Euronet Worldwide Inc (EEFT) 2006 Q4 法說會逐字稿

Greetings ladies and gentlemen, and welcome to the Euronet Worldwide fourth quarter 2006 earnings conference call.

At this time, all participants are in a listen-only mode.

A brief question-and-answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Jeff Newman, Executive Vice President and General Counsel of Euronet Worldwide.

Thank you, Mr. Newman.

You may begin.

Good morning and welcome, everyone, to Euronet Worldwide's quarterly results conference call.

We will be presenting our results for the fourth quarter and the full-year of 2006 on this call.

We have Rick Weller, our CFO, and Mike Brown, our CEO, with us today.

Before we begin, I would like to make a disclaimer concerning forward-looking statements.

During this conference call, representatives of Euronet Worldwide will make statements concerning the Company's or management's intentions, expectations or predictions of future performance, including selected financial guidance concerning the Company's results.

These statements are forward-looking statements.

Euronet's actual results may vary materially from those predicted and anticipated in such forward-looking statements as a result of a number of factors including competition, technological developments affecting the market for the Company's products or services, foreign exchange fluctuations and change within laws and regulations affecting Euronet's business.

Additional explanation of these factors and other factors affecting the Company's results are set forth from time to time in Euronet's periodic reports filed with the U.S.

Securities and Exchange Commission including but not limited to its Form 10-K for the period ended December 31, 2005 and its Form 10-Q for the period ended June 30 and September 30, 2006.

Copies of those filings and other public filings with the SEC may be obtained by contacting the Company or the SEC.

Now I'll turn over the call to Rick.

Rick?

Jeff, thank you, and welcome, everyone, who has joined us for a review of the (indiscernible) year 2006 and fourth quarter results.

For the full-year, revenues were $629 million, up 18% over 2005.

Operating income was $52.3 million, up 9% over last year.

Adjusted EBITDA $88.8 million, a 17% increase over 2005's.

EBITDA of $75.8 million, full-year earnings per share came in at $1.07, an 11% increase over 2005's EPS excluding FX gains or losses, share based compensation, discontinued operations, or debt restructuring charges.

Before I go into more details regarding the year and the quarter, we thought we would give you a brief update on the RIA acquisition.

So, on the next slide, slide six, you can see that we are on track to complete this important transaction.

We have received early termination of the HSR waiting period and we've made good progress in getting the consent of state and foreign license agencies.

More specifically, we've received 32 state approvals and all foreign approvals that are required.

In addition to these approvals, we're taken several steps to be positioned to leverage the scale, momentum, and maturity of RIA.

We intend to quickly take advantage of the two companies joining together.

On slide seven, I'll give you a brief update on market developments.

Consistent with competitors, RIA has experienced softness in transactions to Mexico.

Fortunately, RIA's focus on markets other than Mexico have played a key role in offsetting some of that impact. (indiscernible) pricing pressure and margin pressure, RIA has seen some.

On the other hand, the growth in their international business helped stabilize overall margins through positive mix.

Generally speaking, RIA makes more on non-U.S. originated transactions and those are the ones that are growing the fastest.

As you can see in the slide, RIA's international business is growing more than 50% year-over-year & some growing at triple digits.

Moreover, it appears much of the margin concerns center around FX arbitrage models, whereas RIA's model is more focused on a fee agent based approach.

Accordingly, margins are less sensitive to competitive FX pressures.

Regarding the earnings expectation from RIA, we did factor into our analysis some of the weakness seen in Mexico transactions.

That, together with the recent performance, we reiterate our expectation of a dilutive $0.07 to $0.13 per share in 2007 with a view toward the upper end of this range if the Mexican traffic weakness continues.

We look forward to closing the RIA transaction as soon as possible.

Now on to more about the quarter and the year.

Slide eight, please.

Again, this year, we've seen a strong increase in 2006 revenues over 2005.

This year, we broke the $600 million mark, a meaningful accomplishment.

Now with the RIA acquisition, we will soon be approaching $1 billion in annual revenues.

Slight nine, please.

You can see that in 2006 we continue to post substantial improvements in transaction growth.

This represents a 30% increase in transactions processed in 2005 with similar improvements coming from each of the EFT and prepaid segments.

EFT transaction growth was principally driven by a 23% increase in ATMs managed and operated together with the full-year benefits of a couple smaller acquisitions last year in EFT.

I'll also point out that of our 23% increase in ATMs, more than 60% came from organic growth from our customer's editions of ATMs throughout the year as well as adding more Euronet homed at-risk ATMs in certain markets.

The prepaid segment's transaction growth came across all markets together with very minor benefits from acquired companies.

Accordingly, the prepaid segment's growth was virtually all organic.

Next slide please.

Here on slight ten, you can see in the yellow and blue bars of 2006 the $52.3 million in operating income and the $88.8 million in adjusted EBITDA I referred to a few slides back.

This chart also reflects the continued improvement in the quality of our earnings where you can see better adjusted EBITDA expanded more than operating income.

I think it is also important to point out in this chart that we would have seen even better expansion of our profits if we chose not to invest in 2006 in several key expansion areas including China, Eastern European markets such as Bulgaria and Ukraine, money transfer and card products.

In total, our operating expenses included approximately $6 million or about $0.14 per share for these investments.

While we could have held off on making these investments, we believe the opportunities are quite substantial and well worth the trade-off of short-term benefits from higher current period earnings.

I'll also point out that we will be seeing the benefits of some of these investments as we move through 2007, such as the acquisition of RIA where we will take prompt action of combining their business with ours and card business where Mike will comment later about our signing of a card outsourcing agreement in Greece together with a growing pipeline of opportunities.

As we announced last quarter, we signed up our second customer in China and continue to be confident that we will expand our business in China and other Asian Pacific markets in the relative short-term.

So net-net, a good year with key investments to nicely position us for expanding opportunities in the near future.

Now to slide 11 for some segment focus.

Here, you can see we have similar revenue growth produced by both the EFT and prepaid segments with the advantage to EFT.

In our EFT segment, we posted a 24% year-over-year growth in both revenue and operating income.

Had we not made the important market expansion investments discussed on the previous slide, operating income would have seen a sizable increase in 2006.

Net-net, our EFT business continues to benefit from good organic growth in both ATMs and transactions, as well as continued signings of new outsourcing agreements.

In our prepaid segment, we posted a 14% year-over-year growth while at the same time we continued to point out the maturing trends of our UK and Australian markets as well as the reduced exclusivity commission rate in Spain.

As you will recall, in the second quarter, we discussed the impacts of prepaid segment related to the Spanish commission matter.

Without the impact of Spain, the prepaid segment would have grown 17% year-over-year, in line with our expectations.

On prepaid (indiscernible) income, you will see it remained flat year-over-year.

It is important, however, to look beneath the surface to see prepaid's contribution.

To this end, the reduced Spanish Exclusivity Commission together with the improvements, investments in the money transfer product have had a fairly significant impact on prepaid segments operating income.

If we were to exclude the Spanish and money transfer business from our prepaid segment's operating income, the prepaid segment's operating income would have improved 21% year-over-year; a nice expansion over the 17% revenue growth from all other prepaid businesses.

And again, excluding Spain and money transfer, operating income margins would have improved from 8.5% in 2005 to 8.8% in 2006; a nice operating margin improvement.

I'll also point out here that revenues from the software business increased year-over-year, the majority of which came from the early 2006 acquisition of Essentis.

On software's operating income line, Essentis finished the year slightly better than our expectations.

More importantly, we continued to validate through the year the high quality of the Essentis product and the opportunities it holds for the future.

We are quite pleased with the relatively insignificant investment we made in this business.

Mike will provide additional comments with respect to the EFT and prepaid businesses in a few minutes.

Now, let's go to discuss EPS on the next slide.

For the full-year 2005, our diluted earnings per share of $1.07 represented an 11% increase over 2005's diluted shares -- per-share earnings of $0.96.

With respect to the EPS calculation, you may have noticed that the convertible shares of the $140 million convert were dilutive, while the $175 million convertible was not.

We noted in our earnings release we would expect $140 million convertible to continue to be dilutive, but not the $175 million convertible.

We do not expect the $175 million convertible to be dilutive until our quarterly earnings per share are nearly $0.40.

Now that we've hit the highlights for the year, let's make a few brief comments on the quarter.

To slide 13.

For the fourth quarter of 2006, the Company delivered revenues of $166.8 one million, our operating income of $14.6 million, adjusted EBITDA of $24 million and earnings per share of $0.30 excluding FX losses, share-based comp and discontinued operations.

If we now moved to slide 14, we will start to look at each area more closely.

Here on slide 14, you can see the fourth quarter 2006 improvement over 2005 and 2004.

You can see that we continue to post improving numbers year-over-year.

Let's move to slide 15.

On slide 15, we illustrate quarter over quarter transaction growth. 28% increase in transactions year-over-year has been instrumental to the revenue growth I reviewed with you on the previous slide.

We continue to see transaction growth in both the EFT and prepaid segments.

For the EFT segment, transaction growth has been stimulated by an increased number of ATMs under management, continued expansion efforts at key multinational bank customers and card penetration rates.

In the prepaid segment, growth continues as prepaid mobile subscription rates increase, scratch cards shift to electronic, more retailers are signed on, more terminals are deployed, and more products are added to the terminals.

Now to slide 16.

Consistent with the revenue growth, we see our profit indicators of operating income and EBITDA continue to reflect the growth of our business.

Given our fourth quarter's $24 million EBITDA, we are almost at the $100 million annualized EBITDA mark.

And if you accept that the segment's float earnings of more than $1 million a quarter are operational in nature rather than investment, we are easily over the $100 million mark.

Slide 17, please.

Here on slide 17, we can review our segments' year-over-year quarterly results.

As in the annual result, the EFT segment's revenue grew year-over-year by 20% and operating income grew by 14%.

The difference in the margin expansion generally relates to the expansion in China, certain Eastern European markets, increased depreciation charges and investments we are making in the card processing business.

Moreover, as we mentioned in the third quarter, we extended for several years to be specific through 2011 a couple of large outsourcing agreements in advance of their expiration date.

In exchange of these term extensions, we agreed to certain extension incentives that we are accounting for over the new remaining lives of the agreement.

While we recognize we gave a little in terms of short-term interest, we significantly extended the long-term nature of our agreements and further solidified our relationship with these key multinational bank customers.

In the prepaid segment, we grew our revenues year-over-year by 12% and operating income declined by $500,000.

The quarterly year-over-year results were again significantly impacted by the Spanish Exclusivity Commission and the investments in the money transfer products.

If Spain and money transfer were excluded from both 2005 and 2006's fourth quarter results, the prepaid segment's revenues grew 17% year-over-year and operating income grew 21% year-over-year, and operating margins would have improved from 8.6% to 9%.

Spain continues to grow at sales of non Telefonica charges, recharges, and as you know, we have announced the acquisition of RIA, where we expect to rapidly integrate our (indiscernible) business.

As I mentioned before, we are making good progress on pre-closing integration matters and expect to be well positioned to take advantage of the synergies the RIA business has to offer.

All in all, we finished the quarter ahead of expectations.

Now for the next slide.

Our diluted earnings per share of $0.30 exceeded our expectations for the fourth quarter of 2006.

I may also note that we had a slightly more favorable effective tax rate for the fourth quarter that contributed about half a penny a share.

This resulted from a lower statutory rate in a couple of countries, offset by higher rates in a couple of other countries.

Also, when taken as a whole, you can see that the incremental investments we made in the fourth quarter for money transfer and card processing operations were more than offset by the aggregate of smaller, better-than-expected performances across a number of our different business units.

Before I leave this EPS slide, I want to note for you that in the first quarter of 2007, we will commence providing our EPS guidance on a cash basis.

When reflecting on our business and through discussions with shareholders and analysts, we are often asked to draw greater focus on our production of cash.

Traditional GAAP reporting of non-cash based compensation and intangible amortization masked the quality of cash earnings.

Moreover, with the recent acquisition or announced acquisition of RIA, this distortion will become even more pronounced.

Accordingly, after due consideration, we have decided to discuss cash EPS.

For clarity, we determined cash EPS to be GAAP EPS excluding the impacts of share based compensation, intangible asset amortization, FX gains or losses or debt restructuring charges.

Under this methodology, our fourth quarter 2006 cash EPS was $0.33 per share and $1.22 per share for the full-year.

Now, to slide 19 for a few comments on the balance sheet.

Since the third quarter 2006, our balance sheet changed in certain key areas, mostly due to timing.

Our cash continues to increase as a result of the production of free cash flows.

I will also point out that we have triggered our revolving line of credit prior to year end to accommodate year end cash needs in certain parts of our business so as to not disrupt our yields on short-term commercial paper investments.

Subsequent to year end, we repaid the draw and accordingly, our debt is back to the similar positions at September levels.

We also saw it in recent Accounts Receivable and Accounts Payable at the end of the year.

These increases were the result of settlement timing at year end given that the last day of the year fell on a weekend.

Net-net, our balance sheet continues to strengthen.

I've also provided a pro forma view of our debt leverage statistics given the pending closing of the RIA acquisition.

You can see here that with the assumed $180 million in debt, our debt to EBITDA ratio will be approximately 4.5 times; but on a net debt basis, just under two times, and as mentioned in the acquisition announcement, we would expect to see aggressive paydowns of debt from our strong internally generated cash flows.

In summary, on most any front, 2006 was a good year with key P&L investments made to provide for good long-term outlook.

Now to Mike.

Thank you, Rick.

I think I'll start the discussions here with slide number 22.

We're going to talk about the EFT processing segment, our original legacy business.

This segment continues to deliver very consistent and improving results.

We are the service provider of choice to a number of banks in emerging markets in Europe, Asia, Africa, and in the Middle East.

In addition to our traditional ATM outsource services, our product offerings now includes POS, debit and credit card management services, and bank [NDFT] software support including merchant acquiring and card issuing solutions.

This segment continues to grow because these markets, as I mentioned, are the markets that are adding additional retail accounts.

On slide number 23, we highlighted our strengths in our EFT segment.

As most of you are familiar with our key business units, I will move on to the next slide to discuss the EFT financial highlights for the full-year and the fourth quarter of 2006.

Slide number 24, please.

Slide number 24 shows that 2006 EFT financial results with improvements across the board.

For the full-year, both our revenues and our operating income grew by 24% and adjusted EBITDA increased by 26%.

We are very pleased to have maintained our operating margins year-over-year despite our significant investments in new markets like China, Ukraine and Bulgaria, and our investments in the card business.

Operating income margin of 24% in 2006 remained virtually unchanged to our 2005 operating income margin and our adjusted EBITDA margin improved from 33% last year to 34% this year despite those investments.

Additionally, in terms of year-over-year performance, the EFT division increased their ATMs by 23%, added 38% more POS terminals and posted a 28% increase in transactions.

I'd like to thank all the teams in all of our EFT markets for continuing to deliver the growth while we're still making investments for the future.

Slide number 25.

Slide 25 gives a snapshot of our fourth quarter 2006 EFT financial results.

Our revenue of $35.3 million in Q4 of 2006 was up 20% over the same quarter last year.

Our operating income of $8.2 million in Q4 of 2006 saw a 14% increase over the same quarter last year.

Our adjusted EBITDA $11.8 million in Q4 2006 saw a 23% increase over the same quarter last year.

As Rick mentioned earlier, our depreciation expense increased this year as a result of deployment of our own ATMs, the deployment of Type 2 ATMs, and also our [EMBA] [triple debt] upgrade and intangible amortization and streamline acquisition that we made in late 2005 and throughout 2006.

In essence, you can see the increased levels of depreciation expense fall pretty much straight through to the operating income line.

Now, let's move on to discuss Q4 2006 business highlights of the (indiscernible) processing segment.

First of all, in Europe, we continued to see significant growth in Poland, which is our biggest market in EFT.

At the end of 2006, we were operating more than 2,100 ATMs in Poland including more than 550 of the Euronet branded ATMs in this market.

We have started to deploy some of our own Euronet branded ATMs in other key markets and just last week, we launched our first Euronet branded ATM in the Ukraine, our newest market.

We applied the credit card outsourcing agreement with (indiscernible) cards, a financial product insurance services company in Greece.

We are building our pipeline of card processing opportunities and would anticipate to more 2007 successes.

We signed a POS Gateway services agreement also with Citibank in Slovakia.

Moving on to a very important announcement that we made just recently.

We signed a regional after services agreement with Standard Charter Bank, a leading multinational bank operating in more than 50 countries in Asia, Africa, and the Middle East; a nice map right on top of our map.

Let me expand a little bit more on this agreement.

Standard Charter bank has selected us to provide ATM network services, ATM drive-in and card management services in 10 countries subject to scope definition of a country by country basis.

We have finalized the scope of services to be performed by SCB in three of these 10 countries -- Qatar, India, and the UAE.

The SCB Qatar project is now alive.

We are in a process of finalizing the scope of services for the remaining countries as we speak.

Furthermore, the potential opportunities for the regional SCB agreement include ATM management services across 15 countries over the next two years.

We're very pleased with the potential upside of this agreement and look forward to launching live operations in multiple countries for Standard Charter Bank.

As a little aside, Standard Charter Bank is exactly the kind of agreement that Euronet is in a unique position around the world to deliver.

We are the ones who know how to operate ATMs in developing markets and we have in-country operations in a vast majority of these markets, so we can map our services on top of the needs of these multinational banks like Standard Charter.

Okay, moving on to slide number 27 in India.

There have been some positive developments in the Reserve Bank of India's regulations here recently.

We are cautiously optimistic that things will loosen up in our Indian market.

We increased our ATMs under management in India this year -- or last year, 2006, 34% year-over-year.

We have over 1,800 ATMs live in India and under management for 10 different banks.

This does not, of course, include the 920 ATMs of corporations we announced in Q3.

We don't plan on including them in our account until we expand our services to include transactional processing as well as field services and so forth.

Our cash net network, this gem continues to grow.

This network has become the largest shared network, ATM network, in the country with more than 6,300 ATMs [and] about, I think in India we're up to -- there's about 18,000 ATMs right now in India.

We saw a 17% increase year-over-year in the number of ATMs in the shared network while transactions increased by 125% as opposed to that 17% for the same period.

In a market which has approximately 18,000 to 20,000 ATMs, our shared ATM network plays a significant role in helping banks to quickly provide their customers access to a larger network of ATMs.

We're very pleased with the success of our cash net network and we look forward to providing added convenience to our banking clients as well as their end user customers.

Going on to slide number 28, please.

We'll talk about China here for a minute first.

We have installed and brought live 87 ATMs in Beijing, Shanghai and Guangdong Provinces for Post Bank there in China.

We're waiting for new postal branches to be opened to deploy our remaining three ATMs or a 90 unit pilot.

Post Bank has announced the success of our pilot internally to its Beijing, Shanghai and Guangdong branches, and actually this word is getting around to other branches as well.

We are now in the process of building a standard interface for all postal branches in all 31 provinces to improve the ATM network connectivity and efficiency for existing ATMs as well as any new ATM deployments in the future.

We've continued to increase our sales efforts across China as well to other banks other than the Post Bank.

Now, I'll cover a few highlights for software.

We signed a large services agreement with Moneris for Essentis software and this is an extension of our primary agreement with the leading merchant acquire in Canada.

Next slide, please.

On slide number 29, our final slide for EFT, we outlined our combined ATM categories.

Since our last call, we've added 394 ATMs to our EFT network.

We now have a total of 8,885 managed ATMs; that's a 23% increase year-over-year as compared to the end of 2005.

In the ATMs under contract category, we have 945 ATMs under contract not yet installed.

This shows that a number of ATMs or banks have committed to add to our network over the next 12 to 24 months.

All in all, a very good year for our EFT segment.

We're very excited about the new year and the opportunities available to us to expand our ATM, POS and card offerings to many more banks in the regions we serve.

Now I'll just jump across to our prepaid processing segment, if you could move on, please, to slide number 31.

Similar to our EFT segment, we've highlighted in this slide our strength in the prepaid segment.

As most of our callers are familiar with our business, I'll go right into the discussion of the prepaid financial results for the full year in the fourth quarter of 2006, and you can revisit this slide later to see the itemized highlights.

Slide number 23 -- or I'm sorry, 32.

We see our prepaid financial highlights for the full year 2006.

Our annual prepaid revenues of $470 million in 2006 were up 14% over last year's revenues.

Our annual operating income of $34.8 million was equal to last year's results, while our annual adjusted EBITDA of $48 million saw a 5% increase over 2005 results in prepaid.

Similar to the last few quarters, I will discuss our full year 2006 prepaid financial results by excluding the impacts of our Spain business as well as our expenses in the Veloz money transfer business.

As I mentioned previously, the exclusion of these two items clearly illustrates the growth of our prepaid subsidiaries and makes for a fair evaluation of this very dynamic segment.

Excluding money transferred in Spain for the full year 2006, our prepaid segment would have improved its revenue and operating income by 17% and 21% respectively over prior year.

Consistent with the revenue growth, we see that our profit indicators of operating income and adjusted EBITDA continue to reflect the leverage of our revenue growth to the bottom-line.

This was a result in the improved operating results across all these markets.

With the addition of RIA and [La National], we expect to (indiscernible) significantly from the consolidation and optimizing of resources in these three businesses.

With the acquisitions of these more established businesses, we will be able to reduce the startup investments we've been making in money transfer, just to point out our numbers so far.

Going onto slide number 20 -- I'm sorry, 33.

We see our prepaid financial highlights for the fourth quarter 2006.

Our prepaid revenues of $124.6 million in Q4 were up 12% over the same quarter last year.

Our operating income and adjusted EBITDA in Q4 of 2006 decreased slightly by 5% and 2% respectively over the same quarter last year.

Here again, I think it's helpful to see what is happening with our prepaid business with Spain money transfer set aside.

If we exclude Spain and money transfer from Q4 2006, our prepaid segment would have improved its revenue by 15% and its operating income by 21% respectively over year-over-year indicating a strong result and the leverage that we have posted by the other prepaid subsidiaries.

Slide number 34, please.

This shows our fourth quarter prepaid business highlighted in our primary markets.

I will discuss a few of these accomplishments which reemphasize our three primary objectives in the prepaid business -- add retailer cash collection locations, deploy more terminals, and add new high margin products to distribute over our nearly 300,000 terminals.

In Germany, we signed and rolled out prepaid at 915 stores for [Cheeblo], a retailer for coffee and consumer goods.

We continued to expand our drugstore chain presence for prepaid in Q4; we signed two new drugstore chains for 860 stores in total, and we signed an exclusive agreement with Premier, a leading German pay-TV operator with approximately 3.4 million subscribers to launch the distribution of their new prepaid TV products.

In the UK, we signed agreements with key partners to process gift card store transactions at Sainsbury's and [Martin McCole's], and we also started offering Web pop-up services for direct debit customers (indiscernible).

Moving on to slide number 35.

Here in the U.S., we continue to sign agreements with Merchants, [ITOS] and (indiscernible) providers, which has enabled the U.S. to be our largest operating income growth contributor in 2006.

You can see examples of these accomplishments on slide number 35.

In Poland, we saw continued growth in small regionals as well as a significant expansion of our third party terminal base in cooperation with the UniCredito Bank in Poland (indiscernible).

We now have 10,900 terminals.

This is a 37% increase in terminals year-over-year and the transactions increased by 52% year-over-year.

Again, showing leverage.

In slide number 36, moving on to Spain, we've got positive developments in this markets as well.

We've continued to add new products and services across our terminals and we have successfully completed the integration of our two processing platforms in Spain.

Similarly, in both our Australia and New Zealand prepaid markets, we continued to add new stores and products.

These accomplishments and initiatives are itemized on slide number 36.

Slide number 37.

We continue to be excited about our overall prepaid business.

We recently launched operations in our 12 prepaid market with a small investment we made in Brodos Romania, an electronic prepaid mobile airtime processor that supports pop-up purchases at several thousand terminals.

The Company earns its revenue on a transaction basis versus a commission basis, though, I might add.

Brodos Romania has processing agreements with the two largest mobile operators in the countries and Brodos Romania's transactions are processed from our German prepaid processing platform.

So we're getting leverage there just from an operational perspective.

We can see that the newly acquired business augmenting and complementing our existing EFT business in Romania.

This is our fourth market in Europe in addition to Germany, Poland, and the UK where we offer both our EFT and prepaid line of products.

This brings to an end of our prepaid discussion and I would like to thank all our prepaid teams around the world for delivering growth, expanding into new markets and opening up new markets.

As we look forward to the close of -- slide 38, please -- as we look forward to the close of the RIA acquisition, we continue to expand our Veloz money transfer business as well.

We have approximately 1,600 storefronts connected to our Veloz system that will benefit from the RIA and La National products and scale.

We have received license approvals for our Veloz operations in all the major states in the United States including New York that just came last week.

We signed an agreement with (indiscernible) USA to be their exclusive processing partner in the U.S. for cross border top-up in (indiscernible) Mexico.

This agreement presents significant opportunities for us.

We believe the addition of RIA's impressive scale to our business will enable us to significantly leverage our Veloz assets.

As Rick mentioned earlier, we are actively working to quickly and efficiently integrate the three businesses upon closing.

Slide number 39.

We have made several comments about our investments in the last few quarters and I would like to address these investments.

As many of you know, there is significant opportunities for the deployment of ATMs and introduction of card-base and money transfer products in these emerging and global markets like China, India, and Eastern Europe.

And we feel these opportunities are accentuated by the continued integration patterns around the world.

Because of this, we made certain key investments in our business which will position us for future growth and enhance our shareholder value in the medium and long-term.

Some of our primary investments were in an entry into markets like China, Bulgaria and the Ukraine last year.

These emerging markets hold a lot of potential for our advancement and we have a first mover advantage in [Holladox].

We continue to believe our move into the money transfer business will yield strong results, particularly by adding the global scale of RIA.

In EFT, we are focusing on expanding our product offering beyond just ATM outsourcing.

The Essentis software platform provides us with an opportunity to move at a large scale card issuing and merchant acquiring and we made some quality personnel investments to go after these opportunities.

All of these planned investments impacted our immediate growth in 2006.

To put it into perspective, if not for these investments for our future, our EPS in 2006 would have been $0.14 higher or $1.21 up from $0.96 per share.

I would like to just make a qualitative comment here.

Obviously we've been running this company now for 12 years and I have never been more excited about the opportunities that we see before us.

We have a huge amount of positive cash flow that we are generating.

We're getting into more and more developed markets.

We have an excellent reputation.

We just closed or are about to close on our RIA acquisition and I would like to point out we did not buy RIA just for Mexico, but we bought RIA because we wanted to leverage it into other countries and to become truly a global money transfer player, leveraging our relationships around the world both on the EFT side for payouts of money transfers and also on our cash collection side with the prepaid side of our business to be able to collect cash on behalf of RIA for money transfers.

We look around -- as I look around world, I see more and more markets, more and more of these emerging markets at more and more retailing channels.

We love that.

We love the fact that people are getting more cards and more retail accounts.

That's forcing more ATM transactions, more POS transactions, more competition in these markets, more competition and these people have to do things more efficiently.

They need to bring in quality players that can help them with [their scale], that's us, help them be more competitive in their marketplaces.

So, yes, we have made investments this year, it's a little bit fortunate I guess you could say that I've got five different opportunities that I'm investing in one year.

Maybe that would be better if I did this over five years, but I can see that these opportunities will pay for themselves quite quickly.

So moving on to slide number 40, we will summarize 2006.

You can see we continue to grow our business in addition to making any significant investments.

We exceeded our earnings expectations for the fourth quarter at $0.30.

We exceeded our operation -- expanded our operations in two of the world's largest markets.

We successfully completed our pilot ATM projects for the Post Bank, the second largest retail bank in China and we signed a second ATM outsourcing customer in China within a year of launching our operations.

I would expect that we will continue to add more contracts and more strong relationships with these parties as we move into 2007.

In India -- India is not a small market either, last I checked.

We increased our ATM network there by 34% year-over-year despite RVI regulatory constraints; a significant achievement for that market and my kudos go out to the Indian team for being able to accomplish that.

We continued to expand into the new markets in our EFT business segment in central and Eastern Europe.

We added Bulgaria and the Ukraine and we signed leading banks in both these markets for our EFT services.

We continued to move these and take advantage of the fact that we are the (indiscernible) leaders in central and Eastern Europe.

We are also a perfect match for the multinational banks looking for processors who can provide multicountry, multicurrency and cross-border processing solutions.

This significant advantage enables us to sign a regional manager services agreement with Standard Charter Bank, a leading multinational bank to offer EFT services in multiple countries.

We're unique here and we're able to get this deal.

We made significant advancements as well in our cash collections network, our prepaid side of our business, and at the end of 2006, we had nearly 300,000 POS terminals at 25% increase year-over-year.

Our teams are leveraging our cash collection network to offer a number of new high margin prepaid products.

We also strengthened our prepaid product offering in 2006 by adding a number of Wireless top-up products.

We also introduced a number of [instant] prepaid products including prepaid pay-TV, gift cards, cross-border bill payment, prepaid music, prepaid debit cards, just to name a few, and I'd like to point out that when I add those transactions on top of my current network, they're virtually 100% margin because I've already paid for the network.

We also announced significant acquisitions in the money transfer business as we've talked about before.

With the acquisition of RIA India, we will become the third largest global money transfer company, and number two better watch out.

And [a lot of] nationality acquisitions provide us a leading market share in the Dominican Republic money transfer quarter from the U.S. at a significant presence for us in the northeast part of the United States.

Finally, we expect Q1 2007 EPS to be approximately $0.28 to $0.29 on a basis consistent with historical reporting.

As Rick mentioned earlier, we are commencing with a transition to cash based EPS in Q1 2007 and we expect it to be approximately $0.32 to $0.33.

This reflects our traditional seasonality of the first quarter and our investments.

This concludes our presentation portion of the call and now Rick and I would be happy to take questions.

Operator, will you assist us here?

(OPERATOR INSTRUCTIONS).

Josh Elving, Piper Jaffray.

Could you maybe give us a little bit more color on the regulatory environment in India?

I understand maybe there may have been some movement on that front and maybe a little color as to when we might see some of those regulatory restraints perhaps loosened?

The best we know here with India is first of all, RBI makes up its own decisions and we don't have any spies in there as of yet.

But as best we can tell, a couple of good things are happening.

Number one is some of the very largest banks have been allowed to add additional ATMs, and they've actually moved that down to that kind of next year semi-private kind of banks.

It hasn't got down to the multinationals yet, but those two movements are very good news we believe for us.

In addition to that, RBI has said they're going to take a hard look at the allowance of having ATMs in a wide label fashion around their country.

So all three of those don't point to say we can immediately start to throw out new ATMs for Citibank or whatever, but they do point to the fact that RBI is loosening its grip over say, no ATMs, no new ATMs at all.

So I can't tell you when.

My staff, there seems to be optimistic that we can get some movement in the first half of this year, but none of us know for sure.

But certainly a lot better than we were looking at six months ago.

With regards to the RIA transaction and your opportunity to cross out some of the prepaid products, can you talk a little bit about the market and your position in South America?

Does that significantly open up a new opportunity for you in South America on the prepaid side?

No, because -- not directly.

I mean, we have relationships certainly, but you've got to remember because of directions of funds (indiscernible) here.

South America is a recipient of money transfers, not an originator of money transfers, and so we collect money here in the U.S. or in Spain or whatever and we send monies to South America, but that doesn't necessarily mean that it's a good market for us to collect money on behalf of prepaid down there.

But, the fact is, and you are right, we do have relationships now, more relationships with more banks and et cetera down there, so we are taking a look at some prepaid opportunities down in South America, as we have for the last four years, but we just haven't been able to find the right one yet.

My last question would be with regards to the Mexican corridor for money transfers, obviously that has been under some pressure lately.

With regards to trends you're seeing, I think Rick may have indicated that '07 might be a little bit closer to the high side of dilution potential from RIA.

If trends remain relatively difficult, can you just talk a little bit about the trends you're seeing in that specific corridor?

Well, first, I guess it would be fair to say more than anything they've been choppy.

Actually even at the time of the transaction with RIA, we saw a restoration in some of the Mexican transfers and some of the numbers out of the bank of Mexico and things like that and then we saw another dip in some of those and then even [at] the most recent trend I think we've seen a little more resilience in it.

And so I guess we would say it's still unclear as to what the current and sustained trend is going to be.

On the other hand, when you take a look at just the fundamental role that the immigration labor force plays in the U.S., you know that they have to be doing something with their money.

Maybe some of this money is moved through more nontraditional channels and as that kind of quiets down and we come back to more state of normalcy, we will see how that turns out.

But what I will also point out though is that while we have seen this Mexican stuff, again what Mike said, the reason we acquired RIA was not because of the brilliance of Mexico traffic, but because of the significance of the international traffic where we're seeing growth rates that are in the triple digit ranges there.

So we need to be patient through the Mexico -- let's say choppiness here and we and our teams are quite excited about what we see outside of this space as well.

Tony Wible, Citigroup.

I was hoping to tack on to that prior question.

I guess, to get to that low end of the dilution range, what kind of assumptions are you looking for transactions and pricing?

What would the variance between the low end of the dilution versus the high end?

We would like to see upper single digit if not lower double-digit Mexican growth traffic, but pretty much upper single digit Mexican growth.

And that's for the low end or the high end of the dilution?

That would be for the low end of the dilution.

And I appreciate -- thanks for breaking up the Spanish contribution and prepaid, but is there a way of looking at just what the Spanish market itself would be growing at if you didn't have some of the contract issues?

Is there a way of kind of stripping that out?

We prefer not to because we have competitors in Spain.

I would like to help you on that explicitly, but it's a very competitive market.

Everybody there is pretty ruthless, and I prefer not to put anything in print.

Understood.

Is there a way of saying if we look at that 17% organic growth rate that you've kind of pointed for the rest of that business, would Spain be above or below that?

Well, you mean as moving forward from now?

Yes.

Basically, I'm trying to get what would be a good secular organic growth rate to assume on prepaid after we grow through the Spanish issue in the second, third quarter?

Well, I think what we've set out there is that we would likely see something in the double-digit range on growth rate there.

This year, we saw if you take Spain out, we saw numbers that were in the upper teens, lower twenties kind of numbers there.

And what we've said in the market is that we would expect (indiscernible) to see some double-digit growth rates.

It might be a little bit towards the lower end of that double-digit growth rate and that to go over 20% we would likely need to see some inquisitive action in there.

And how much should we be anticipating from the Romanian acquisition?

We have our own estimates, but is there any commentary you can help us pinpoint that more accurately?

Well, I wouldn't expect a lot of earnings from it at this point.

It's a small transaction, gives us a great position in the Romanian market and really complements our EFT business there.

Gives us some opportunity to go after some other bill payment and other product like that, but I wouldn't [heat up] the model much for it.

I think I caught during the slides, did you guys purchase some ISO contracts in the U.S.?

If so, I guess how big where those contracts?

Well, we did enter into a relationship with a couple of key ISOs, and we didn't necessarily just purchase them outright.

We have certain arrangements with them so that the transactions come our way and there will be a certain kind of incentive to do that.

So it isn't as if it's a -- it's not really like an acquisition like you and I might normally think of an acquisition.

So it's really more to do with the relationship with those ISOs and the incentive that we give them to be able to bring those retailers our way.

So if we don't see like a step function increase here, we'll have to see that develop as the year matures.

Is it kind of like an incentive payment?

Or is it --

Exactly.

And getting there and kind of getting virtually there 100% [line] shares is all our products.

Last question here.

The $0.28 to $0.29 guidance, just want to be clear, that is the guidance that is under the old pro forma accounting that you would provide excludes foreign exchange and excludes options?

Yes, that's correct and then we also gave you the same numbers 32%, 33% we're using as kind of new cash based EPS methodologies.

Robert Dodd, Morgan Keegan.

Two main ones.

On the investment front, in the past (technical difficulty) numbers in terms of how much incremental investment you've made in a quarter versus the prior quarters.

Can you give us an idea how much more you spent in the prepaid businesses and how much more in the EFT businesses to support these new products?

Well, we've got a number of investments that aren't included in that $0.14 because you've got to invest in your business just to continue to grow it.

But we have made extraordinary investments in a couple of areas that do change our numbers and that's why we have pointed those out.

Things like we're going to lose or on a run rate right now we're losing about $0.03 to $0.04 a share just in China, but I think China is an excellent investment for us.

We now have a successful pilot project and so forth, so we point that out much like we did with India when we were starting up in India.

We also pointed out what we did in money transfer because people are always sensitive to our margins in the prepaid segment and we include that in the prepaid segment, so if you exclude that, then prepaid segment numbers become more obvious.

So I'd say those are the two -- probably two of the larger investments and then we've also done some investment in personnel and also technologies and so forth to sell more card processing and card-based solutions to our EFT markets in central and Eastern Europe and also been in India.

So we've kind of pointed those out.

So that's kind of where it is; the lion's share of that as far as the three things I just mentioned.

Looking forward to RIA, when you close that, I mean can you give us an idea what your -- the sales approach is going to be in terms of how you are going to cross-market the RIA products to your prepaid agents and if you --

Well, I'm not going to tell you all my top-secret stuff, but I'll tell you this, we met with -- we've been having multiple meetings with the RIA management.

They're very impressive.

Juan Bianchi is excellent and we've already got our first pay-spot terminal in a RIA store.

We brought that live just a few days ago, and we're not even close yet.

We hope to have all of the RIA stores in the U.S. populated with our terminal before the end of this month.

In addition to that, we're working on what it's going to take to sell our prepaid offerings into their 10,000 merchants, and on the flip side, we're trying to figure out (indiscernible) call it 300,000 points of presence which of those are applicable markets for it to become RIA agents.

So we're working through all that right now and, of course, we will do that after this transaction is closed, but we're putting in a lot of work right now.

And then the thing that you guys can't see that we do is after the announcement we've had, we've had now joint sessions between all of the different country heads of both RIA and Euronet and you just have to be excited about the optimism and cross sharing of ideas.

It's opened new doors with respect to discussions with major retailers, with banks in these markets and so we have to see these elements come to fruition, but it is certainly meeting or exceeding our expectations in terms of the early level of energy to take advantage of combining these businesses.

(OPERATOR INSTRUCTIONS).

Actually, I didn't realize the time.

It's after nine and I try to promise people that we'll only stay on for an hour, so why don't we just end the discussion now.

I'd like to thank anybody who's left on for their presence and hope to talk to you again here in a couple of months with our next release.

Thank you very much.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you all for your participation.

All parties may disconnect now.

Thank you.