Euronet Worldwide Inc (EEFT) 2020 Q3 法說會逐字稿

Greetings, and welcome to the Euronet Worldwide Third Quarter 2020 Earnings Conference Call. (Operator Instructions)

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, and welcome, everyone, to Euronet's quarterly results conference call. We'll present our results for the third quarter 2020 on this call. We have Mike Brown, our Chairman and CEO; Rick Weller, our CFO; and Kevin Caponecchi, the 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 make today. Statements made on this call that concern Euronet's or its management's intentions, expectations or predictions of future performance are forward-looking statements. Euronet's actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors that are listed on the first page of our presentation. Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide such update under any circumstances. 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 good morning, and thank you all for joining us today. I'm excited to be able to tell you that we considerably exceeded the earnings expectations that we had set in July as a result of double-digit year-over-year growth in our epay and Money Transfer Segments, together with better-than-expected ATM transactions as we benefited from a much quicker return to travel than we initially anticipated.

As you will see, as we go through the quarterly highlights, these results are a testament to our diverse product and geographic revenue mix, our flexible and scalable technology, our strong balance sheet and our dedicated and talented employee base, who are working harder than ever to drive this business forward. There is no better example of this in our announcement yesterday that Ria is now Kroger's second money transfer provider.

In EFT, we benefited from stronger-than-expected resiliency in ATM cash withdrawals as we saw local and international governments ease their movement restrictions and countries open their borders to some international arrivals.

In epay, we continue to see strong sales of prepaid self-use content in both the physical, retail and digital channels as well as mobile increases in digital channels in certain markets. In fact, our digital channel transactions grew at triple-digit rates on a year-over-year basis.

Finally, in money transfer, we continued to deliver strong growth rates as a result of very strong 22% growth in U.S. international outbound remittances as well as 26% increase in international cross-border remittances, partially offset by declines in the U.S. domestic business and in Malaysia. Digital transactions initiated through our website or our mobile app also continued to accelerate, delivering an exceptional 126% year-over-year growth in the third quarter.

I am extremely proud of the strong double-digit earnings growth in 2 of our segments and the flexibility of our EFT team to enable ATMs on short notice to take advantage of the changing travel trends, which resulted in significantly better results than we expected, all of which was made possible by our strong balance sheet.

Now let's move on to Slide #6, and I'll give you some additional details on how we achieved this remarkable performance in the quarter. Slide 6. So we've got 4 graphs here for us to look through. Because over half of Euronet's 2019 profits came from our EFT division, and a little over half of those profits came from travelers, we get questions about the recovery of this segment. Here on this slide, we want to give you a perspective of how responsive our ATM transactions are to the lifting of restrictions by focusing on what we have seen on our own branded ATM networks across Europe. To that end, the 3 most relevant questions are: number one, after COVID-19, will people return to using cash in their daily life, both while traveling and when at home? Number two, how fast do you think EFT will return to transaction and cash levels we saw in 2019? And finally, number three, are there any lessons that we can learn from 2020 that can be extrapolated to 2021 and beyond?

So first, I will try to answer the question on domestic transactions. Certainly, in March through May, we saw virtually every country in Europe establish very tight domestic lockdowns. Bars, restaurants, businesses and offices were closed and even leaving one's home or apartment could be met with police question. As you can see, in the first graph, graph number one, even without a cure for COVID-19, we saw domestic transactions come back very quickly once the shelter in place restrictions were lifted. This did vary by country, ranging from 85% to 95% of last year's transactions.

This is a substantial recovery, considering that virtually every country still has some COVID restrictions in place, including limited restaurant seating, reduced bar hours, mandated work from home orders and no long-term cure or vaccine. I would also like to point out that for one country, which we did not include in the graph statistics, we saw incredible growth in domestic transactions, where we had a 43% growth over the prior year because the banks closed their branches or didn't load their ATMs. So while we don't expect all bank branches to close or all bank ATMs to be left idle without cash, we continue to see opportunity to meet the cash needs of customers.

To answer the rest of the questions, let me remind you of the timetable associated with various cross-border changes. Through April, May and even into June, virtually all European countries had closed their borders to all other countries around the world. Surprisingly, on June 15, the EU agreed on opening their borders to one another beginning July 1. These borders were to remain closed to all non-EU travelers and are still closed. Euronet gets about 1/4 of its European traveler transactions from folks visiting from outside the EU. So even in the best of situations, we did not expect to achieve in this third quarter even roughly 3/4 of 2019's volume. Accordingly, that part of our transactions will be dependent upon borders being fully opened.

What we found was that with such short notice periods, vacationers were more apt to travel by car to their holiday destination. And as you can see in the graph number two, beginning on July 1, there was a steady increase in transactions through August, resulting in about 50% of 2019's transactions. As September came upon Europe, more COVID-related restrictions were added and that number fell to about 30% of 2019 levels. Being that 3 quarters of all 2019 Euronet-owned ATM European transactions were from card holders within 3 quarters or -- within Europe, this shows amazing resilience.

Here in graph #3, we see countries in which air travel brings in most of the tourists. Bear in mind that flying requires advanced reservations, more preparation and travel surety as well. Accordingly, we were pleasantly surprised to see these levels reach about 20% of 2019 volumes.

Finally, in graph #4, you can see the international transactions indexed with European international flights. On a real-time basis, you can see that our international transactions outpaced, but roughly correlate to flight information. This serves as another data point to demonstrate the desire travelers have to withdraw cash and use cash when they travel abroad.

So what is our conclusion? Unfortunately, I can tell you that none of us know exactly what 2021 will bring. But what is empirically clear is that people in large numbers are ready to go on holiday, even right now, if the government only would lift their travel restrictions and open their borders, both for European and for foreign passports. It is also a message to governments on how much thoughtful planning is essential to ensure a full recovery. The economic disadvantage to Europe is huge. So we are cautiously optimistic that in 2021, it could be a good year for EFT, assuming governments ease this past summer as a guide to opening their borders for those who are anxious to go on holidays.

Now let's go on to Slide #7, and we'll discuss some of the recent EFT highlights. Okay, Slide #7. Just this week, we launched a new IAD network in Egypt, the fourth country outside of Europe where we have deployed Euronet-branded ATMs. Prior to COVID, when asked that we were able to continue to deploy 4,000-plus ATMs a year, I always answered yes with the belief that the opportunity outside of Europe is just as big or bigger than the opportunities in Europe. We maintain this belief and have not stopped pushing forward to be ready for the post-COVID world with new ATMs in new markets.

In Europe, we launched a new initiative that we are calling ATM For The Community, which aligns with our mission to bring payment convenience to everyone. Despite the reports that cash is becoming extinct, it is estimated that cash still accounts for 60% of the transactions used across Europe. With this initiative, we are working with leaders and communities across several countries, primarily in more rural areas to ensure that their citizens have convenient secure access to cash as these communities have been impacted the most by European's continuing trend of bank branch and ATM closures.

We also launched the managed services agreement with IDFC First Bank, a leading private sector bank in India, and we used our technology to launch digital banking services for ING Bank in the Philippines. In Spain, we signed an ATM network participation agreement with Cajamar Bank, whereby Cajamar Bank customers can now use Euronet-branded ATMs under similar terms as their own bank's ATM. These agreements reflect the value of our ubiquitous ATM network, which allows customers to access their money wherever they are. This is also a strategic advantage for Euronet as we are the only player in the market with ATMs across all of Europe. We also launched acceptance of postcards on our Euronet-branded ATM networks in Denmark, Sweden, Switzerland, Romania and the U.K., and we launched ATM POS and card management outsourcing for ABI Bank in Albania.

Finally, we ended the quarter with 43,956 active ATMs. This sequential increase includes a reactivation of 3,800 ATMs that were closed at the end of June to capture the increase in ATM transactions as movement restrictions were lifted and 444 new ATM deployments were across the business. These were offset by the removal of about 1,300 outsourcing ATMs and 563 low-margin ATMs, which were removed due to the acquisitions by larger banks and the desire to in-source ATM operations. It's important to note that this in-sourcing is due to M&A activity and doesn't diminish the outsourcing pipeline we continue to see within the segment. We also expect a decrease of another 2,000 very low-margin Indian ATMs in the fourth quarter, the income of which to us is marginal.

In summary, there is no doubt that COVID has had a profound impact on our EFT segment results, but the resiliency of our ATM transactions as restrictions were lifted together with our ability to continue to launch new markets, diversify our product portfolio and sign new agreements underscore the health of our core EFT business, and that the post-COVID growth prospects for this segment remain intact.

Now we'll move on to Slide #8, and we'll talk about epay. It's worth repeating that I'm thrilled with epay's double-digit earnings growth in the quarter, driven by continued growth trends in digital media content and expansion of mobile content in certain markets. This growth came from continued strength in our physical retail network as well as triple-digit transaction growth in the digital channel, which resulted from our ability to deliver both mobile and digital media products to a growing list of mobile wallets and e-commerce sites due to our industry-leading technology. Our transactions through mobile wallets continue to grow at very strong triple-digit rate. As an example of continued growth in mobile wallets, you may remember a few quarters ago that we told you about our partnership with Amazon Pay in India. As you can see in our transaction count, we continue to see tremendous growth in transactions through Amazon Pay. This quarter, we have furthered this partnership by adding 2 billers of bottled gas, a key cooking utility in India. We now have all 3 billers providing bottles gas in India and are processing 30,000 transactions a day through Amazon Pay just in this one category.

During the quarter, we also added credit card bill payment services and Google Play recharge code with the Amazon Pay wallet and are seeing nice transaction adoption in these other new categories as well. Our technology has allowed us to further expand our mobile distribution in Brazil. This quarter, we added mobile distribution services to the Itaucard app, the mobile app of Itau Bank, Brazil's largest private sector bank with over 50 million accounts. Additionally, we further expanded our mobile distribution in the U.S. through the acquisition of the covenant contract with AT&T, allowing epay to activate and distribute their prepaid mobile airtime.

And finally, our technology also allowed us to expand our long-standing distribution agreement with Microsoft. epay will now manage the monthly recurring billing between Microsoft and select telecommunications retailers for the sale of Xbox Game Pass Ultimate and Xbox All Access subscriptions worldwide. This is epay's first gaming subscription service and the first gaming bundle distribution agreement with Microsoft. Our epay segment may provide the most evident example of how powerful our technology suite is continuing to attract customers from both new and long-time customers. Our pipeline of new launches remains robust, which we expect to drive similar year-over-year growth rates in the fourth quarter as we saw in the third quarter.

Now let's talk about money transfer on Slide #9. Slide 9. I couldn't be more excited to talk to you about money transfer on the heels of the last couple of days of announcements, including Kroger, which has expanded its financial services marketplace and has selected Ria as its second provider of money transfer services inside approximately 2,000 Kroger locations here in the U.S. You may remember last year that epay implemented a new customer service solution for Kroger, which greatly reduced the complexity of financial transactions for Kroger's staff and the transaction time required of Kroger's customers. While we wanted to partner with Kroger since we acquired Ria in 2007 and the success of epay's SaaS solution demonstrated to Kroger our superior technical capabilities, which combined with Ria's secure, affordable product offering and unyielding commitment to compliance led Kroger to choose Ria through a competitive RFP process.

We are very excited to work with Kroger to provide their customers with the Ria money transfer experience. The service will be live inside Kroger stores in the next couple of weeks and is a significant addition to our U.S. money transfer network. This is a remarkable accomplishment achieved by teams from both our epay and Money Transfer Segment.

We also signed an agreement with Fiesta Mart, a large Texas-based grocery store chain to offer Ria's money transfer service in Fiesta Mart in-store customer service centers across Texas. This agreement builds upon a 10-year retail model partnership Ria has had with Bodega Latina, which owns both the Fiesta Mart in Texas and also El Super-branded stores in California, and this was another competitive win for Ria. We look forward to helping Bodega Latina build similar customer push traffic, transaction volumes and growth rates in Fiesta Mart that we've been able to achieve in El Super over the last decade.

We continue to expand upon our success of adding post offices to our send and receive networks. Let me remind you that outside the U.S., post offices are the equivalent of large chain retailers here in the U.S. with the largest volume of transfers going through these locations due in a large part to their ubiquity. Like many large retailers, these post offices have historically had exclusive agreements with our competitors, and this, together with the Kroger agreement, are 2 more data points that highlight that large retailers and post offices are opting for growth and responding to their customers' preferences for choice and competitive pricing. This quarter, we added both send and payout services for the Post of Serbia, which has more than 1,300 locations across the country, and we launched payout services at more than 250 Jordan Post branches. We also signed agreements with the Indonesian Post and the Moldova Post, which we expect to launch in the coming months.

Aside from the post offices, we added MMBL in Sri Lanka, which has been exclusive with one of our competitors for nearly 25 years. We also added Asia Commercial Bank in Vietnam, Lulu Exchange in Kuwait and several others. In addition to this physical distribution expansion, we also launched payout services to M-Pesa wallet in Mozambique through Zeepay as well as Airtel wallets in Malawi, Rwanda and Tanzania through our recently announced partnership with Thunes. With these countries, our mobile wallet network, provides access to 160 million users across 17 countries. Another exciting agreement we had launched during the quarter is a digital money transfer service partnership with French neo-bank Nickel.

Along with its online money transfer platform partner, Monisnap, Ria will offer digital capabilities and its network to customers of both companies wishing to send money abroad. I would like to put our strong money transfer growth numbers into some kind of perspective. Ria has about 5% market share of the roughly $700-plus billion international family remittance market. By our estimate, roughly 25% of this market is acquired digitally. Of the 75% remaining, all through bricks-and-mortar agents, Ria has almost 6 of those 75% with our agent revenue growth in the mid-20% range compared to last year. We are positioned for total market share, a heck of a lot bigger. This brick-and-mortar business is performing extremely well, perhaps arguably better than any pre-COVID quarter that we've had in years. We are growing roughly 5x as fast as the World Bank says that the market is growing, and that is not even including our 126% year-over-year digital growth in the third quarter. And all of this, by the way, is without Kroger, without Fiesta…

(technical difficulty)

I apologize. Operator, would you just tell me if I'm still on the line?

And yes, you are connected, and we can hear you clearly.

Okay. Perfect. I apologize to everybody. We're having some telecommunication drops here in Kansas City. So let's figure out where we were. Okay. Yes. So like I mentioned, we are growing roughly 5x as fast as the World Bank is, and that's not including the 126% year-over-year digital growth in the third quarter. And all of this is without Kroger, without Fiesta and our new post offices. These new agreements will continue to fuel growth in our Money Transfer Segment, where we saw tremendous growth in remittances during the quarter, except in Malaysia and the U.S. domestic business. These strong growth rates are a testament to the selflessness of our immigrant customers, who prioritize their families back home on payday over the abundant economic uncertainties they face as well as the strong value proposition that we offer them.

We have also benefited from strong execution in the digital channels, the struggles of some smaller competitors and continued expansion of our network, both our direct to account network, including banks, wallets and cards as well as our physical network of agents and retail stores. With a network that now reaches almost 450,000 physical locations in 159 countries and quickly growing digital and wallet payout networks, we anticipate that for the entire Money Transfer Segment, we will continue to deliver double-digit international outbound transaction growth in the fourth quarter, assuming no major changes in the global economy and no pervasive lockdown stemming from the second wave of the coronavirus. It was an exceptional quarter for Money Transfer, punctuated by our new agreements with Kroger and Fiesta Mart.

Now let's move on to Slide #10, and I'll give you some technology highlights from the quarter. Slide 10. As you likely know by now, our technology is a key factor in our continued success. In this quarter, there are 4 significant accomplishments that we'd like to highlight. Starting with the Bank of Mozambique that I've talked to you about for the last couple of quarters. I'm pleased to tell you that we are live with our REN Foundation payments solution. We launched the first bank in late September on time, meeting our original time line, despite the pandemic and travel restrictions that prevented us from working in-person with the bank since March. How is that for powerful technology. We expect several more banks to go live in the coming days. I am extremely proud of our REN team. They have worked tirelessly to overcome many pandemic-related obstacles while exceeding our customers' expectations here in Mozambique.

We also signed an issuer processing and payment services agreement for GoPay in 4 key markets: Indonesia, Philippines, Thailand and Vietnam. GoPay is the largest payment wallet in Indonesia and originates from Gojek, a ride-hailing app kind of like Uber in the U.S. Like Uber, Gojek has expanded into a multiservice platform, covering food delivery, shopping, local delivery and more, while amassing over 100 million active users across Southeast Asia.

Gojek launched GoPay as a closed-loop wallet to enable their customers to seamlessly pay us without carrying cash. For those not familiar with the term, closed-loop implies acceptance only within a network of merchants onboarded by GoPay. To drive more broad-based acceptance, Gojek wants to convert GoPay into an open-loop wallet. Through our partnership, GoPay will connect via our REV payment cloud to Euronet issuance platform. Euronet will convert the closed-loop wallet balance into a virtually -- into a virtual internationally branded prepaid card balance. In this way, a customer can effortlessly use the GoPay wallet at any physical or online merchant that accepts the branded card scheme. This is a great example of one of Asia's fastest growing fintech leveraging Euronet's technology to strengthen and improve their customer offering.

From our press release last week, you saw we signed an agreement with Connected Processing Services, CPS, a U.S.-based processor of independently owned ATM networks. CPS will leverage our REN Foundation from a cloud-based installation. This is a perfect example of a customer using our cloud-based technology to modernize their payment infrastructure. This implementation may be the first or one of the first examples of ATM or POS processor using modern, scalable and less expensive cloud-based technology to drive their business.

Finally, consumer payment patterns have dramatically evolved with the advent of e-commerce and the development of alternative payment options. Payments are no longer confined to regular business hours and traditional payment channels, resulting in new challenges for funds transfer. Traditional payments that involve delayed funds availability, pending settlement between sending and receiving institutions are no longer in line with customer expectations. Real-time payment is a new way to exchange money and purchase services in seconds.

These schemes combine immediate funds availability, settlement finality, instant confirmation and integrated information flows, again all in seconds. The interest in real-time payments creates 2 exciting new opportunities for Euronet: First, in markets with a deployed real-time payment scheme, many financial institutions find it difficult to connect their legacy platforms to the real-time payment clearing house, resulting in lower-than-anticipated adoption rates. The reasons are numerous, but our REN Foundation can be used as a gateway, providing simplified interfaces that minimize the impact to a customer's legacy systems and accelerate adoption. We call our solution REN Connect and the interest is high, and we've already secured 2 bank agreements in Asia for this.

Second, there are many countries around the world without a real-time payment scheme, and they are seeking potential solutions. We have further developed and configured the REN Foundation as a real-time payments clearinghouse. This solution could reside within the national switch, private processor or central bank and provides the overall real-time payments ecosystem required for payments modernization. We call our solution, REN RTP, and we are currently involved in bidding for several of these large opportunities. I'm really excited as we travel towards becoming one of the go-to technology providers for real-time payment solutions around the world.

In wrapping up, COVID-19 continues to dominate most of the headlines and has negatively impacted many companies in 2020, including Euronet. But with 2 segments growing at double-digit rates, a strengthening balance sheet, our exceptional employee base and powerful technology, I'm more than confident that our long-term growth strategy remains fully intact, perhaps even stronger than pre-COVID.

With that, I'll turn it over to Rick.

Good morning, and thank you, Mike, and thank you to all who have joined us today. As we have in the last few quarters, I will begin my comments on the balance sheet on Slide 12, as it continues to provide the best picture of Euronet's financial strength and stability and underscores our confidence to achieve accomplishments, like Mike just mentioned. We finished the quarter with more than $1 billion in unrestricted cash, and our ATM cash remained largely consistent. This increase was driven by approximately $50 million of cash generated from operations combined with favorable working capital management. Our total indebtedness was $1.1 billion, unchanged from June.

Next slide, please. I'm on Slide 13. For the quarter, we reported revenue of $664 million, operating income of $66 million, adjusted operating income of $67.6 million and adjusted EBITDA of $105 million. As you likely read in our press release, operating income includes a $1.5 million impairment of previously acquired customer relationship intangible assets. This charge has been excluded from adjusted operating income, adjusted EBITDA and adjusted EPS to facilitate comparisons to the prior year results. We delivered adjusted EPS of $1.12 compared to $2.84 for the prior year, with the decrease being the result of the transaction declines stemming from COVID-19.

So next slide, please. Here on Slide 14, we show you our 3-year transaction trends. EFT transactions increased 14% driven by increased point-of-sale driving and card processing transactions in Europe, together with payment processing growth for low-value transactions of a customer's bank wallet and e-commerce site, partially offset by fewer transactions in Europe and Asia Pacific related to the COVID-19 pandemic, driven governmentally imposed border closures and shelter in place orders. epay transactions grew 66% from increases in Europe and Brazil as well as very strong contributions from India, which include a large volume of low-value in-app mobile top-up transactions. Money transfer transactions grew 5% with a very strong 22% growth in U.S. international outbound transfers and 26% growth in internationally initiated cross-border remittances, which were partially offset by declines in U.S. domestic transfers and transfers initiated in Malaysia.

Next slide, please. Here on Slide 15, we present our results on an as-reported basis. On one hand, most of the major currencies where we operate increased year-over-year at low to mid-single-digit rates. But on the other hand, a few currencies such as the Indian rupee declined in the low- to mid-single-digit range. To normalize the impact of currency fluctuations, we have presented our results on a constant currency basis on the next slide.

I'm now on Slide 16. For the third quarter, EFT revenue declined 55%, operating income declined 96% and adjusted EBITDA declined 84%, driven by the COVID-19-induced impact of lower ATM transactions in Europe and Asia, especially high-value cross-border transactions across Europe, partially offset by more than $30 million in cost savings achieved during the quarter as part of the company's cost saving initiative in 2020. epay revenue grew 3%, operating income grew 9% and adjusted EBITDA grew 11%, driven by continued strength in sales of digital media content and mobile sales through digital channels in certain markets. While revenues grew year-over-year, the epay segment too experienced the impacts of customer movement restrictions in certain markets, but other markets were positively impacted, where the company has a higher mix of digital distribution or a higher concentration of retailers that were deemed essential and remained open during the pandemic.

Money Transfer revenue, adjusted operating income and adjusted EBITDA grew 13%, 35% and 30%, respectively. This growth was driven by strong double-digit growth in U.S. outbound and internationally originated money transfers, partially offset by declines in U.S. domestic business. Revenue and gross profit per transaction expanded nicely as a result of a shift in transactions to higher margin, higher earning countries and a decline in U.S. domestic business, which earns a lower gross profit per transaction. These expanded operating margins, in both the epay and Money Transfer Segment, underscore the leverage strength of their respective operations.

Now as it relates to all segments, I would like to give you an update on our cost savings initiatives introduced at the onset of COVID-19 to help limit the impact of pressure on earnings. You will recall that we gave you an estimate of approximately $130 million in cost savings, and in the second quarter call, we shared with you that we achieved $35 million in the second quarter and expected to see additional savings of approximately $15 million per quarter. Bear in mind that this initiative was to blunt the impacts of COVID-19, which we anticipated would give us a second quarter adjusted EBITDA of nearly breakeven and the consumption of approximately $25 million cash. Moreover, there was no way to know when things might begin to recover. Since then, as you now know, when reading through our earnings release, we have produced well more than breakeven adjusted EBITDA since then. In fact, $142 million more than breakeven. And with our current expectations for the fourth quarter, that number will increase to somewhere around $210 million.

While these results were certainly supported by our aggressive cost-cutting measures, especially in the EFT segment, the real driver has been the growth in the epay and Money Transfer Segments, together with the resilience in travel benefiting transactions in the EFT segment. Due to the resilience of travel, we found the need and clearly, the motivation to make more cash bills, reactivate ATM sooner and to even deploy ATMs in new markets, mind you, on a very methodical basis. To that end, we incurred upwards of $5 million of additional cost to support the resilient travel volumes, and we curtailed nearly $10 million in cost we had on the radar screen for the Money Transfer and epay segments to support the robust volumes and opportunities we see now that we better understand the COVID-19 impacts on all parts of our business.

So in summary, we have achieved approximately $70 million of the targeted savings through the third quarter, upwards to $5 million of which was rolled back in the EFT business. In the epay and Money Transfer businesses, we're going to hold off as we did in the third quarter on approximately $10 million in cost savings. It is important to note that we took these actions in light of seeing resilience in travel and year-over-year double-digit growth in epay and Money Transfer Segments. And we look forward -- as we look forward, we continue to have approximately $20 million to $25 million per quarter targeted in savings. That's per quarter, not in addition to, included in our expectations, which is -- most of which is in the EFT segment. Furthermore, as we did this quarter, if we see further resilience and opportunities, it may well be we roll back into the business some of these targeted quarterly savings. I hope you can appreciate that our pullback in targeted savings was in light of favorable results and the view towards supporting the momentum we see in all 3 segments together with an ever watchful eye on the future.

In wrapping up, it's worth repeating, we are very pleased with the strong double-digit growth rates we were able to deliver across 2 of our segments, while the travel restrictions continued to weigh on our EFT business. However, we are encouraged by the resilience of travel as restrictions were lifted. We will refrain from giving official guidance because the changes to movement restrictions and border openings are ever changing and the economic recovery from COVID remains uncertain. However, we do believe that it is important to give you a couple of data points to help frame expectations. With that, we would expect fourth quarter consolidated revenues to be approximately 95% or possibly better of the prior year with EFT, epay and Money Transfer to deliver similar to somewhat better growth rates to the third quarter. For these revenue -- from these revenue levels, with significant cost savings and careful expense management actions, we expect that fourth quarter EBITDA will be $70 million to $80 million.

In closing, Mike's earlier comments are worth repeating. We are very pleased to deliver results that exceeded our earlier expectations. This is a testament to our diverse product and geographical revenue mix, powerful technology and our talented employee base who make all this possible, all supported by our strengthening balance sheet. These results give us confidence that the long-term growth prospects for the business not only remain intact, but are becoming even stronger as we continue to be able to invest in products and technology that are driving the business forward.

With that, I will turn it back over to Mike for final comments.

Thank you, Rick. As I close, or as we close, I don't want to hide from the impact of COVID-19 on this year's financial results, particularly in EFT. However, let's not forget that 2 of our 3 segments posted double-digit year-over-year growth this year, which has been very challenging by any business' standards. We saw near immediate increase in EFT transactions as travel restrictions were lifted in Europe. We were also able to bring REN live in Mozambique on time. We expanded our Money Transfer network with Kroger, a leading grocery retailer in the U.S., and our technology allowed us to expand with Microsoft.

And we also achieved triple-digit expansion in our digital transactions in epay and Money Transfer. This is quite a list of accomplishments, which has proven that our economic model is still valid, and we are making the right investments to grow our business for the long term. Moreover, we see that people are still anxious to travel and will continue to go on vacation as soon as they are able. And maybe most importantly, our balance sheet is strong, which continues to comfort our current customers and impress and attract new customers like Kroger, Fiesta Mart, and Money Transfer, and Microsoft and epay.

Thank you all for your continued interest and support of Euronet, and now we will be happy to take questions. Operator, will you please assist?

(Operator Instructions) Your first question comes from the line of Ken Suchoski from Autonomous Research.

I wanted to ask about the -- just the revenue per transaction and the Money Transfer business. You called that some mix shift, but if you control for the mix shift of the business, how is that revenue per transaction trended?

How has it consistently trended? I'd say, generally stable. As we've said before, you always see competition out there in the market. So -- and I would generally say that those have been kind of like pockets of different competition from time to time. But over time, ultimately, you see that the numbers will generally come in, and our counter to that is to continue to expand the mix and to take advantage of opportunities when they're out there. So I would say, generally, over time, we've seen reasonably consistent, but in the -- generally, in the Money Transfer business, you would see it come in, and we counter it with mix shifting. And actually, we've done quite a good job over the last number of years at that.

Yes. That's helpful, Rick. And then just quickly on the margin in the Money Transfer Segment. I mean, I think when we look back, that was the best margin that you printed in the company's history. So can you talk about what drove that outperformance? And do you expect that to normalize in the coming quarters?

Well, yes, as I mentioned that really -- it really reflects the leverageability of our business. We -- while we did not take cost cutting actions, as we pointed out in the call here, we saw the opportunity to continue to support the business. So it really is a very strong leveraging. I would expect to see it come back into some more normal range there. We had great growth quarter, great mix, and the team did a good job at managing expense. So -- but I would expect to see it kind of come back a little bit more in normal ranges. But again, this is really the benefit of continuing to add more and more volume onto the business.

Yes. Really helpful. And then if I could just squeeze one last one in. Just the Walmart business, how much is that business down? And I guess, how big is that business as a percentage of the Money Transfer Segment?

Well, it used to be a good 20-ish percent of the total Money Transfer Segment. It's down in the 40% range from last year. So -- and by the way, that has something to do with those -- the last 2 questions you have because the contribution per transaction, there is considerably less than one that has an FX benefit. So that -- and as we continue to grow our international remittance at the almost stunning volume that brings up our average transaction -- revenue per transaction.

Your next question comes from the line of Andrew Schmidt with Citi.

Just starting off with the EFT segment. Why don't you talk a little bit about the expectations embedded in the fourth quarter outlook for performance? And then if I could ask about FY '21. I appreciate the comments on the EFT transaction trends. Just talk a little bit about -- a little bit more about what you saw when things opened up more about your confidence and visibility for FY '20 results? Some more detail there would be helpful.

Well, we were trying -- on the last question, when we try to project out next year, it's kind of hard to know that exactly, but what was just really clear. And we tried to show that with the graph is that if the countries open the borders, people will show up. And so it's kind of like open the gates and the dogs get out, and that's just going to happen. So next year is going to be throttled by either openings or closings by the governments, particularly in Europe.

And let's not also forget that when we said, we got up to 50% of last year's transactions in the countries that you could drive to vacation pretty quickly. You didn't need to make very advanced like plane reservations and so forth. That 50% was really 50 of 75 because still 1/4 of the transactions that we received in 2019 are still from countries like ourselves, like the U.S. and North America and Russia and so forth that still aren't even allowed into the market. So we saw resiliency, is the best word to describe it. People are going -- this is without a COVID vaccine, without any kind of cure, people are just ready to go on vacation. I think they're all tired of it.

So it really comes down to the countries on whether they'll open their borders or not, and with how much advanced notes. When you say, on June 15, where we'll open our border to 2 weeks, it just doesn't give people a whole lot of time to get themselves organized to go on a trip on an airplane, which is why we saw our airplane-focused countries, either like Portugal, Spain and Greece, we saw those down considerably from the countries that you could drive to. I mean at the end of the day, people are flocking to vacation, and they're flocking -- when they're on vacation, they're flocking to cash.

Okay. And then the fourth quarter expectations in terms of EFT performance?

Well, we didn't have -- we're assuming that we're going to have borders opened-ish like they are now. We expect some small closures, maybe for some particular areas within countries. Fourth quarter was not ever one of our biggest quarters for EFT remember. Our 2 big quarters were Q2 and Q3.

And I'd just add to that, as I mentioned in my comments, is that we would expect to see the EFT revenues on a year-over-year basis would be similar. And I think I would be a little optimistic saying, they'd probably be a little better than what we would see on the growth rate as you kind of compare it to third quarter growth rate. So if you look at third quarter's year-over-year growth rate, probably going to see a similar growth rate, if not better for EFT.

Unless we keep our fingers crossed.

Exactly right. Just one last question. I want to make sure I touch on it. The REN Ecosystem and REV Payments Cloud, some really interesting updates there. It sounds like you have a good pipeline. Could you talk a little bit about sort of the sales distribution process, what's in the pipeline from a use case perspective? Just curious because it seems like there's a lot of opportunity to address a variety of different use cases. So just some comments about sort of the sales process and the pipeline would be helpful.

Yes. This is Kevin. So as Mike articulated, we kind of view with the REN Ecosystem sort of 3 big opportunities: one, modernizing bank’s legacy structure. That is work that we've all (technical difficulty) of the company. It's a little more challenging with COVID because it's more difficult to reach the banks, but we're actively reaching out to banks around the world about modernizing the legacy systems with the REN Ecosystem. So that's one opportunity.

The opportunity -- the 2 opportunities that Mike referenced in the script were related to RTP, and the first one being countries where RTP is already deployed. There is about 55 of those countries. Within that mix of 55, there is varying degrees of adoption of the RTP network. We are targeting those countries that have low participation or low adoption and focusing on helping participants connect to the existing RTP through REN Connect. And the way we're doing that is through our local sales teams and these various markets.

Then the third opportunity that Mike referenced is for those countries that do not have an RTP network, and obviously, if only 55 have it, that means there is a whole lot of countries that don't have it, those countries are at various stages of looking for RTP solutions. We're actively bidding on a handful of those as we speak. They involve a very long sales cycle, I would say, 18 to 24 months, and we are actively involved in several of those, and in 2021, we envision a handful more becoming available. So I hope that addresses your question.

And when we talk about the 50-ish RTP systems that are currently installed around the world, not one of those was architected in the last 20 years. So the advantage that we have is we have modern, scalable technology, the kind that you would see at Amazon or Google or one of these high-tech players. And that's really -- even though, we're starting after some of the other guys, if people want to have a modern scalable system that's kind of future growth or kind of the best game in town.

The other point, Andrew, I should have made was within each of those deployed RTPs, there -- the market ranges from about 200 to 500 available participants. So for each of those 55, you've got 200 to 500 potential participants with varying degrees of adoption. So -- and the long and short of it is, it's a big market. It's a big market for what we call REN Connect.

Okay. And I'm going to apologize, kind of in advance. We talked a little bit longer than usual this time. Operator, we'll allow one more question because we're already at top of the hour.

And your next question comes from the line of Peter Heckmann from D.A. Davidson.

Just a lot of information, as always. Is there any way to quantify the AT&T win? And which markets you'll be active with AT&T? Is it primarily the U.S.?

Yes. So Peter, this is Kevin. So as you might know, AT&T's prepaid is national all through the U.S. There are only 2 of these contracts made available. One through one of my competitors, and the one that we acquired. What's interesting about this opportunity is, it's focused on activations, and so we're just doing a mobile top-up. The focus with this AT&T relationship is around activating new users on AT&T's prepaid network. AT&T and Verizon are relatively new to the prepaid game, and they're aggressively pursuing customers for prepaid. We have got an established network for activations, and we're aggressively growing that activation network. So we're pretty bullish about the opportunity long run. It will take some time to get round up, but it includes a residual payment to us from the mobile operator. So from a margin standpoint, it's much more lucrative business than what you would associate with the traditional mobile top up.

Got it. Got it. That's really helpful. And then I missed it when you mentioned Mozambique the first time. Were there any success fees related to a go live in the third quarter are you expected in the fourth quarter? And can you remind us a little bit of how you expect that revenue to ramp from that relationship?

Okay. So this was -- remember, this was 2 things. This was a license and no additional fees in the third quarter, but it also -- we also cut a deal with them to have basically all their DCC traffic that happens in the country as we connect up all these banks. Obviously, we're not going to get a lot of travelers to any country right now with all these borders closed, but that's going to last for many years from now. So that's all good news. So -- all right. Thank you very much. Bye-bye.

And thank you, everybody, for your time. I think we're going to sign off. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.