Greetings, and welcome to the Euronet Worldwide First Quarter 2022 Earnings Conference Call. It is now my pleasure to introduce your host, Mr. Scott Claassen, General Counsel for Euronet Worldwide. Thank you. Mr. Claassen, you may begin.

Thank you. Good morning, everyone, and welcome to Euronet's quarterly results conference call for the first 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 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 such update. In addition, the PowerPoint 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'll turn the call over to our CEO, Mike Brown. Mike?

Thank you, Scott, and thank you, everyone, for joining us today. I'll begin my comments on Slide #5. Finally, I am pleased to be here today to talk to you about our strong growth rates in what is typically our seasonally lightest quarter, Q1. The strength of our balance sheet continues to afford us the opportunity to make investments that will allow us to continue to grow the business. During the quarter, we were able to close the acquisition of Piraeus Bank's merchant acquiring business, we repurchased $70 million worth of shares, we added more than $100 million of cash to our ATMs to support increasing transaction trends that we are seeing and we made an investment in a company called Marker Trax, who previously announced will utilize our REN technology to further grow their business. All of these items are strategic decisions that position us to continue to deliver strong returns for our shareholders. Our EFT results continue to improve, driven largely by a strong recovery of travel stemming from reduced COVID restrictions across the globe. In fact, we saw a constant currency revenue in EFT to exceed the first quarter of 2019 revenue albeit from a different mix of transactions, with our most profitable transactions still lagging 2019 levels by about 30% as we move into the second quarter. Epay continued to see strong demand for digitally distributed products. The Money Transfer results were generally similar to the trends we saw in the fourth quarter, with double-digit growth in our direct-to-consumer digital transactions and our U.S. and Europe outbound transactions, partially offset by declines in Asia from the lingering effects of the COVID restrictions, together with continued declines in domestic transfers and investments in our network and our new product expansion. And while I'm extremely pleased with the…

Good morning, and I too welcome you for joining us today. I'll begin my comments with the balance sheet on Slide #15. As Mike mentioned, we are extremely pleased to deliver our third consecutive quarter of double-digit growth on consolidated revenue and adjusted EBITDA. The strength of our balance sheet allowed us to make investments during the first quarter that we expect will provide for continued value improvements for our shareholders in the coming years. As you can see on this slide, we ended the first quarter with $986 million in cash and approximately $1.8 billion in debt. The decrease in cash and the increase in debt is the result of the closing of the Piraeus Bank Merchant Acquiring business, the repurchase of approximately $70 million in our shares, cash used to fill the ATMs in anticipation of the travel season and an equity investment in Marker Trax. We generated approximately $20 million in free cash from operations, which partially offset the uses of cash. On Slide 16, you can see that for the first quarter, we produced revenue of $718 million, operating income of $36.7 million and adjusted EBITDA of $79.5 million. We delivered adjusted EPS of $0.69, a 200% increase from the $0.23 from the first quarter of 2021. Next slide, please. Here on Slide 17, we present our 3-year transaction trends by segment. EFT transactions grew 44% as a result of improving domestic and international cash withdrawals, together with a continued benefit from a significant increase in low-value point-of-sale transactions in Europe, and low value payment processing transactions in the Asia Pacific market. Epay transactions grew 30%, driven by continued strength in mobile top-up and digital media content distributed through digital channels. Money Transfer transactions had a net increase of 7%, including 10% growth in the U.S.…

Thanks, Rick. As I close, I'd just like to reiterate the confidence that I have in all areas of the business. We are seeing all the right travel -- all the right trends as travel returns, and we are positioning our EFT segment to capture those transactions. We closed Piraeus Bank merchants acquiring acquisition, which we expect will contribute nicely to our earnings growth in the coming years, epay continues to grow its digital branded payments content and expand its distribution channels. Our Money Transfer team continues to deliver double-digit transaction growth in the U.S. outbound, direct-to-consumer digital and our international outbound transactions, excluding Asia Pac. We are beginning to see migrant workers come back to Asia, and therefore, we would expect good growth momentum in that region in the quarters to follow. And our tech platforms continue to grow, with REN signing 3 more agreements, bringing the total revenue we expect to more than $90 million over the next 6 years, and Dandelion is focused on enhancing its features and building its pipeline. To sum it up, after 2 years of crushing travel restrictions due to COVID, I am finally in a good mood. With that, I will close my comments, and we'll be happy to take questions. Operator, will you please assist.

[Operator Instructions]. And our first question comes from Peter Heckmann of Davidson.

I have several, but I just wanted to start out -- you may not be able to comment in any real detail. But just curious how you're thinking about that expansion on the Walmart contract to include U.S. to Mexico transfers?

We're certainly happy about it. I mean, -- it's once -- I mean, we've been -- as you know, we kind of broke the mold by doing domestic transfers with Walmart almost a decade ago. And -- and this expansion to Mexico is just more transactions. So we're very happy about it.

Okay. That's fair. And then just in terms of the cost pressures and inflation, one of the bigger manufacturers that came out yesterday and talked about some of the impacts on their business. How are you thinking about cost pressures on your ATM hardware purchases as well as POS devices? And how does that play into some of your deployment plans?

Well, Pete, we've certainly given thought and consideration to it. But in the grand scheme of things, the CapEx in our business for -- whether it's ATMs or POS devices, is relatively small. And -- so we'll deal with the costs as they come up. I mean we are seeing other cost pressures across our business, whether they're from the labor front to the -- to cash delivery and maintenance and things like that. So -- and as we take a look at our business, I think it's fair to say we probably feel more bullish and optimistic about the tourism recovery now than we would have even at the end of the -- when we announced the fourth quarter results. But we've also now seen a couple of other things creep into the picture. As Mike said, we're seeing inflation hit us a bit more. We're seeing that some of that inflation is having a little bit of impact on some of our customer trends, not in a big way yet, but kind of maybe seeing some leading indicators, and as I mentioned, FX. But despite those, we continue to feel confident that we'll be at a similar 2019 earnings number. So clearly, some of those moving parts are coming into the picture, but we've seen some robust numbers on the travel side, which give us confidence to be able to manage within that for the P&L for this year, Pete.

Okay. That's fair. And then just on the seasonality on PDMA, on that $100 million of revenue, would it roughly mirror EFT or just a little bit more weighting to the fourth quarter for holiday seasonality?

No, it's going to be -- okay. So it's kind of a weird hybrid. It will -- let's not forget that these are lots of POS terminals all across Greece. So the bulk of their customers, you think, would be the locals, they're 10 million Greeks. But let's not forget, there's going to be 33 million visitors on a busy year to Greece. So you get a bit of that travel tick, and then obviously, like everybody else around Christmas time.

And our next question comes from Andrew Schmidt of Citi.

Mike and Rick, good to see the travel pick up here, long awaited. Nice to see [indiscernible] arrived. Question, it seems like you have a lot of momentum here, especially EFT going into the second quarter and the third quarter. And I appreciate that there's some headwinds that might be appearing. But just that -- just reiterating that $7 number or the similar earnings to 2019, is that, in your view, kind of a beatable threshold based on where you sit? Or -- or are there -- are these other offsets, perhaps a slower start to the year, inflation, things like that relatively meaningful for the full year? Just trying to get a picture if you could, sort of size any potential impacts, how you'd characterize that full year EPS picture, that would be great.

Yes, Andrew, what I would say is that we're obviously optimistic about the travel there, but it still is a bit of a wildcard. I would tell you that what I'm seeing, what I'm hearing, what's coming out every day in the press, I mean even some information early this morning, I read a headline where Google noted that one -- some of the most significant hits or searches were for travel-related things, I think more specifically, like islands and beaches and stuff like that. So it's -- we're seeing stuff come out daily that just continue to increase our optimism for a really good travel. So I think that it would appear now there's a greater likelihood that we'll have a better travel season this year than a, let's call it, a lesser one. I even read something, a headline coming out from the U.S. CDC, where essentially now they've said, well, they've downgraded the virus to no longer being considered a pandemic in the United States. So it would appear as if there's less of a likelihood that a concerning variant would pop up now. So I think right now, it looks like all the momentum is moving in our direction. And if I were to guess, and I think that's what you're asking me to do here, is to guess is what's the likelihood of being better than the $7, I think it's a reasonably decent likelihood. But again, it's a wildcard on just how robust the travel will be.

And if there will be any of these kind of supply chain issues or labor shortages at airports or whatever that will kind of muck it up a little bit. But I think everything is pointing the same direction, the airlines haven't made money in a long time. They're all trying to staff up, and there aren't going to be any deals going to Europe this summer. Nothing is going to be on sale because demand is high.

Yes. But it's also encouraging, too, when you take a look -- I mean, on the plus side for us, when we look at the FX, the drifting down of the euro, well the euro is now at about [indiscernible] or something like that. It's nearly equal to the dollar, right? So it's a good value for a U.S. person to go to Europe right now. So I think that given the fact that they've not been able to travel, that the euro is weaker against the dollar, we'll buy them a lot more over there. So those are, let's say, at least some positive factors as well.

Super helpful context, I appreciate that. And then just 2 questions just to wrap up. I guess within -- has your outlook changed from that, sort of, 70% high-value transaction recovery? And then separately, just to wrap up my questions, just curious where you're seeing the most demand from the REN side of things? 2 separate components there.

Okay. So with respect to the 70% we mentioned in the first quarter that we're down about 30% on non-EU transactions. So that seems consistent. That could get better as the season continues. I think the Americans are -- and, which are the second biggest group of non-EU people that would come to Europe. I think they're getting confident so that number could improve. We'll just have to wait and see. With respect to REN, okay, so this is really interesting, our very first, you might call it, epicenter of lots of deals originated in the Asia Pac area. And primarily, that's because the banks over there feel extremely threatened by all these mobile wallets. And you can read about everybody from Alipay to Paytm, the X and Y and Z in India and all across Southeast Asia. These wallets are kind of scaring the bogies out of banks. Banks are going to have to be more responsive, less conservative, better technology, et cetera, and REN is the perfect tech stack for that. We are not built for ISO 85, 83 transactions like everybody else in the world, like all these other back offices, which was a standard of delivered 40 years ago. We're built for ISO 20022, all these extra features and functionalities like we just mentioned with EastWest Bank in the Philippines. So that's where it started. But now we're starting to get deals in South America as well. In Africa, we've got deals cooking. So I think just between us, guys, I bet you the U.S. will be one of the later areas to do this because the banks over here are kind of fat, done and happy right now. So they don't feel the impetus for change and for upgrading their technology.

Moreover, the Central Bank system hasn't moved as quickly either.

I mean, if you look at all across the world, everybody's put in RTP system. And the Fed now is slow and delayed and won't allow international remittances or anything. Transfer is going into that for many more years. So the U.S. will be slow, but the rest of the world is a lot of the world.

And our next question comes from Vasu Govil of KBW.

Some really good trends in the numbers here, so that's good to see. I guess my first question, I know you guys referenced sort of some impacts on the business from inflation. Maybe you could help put a finer point there. on sort of what -- how you're seeing those impacts go through the business? For instance, is rising fuel price and impact to sort of servicing your ATM business? And then also interest rates, how does that sort of impact the interest expense for cash usage in the ATM business?

Yes. Well, I think in both of those, we're seeing some numbers go up here. If I'm going to take a look at what we've seen, let's call it, kind of a macro relative way, we've seen kind of in the ballpark of $5 million to $8 million potential impact on the cost of our cash going into the ATM. And we've seen probably that much or more in labor costs, in different precincts around the business. So without going through every line item and as I said earlier, we're fortunate to see some robustness come through in the travel that gives us the ability to cover that. But that kind of gives you an idea of some of the increased costs that we've baked into the expectations for the year.

That's super helpful. And then I just had a higher-level question on Dandelion, which Mike, you talked about. And you just touched a little bit on sort of the selling efforts there. But maybe you could elaborate on that a little bit more, where are you seeing appetite coming from in the market? Is it mostly banks? Is it fintechs? And when could we start to see some contribution from that initiative? And then I guess the other side of it, is there a lot of upfront investment required as you bring clients onto that platform?

I'll answer the second question first. There is some investment. Certainly, we're hiring enough people to deal with the opportunities that we have there, more in the sales and implementation areas. But this isn't going to change our numbers marketedly. You said who is the most interested? Well, fintechs are kind of like -- kind of fall off the boat obvious, because they want to give their customers as much utility as they can with their apps. And so -- and nobody's got what we have with respect to digital distribution of funds. I mean that's one thing we need to point out. There is no company on the planet that has access to the 4 billion freakin' bank accounts or wallet accounts. And so that just gives us utility that nobody else has. Plus, of course, our roughly 500,000 cash locations, et cetera, et cetera. So that makes fintechs like us. Banks though, are starting to be the real serious interest players now. Where fintechs is an easy one, but banks, what they now have is they really only have Swift as their methodology for payment. Those payments, those -- that's just a messaging system. There's no compliance, there's no settlement. There's nothing with those guys. You never know when -- when that payment will find its way to the destination. You have no way to track it along the way. So having a data line system is something that banks can then give to their customers to make them more competitive.

And I think the other thing that we are seeing out there is that the banks will become more and more interested in this type of product because they're competing with the fintechs. The fintechs are coming in. They're agile. They've been our first customers in because they can quickly snap it in. They don't have to deal with old legacy technology. They're also probably a smaller, more nimble group. And they're putting these kinds of features in the hands of customers. And when those customers see that they can make real-time payments, and they can see on their phone that their payment was just completed. And I mean those kinds of things, the consumers will consistently gravitate to quicker and simpler and better value. And I think that as we see more and more fintechs deliver these very highly appreciated products to customers, the banks are playing catch up. And they will need products like this to be really competitive with the fintech. So we're encouraged by what we see out there on both the fintech front and the traditional banking institutions.

That's super helpful. And then just one final modeling question from me. I guess what level of FX headwind are you now baking into that $7 EPS expectation for the year?

We -- in our numbers today include what I'll call is, is generally the rate that we see now like -- I'd say mathematically, it probably was like the last 3 -- or over the last week or so. But it's a more current rate that we have in there. We take the current view of the rates, and then we assume that, that view is going to hold through the rest of the year. We don't try to outguess it. So it's basically current rate structures going forward.

Operator, I think we've got time for another question or so.

Our next question comes from Darrin Peller of Wolfe Research.

Darrin, are you with us? [Technical Difficulty]

That, from your perspective, are still underwater relative to what they should be, if we didn't have a pandemic. I know that there's been outperformance in Money Transfer.

Darrin, would you mind repeating that from the beginning? You cut out the first half of the.

Okay. I was just trying to figure out, if you could just summarize the components of the business you think are still reeling underwater and by the magnitude from an EPS standpoint relative to what they should be, if we didn't have a pandemic. In other words, versus '19, but more importantly, even if we didn't have -- it would have grown for '19. So cross-border.

No, I think that's a really good point. I mean you've got to remember that if we could hit our number that we hope for this year, which is 2019's number, that will be with a change in both epay and Money Transfer, adding they're probably going to be coming in $100 million in EBITDA more than they did in '19 this year. So that's my kind of ace up my sleeve for next year. As we get full travel in 2023, you would think that we could bring in a big chunk of additional EFT revenue next year just to get to where we were for travel in '19. So that's what's kind of exciting as I've got business as usual growth in all the segments. I'm adding more ATMs, I'm going into more countries, et cetera. But when travel comes back all the way, next year, I've got a big bump there, too. So this is kind of a 1, 2 punch for the next 2 years.

Right. And then above and beyond that, specifically travel, which sounds like it could be an incremental couple of bucks of EPS when it's full force. I think there's other aspects, right? I mean you talked about the migrant workers moving now into market. So again, if we added it all up, I'm just curious what your thoughts are on where we should be if the pandemic never occurred in terms of EPS.

Yes. Now we'll get into some real fine math here, Darrin. So let me -- I was going to say, let's pull up to at least the scud missile kind of range here. The -- Mike said that we benefited from our other 2 businesses growing nicely over this pandemic period. And he mentioned there that they'll contribute in the order of magnitude, $100 million. Depending on how you model the splits between your -- the segments, what most of you will find is that you would see that there's probably somewhere in the magnitude of $75 million to $100 million in EBITDA difference on the EFT side of the business, okay? So again, real macro level. So if I just use the low end of that number, and I think you threw out -- you said, could you add another $1 or $2 to your earnings per share, I think the short answer to that is yes. But just some real macro math, if I use the low end of that $75 million, and I take it times about a 25% tax rate for, again, macro math purposes -- so take that times 0.75 is $56 million, and we've got about 52 million shares. So that would map out to being a little bit better than a dollar. Now again, we're working with some real macro kind of math here. So I think it clearly would support your thesis of maybe another dollar. Getting up to the $2 kind of range, I think, would be more dependent upon how well our additional owned ATMs would perform. Since 2019, our ATM count has remained relatively the same, except we've changed out the mix a bit. We've added more of our own ATMs to replace outsourced ATMs that went out of the picture. And many of those outsourced were low-value ATMs. Now to the extent that those ATMs perform better than or at least equal to what we had seen previously, that -- and that was about a 15% shift, well, the -- and our EBITDA of -- and I should really use of op income, Darrin, instead of EBITDA, because that is where we have some dock, we had about $300 million of op income out of the EFT segment in 2019. So if I take that $300 million times 0.15, $45 million times 0.75 would be $33 million divided by 52 would be $0.65 a share. Now again, I'm working with some real big numbers here, so don't etch any of this in stone. But I think just kind of mentally thinking through it would kind of support a thesis that you said, if we get back to our full travel recovery numbers, we see the benefit of these additional ATM mix change outs we had, we could add another $1 or maybe nearly $2 to our EPS number. So I think that macro math would kind of support your speculation.

One quick -- Rick, just 1 quick follow-up for you rates. Interest rates and what that could mean for the business as they increase, when you think about the cash and the float you have in the business?

Yes. We're anticipating that there's going to be another several million dollars in the interest category here. I would say kind of in the $8 million to $10 million kind of range based upon what we've seen in the rates and what we anticipate what the rate structures could bump up to. But that's kind of what we've got baked in our anticipation.

All right. I think, operator, we're after the top of the hour. So with that, I'd like to thank everybody for joining today, and I look forward to talking to you after hopefully a really good Q2. Thank you very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.