software is, if you think of it as being switching product, it's not limited to car processing. We can switch virtually anything, if we wanted to switch finger prints, we can switch finger prints. Okay, so our structure, our technology is not dependent upon the old historical ways of transacting. This is where when Mike commented on some of the things we're doing in whether it's an EFT or an epay where we're looking at and doing transactions with alternative payment providers. We're doing these transactions outside of your traditional card settlement organization, that's also reflects the value of other assets that we have and that is, we don't just move a transaction around. We move the money related to the transaction. So someone wants to use our state of more than a million devices across our geographical footprint, we can handle that transaction whether it's a card, whether it's a virtual number. Whether it's a bar code, 3D. we can handle that transaction and then we can settle the monies between the card guy or that payment guy and the merchant. So we're excited about this software as well as the assets we have to take more advantage of it as we continue to grow.

That's great. Just one quick maintenance question I'll get back in the queue. On the small acquisition, can you just give us an idea of what the annualized revenue might be and when that'll be closed?

It won't move the needle. It is already closed and it's a good way to add a product without it being dilutive to our P&L. but the important part is because it won't be immediately contributory nor dilutive to our P&L on a standalone basis, it really gives us that third product to go to a merchant with a much stronger and a more compelling opportunity for that merchant. So no real impact in our business, but certainly a great addition to our product portfolio.

Great, cheers. Appreciated.

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

Appreciate the succinct growth outlook summary that's really helpful. One of the areas where obviously you're doing extremely well is India and I wonder if you can help us understand how much of a contribution India might be from a growth standpoint and I'm thinking specifically in EFT. You know when I looked in the 10-K it's still a relatively small part of your overall revenue but it's big market and EFT, it offered some EFT diversification. So can you help us frame up the India contribution in your ATM business and [indiscernible] market?

Well we don't have to, you can see the percent that India kind of has of the whole EFT market. It's kind of like around 10%. But the interesting thing is, you saw last year that EFT kind of grew it bottom line by 35% or 36% if I remembered correctly. India this year compared to last year of course it had some problems last year is going to beat that number. So it will be an even bigger percent of the total EFT this year than it was last year. it's just screaming right now, which is great.

In India, it's one of these markets that has a lot of excitement about it just because of its size and we've been there for a while, but we're really starting to see where we're having contribution to our business from India from all three segments. Whether it's doing transaction processing for the likes of Paytm or Flipkart or you know go through the list or it's doing ATM or it's doing money transfer like with our upgraded and improved now number two network in the country. And so all three segments are starting to have a greater and greater contribution and then finally I would say, look that's a we've got a good team in India that is on that side of the globe and will give us the ability to expand in other markets as Mike said, there's opportunity well beyond Europe on ATM deployment and development and we've got a team that is expert in that and can really help us there so. It's beyond India and then, just to put in comparison because we won't put out like profit numbers on India. Just separately on money transfer keeping mind that, that's a $75 billion receipt [ph] market that's three times what the Mexico market is. So clearly a very big market and we're firmly planted in all three segments there.

And as Rick said, I think one of our biggest assets we have there, we've got technology, we're deploying new technology. But we've got a really capable leadership team there and when you have that, then they can focus on not only in India, but the rest of the region.

Okay, that's helpful. Thank you and then quickly Mike, can you comment capital priorities. You did buybacks on stock. I believe it was higher in the fourth quarter.

Yes we thought it was a pretty good buy at $10 past today's price. So we when it comes to capital allocation we'll use it the same way as we've always used it. We go where our preference is always on acquisition that keeps on growing kind of that gift that keeps on giving. If we can't use it there, then these ATMs we keep growing our ATMs but we can't grow our account on ATMs fast enough to really eat through enough of the cash flow. So we will look at stock buybacks if the market doesn't treat us well and we believe the opportunity is in excess of where the market puts us. So we'll just keep looking there and we're careful. We've been very financially conservative, but we'll do it the same place as we've always done it.

Thank you very much.

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

Congratulations on the quarter despite the ASC 606 Reg 2. Two quick questions, one on Page 13 of the deck the two outsourcing agreements that you signed, it seems like we haven't had one of those in a while, what do you think of those two that you signed and are there any more out there?

Well the short answer is there are more out there, Mike. As we've said in the past we've said we've seen some newer opportunities emerging on the outsourcing, we think that banks of - let's say for the most part digested the financial crisis, dealing with their capital structure some of the sovereign debt issues and things like which kind of gets it back to the point of figuring out, how they can be more efficient and run their business and part of that is, we simply offer a solution that cost less and gives more capability for their customer. So there are other opportunities we've commented on the past, but Mike you might have any other comments on those.

Dealing with banks is a lithe challenging because sometimes they don't make very good business decisions, but the reality is we can do outsourcing for banks more cost effectively with better uptimes than anybody on the planet and we have the most sophisticated software to do so. Banks are now starting to realize that software also gives them additional capabilities for marketing and other customer interfaces, so we're going to keep selling and as we get more of them, as we get more the word gets around. We also can - these ATMs typically think people think of ATM in a cash out version that's it. Well you remember, we sell products on our ATM, we've got probably 2,600-2,700 of our ATMs are deposit machines. Where they'll take bunches of currency and you can put it into the machine and it counts it and give you immediate credit, this is great particularly for the emerging market banks because they've got a real, they've got to manage cash both come in and out because so many of their purchases in their country, merchants are kind of cash based. So we just have a whole plethora of opportunities to help banks be more efficient and so we hopefully get more, we should get a lot. But we're waited on the banks to make that realization.

Got it and then Page 13 and 14. Does anything stick out there one or two items that could move the needle over the next year to?

Mike what I would say just like with a lot of our business it's not one item that moves the needle. This is a - as a guy said one time when you're up laying bricks by a cathedral you're putting it on brick-by-brick and you stand back and you got a wall over cathedral. I mean our business is brick by brick, it's more product, its more devices, and it's more market. So now the themes of some of these again become maybe more significant here. As Mike commented on earlier, our software truly gives us an advantage, we do cardless payout transactions. We do ticket type of productions. We do rebates for large mobile phone manufacturers. And more and more of these I'll just call them alternative payments. People that do not have the ability for a person to get cash through your traditional ATM because it takes a card. Well we don't have to have a card and so I think it's probably some of the themes that will be more meaningful to us as oppose to anyone individual point that we've made on an expansion on this page, but Mike you've got other observations.

I mean I'd just echo what Rick said, it's that's actually one of our biggest financial strengths for people who are buying our stock. We don't have an enormous blocks you take out and then we're in really big trouble, which is lots of bricks and so we'll just continue to do that and the more of these fields. It's interesting when you sell one of these kind of not off the shelf products to somebody to bank. The other banks in the market have to be competitive so then they start to talking to you. So we'll continue with that into the future.

Sounds good. Thank you guys.

And operator, I think it's 9 'o clock or past 9 'o clock. So we better take one more question and then we'll call it quit for the day.

Yes, sir. Our final question will come from the line of Josh Elving of Lake Street Capital. Your line is now open.

I hate to go back to the DCC. Well I had one more question that hasn't been discussed and that is, historically you talked about having a couple of different revenue models for your ATMs throughout Europe and if we were to just fast forward a couple years and some kind of cap has gone through. What is your flexibility to redeploy some of those ATMs and how would you describe the market throughout Europe to do that or the other [indiscernible]?

I mean you might have heard in today's Q&A our presentation we talked about how we 200 and some ATMs that we took off the streets that were associated with YourCash. I mean basically we're putting on ATMs all the time and we miss a few. We pick really good site for the best site pickers in the world by far, but sometimes we miss. So actually redeployment of our assets is just part of what we do every day. It's business as usual.

You know I would then further add that, when you take a look at the deployment of ATMs in Europe and the further east you go, the number of ATMs per population or that's out there just drops consistently as far as you go east and then on the other side of that, what you see is that accounts being open. Bank accounts being open and cards being issued has a completely the reverse kind of turned where they're just continuing to go up and just like we saw in India, where the fear was that, as bank accounts opened people would stop doing ATM transactions. They would just do card transactions. In fact that's not the case. When people put their money in a bank account their habits drive them back to picking up cash and we've seen the emergence of that in India. So there is plenty of yet great opportunity to deploy ATMs in Europe, there's more and more accounts being open even in the farther east, you go into Europe and even more so as you go farther east into India, Asia Pacific etc. so I think that we have a very strong opportunity if we need to deploy these ATMs, there will be plenty of market to deploy there.

And we look at every ATM has its own little P&L. so ATM by ATM we make those decisions.

Okay, I guess helpful. Then I guess we saw some press recently and I know you talked a little bit about India and the ATM business. We saw some press recently that described a little bit of cash crunch recently in India kind of second cash crunch following the demonetization. With the bunch of ATMs being drained of cash, have you seen any impact on yours?

We saw a little cramp for about three or four days, nothing that would really affect us and everything was back on track.

Okay good and then I guess one last quick question in epay. You talked about the customer that you no longer have in the Middle East that the high volume, low margin cost do you have many similar customers like that?

No, that might have been the last one, but that's pretty close to the last one.

Okay and could you offer, any kind of color? I know you that the mix is shifted from top up to non-mobile products. Where is that mix lie today from either revenue or op income?

Well we do it by margin and is around 60.

Approaching two-thirds.

Yes, 65%. Yes is non-mobile in margin. So call it two-thirds, one-third.

Great. Thank you very much.

All right. Operator I think we can adjourn for the day. I want to thank everyone for taking the time to listen to it today on the phone. We'll be happy to talk to you later. All right. Thank you.

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