Greetings and welcome to the Euronet Worldwide Fourth Quarter and Full-Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce your host, Mr. Scott Clausen, General Counsel for Euronet Worldwide. Thank you, Mr. Clausen, you may begin.

Thank you. Good morning, everyone, and welcome to Euronet's fourth quarter and full-year 2022 earnings conference call. 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 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 these anticipated in the forward-looking statements as a result of a number of factors that are listed on the second slide of our presentation. Except as may be required by law, Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any update. In addition, the 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 CFO, Rick Weller. Rick?

Thank you, Scott, and good morning, and welcome to everyone joining us today. I will begin my comments on Slide 5. For the fourth quarter, we delivered revenue of $865 million, operating income of $79 million, adjusted EBITDA of $127 million, and adjusted EPS of $1.39. These results produced strong double-digit constant currency growth rate, driven by strong growth from all 3 segments. With particular reflection on the continued improved domestic and international cash withdrawal transactions in the EFT segment, where the improved demand for travel continues following the lifting of COVID restrictions across the globe. Next slide, please. Slide 6. presents a summary of our year-end balance sheet, compared to the prior quarter-end. As you can see, we ended the year with $1.1 billion in unrestricted cash and $1.6 billion in debt. This increase is largely from cash generated from operations, partially offset by working capital changes. The decrease in debt was largely from the reduction in ATM cash, which was returned from the ATMs following the peak travel season. Next slide, please. Now, I'm on Slide 7. Here, we present our results on an as-reported basis for the fourth quarter. Similar to the last several quarters, many of the currencies in our most significant markets declined in the 10% to 20% range versus the U.S. dollar, compared to the prior year. I will note that towards the end of the fourth quarter, we began to see currency strengthen against the U.S. dollar, which has continued into the first quarter. The improving FX rates in the fourth quarter provided a benefit versus our guidance, which was largely offset by some higher-than-expected operating taxes. Again, that's operating taxes, which goes up in the operating expenses, not in the income tax expenses. To normalize the impact of these currency fluctuations, we…

Thank you, Rick, and thank you, everybody, for joining us today. I'll begin my comments on Slide 15. Well, I guess, as I look back, all I can say is, what a year. We delivered very strong consolidated constant currency double-digit growth rates in the midst of ongoing economic and global uncertainties. We have continued to prove that our business is resilient, and as Rick mentioned during the pandemic, we were not afraid to invest in places we believe that would continue our long-term growth trajectory. In EFT, our most profitable transactions continue to improve. In epay, there continues to be a growing demand for mobile and branded digital payment content and consumers and businesses still need to send money across borders. The fourth quarter unfolded largely in-line with what we expected when we spoke in October. Despite not seeing a full travel recovery, we are encouraged by the continued signs set, at least as it relates to travel, the end of the pandemic seems to be upon us in the U.S., and travel conditions are improving the father East to go. The Euro Control outlook remains consistent, the passenger traffic in 2023 is expected to reach 92% or 93% of 2019 levels. While we'd like to see this data at least in-line with that 100% of 2019, this would still be roughly a 25% improvement from 2022. We are also seeing positive signs from travel booking sites, which indicates a very strong demand for travel this coming summer and year, due to the backlog of people wanting to take trips that were canceled during the pandemic, or delayed due to the capacity restraints, which really vexed us and global travel last year. On their recent earnings call, the Delta Airlines CEO was bullish on the travel industry recovery and…

[Operator Instructions] Our first question comes from the line of Rayna Kumar from UBS.

Good morning Mike and Rick. Thanks for taking my questions. It's good to see that you're reiterating your mid-to-upper teens EPS growth guide for 2023. I just want to make sure that's off of the new 6.51 EPS base for 2022. And Also, if you can walk us through your expectations by segment for the year and for 1Q, that would be really helpful?

Well, we – first of all, yes, it's off the full number for last year. So, when we say, kind of mid-teens, so we're thinking in that, kind of range of maybe 2014, 2015, 2016, maybe for a little bit like 17%, kind of growth rate over last year's total number yet. And then with respect to each of the segments, we don't really break it down by segment, but as I've mentioned and Rick did in our comments, we're pretty excited about all three segments. Of course, the one segment that's going to have the easiest growth you might say, will be the EFT segment because we do believe that we're going to get a lot more travelers to our ATMs this coming summer.

And Rayna, what I would add and consistent with what Mike said, we typically don't give all that, kind of level detail in each of the segments. But I know in the past, we have talked at different times about what we, kind of expect in longer-term growth rates for our segments. And what we've consistently said and we continue to believe is that our epay business will have a revenue growth trajectory that would be in the upper single digits and the low – or the lower double digits on revenue, that operating income would be more on the lower double-digit side. In our money transfer business, we believe that we move – our revenue will be in the, kind of lower double-digit range, but a little bit more aggressive than what we might be on the epay side. So, that would be, kind of – it's possible that we could be into the low teens on that side of the revenue piece, but – so kind of think of that as a 12 or a 13 kind of a number. And we would then expect to see that our operating margins grew a little faster than that. And then on the EFT segment. As you can appreciate with the return of travel as we see the number Mike said earlier, if we just, kind of take the euro control number that, that would be nearly a 25, kind of percent number. What we saw as we, kind of finished up the year and what we're expecting is that the EFT would see a travel recovery, kind of in about the, kind of 70-ish kind of percent range that the end of the year we would end up a little stronger than that as that recovery continued, and that's exactly what we did see. So, if you kind of think of that as being, kind of in a ballpark of 75, kind of percent. If you then again, use the [92, 93] [ph], as Mike says, well, that's merely a 25%. I think it mathematically calculates out to about 22% or 23%, but that's the way I think you probably ought to directionally think about the revenue growth out of the EFT segment. And then obviously, that's going to contribute well stronger expansion on the operating income side. So that's, I think, very, very consistent with what we've talked about in the past. As Mike said, we continue to see very strong momentum going in the pipelines of our Ren product, our Dandelion products. We couldn't feel better than to be able to announce an absolute marquee name like HSBC, recognizing the value of our product. And I think as we continue to build that business, we'll see those pipelines grow, but that kind of gives you some perspective of, again, confirmation of what we expect the continued growth rates to be in our business.

And I would like to also caution to, let's not forget, first quarter for the last 10 years has been our seasonally weakest quarter versus it's, kind of a perfect storm of all three segments tend to be weaker in the first quarter. So, just kind of bear that in mind. And also, when we talk about other things, we're excited about, our acquiring business that we purchased from Piraeus Bank did quite well last year. So, we're excited about that one going forward.

Okay. That's a really helpful detail. Just on the point on travel, what are you seeing in terms of increased capacity at Heathrow Airport versus your expectations?

Okay. So, we don't know exactly what it's going to do. All we know is that the travel caps were removed during the Christmas rush. Now, I would tell you also, let's not forget the Christmas rush isn't nearly the summer rush. So, we're cautiously optimistic that they're getting their act together there. So, we'll have to see what happens, but they know. I think everybody recognizes what a mess up it was last year, and so, they're going to do their best to get it fixed.

And I think that's even reflected. You may have read some news about them having a change in their leadership there. So, they really want their travel industry to work well. And as Mike said, we didn't see any real hiccups going through the fourth quarter, albeit it's obviously much lighter than the third quarter, but those are favorable signs as we look towards next year.

Got it. And…

Operator, we’ll move to the next caller. I’m sorry, Rayna, I got to get everybody else a shot.

Thank you. One moment for our next question. Our next question comes from the line of Andrew Schmidt from Citi.

Hi Mike, hi Rick. Good morning. Thanks for taking my question. To dig in on the – just the reiterated mid-to-upper teens EPS outlook, just, kind of a little bit of a technical question. Are you flowing through the benefit of the FX rates, the favorability there? And then if you are, just wondering if there's offsets that [indiscernible] it seems like if you flow those through, you should be – could be a little bit higher or at the very minimum at the upper end of that range? Any thoughts there would be helpful. Thanks.

Yes, we did – essentially, we've assumed that the IFRS rates are the same as what they are today and that they'll remain unchanged for the rest of the year. And it just, kind of depends on exactly where you want to pinpoint your math on that. As Mike said, if you were more towards the upper teens, it would be a little bit stronger, but yes, it has been appropriately reflected in that number.

We've also – a little bit to the offset of that is we're planning on a couple more Fed rate increases and more rate increases in Europe as well.

Got it. Okay. That makes a lot of sense. I appreciate that. And then just quickly on money transfer. If you just elaborate just a little bit on what you're seeing, it doesn't seem like, Rick, based on your commentary, that the growth rate has materially altered. So, are you seeing something different as we, kind of enter 2023 and maybe the fourth quarter was a little bit of a point-in-time? Or are you seeing kind of these inflation – this inflation kind of impact persist with the remittance customers? Any color there in terms of what you're seeing in money transfer would be helpful. Thanks.

Well, we have essentially incorporated and we did this going back when we first started seeing what we thought were some inflationary impacts about impact on our growth rate because of inflation. So, we'll see how that kind of holds out. But if you take a look at just kind of the fundamental strength that we're seeing across the U.S. outbound, Europe, Middle East. It came back a little bit stronger. Again, we're seeing some of the impacts of COVID starting to lift more consistently around the world, our digital product has continued to improve. We don't expect that we'll see a gusher of additional revenue from Dandelion this year. We're continuing to build and grow that pipeline. It will be much more contributing next year. But I think all that just continues to build our confidence that we're going to be, kind of, like I say, in that kind of [12 to 13] [ph] kind of rate. As Mike said, we would expect to see that first quarter is a little bit slower as it always has been. First quarter is the lightest quarter of all three segments. And – but we expect to see that momentum develop a little bit later as we go or more of that momentum. But – so I don't think that our view or our thinking on money transfer has really changed any. I think that we've appropriately considered some impact of inflation, but we continue to see very good successes on customer addition, on network addition, as we go around the world.

Got it. Thank you very much guys. Appreciate the commentary.

Thank you. One moment for our next question. Our next question comes from the line of Darrin Peller from Wolfe Research.

Hey guys. Thanks for taking my question. Look, it's obviously good to see the progress on EFT. I guess, Mike, when we think about the business in EFT and what the behaviors that we're seeing are today, would you expect that if we got back to that 92%, 93% of 2019 levels by the end of 2023, that your profitability levels of EFT should be the same or more than they were assuming it was 92% in 2019? In other words, like-for-like, has anything changed to push that profitability up in that segment beyond just what travel activity is? I imagine that [indiscernible] in some factors, but yes, Mike, I just want – then if you get to add on to that, the comments you made over rate potential and pricing potential. It was good to hear. I'm curious if you can give us a little bit more specifics on that?

So, I think the reality is if we only get 92% or 93% of the tourists that we did in 2019, we're not going to arrive at 2019's total revenue. However, we do have some opportunities and a lot of it comes down to mix. So, as we spin up some of these new markets in North Africa, in Asia, as we do things our experience is that those ATMs are quite a bit more profitable on a per unit basis than our European ones, even though our European ones are quite good. So, if we can get a little bit of a travel recovery in Asia, that would be great. If we're able – we have some supply chain issues of getting ATMs to expand into North Africa. As that abates, that will help us quite a bit as well. And let's not forget, every one – we were planning on a lot of ATM rollout last year in and around the countries of Central and Eastern Europe, all the ones that now surround Ukraine, in fact, we are planning on almost 500 growth in Ukraine last year. And then, of course, the war happened. Those markets are all cross currency markets. They all have their own [indiscernible] currencies. They're great contributors. And so, that's kind of – we obviously are going to do as much expansion there because last year, they only recovered in the [Technical Difficulty] 50% to 55%, where the rest of the market in general was in that [70%]. So, I think it's – we've got some opportunities. We'll have to see what happens, but I think if we get to 92%, we'll be pretty darn happy, and it also gives us a little bit of gas in the tank for the next year to growth.

That does make sense. When we think about China reopening, can you just maybe remind us, in your view, what kind of contribution China – base travelers did to your business back before the pandemic whether it's in any of the regions, frankly, I'm just curious if you have any insight on that?

The biggest reason place where we have Chinese tourists would be in Asian markets like the Philippines, Malaysia, that opened up [Technical Difficulty] has that ticked up would be fairly good. They were 5% for European travel [Technical Difficulty] will be helpful as well. But a number of these countries are also putting limitations on Chinese Tourism [puts a] [ph] little bit more friction in there, you know requiring COVID test before they come, et cetera.

The other thing that's important to remember about the China travelers is generally speaking, the China UnionPay card does not allow for DCC. Now, in markets where we have a surcharge opportunity and benefit there, but if China has not been that big of a contributor because we don't get the spread on the DCC. We are working on opportunities to potentially enter into agreements with them to enable that, but as of now, it's not there. So, clearly, China travel would give us some benefit, but we've never had a lot of benefit in our P&L from Chinese [Travelers] [ph].

Understood. Thanks Rick.

Thank you. One moment for our next question. Our next question comes from the line of Cris Kennedy from William Blair.

Good morning. Thanks for taking the question. Can you talk about, kind of the timing of Ren revenue hitting your income statement and how that's tracking relative to your initial expectations?

It's tracking pretty much right on what I said in prior quarters. So, in the very first year that we were really selling Ren, which was two years ago, we did about 8 million in revenue at about, call it, an 80% margin. Last year, we did almost twice that. This year, we're looking at 25 million to 30 million, if we can get everything installed. So, it's kind of doubling up every year. So, we're really excited about Ren and it's only growing. And I understand, when we talk about 140 million, kind of in the pipeline, these are contracted minimum revenues in the contracts that we're installing. So, that's what's exciting about it. That doesn't include anything we're going to – that we would sign this year. So, and our experience has been, once we put somebody on our platform, the transactions in almost every case exceeded their expectations. I think darn near every case as the transaction – their transaction-based licenses. So, and as the transactions exceed the expectations of the people we contract with, we end up making a little bit more. So, there's a lot of optimism around Ren right now.

Great to hear. Thanks for taking the question.

Thank you. One moment for our next question. Our next question comes from the line of Pete Heckmann from D.A. Davidson.

Hey good morning. Most of my questions have been answer. I just wanted to follow up though on the digital money transfer. Can you talk about how that's been growing at a very nice clip for several years here? Can you talk about how that has changed the mix of money transfer and what the implications are for both revenue growth and margins if we continue to see the digital growing at 3x, 4x the rest of the [business] [ph]?

Well, obviously, it's good. It changes the mix. So, if we're growing, kind of low teens in net, but that's growing 39% or whatever. It is changing the mix over time. It continues to gain more and more momentum. We open up in more and more countries. I mean, we have a real focus on digital, and it's profitable for us. I'd like to also throw that out there because about 90% of everybody doing digital money transfers are losing money on them. And – but because we can leverage the rest of our bricks-and-mortar business, it is nicely profitable for us. So, I think the mix will continue to change as we go forward. And it will be just more and more on the digital side.

All right. And then in terms of just the Dandelion, I think you had said that you expect that to get some more momentum for 2024, and...

Probably not of revenues this year because now these deals are, you know you hook up a bank and then they start sending, then they have the – our distribution channels now available to their customers, which they didn't – heretofore did not have. And so they then begin marketing to their customers, their customers use it, it gets its own momentum once you've signed up a bank and have it working. So, it's one of those things growing, growing, kind of over time. So, we wouldn't expect much additional Dandelion revenues this year, unless we maybe nail another like Fintech, like we have with Zoom or Remitly because that's a pretty fast ramp up of these banks, which are really where the big money is. They're going to take a little bit longer because they're used to only offering Swift. They didn't offer all the cash payouts, the wallet payout, and also the RTP payouts that we offer with Dandelion. So, but it's really interesting talking to these banks. They are absolutely starting to clue into this value proposition because they want to create a better product for their customers and be competitive.

Alright. Thanks Mike. I appreciate it.

Thank you. One moment for our next question. Our next question comes from the line of Mike Grondahl from Northland Capital Markets.

Hey guys, thanks. Can you guys roughly size up Croatia and that hit going to the euro? And then you did mention some offsets to that were rate related. Could you kind of describe what those rate-related offsets are or what that means?

Well, you go ahead.

Well, yes, Mike, we've not disclosed exactly what our impact is. We'd rather not do that for competitive reasons out there, but the offsets are really in, kind of a couple of categories, some opportunities where interchange rate will improve and some places where we'll be able to add some surcharge or access fees. So – and then as Mike mentioned, we've been proactive on pairing back ATMs that we believe would not be profitable when we don't have DCC. So, it's largely the opportunities that we have to pick up some of this interchange and surcharge and then supplemented by some cost management to largely [Technical Difficulty].

Got it. And then just real quick. Any data points you can throw out there that makes you feel confident or decent about the 92% to 93% travel recovery?

Well, I guess what I'd say is, really kind of two things. One, we have consistently seen, as Mike said in his comments, that our transactions have paralleled the Eurocontrol data. And it's just intuitive, I think, Mike. If people are on the plane, they get off the plane, they start walking down the street, they need cash, they stop by the ATM. So, it just seems so intuitive that there should be direct correlation, and that's what we've consistently seen. So, again, looking to what the outlook of Eurocontrol is, and how they've looked at it, we feel pretty confident with that. The second thing is, as I mentioned, as we kind of closed out the year, we saw that we're, kind of in that 75-ish, kind of percent range there. Some countries, a little better, some a little less, but overall about there. So, again, we've consistently seen this move up. We've seen consistent correlation with Eurocontrol. Mike said in their delta. Again, somebody that's in the business of taking people to Europe. They're feeling pretty bullish about their expectations for this year. So, those are all things that basically point us toward a continuing improvement, and nothing at this point tells us that it looks like the 92%, 93% numbers in jeopardy. So, that's where we continue to see and the optimism that we draw from.

And also, let's not forget, it is [Technical Difficulty] issue. So, our favorite group of travelers, our largest single group are people from Britain because they all have an island currency of [where they land] [ph] of our other territories. And – but even though we averaged about 75% last year, we did the full analysis on flights coming out of Heathrow as an example. And they really – there's really only 62% of 19 travelers last year that came out of Heathrow. So, just by fixing Heathrow, will be good because it's not just the number of travelers, but where they come from. So, that's one of the little, you might say, gives us a little bit of, umph, as we go into next year.

Okay. Hey, thank you guys.

Operator, I think that has to be the last call. We're at the top of the hour. So, I'd like to thank everybody for listening in and happy to talk to you in about 90 days.

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