Euronet Worldwide Inc (EEFT) 2009 Q1 法說會逐字稿

Greetings, and welcome to the Euronet Worldwide first-quarter 2009 earnings conference call.

Today's conference is being recorded.

(Operator instructions.)

It is now my pleasure to introduce your host, Mr.

Jeff Newman, Executive Vice President and General Counsel for Euronet Worldwide.

Thank you.

Mr.

Newman, you may now begin.

Thank you, Connie.

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

We will present our results for the first quarter of 2009 on this call.

And to do that we have Mike Brown, our CEO; Rick Weller, our CFO; and Kevin Caponecchi, our President, on the call.

Before we begin, I'd like to remind you that statements made on this call that concern Euronet or its management's intentions, expectations or predictions of future performance are forward-looking statements.

Our actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors affecting our business, including current conditions in world financial markets and general economic conditions, technological developments affecting the market for the Company's products and services, foreign exchange fluctuations and changes in laws and regulations, including immigration laws.

These risks and other risks are described in the Company's filings with the Securities & Exchange Commission including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.

Copies of those filings may be obtained by contacting the Company or the SEC.

Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such update under any circumstances.

Now it's over to you, Rick.

Jeff, thank you.

And welcome, everyone.

I'll start off on slide number five.

For the first quarter 2009, the Company delivered revenue of $233.7 million, adjusted EBITDA of $29.7 million, operating income of $9.7 million, and cash earnings per share of $0.31.

The year-over-year decreases in these results, other than the increase in cash EPS, was almost entirely driven by the change in foreign exchange rates resulting from a significant year-over-year strengthening of the US dollar to most all other currencies.

On a constant dollar basis year-over-year revenues would have improved 15%, adjusted EBITDA 10%, and adjusted operating income 23%.

I'll talk more about the constant dollar results in a few minutes.

Our cash EPS of $0.31 exceeded our guidance of $0.27 largely as a result of certain cancellation fees recorded in the first quarter 2009.

For purposes of clarity, approximately $900,000 of the $4.4 million termination fees was expected when we gave our $0.27 guidance.

The outcome of negotiations related to the remaining $3.5 million was not known until after we released our guidance in late February.

In an attempt to clarify the recurring operating income, we have also presented our adjusted operating income.

The items excluded in arriving at adjusted operating income were the $9.9 million in additional non-cash charges related to the second step accounting process for intangible assets, the $4.4 million in cancellation fees recorded as income in the first quarter 2009, and the $3 million in fees expensed in the first quarter 2008 related to our interest to acquire MoneyGram.

If we now move to slide number six -- on slide six we illustrate quarter-over-quarter transaction growth.

Again this quarter the business posted growth in transactions.

The Prepaid segment posted a 10% transaction growth and, as you can see in the chart, the EFT transactions year over year declined slightly, all related to the transactions of the terminated contracts we discussed.

However, on a pro forma basis, if the transactions related to the terminated contracts were excluded from last year's first-quarter stats, the EFT segment's transactions would have grown 14% year over year, reflecting the fundamental transaction growth in the segment and market.

Now on to slide seven.

In the first quarter we have processed approximately 4 million money transfers.

This represents transaction growth of approximately 6% year over year.

You can see in this chart how the business continues to grow through transfers sent to countries other than Mexico.

I think this clearly illustrates the continued mix shift to markets other than Mexico, which are growing faster and more profitably.

Let's turn to slide eight.

Slide eight includes a review of our segments' first-quarter results as reported compared to last year.

Consistent with our discussion in the segment results last quarter, we included on the next slide the results adjusted for the effects of FX, the second step impairment charge adjustment, contract termination fees, and the MoneyGram acquisition-related cost incurred last year.

I believe the adjusted views give you a cleaner understanding of the business.

Let's go to the next slide, please.

Now, as you can see here on slide nine, EFT revenues grew by 9%.

And, again, this slide illustrates the adjusted revenue op income and EBITDA on an adjusted FX basis.

You may recall that the FX rates changed materially this quarter versus last quarter.

So EFT revenues grew by 9%, while adjusted operating income and EBITDA increased by 8% and 2%, respectively.

You can see here how the terminated contracts impacted the profit stats.

Just as how adding large contracts can leverage the profit numbers, the loss of contracts works equally the other way.

I would also like to clarify a sentence in our press release where we said that since March 31, 2008 either expired or terminated contracts reduced our ATM count by 4,100 machines.

You may recall that in the second quarter of 2008 we reported 2,400 machines related to the expiring UK contract, and in our fourth-quarter 2008 results we discussed the other 1,700 ATMs related to terminated contracts.

To be clear, there have been no additional terminations in this first quarter.

Prepaid revenues, adjusted operating income, and EBITDA grew by 16%, 33% and 24%, respectively.

These strong first-quarter results followed similarly strong results reported in the fourth quarter 2008.

The growth was the result of expanded product offerings, taking advantage of competitor weaknesses, and leveraging the supporting cost structure.

Money Transfer revenues, adjusted operating income, and EBITDA grew by 9%, 5% and 6%, respectively.

The revenue growth was driven by transactional growth, principally in non-US markets, while the margin contraction was the result of higher payout correspondent cost stemming from lost volume discounts in Mexico.

Let's now move to a few comments regarding our balance sheet.

Let's go to slide 10.

Since the 2008 year end, our balance sheet changed largely as a result of two key factors.

One, approximately $20 million in cash was used to repay debt; and, two, the adoption of a new accounting principle.

The repayment of debt is fairly self-explanatory.

On the other hand, the restatement of the 12/31/08 balance sheet isn't.

Many of you may know that in the first quarter, companies that had previously issued convertible bonds were required to assign a portion of the debt to stockholders' equity for the estimated value of the conversion feature.

For Euronet, this resulted in shifting approximately $31 million of debt to stockholders' equity.

The decreased debt then must be accreted back to the principal amount through the first-put-call date.

It also resulted in approximately $2.4 million more non-cash interest expense in the first quarter 2009.

In this slide you can see that we present a couple of our debt ratios on a last-quarter annualized basis.

Our leverage ratios increased slightly due to the first-quarter seasonality and the foreign currency fluctuations.

We will continue to have a strong balance sheet -- we continue to have a strong balance sheet through this difficult economy and we will continue to improve our leveraged position.

Now to Mike.

Next slide, please.

Thank you, and hello everyone who have joined us on the call or on the Web today.

Before we move into our segment discussion, I would like to make a few comments regarding our first-quarter 2009 results.

The declines in foreign currency exchange rates, FX, against the US dollar were significant year over year, as Rick mentioned.

And I'll point out that while most of the FX decline happened in the last four months of 2008, we did see continued FX decline in the first quarter of this year, albeit at a much slower rate.

Consequently, this will be a similar theme in our second- and third-quarter results of this year, assuming currency rates remain the same and relatively similar to current levels.

In our press release and the slide presentation we have presented the results both on as as-reported and an adjusted-for-currency basis to provide a comparative view.

For a more meaningful discussion and to better help you understand the fundamental growth in our three business segments, I will discuss our results adjusted for currency in the next few slides.

Aside from the currency challenges, the loss of certain contracts in the EFT segment, which we discussed in the fourth quarter, and the slower growth in the Money Transfer business due to the economic slowdown, are two other important factors to consider when comparing our year-over-year results.

On the other hand, Prepaid continued to take advantage of market opportunities and posted very strong results.

In summary, we delivered on our Q guidance as expected.

Please move on to the next slide, slide number 13, actually.

Here we've presented our EFT results on an as-reported basis.

As indicated in my earlier comments, I'll focus my discussion on the FX-adjusted results, so, if you wouldn't mind, move on to the next page.

Slide number 14 -- as Rick mentioned a few slides ago, if adjusted for currency and contract termination fees, EFT's first-quarter 2009 revenue improved by 9%, while adjusted operating income and EBITDA decreased by 8% and 2%, respectively, year over year.

I love this business's ability to leverage profits from adding large contracts.

But it can also have the opposite effect when you lose a contract, as evidenced by the difference between our revenue and our profit growth this quarter.

As previously discussed last quarter, these operating profit declines are the result of lost operating leverage related to certain terminated contracts.

On a positive note, we continued to renew contracts and have successfully renewed all significant contracts that are due to expire this year, 2009.

With regard to our business highlights, we signed the network participation agreements with Bank BGZ, a leading retail bank in Poland, and Ukrsibbank, the fourth largest bank in Ukraine, which is owned by BNP Paribas Group out of France.

We are currently live with Cashlink Bangladesh, or CBL, for six banks and 48 ATMs.

We have a 10% equity partnership stake in CBL, which provides shared ATM network and outsourcing services for banks in Bangladesh.

To date we have received a good return from our relatively small investment through software sales and related services agreement with our Indian EFT business to support the launch of this initiative.

We are exploring new opportunities with CBL to further develop this partnership.

Move on, please, to slide number 15.

Our Cashnet shared ATM network continues to strengthen our value proposition among Indian banks and their customers.

We processed approximately 150,000 transactions per day on Cashnet in the first quarter 2009, which translates into a whopping 100% transaction growth year over year.

In a market which has approximately 35,000 ATMs for 1.1 billion people, our shared ATM network continues to play a significant role in helping Indian banks quickly provide their customers access to a larger network of ATMs with limited or no capital spend.

Our ITM software out of Little Rock -- their team there continues to add new customers, as evidenced by our Q1 wins including CBL Bangladesh, while expanding our service offerings to existing customers.

For several quarters now, the Reserve Bank of India's restriction on off-site ATM deployment has not only impacted our ability to roll out ATMs from our contracted backlog for our bank customers, but it has also hindered those banks' ATM expansion plans.

However, as recently announced -- and you might have seen this in the press -- the Reserve Bank of India has given commercial banks in India permission to deploy offsite ATMs without their prior approval.

We believe this signals a significant change within the Indian banking industry, and are cautiously optimistic that this ruling can bring about some much needed changes in the advancing of the country's retail banking system, which has one of the lowest ATM penetrations amongst developing countries.

For example, there are approximately 30 ATMs per million people in India, compared to approximately 100 ATMs per million people in China and 370 ATMs in Central and Eastern Europe per million people.

So India has a lot of catching up to do.

This brings me to the end of our EFT discussions.

While there is not much we can do to control currency fluctuations, our teams are working hard to replace the lost contracts with new signings.

We are optimistic that our strong sales pipeline and our ATM backlog of approximately 1,400 ATMs will enable us to address this challenge.

Please move on now to slide number 17.

Just like in our EFT discussion, I'll cover our FX-adjusted Prepaid results and business highlights in the next slide.

Slide number 18, please.

Adjusted for currency, our Prepaid revenues increased by 16%, while our operating income and adjusted EBITDA improved by approximately 33% and 24%, respectively, outpacing impressive revenue growth.

The strong year-over-year improvements are supported by our sales momentum in primary markets where we continued to win accounts from weak, or weakened, competitors and at the same time we're retaining our key existing accounts.

As well, we are seeing increased contribution from non-wireless products.

On slides number 18 and 19 you'll find a number of business highlights from the first quarter, which we expect will further contribute to our growth in the prepaid segment.

In the interests of time I won't go through every highlight, but I will address a few.

We renewed major contracts including the Post Office in the UK, Rossmann in Germany, and a number of well known fuel retailers across Poland, New Zealand, and the UK.

We expanded our presence in Radio Shack locations in the US from 3,000 to 4,200 stores.

And we continued to expand our large retailer network with new wins in Italy, Australia, and Spain for approximately 2,000 stores in total.

Next slide, please, slide number 19.

Apple iTunes continues to be one of our leading non-wireless product offerings.

With the signing of distribution agreements in Italy and New Zealand we now distribute iTunes in 10 countries.

We signed an agreement with Sisal, a bill payment aggregator and lottery company in Italy, to process utility bill payments across supermarkets and major retailer locations.

Our US Prepaid business was ranked number one in a brand preference study based upon responses from 65 convenience store chains across the country.

Before my closing comments, I would like to address the upcoming regulatory initiative in Europe.

Many of you are already aware of the November 2009 implementation of the European Union's Payment Services Directive, PSD.

The Directive aims to make it easier for processors such as Euronet to conduct business across the European Union under a single license, thereby reducing our exposure to several different regulators and improving our operating efficiency.

Additionally, it also will enable us to market a variety of products in multiple countries through different types of retail channels that were not available to us earlier.

We are excited about these opportunities presented by this regulatory initiative, and are working to secure the PSD license.

In summary, our Prepaid teams continue to take advantages of opportunities afforded by the current market environment.

A combination of our Prepaid wireless and non-wireless product offerings, and the breadth of our retailer network continues to nicely benefit our bottom-line performance on a constant currency basis.

Now we'll move on to our Money Transfer discussion on slide number 21.

You can see here the numbers for our Money Transfer highlights as reported for the first quarter of 2009.

Next we'll move on to slide number 22.

Similar to the fourth quarter, we have highlighted three important performance indicators of our business.

For the first quarter, non-US-originated transactions increased by 23% over prior year, while revenues improved by 26% adjusted for currency.

The growth is highly commendable considering the current economic environment.

As expected, we continued to experience challenges in the US-to-Mexico corridor.

Transactions and revenues declined by 13% and 14%, respectively, year over year.

On the other hand, we continued to see transaction growth in our US-to-non-Mexico corridors, which increased by 10%, while revenues increased by 7%.

Our first quarter 2009 Money Transfer results, adjusted for currency and impairment charges, resulted in year-over-year improvements in revenues, adjusted operating income, and EBITDA of 9%, 5%, and 6%, respectively.

While the continued weakness in the Mexico corridor impacted our results, I'm very pleased to see continued double-digit growth in volumes and profits from non-US markets, which contributed to the year-over-year improvements in our Money Transfer business.

Additionally, our teams continued to expand our share and profits from non-US markets.

While 35% of our total transfers are from non-US markets, these transfers accounted for approximately half of our total gross profits.

Slide number 23 and we'll wrap this up.

In summary, you can see that our cash EPS of $0.31 in the fourth -- in the first quarter of 2009 did exceed our guidance of $0.27, largely as a result of certain contract termination fees.

Our business posted double-digit growth in revenues and profits year over year on a constant currency basis.

That is amazing to me, based upon the economics and the environment out there, a commendable achievement.

The current economic downturn presents challenges as well as opportunities in all three of our businesses.

And I think I've mentioned this to you on prior calls.

Primarily in our Prepaid segment we have continued to increase our market share over our competitors.

Shared ATM networks are popular now with banks looking to provide their customers access to a large network quickly and at a cheaper cost than doing it all by themselves.

Our Cashnet shared ATM network in India is one such example, where we continued to see transactions increase quarter after quarter after quarter.

We continue to see growth in volumes and profits from our non-US-originated money transfers.

And to put this in perspective, 35% of our total transfers are growing at 23% and they contributed approximately half of our total gross profits in this segment.

Overall, a good quarter and I would like to thank our teams worldwide for their continued commitment to our business.

And, finally, we expect that our second-quarter 2009 adjusted cash earnings per share from continuing operations to be approximately $0.29, assuming currencies remain stable through the end of the quarter.

This concludes our presentation portion of the call.

And now we would be more than happy to entertain your questions.

Operator, would you please assist us?

(Operator instructions.) Anurag Rana; KeyBanc.

Good morning, everyone.

Congratulations on a good quarter.

Mike, I just wanted for you to remind us how things are going in China and when can we expect the increase in ATMs over the next how many months?

I would be happy to answer it, but I think a better person to answer it would be Kevin Caponecchi, our President, who just returned from two weeks in Asia.

And he can give you kind of the up to the date updates.

So, Kevin, please?

Yes.

So China, as you know, has been a frustrating story for all of us.

The Olympics happened last year.

So we anticipated a slowdown in the third quarter, but we also anticipated a pickup in the fourth quarter, which didn't happen.

So basically there was half a year where we didn't see anything.

But the goods news is, is in the first quarter of this year we did see a pickup, although modest.

But we are now deploying ATMs.

We deployed a little under 50 ATMs in the first quarter this year.

And we shifted our strategy from focusing on China Postal's headquarters to really working at a branch level.

And the result of that has been we're in negotiations with three new branches of China Postal to deploy ATMs.

We signed an agreement in the first quarter with Postal Shanghai to deploy ATMs in Shanghai.

And China Postal in Beijing has initiated a program to initiate 90 self-service branches across Beijing.

So in total, I feel that this will be a year -- I'm cautiously optimistic that this will be a year where we start to see some deployment and growth in China.

Oh, great.

Thank you.

And have you seen any change in sentiments from foreign governments now?

Are they getting more protectionist in the nature of their dealing with foreign companies?

No, actually our -- particularly in the EFT segment, I think you saw a little theme on some of my comments.

This environment has caused the governments to go back to the banks and demand that they change some of their kind of evil ways, you know?

I mean, they've been asked to change their practices to be more cost effective, save money, cut costs.

And this falls so beautifully right into our hands.

Kevin, do you have some extra comments?

The other comment I'll make is in India.

The recent decision by RBI to release the rules on the deployment of offsite ATMs will in particular help the foreign banks, because the rules in India still prevent foreign banks from buying Indian banks.

So the one way that a foreign bank can expand is by increasing their reach to consumers.

And a key way to do that has been through ATM deployment.

And they've been restricted by the RBI to do that.

With the recent lift of restrictions, the foreign banks that we work with are looking to expand aggressively in India.

So we're cautiously optimistic.

And we have signed -- Kevin, correct me -- I think just about every foreign bank that's got retail presence in India [except one.]

100% are us.

Or, 100% are us.

So for us this RBI announcement -- we're again use the term cautiously optimistic, but it's the best darn news we've heard in two years.

More than three-quarters of our backlog in India today is related to foreign banks.

So we expect to be able to deploy that and hopefully add to it.

And we were frustrated, as were they, because RBI basically didn't allow them to expand.

Oh, great.

Thank you.

And lastly, is there -- should we expect all the free cash flow generated now to be used to pay down debt, or can we expect any acquisitions this year?

Well, Anurag, first of all, you know that we do have a responsibility to pay down debt, so we'll continue to do that, especially on the convertible debt.

With regard to acquisitions, I don't think that it's wise to ever speculate on whether we would or wouldn't.

We continue to see opportunities out there.

We've always got candidates in front of us.

It's just a matter of whether or not those appropriately fit within our strategy, and the price is something that we can make work that fits within our return expectations and is a good use of our cash, also balanced with what the total capital markets are.

The banks are becoming a little more open to lending and providing additional debt capital, but it's still coming at a very high price.

And so you just have to balance all of those circumstances, whether it's strategy, return, available capital and alternative uses of that money.

So I'd make no predictions at this time.

Thank you.

And I'll add one extra quick -- people ask about acquisitions all the time, because there was a time in our past where we were quite acquisitive.

I think we purchased something like 16 companies across four or five years.

But the reality is we haven't purchased a company of any kind of significance -- we've purchased one company in the last three years, which is RIA.

I mean, the reality is we've had a couple little things go on, real small ones.

But the reality is we haven't, because of the markets, we haven't seen anything that's been a good buy.

And at the end of the day we've got to buy something that is accretive to you and gives you a return on your investment, because you are our shareholders.

Franco Turrinelli; William Blair & Company.

Good morning.

Hey, just a couple of quick things I wanted to just make absolutely sure.

So when you give us the adjusted revenue numbers, Rick, are you taking out the $4.4 million of the termination fees from revenue as well as from operating income?

Yes, sir.

If you look at that schedule that we put in there that says it's adjusted as well as for pro-forma adjusted for FX, that excludes the termination fees and it adjusts the FX as if it was the same rate as last year.

Okay.

So obviously, so it's minus the termination fees, plus the forex impact, is the way to think about it?

Exactly.

And it also took out of there the charges from the first quarter of last year, so you get a pretty clean view of year over year.

Yes.

Great.

That's very helpful.

Mike, the renewals in Prepaid, that's terrific.

That's an impressive set of renewals.

Can you comment maybe a little bit on the terms of those renewals, what's happening to the contractual arrangements, how all of that stuff is playing out, particularly given the issues your competitors are having?

Now, we -- did you -- these weren't renewals in Prepaid.

Oh yes, yes it was, the Post Office, and so forth.

They've basically, margins have basically been flat.

Maybe that's because, you know, really not much has changed as far as our economics at all.

They've been very -- you kind of hate to say this, but almost pleasant renewals.

Similar terms.

Yes, similar terms.

Good.

Well, that's [always] encouraging.

And then finally, on the PSD license, can you kind of give us a sense of what you need to do to get that, when we should -- is this relatively straightforward?

Is this something that's going to be very expensive?

Just give us some more help on the PSD license.

It is straightforward, kind of.

I mean, because they're just now issuing them for the first time and that's one thing that we've gathered, is the PSD -- the legislation is in, but now each country has to kind of conform their own legalities around that.

But it doesn't appear very expensive.

It appears as something we can definitely do and we're doing pretty easily.

And I think another thing it does give us is, this really gives advantage to the bigger players.

I mean, right now if you're a little Joe the money transfer company and you want to send money back to your home country, you deal with the regulations just within your country.

With one big kind of fell swoop, all of a sudden we're licensed kind of everywhere.

And so that is a tremendous benefit for a large company who wants to expand their footprint across Europe.

So we see this as a real benefit and doesn't -- we've been engaged in this for many months now.

We've been watching the legislation play out, so we're right on top of it.

Doesn't look like it's going to be too expensive.

And we're going to take full advantage of it.

Does the PSD license in any way reduce the value of what you're doing for OMV?

Oh, no, no, no.

That's a whole different game there.

It's a, yes, it's a totally different game.

So --

I mean, what we've created is a data processing center that takes advantage of the SEPA requirements.

It's not -- the legislation for the SEPA legislation's been there for four years.

We're really the first people to have kind of a back-office reporting system, the whole shooting match, to wrap around a retailer and give them a solution.

If anything, Franco, it could even be more efficient for us than the OMV process, because under that kind of license and depending on how we move forward and what parts we get, it could include acquiring rights.

And right now, as you know, we use a partner in that OMV deal to accomplish this multi-country acquiring process.

So, it could just make our process a little bit cleaner and provide a better product even for our customers.

So, Kevin, can you give us an OMV update?

Yes.

We've deployed five countries to date.

The good news is the three biggest countries -- Austria, Germany, and Romania -- will be deployed this year.

We're on target to initiate Austria in June/July.

So we're on plan.

And your previous comments about ramp-up in revenue or ramp-down in expenses still apply?

That's right.

And the good news is transaction volumes have been a little -- exceeded the forecast, or what we've deployed today.

And those three big countries account for more than three quarters of the total transaction volume in this contract.

So when we bring those live we're going to see a lot more revenues come our way.

Thank you very much.

I'll get back in queue.

(Operator instructions.) Robert Dodd; Morgan Keegan.

Hi, guys.

Just kind of a silly -- going back to PSD for a second, I mean, I can see how that's obviously a big opportunity in Money Transfer because it changes the [legs] and to a degree in Prepaid, and even in ATM.

The one question I have is what's the risk in, for example, Germany with -- where you own the network and this change in legs could make it easier for competitive offsite ATM networks to actually start up.

I mean, what's your risk there and is there any consideration -- I realize it's very early -- given to perhaps selling your owned ATM business in Germany?

Well, right now, Robert, we have several competitors that are offsite deployers in Germany.

So we're not the only guys playing in this market even today.

The only thing that this might change is, is that we wouldn't require a sponsor bank.

And so for us what that means is we'd be able to keep 100% of those revenues rather than splitting them with basically kind of a logoed sponsor bank.

So for somebody who's already set up, if you want to turn that switch you see immediately greater revenues kind of the next day.

So I don't think it's going to cause more competitors to come in sooner.

At the end of the day this game is all based upon great locations.

We've been doing this for seven or eight years now.

We've got the best, some of the best, locations in Germany.

And we recognize -- even though we're adding ATMs there, the next tier of sites is less exciting to us than the tier of sites that we have today.

So we've got these things locked in for a long time and I don't really see much of a change.

Okay.

Got it.

Just then on the pipeline, obviously I know it's very early with the rules only just changing in India, but can you give us any -- and you've got a backlog to install there -- but any preliminary discussions or incoming phone calls from other banks in terms of what they're looking to do, expanding their footprint, given the rules have changed?

This is Kevin.

Early days -- the foreign banks are -- we are in some dialogues with some foreign banks that have expressed interest in accelerating or expanding what they're doing.

But it would be too early for me to say that we're going to -- how that's going to play out.

Okay.

Got it.

And then just one final one -- on the general pipeline in the EF- (technical difficulty) on ATMs.

Obviously you lost some in Q4.

Q1 you signed a number of deals.

I mean, can you give us an idea of, maybe not specific numbers, but where -- what you expect the pattern to be in terms of ATM deployments and ATMs managed, for lack of a better term, as we go through the year and kind of where you expect to be at the end of the year?

Well, I think what -- and Kevin, you can add to this -- I mentioned in the last call that the number of serious discussions or negotiations that we are in right now with respect to do more outsourcing contracts are probably threefold where they were this time last year.

We've closed a few of those things.

We think we've got several that are imminent, but none of these deals are done until they're done.

So we don't announce them and we can't -- we don't want to lead your expectations awry.

But the ones that we're signing in the first quarter are exactly the ones that are going to start generating revenue for us towards the end of Q3 and into Q4 so we can walk into 2010 with a really strong new set of numbers.

And it seems like we're tracking right according to that.

Then you couple that with the positives that we're seeing in Asia as Kevin announced.

I mean, it's the first -- it's funny.

Within two weeks we had two good things happen in each of our two big countries, China and India, and that we can kind of maybe release some of that logjam.

So, anything else I've forgotten --

No.

I think we'll deploy several hundred ATMs out of our backlog in Asia this quarter -- or ne- -- yes, the current quarter.

And I think, again, Europe is dependent somewhat on getting some of these deals closed, which we feel pretty good about.

The other comment I should have made earlier around India that's fairly exciting is that there was a change by the RBI at the beginning of the month of April to eliminate all fees associated with a transaction to consumers.

The result has been quite a big acceleration of transaction volume in Cashnet in India.

And so we, again, remain also optimistic that that will continue through the year.

Got it.

Thanks, guys.

Bob Napoli; Piper Jaffray.

Good morning.

On the Prepaid business, the transactions this quarter were, while up nicely year over year, were down 6% sequential quarter.

And I know there's some seasonality there, but it was down 3% last quarter.

I was wondering if you could talk a little bit about are you seeing economic effects?

What caused the quarter on a trend basis to be down this much?

Well, you're talking -- they're not down year over year.

They're only down sequentially (naudible.)

Yes.

But usually like they're down only a couple percent, and they were down a fair amount more.

Is that -- ?

Yes.

Actually, what you see -- seasonality is a big thing for us in Q1, particularly in this line of business.

As an example, when we have these multi -- we have lots of these multi-store chains.

And as an example, a Tesco might have 25 lanes of cash registers.

And they're all lit up in December.

So we would have done a transaction in Q4 and the way our computers generate the results is we'll say okay, we had X amount of terminals live that quarter based upon terminals that actually have processed a transaction.

When you get to Q1, there's just a whole lot less holiday traffic and so people like Tesco and Walmart and so forth don't light up as many lanes.

And so our number of terminals actually goes down.

And that was the same thing -- I think somebody had a very similar question at this time last year.

And so it doesn't -- for us seasonality is really all of it with respect to the number of terminals and so forth, and number of transactions.

What level of transaction growth do you think you can attain this year and next year in the Prepaid business?

We don't really project that for you, but if you just look at growth rates that we've been having over the last couple of quarters, they are very impressive.

And then you couple that -- yes, as Kevin just whispered to me, we're adding more and more new products.

And all this means is we've got this cash collection infrastructure which, when we originally envisioned it, it was basically to collect money on behalf of mobile operators only.

That was our [killer app.] And more and more of our products now are not -- we have added more and more products, so that, depending on how you count it, somewhere between 8% and 18% of our transactions in Prepaid are not mobile products.

And so, that's just brand newfound, new growth for us.

And we will continue to see this as we're adding things like iTunes and gift cards and so forth across multiple markets.

Remember, too, in last quarter how we announced that we had won the bid for London's Congestion Charge?

This is really going to help our numbers in the London market for our UK numbers.

That will go live in October.

And so, second half of this year we're going to see a big boost on account of that contract.

Okay.

It's just, Bob, I mean right now our fastest growing segment is Prepaid and they're doing a very good job.\

Right.

No, I think you have tremendous opportunities there and I'm just trying to --

And you saw the leverage too between revenues and op profit, bottom line, great leverage.

I mean, your US business historically has been relatively small in Prepaid.

I mean, do you view the US market as a major opportunity?

Oh, yes, absolutely.

I mean, a couple things have happened here.

Much like overseas, we have one large competitor and a whole bunch of little guys.

And these little guys, most all of them are either struggling or technically bankrupt right now.

So it's just a question how all those cards will play out.

But we've been winning market share.

We've been getting great ratings from our customers, as I mentioned.

We've got a great relationship with Sprint and the [booth] guys.

We're adding more relationships all the time.

So US could be a very strong growth market for us for this year and next.

The PSD, you really didn't talk about Money Transfer opportunities for yourself very much, I didn't get the feeling.

Whereas you listen to Western Union and it's a pretty aggressive strategy based upon PSD.

Is there -- I mean, you talked about Prepaid, but not really about Money Transfer.

Do you have --

Well, I could prob- -- I don't -- I didn't listen to Christine's call, but there's no way we can be, or we would be, any less aggressive than Western Union.

The reality is PSD gives us an instant license effectively to all these European, these EU countries.

And rather than right now we have to apply for them one country at a time, have all thispaperwork and pain.

And now, with kind of one fell swoop, you get access to the entire marketplace over there.

So we can go into multiple markets a lot easier and quicker.

And we intend to, absolutely.

When do you expect to have the license?

Expected towards the end of second half of the year.

Look, I don't think they can be issued before November of this year.

Thank you.

Yes.

The other thing I was just going to mention is that the other opportunity it offers is a more consistent operating approach across our different countries, as opposed to having to have a bunch of different processes and regulatory regimes that we deal with on a country-by-country basis.

So it just gives us that opportunity to be more consistent, be more efficient in our operation, et cetera.

And that just means lower cost to get into a market.

You know, end of the day it's economies of scale for us.

Thank you.

Gil Luria; Wedbush Morgan.

Thanks.

It's actually [Nick Setian] for Gil.

Given the increasing importance of the non-US Money Transfer business, would you please give us some more color on specific geographies, perhaps areas that either outperformed or underperformed relative to your expectations going into the quarter?

We had -- well, first of all, our largest market is Spain, growing very nicely in a really rough environment there.

We must be stealing market share from others, because we're growing while the total number of transfers in that market are down.

I think we grew around 20-some-% last year, even though the Bank of Spain's numbers were down 7%.

So that says that we are growing at the expense of our competitors in that market.

We're strong -- our big countries that we're in in Europe are Spain, Italy, UK, Germany, France, Ireland.

And we're expanding in -- we've got a few smaller countries, Switzerland and so forth, and Belgium, that we're going into.

And we'll continue to do that.

Great.

Thanks so much.

[Klaus Von Stoderheim]; Deutsche Bank.

Hi.

I had one question.

You talked earlier about terminated contracts in EFT, and I was wondering how much of the total was that and what were the reasons for the termination?

And is that a singular experience or is there some sort of churn?

Well, we explained this a lot in the last quarter, but I'll give it to you real briefly.

We had basically we had four contracts that were terminated in the fourth quarter.

They were -- at least three of them were kind of extraordinary and surprising kinds of results for us.

The first one was, there was -- it was in India and we had a very large publicly-owned bank buying a medium-size bank and we were doing the ATM drive-in for the medium-size bank.

So they kind of sucked it all into there.

That's where some of our termination fees came from.

And the other two that were really extraordinary were the only negative result we've seen with respect to this economy in the EFT division.

Here we had two large Western European-owned banks who owned banks in Central Europe, actually both in Poland, who recognized that there balance sheets were in deep trouble.

They were trying to figure out some way to bring in more capital.

So they terminated our agreement with the thought that they would then send those transactions to a sister entity in their home country where they have an ownership with the full intention then of spinning off a processor entity, not a bank, and with the idea -- and then they own part of this entity.

And the idea was that they were going to sell this entity towards the end of last year to raise liquid capital to fill the hole in their balance sheet.

Unfortunately for them, this was unable -- none of these sales were able to be pulled off.

So they ended up, as we talked to the local guys, they ended up pulling the contracts away and are now with an organization that is providing less service at a higher fee than we did.

So it wasn't a real bright move on their part, but it was strategic and it was kind of unique.

And it was kind of the first time that something like that's ever happened to us.

Okay, thanks.

George [Silafas]; Gulf Stream Asset.

My question has been answered.

Thanks.

At this time, with no further questions in the queue, I'd like to turn the conference back over to your presenters for any additional or closing remarks.

Well, if that's all we have for today I'd like to thank everybody again for taking the time to listen to the call.

And I look forward to talking to you in about 90 days.

Thank you.

And this concludes today's conference.

We thank you for your participation.