Euronet Worldwide Inc (EEFT) 2011 Q1 法說會逐字稿

Greetings and welcome to Euronet Worldwide first quarter 2011 earnings conference call.

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

Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions) As a reminder this conference is now recorded.

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

Jeff Newman, Executive Vice President and general counsel for Euronet Worldwide.

Mr.

Newman, you may begin.

Thank you, Tyrone.

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

On this call we will present our results for the first quarter 2011.

We have Mike Brown, our Chairman and CEO, Rick Weller our CFO, and Kevin Caponecchi the President of Euronet Worldwide on the call.

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

Statements made on this call that concern Euronet's or it's management's intentions, expectations or predictions of future performance are forward-looking statements.

Euronet's actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors including conditions in world financial markets and general economic conditions, technological developments affecting the market for the Company's products and services, foreign currency exchange fluctuations, a company's ability to renew existing contracts at profitable rates, changes in fees and payable for transactions performed for card carrying international logos and changes in laws and regulations affecting the Company's business including immigration laws.

These risks and other risks are described in the company's filings with the Securities and 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 these filings may be obtained via the SEC's Edgar website or 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 updates under any circumstances.

The Company regularly posts important information to the investor relation section of its website.

Now I will turn the call over to Rick Weller, our CFO.

Rick?

Thank you, Jeff.

Welcome, everyone.

I will begin with the first quarter results on slide 5.

For the first quarter 2011, Euronet delivered revenue of $262.6 million, operating income of $17.2 million and adjusted EBITDA of $33.6 million.

Cash, earnings per share for the first quarter 2011 was $0.30 cents, $0.01 cent less than our guidance of $0.31.

The penny difference was the result of a higher effective tax rate and slightly higher than expected impact of the German ATM rate change effective January 15, 2011.

Had it not been for this, we would have been a penny better and hit our guidance.

I will discuss more specific aspects of the operating results when I get to segment reporting.

Let's move to slide six please.

On slide six you can see a three-year trend in transaction growth in our EFT and ePay segments.

In the first quarter 2011, the EFT segment posted transaction growth of 10% and the ePay segment posted 22%.

In EFT transaction growth was driven by growth in Poland, China and India.

In India, our cash net network continues to deliver a very strong transaction growth with the number of average transactions per day growing more than 30% in the first quarter 2011 over the previous year.

In our ePay segment we achieved strong transaction growth from the Middle East, India, Italy and Germany.

First quarter 2011 results also included transactions for ePay Brazil which were not included in last year's results.

This transaction growth was partially offset by declines in the U.S., Australia, UK and Spain where economies continue to be quite challenged.

And to a lesser extent, some up take in post pay plans.

Next slide please.

On slide 7 we show quarterly trends in Money Transfer as well as the mix of U.S.

and international originated transactions over the last three years.

The chart on the left shows total transaction volumes through Money Transfer segment including non-transfer related products.

Total transactions increased 10% in first quarter 2011 versus the same quarter last year.

Within that mix non-transfer related transactions now account for 12% of the total Money Transfer transactions.

Non-Money Transfer services include, for example, check cashing services, bill payment, currency exchange and RIA's prepaid debit cards.

Mike will speak in greater detail about the non-Money Transfer products later in this presentation.

You may recall last quarter, when we mentioned that because Mexico constitutes less than 20% of the total transfers now, we were going to move away from calling out Mexico and commenting on the growing significance of products other than Money Transfer.

To that end these charts now include all transactions.

The comparative prior periods have been restated to include all such non-Money Transfer products.

The chart on the right shows total transactions split between U.S.

and non-U.S.

and the locations.

You can see the positive trends.

International Money Transfers account for 43% of total transaction volumes in the first quarter 2011.

Up from 35% in the first quarter 2009.

Our strategy remains focused on growth in more profitable corridors of Europe, Africa, Asia and Latin America.

Next slide, please.

On slide 8, we review our reported results for the first quarter 2011 compared to the prior year.

Let me start by pointing out that we did not see significant impact due to foreign exchange rate fluctuations in the first quarter 2011.

We have included a schedule of the business segment results for the first quarter of 2011 compared to 2010 that have been adjusted for FX rates in the supplemental data located in the back of the presentation.

So all my comments are on reported numbers because constant dollar numbers are essentially the same.

Now to the segments beginning with EFT where revenues decreased 9%, operating income decreased 37% and adjusted EBITDA decreased 25%.

These margin declines are primarily attributable to reduced interchange fees in Poland and the reduced ATM fees in Germany offset by growth in ATM's under management, value added products and cost savings.

As noted in the press release, we experienced a slightly higher impact in the first quarter than we expected from the German ATM fee change largely the result of lower than expected surcharge acceptance rate.

This higher German fee impact has been fully considered in providing our guidance for the second quarter.

I will also remind everyone that it was May last year when the Poland interchange hit us.

So as we look forward to the second quarter, the year over year comparisons will become a bit easier.

For the ePay segment, revenues grew 7%, operating income grew 8% and adjusted EBITDA grew 9%.

In previous quarters we described the revenue impacts that resulted from an increased mix of transactions in markets that have lower rates of revenue per transaction.

These mix impacts continue in the first quarter of 2011 where transaction declines in some higher yielding markets like the U.S.

and Australia are offset by growth in lower yielding transactions in other markets like the Middle East and India.

The net impact of transactional mix change and the addition of ePay Brazil drove the 8% improvement in operating income for the quarter.

For the Money Transfer segment, revenues grew 13%, operating income grew 87% and adjusted EBITDA grew 24%.

As I stated on the prior slide the revenue growth was mostly attributable to international transactions where we benefit nicely from higher per transaction revenues.

The leverage of the transaction growth and the higher margin international transactions were the principal factors behind the double-digit operating increase and EBITDA expansion over last year.

As we said before, one of the real values of Euronet is the diversity of our products and markets.

The value of that diversity really shows through this quarter with the Money Transfer results.

This was a really nice contribution for Money Transfer.

Overall first quarter 2011 consolidated operating income was down 5% compared to last year, principally due to the Poland and German rate changes.

However, as we pointed out in the press release, had we not experienced such rate changes our operating income would have improved 18% year-over-year.

And finally, while not on this slide, I want to make a few brief remarks about tax.

As we reported, we experienced slightly higher tax expense.

This is the result of producing more operating income and higher tax rate jurisdictions such as Italy, Brazil and France, and less in low tax rate jurisdictions or jurisdictions where we have this shelter of net operating losses such as Poland, Spain and the U.S.

Accordingly, as in the first quarter, we would expect our cash earnings tax rate to move from about 28% to 30% to about 30% to 32% absent any legislated rate changes.

This updated view of tax has been fully considered in arriving at the $0.35 guidance you may have noted in the press release.

Now move to slide nine.

On slide nine you can see the highlights of our balance sheet.

There is only one key change, cash increased $33.5 million from the beginning of the year.

The increase in unrestricted cash reflects strong operating cash generation, timing on interest and tax payments, lighter capital expenditures and favorable working capital movements.

There are no debt obligations coming due in the near term.

Our revolver term runs through April of 2012.

The first put date on the $175 million convertible bonds is October 2012, and the $127 million term loan has an April 2014 maturity date.

As such we have no significant obligations for the next year.

That being said, we are considering some debt restructuring given the debt markets are becoming more and more attractive.

But we are in a good position in that we don't have to do anything for awhile and our current rates are attractive.

With that I conclude my comments on the financial results of the first quarter and will hand it over to Mike for further comment on each segment.

Thank you, Rick, and thanks everyone who has joined us on our call today or are on the web.

This has been a busy quarter and a quarter that we have seen some challenges such as the ATM fee change in Germany and the year-over-year Polish interchange rate impact.

But on the other hand, it really shows the continued growth and expansion of our Money Transfer business and other businesses.

Had it not been for the Germany and the Poland rate changes, Euronet's operating income and cash EPS would have yielded 18% and 13% growth respectively really illustrating the earnings growth prospect for our business.

To add an additional perspective to the Poland, Germany impacts, while we still have three quarters to go before we lap the Germany rate change we will largely lap last year's May interchange decrease in Poland.

Accordingly, the upcoming lapping is pretty evident considering our second quarter guidance of $0.35 against last year's second quarter cash EPS of $0.30, where we expect to see a 17% improvement year-over-year in Q2.

That improvement is made possible by many of the prior quarters and the first quarter's highlights that we'll talk about here as we go on to slide number 12 and beyond.

Please switch to slide number 12.

On slide 12 we reflect the EFT segment financial results on an as reported basis for the quarter.

Rick took us through the financial highlights for each of our segments a few minutes ago, so I will not repeat those comments here.

I do want to reinforce, however, that while the EFT results offer some challenges, the EFT management team has taken steps to improve the direct cost structure in leveraging our other emerging opportunities in Europe, Asia and the Middle East.

I will speak to some examples of these in the next few slides.

But jump over here now to slide number 13 where we have a significant list of accomplishments pertaining to new agreements for ATM expansion, outsourcing and network participation agreements.

You might remember over the last couple of quarters I've mentioned that we have been working on a lot of things that the pipeline of new deals has been quite robust, and this quarter is evident of us closing some of those deals.

So during the quarter we launched the first 30 ATM's on a shared Euronet ATM network in Romania with plans to deploy significantly more across the remainder of 2011.

In addition we are very pleased to announce the signing of a new sponsorship agreement with Citibank in Greece that enables us to deploy the first independent ATM network in that country.

We signed a five-year agreement with [Dena] Bank in Serbia for debit card issuing and ATM driving at 130 branch locations and our network participation agreement with [Alianz] Bank in Bulgaria is a 5-year deal in the first step of our strategy for Euronet's ATM network growth in Bulgaria.

We also signed an agreement with BCR Erste Bank Romania for ATM, POS and Value Added Services on 2,200 ATM's and across 17,000 points of sale.

We have new Value Added Service agreements with GE Budapest Bank in Hungary and with Citibank in the Czech Republic.

I am also very pleased to announce the agreement for Value Added Services at POS terminals of Attica Department Stores in Greece, one of the biggest department stores in Greece and one of our largest EPOS customers.

Moving to the Middle East and Asia, we won a brown label ATM deal with Corporation Bank in India for the deployment of 800 ATM's over the next 12 months.

We have not included these 800 ATM's in our backlog because they are our own [at-risk] machines.

And in China we secured a new order from postal Shanghai for a hundred ATM's to be deployed in this year.

I will go into more detail behind the ATM growth for the quarter the next slide.

Finally I would like to point out we signed several important ITM software agreements during our first quarter.

The first was a new three year deal with ABC Algeria for ITM software and driving ATM's and debit card management.

There were also three additional ITM software agreements with new clients in Iraq, Sri Lanka and Suriname each carrying a five year maintenance agreement.

As you can see this was an extremely productive quarter establishing new business for us in this segment.

(Inaudible) did a fantastic job.

So now let's look on page 14 and I will speak about our efforts in the first quarter to renew and extend contracts with existing customers and to sell new products and services throughout our ATM networks.

For contract renewals we expanded our agreement with [Tipotex Carter] Bank in Montenegro for Diner's Card cash withdraws on their bank's ATM's.

We also signed a three-year renewal with [C3] in the United Arab Emirates for driving ATM's, payroll card management and processing.

Before I discuss the new product section, I would like to pause for just a moment and talk about what we have been doing to better position the EFT segment as a business partner by building on our historical strength as a technology provider.

This segment has built a reputation and a brand identity on its ability to deliver the highest quality secure transaction processing capabilities across its network.

As we continue to deploy our value added services we see a natural opportunity to build a broader, more effective and mutually beneficial partnership with our banks, department stores and other retailers.

We have a unique ability to execute tactics and to help our partners market across our ATM network, and we believe we can be even more effective with increased focus as a part of being a business partner and not just a technological partner.

Related to this we picked up a couple of awards recently.

The first was the 2011 Hit Of The Year Award that we received jointly with NCR Polska for our work on automated deposit terminal network that we rolled out last year and we are adding a second customer to this, this quarter.

We also won the Most Innovative Hosted Class Services Award from Sisco for our work in developing hybrid class services that support our customers' needs for a more flexible pay-per-usage architecture model.

This has resulted in substantial savings mainly in our cross border offerings with OMV and is a very cost effective and efficient solution for the rest of the EFT business.

These are both good examples of what we are doing to develop solutions that meet the needs of our business partners.

As you can see on this slide, we signed a number of new agreements in the first quarter to include an agreement with Sky Cash Mobile for cardless cash withdrawals on Euronet branded ATM's and an agreement with the Mobile Operator Mediacom to introduce the first ATM couponing campaign on Euronet ATM's in Poland.

In addition, we launched an ATM based promotional prize redemption campaign with the Mobile Operator Plus on 2000 Euronet ATM's in Poland.

This was the first promotional action of its kind in Poland.

We rolled out bill payment functionality on 1200 ATM's with Raiffeisen Bank in Romania and we launched Value Added Services on approximately 460 ATM's with Raiffeisen Bank in Croatia.

We also launched Value Added Services on our Euronet ATM network in Ukraine with full roll out planned for the second quarter 2011.

During that quarter, the number of ATM's under management grew 8% versus the previous year to 11,055.

And at quarter end our ATM outsourcing backlog stood at 777 units.

We saw expansion of our ATM network in Europe, particularly in Poland, Romania, Croatia and Czech Republic, as well now in China and India.

In China we rolled out 105 ATM's in this quarter which brings the total ATM's under management in that country to over 900.

Now let's move on to slide number 16.

Here we reflect the ePay segment financial analysis results on an as reported basis for the quarter.

Again these numbers were (inaudible) let's jump onto to slide number 17 and talk about the business.

Here we have included on slide 17 some of the more significant agreements to expand our core mobile top-up business in several countries.

In Spain we closed a deal with a pharmaceutical distributor, [Jepharm], to include our services at their associated drug stores and points of sale, approximately 500 locations this year.

Initially the agreement included selling mobile top-up and could eventually include other non mobile products such as gift cards and gift boxes.

We have also launched a distribution of the your European Lottery Euro Million through the exclusive lottery services [LotterKargan].

This launch includes the pilot of 100 stores in three cities across Spain in March with expansions expected in May.

In Italy we launched an agreement with Lombardini Discount to sell our prepaid products in their 230 owned stores at a hundred franchise locations, and we have had continued success renewing our expanding other retailer relationships and partnerships in Italy, finding another 543 direct independent retailers in the first quarter raising the total number of active points of sale managed directly or through distributors in Italy to 7500.

Moving to the UK, during the quarter we signed and launched an MVNO agreement with QiComm and launched a service with phones for you Virgin Mobile.

This is a service where we provide data back to the mobile phone retailers that allows them to notify customers that they may be eligible for a phone upgrade.

We get a click fee for each upgrade message plus the benefit of the top-up load if the customer takes the offer.

We are looking at offering this service to retailers and other networks around the world.

In Germany we signed six new retailers to sell mobile top-up.

These retailers vary in size, but represent about 1,000 store locations in aggregate.

And it all adds up.

Finally we signed new agreements with three other mobile operators to support the sale of International Mobile Recharge which is the purchase of a mobile top-up in one country for a phone that resides in another country.

This gives our customers the ability to purchase mobile air time for their friends and relatives back home.

Moving on to slide number 18 we will speak about our expanding breadth of our non-mobile product offerings in the ePay segment.

Our product focus continues to evolve from mobile top-up toward the new higher margin offerings that include the distribution of digital content, on-line video games, transport and ticketing, bill payment services, prepaid debit and gift cards, as well as electronic payment services for lottery.

This ability is a value differentiator for ePay and allows us to continually expand our non-mobile product portfolio.

For example we signed a new distribution agreement with Starmax in Spain to launch their prepaid TV product to large retailers where we are enabling card activation and distribution.

In the UK we are expanding the distribution of the Microsoft office product which we previously announced with Argos, a large home ware retailer with 700 stores in the UK.

We also launched the Orange Retail pre-paid debit card in 430 Orange Retail stores in the UK where we are providing the activation and loading services.

We are becoming an important player in the distribution and payment processing for on-line video game product for a variety of retailers.

This quarter we won several contracts in Australia and Brazil including video game products.

[Being as] sensitive to the word gaming as we described it, you may be aware of some of the recent issues that have surfaced in the on-line gambling industry in the United States.

I will point out that we do not participate in the sale, distribution or enablement of on-line gambling services in the United States or any other countries where it is illegal.

And our payment processing and distribution agreements for the sale of on-line video game products have nothing to do with gambling products.

They are totally different products.

The problem is everybody uses that same word, gaming.

In Australia, we began additionally to distribute non-mobile products for our Australia MVNO with 4500 outlets across 10 different retail groups.

Wrapping up my comments on ePay, I will reference new signed agreements that we have now with three retailers in India to distribute both mobile and non-mobile content across our ePayments network in 1800 additional locations.

The non-mobile products include insurance protection on baggage theft that might occur while doing rail travel in India as well as the sale of anti-virus software packages.

This is another great example how we are leveraging cross selling between our business segment and, in this case, between the EFT retail network in India and the ePayment segment.

Now let's move on to slide number 20 and we will talk about Money Transfer.

As you can see with the results here on slide 20 I am very pleased with the performance of our Money Transfer segment this quarter.

This business has benefited from our continued efforts to expand the network of agents and payout locations which are continuing to divert [higher] revenue sources and promote steady growth in the segment results.

During this quarter we saw a 10% growth in transaction volumes to 5.3 million.

This is a very commendable growth, a real bright spot in our results this quarter.

Our non-U.S Money Transfer volumes grew at 18% and continue to be very important part of the growth equation for this segment.

On the next two slides I will go into a little bit more detail of what we are doing to further expand our network reach and support our continued transaction growth.

For now let's look at slide number 21.

We review that changes in our send and payout network, correspondence and locations in the first quarter.

Our Money Transfer Payout network reaches 132 countries and has 107,000 total tenant payout locations.

The team continues to actively manage existing agent relationships to optimize channel productivity as well as to pursue opportunities in new countries where we see the greatest potential for growth.

An example of that is Austria where we commenced operations in January.

It is important to point out that as our Money Transfer business grows internationally we are increasingly benefiting from the strong corridors in Europe and Asia.

We continue to focus on the areas that are driving more opportunity for growth and more profitable transactions.

And during this quarter we also launched 17 new correspondence in nine countries that included approximately 450 locations including agreements with BTB Bank in Armenia as well as JS Bank and Meezan Bank in Pakistan.

In addition to what was launched during this quarter, we signed agreements with 26 new correspondents.

These are significant agreements that cover approximately 5,000 more locations to be launched in the second quarter of this year.

In Europe, this includes an agreement with Novabanka in Bulgaria with over 3100 locations and in Asia with Habib Bank in Pakistan with over 1400 locations.

I am very pleased with the progress made in our Money Transfer segment this quarter.

So now let's bring together some points on slide number 22 and what we have been doing relative to our Money Transfer segment.

As I mentioned on a prior slide, this quarter we saw a positive increase in our consolidated transactions and revenues.

A 10% growth in total transactions and a 13% growth in revenue.

It is all a function of our expertise in growing our network.

By adding 10 countries and expanding our agent network we continue to see growth.

We are pleased with this continued growth and the international Money Transfers which now account for 42% of all transfers up from 39% a year ago.

These transfers are considerably more profitable relative to U.S.

transfers and continue to offer more expansion opportunities to us.

We have talked about the growth in non-money Transfer services sold through our Money Transfer network.

These products include for example prepaid debit card, bill payment services and check cashing services.

We are seeing good response from our customers for these types of products and are now included in the transaction volumes of our consolidated results.

We are also making improvements to our network to support the sale process for non-Money Transfer services.

During the quarter we deployed a software solution across our European transfer network.

I will describe kind of as a channel enablement, an improvement that brings more information to the desk tops of our agents and thus are more quickly and easily in support of the sales process.

Ultimately it allows our Money Transfer agents to work smarter and quicker and they sell more transactions as a result.

As I have indicated on the slide we have now enabled our network infrastructure to sell these services in Europe with worldwide availability next quarter.

Finally I would like to update you on the status of our agency agreement with 7-Eleven that covers approximately 5,000 retail locations in the U.S.

We announced this deal at the end of last year and began adding a significant number of locations this month, April.

7-Eleven has indicated that they are pleased with the initial roll out with data suggesting that the channel is attracting a new profile of customers for RIA.

Needless to say we echo their sentiments and look forward to the future of a great relationship with 7-Eleven as a channel partner.

Now let's move on to slide number 23 for our overall summary and outlook.

Just to boil it all down, we posted cash earnings per share of $0.30 in the first quarter of 2011 compared to our $0.31 guidance.

In Poland, the interchange fee and the German ATM rate change were the primary factors behind our year-over-year decrease in the EFT segment.

All three business segments are successfully executing growth strategies to expand our payment network and expand our product portfolio.

We continue to have a very strong cash position and no near term debt obligations.

And finally we expect our second quarter 2011 adjusted cash earnings per share from continuing operations to be approximately $0.35 cents which assumes currency to remain stable through the quarter.

This concludes the presentation, and now we will be glad to take questions.

Operator, can you assist us, please?

(Operator Instructions).

We have a question from Greg Smith of Duncan Williams.

Your line is open.

Hi, guys.

Can we get a little more color on Germany, sort of what exactly happened?

It sounds like the surcharge rates were, where the other banks came out, were in line with your expectations, but it was the consumer acceptance of that?

Just a little more color would be helpful there to start.

Maybe I will give a first shot at this.

Germany is a very unique market, always has been in Europe.

And they have never really had direct surcharge charging, so this new model that was enacted by their banking consortium was brand new.

What we did is we tried to estimate as best we could how many people would, when they walk up to an ATM would actually pay the surcharge.

And we hit it pretty darn close.

In fact we were within 90% of the number that we expected but we were off by a little bit.

And that consumer acceptance of paying those surcharges, that differential on our acceptance assumption is what resulted in a little bit less revenues than we expected.

Now that we have a quarter behind us, we pretty much have an idea, since January 15, so we have 10 weeks behind us, and so we can pretty much estimate what we are going to see for the next coming quarters.

Okay.

Great.

And then the guidance for --

Not to brag, but I think our German team did a darn good job estimating something that was a total unknown based upon the information that we had.

So we got pretty darn close.

Okay.

And then the guidance in 2Q of $0.35 cents, how much of that, you guys have done this in the past.

How much is currency relative to maybe 1Q?

Clearly there is a positive impact given the weakness in the dollar.

Absolutely.

We are thinking it is above $0.01, but for sure below $0.02.

So it is somewhere in that range.

Okay.

And then in the Money Transfer, you are now giving out the non-Money Transfer transactions and products.

Do you have an increased focus on greater penetration of those non-Money Transfer products into your agent base?

So I guess the question is how penetrated is the agent base with those other products, and can we expect them to grow significantly faster than the core Money Transfer?

Mostly our agents only sell wire.

And now our two largest competitors in the industry sell a variety of things.

They sell money orders and they sell bill payments and so forth.

We have now added more products so that we, really becomes in the industry really the big three and then all the little guys.

So what we are doing when we compare our transactions to theirs it actually makes a more fair comparison of the numbers that our competitors use in their presentations than what we use.

And yes, absolutely, we want to focus on that because we have a better value proposition for our agents now than we had before.

We have more products to sell, more ways they can make money when they've got the RIA screen up and they are doing a transaction, for a wire transaction and they can ask them for other transactions too.

Okay.

And then just last question on that topic, how are the margins in those products versus the core Money Transfer?

I will have to do it -- Rick, you might be able to help me on this.

There is a 35% margin on core Money Transfer products and on the bill payment, some of them are better than that, and some are a little bit worse.

Greg, I would add that the margin, if you just want to look at it on a percentage, can be even better than we see on Money Transfer.

But the absolute amount of money we make per transaction is obviously lower.

Because, as you know, in the Money Transfer business we can make $5.00, $6.00, $7.00 in net margin per transaction.

In these other products, whether it's a bill pay product or it's a selling of a debit card or things like that, we are not going to make $5.00, $6.00, or $7.00 per transaction.

But our margin as a percentage of the revenue that we get can be very comparable if not better in some cases than the Money Transfer.

So we would expect that what this does is it continues to support our margin in the business, but it could lead to a little bit lower average revenue per transaction or average margin per transaction just when you do the simple math on it.

Okay.

Got it, thank you.

Thank you, our next question is from Robert Dodd of Morgan Keegan.

Your line is open.

Hi, guys.

On Germany if I can, that lower acceptance rate, have you seen over the 10 weeks, has that changed or was there an initial bigger negative reaction from consumers never seeing a surcharge at all before and then gradual acceptance improving or has it been stable over the period?

I think Robert you hit it right on the head.

We saw a little bit more of that initial reaction and after that it is pretty much settled down.

And as Mike said, you know we really didn't have a benchmark.

The consumers in Germany were not accustomed to this type of a surcharge transaction at the ATM and so we did find that there were some types of reaction earlier on, but then that settled down and we have seen it pretty consistent in the last few weeks.

And just to add to that, Robert, we continue to tweak this.

Because what we have, our system is very flexible and allows us to charge different surcharges at different ATM's depending on time of day, location, competition and so forth so we will continue to tweak this to try to maximize it.

Okay.

Great.

Thanks.

And in Poland have you seen any movement either from the Polish regulator or the EU on a cross border basis on shifting to a uniform allowing surcharge particularly in Poland if you owned ATM's?

Is there any movement there?

We haven't seen it here.

If I was a betting man, I would say that would probably not be instigated from Poland.

They can convey on a regulatory basis with these kind of new banking things.

They tend to be more of a follower than a leader, and so it, however the EU is, they are allowing it in certain markets like Germany, that we just got finished talking to, the UK as well.

And so it might be interesting to see what would happen.

I imagine if the EU goes through with it as a group Poland would follow.

Got it.

A quick one on prepaid, do you have any relationship with the Playstation network?

Is there anything going on with them being shutdown, et cetera?

I know you don't (inaudible).

No.

No, I don't think we do.

Kevin, am I missing something?

We issue Playstation prepaid cards, but the issue that they had, that they announced yesterday, was related to on-line accounts related to credit cards.

Okay.

And then last question, more of a long-term issue, looking at the Money Transfer business and now focusing on the growth there in addition to expanding the network, to adding other products, including mentioning a prepaid product, and then if we look at the prepaid ePay business, for awhile if I remember right, top-ups of prepaid products in the U.S.

have been one of your faster grower offerings.

It just looks like to me those two, Money Transfer VIA and ePay are converging in terms of the source of growth for both of us.

Is there any strategic reason for keeping them as separate businesses or are you planning in the long run of essentially merging those two units together?

We don't have any plans on merging the two together, but what you are noting is a great complimentary there.

Because if you issue prepaid debit cards say in the Money Transfer segment, the way that you make a prepaid debit card commercially viable is by giving a lot of ubiquity with respect to adding more value to it.

And so to add an ePay network of almost 600,000 locations that we have worldwide, or POS terminals in 300,000 locations, would give our Money Transfer card, if we had a prepaid debit card, a lot more ubiquity.

So that gives us a competitive advantage.

Okay.

Thank you.

Thank you.

Our next question is from Chris [Shettler] from William Blair & Company.

Your line is open.

Good morning.

In the ePay segment, Mike, you mentioned an up take on post pay plans there.

Can you maybe talk about the trends you are seeing?

Are they accelerating relatively consistent versus previous quarters?

And then what are the drivers that increased post pay usage?

When, like the iPhone first came out, it did drive some of the more well healed, prepaid customers maybe if they wanted an iPhone to go to a post pay plan.

We haven't seen a tremendous migration there.

In our more harder hit countries where the economies are still weak and that would be UK, Spain, et cetera, there's just less transactions in those markets and we are doing a full analysis to try to figure that all out.

What we have seen, though, in the US is a total contrary to that.

And that's as the hand sets have now come down in price where they are very, you can get a data hand set now very inexpensively.

We have seen the prepaid data plans are increasing.

So you can get those all you can eat plans that you see were basically pioneered by the metro PCS and Cricket guys in the US and have now been also mimicked by Boost and others.

Those all you can eat plans for prepaid are causing more and more prepaid customers to use data phones and actually to increase their ARPU.

So what we are doing is we are getting a bigger wallet share in a number of these markets.

I would imagine this idea will jump the Atlantic, and when it does it would be a boom to our business.

Okay.

Thanks for that.

And then on an EFT segment, any more color you guys can provide on the value added services that you are offering?

And specifically maybe if you could call out the increase in the year-over-year revenue that you saw from value added services and just give us a sense for how sustainable those types of year-over-year increases are on a go forward basis.

Well we do a number of things and from a competitive point of view I am not going to delineate for you, nothing personal.

This is how we kind of differentiate ourselves.

But the kinds of things that we do offer are things like mobile phone top-up which is another great thing to have all of these mobile operator connections that we have with ePay so we can leverage those.

We do CRM at the ATM.

We do advertising at the ATM.

We do dynamic currency conversion at the ATM's.

And bill payment at the ATM's.

It seems like every two weeks we come up with a new idea for a new product to cross sell to our existing customers.

It is keeping them on their toes and us on our toes with new opportunities.

With a little luck, it is these kind of things that really put the, you might say the claws into our customers, so that we keep a customer for a long time and we offer them a value proposition they really couldn't get otherwise.

So we can make that customer more money.

We have focus.

I mentioned on the last call that in the old days we used to focus our ATM outsourcing deals primarily just on the cost savings of productivity we could give a bank.

Now we flipped it around and said not only can we give you that, but we can give you revenue sources.

And that's what that little soliloquy that I gave earlier when I talked about being a business partner, this is what is really appealing to the banks now especially because the banks all need money.

If we can offer more revenue opportunities, I hope that continues to grow.

Wouldn't it be nice if instead of as a minority of our, a smaller part of our business, it became the largest part of our business.

But we are not there yet.

Okay.

And in terms of the year --

As far as how long can it continue, think about all of the things I just told you.

All of these are great ideas for future revenues and current revenues and we will come up with more by the time I'm on the call next time.

Thanks, Mike.

Last one for me, Rick, can you reiterate the tax commentary?

I missed that.

I just said that we had a little higher effective tax rate because of mix and getting more profits from our higher tax rate countries rather than the lower tax rate countries or countries where we have got NOL shelter.

And I mentioned that in the past I have generally said that we would be in the, approaching 30% or kind of 30% in effective tax rate, the 28% to 30% range.

And now I would probably say that we are in that 30% to 32% range, absent any kind of legislative rate reductions that could happen in some of the countries.

So that's for the full year?

Yes.

Okay, thank you guys.

Thank you.

Our next question is from Gil Luria of Wedbush Securities.

Thank you for taking my question.

India seems to continue to be a big part of the momentum in the EFT business.

Can you tell us how many of the 11,000 ATM's are now in India, and of the 777 lucky backlog, how many of those are in India?

About 20% of the total ATM's are in India and about 60% of the ATM's in backlog are in India-China.

Got it.

That's great.

And currency provided 3% for the quarter, but the Euro's continued to go up recently.

How much of the 17% EPS growth, the guidance for the second quarter is your expectation for currency impact.

It is about $0.01 to $0.02 a share, and so last year we did $0.30 cents I think in the second quarter.

So the 35 divided by the 30 was a 17% improvement.

Let's just assume that if it is 1%, one divided by 30 is 3% and if it is 2 it is 6%.

So somewhere between that 3 and 6%, Chris.

Got it, that makes sense.

Gill, I'm sorry.

That's okay.

And then finally can you tell us what the contribution was from Brazil prepaid in the quarter?

We don't draw that number out specifically, Gill, but as we said in the release and in our comments that it was the improvement in the ePay was largely attributable to Brazil.

That makes sense.

Thank you.

Thank you.

Or next question is from Bob Napoli from Piper Jaffray.

Your line is open, sir.

Thank you, and good morning.

Good morning, Bob.

Your Money Transfer business, what is the pricing, revenue per transaction was up 2% about it looks like in the quarter.

Have you increased prices or is it because of some of these additional products?

And where is your pricing relative to two of your larger competitors, Western Union and MoneyGram?

You are talking, Bob, specifically in the Money Transfer segment?

Yes.

Your revenue grew faster than transactions.

Yes, isn't that nice, it is called leverage.

We love it.

Basically our pricing really hasn't changed much, but the mix as we continue to grow our foreign transactions are going to give us, as Rick mentioned in his comments, we make more per wire for Europe or Australian or a non-US generated wire than we do in the US.

So with the fat growth rate that we have seen, it was mentioned 18% in our overseas or non-US originated transactions, we have 18% growth there.

And on average they make us a little bit more money per transaction.

That's why you see the [quota].

Bob I would tell you that 95% of that number was strictly because of mix and 5% because of rate.

We saw a net overall improvement in rate, i.e, price increases, if you will.

The price increase really comes from leveraging some of our FX spread in certain markets where we see opportunities.

And we saw that opportunity in the European markets, but we did see a little more price pressure in the US market.

So on balance we ended up having a little better pricing for the quarter.

Like I said 95% of that was because of mix so only a slight amount because of pricing.

But some of the advantages we picked up in Europe were offset by some of the more competitive pricing that we saw in the US.

Okay.

Last night Western Union mentioned, and the consumer financial protection bureau has mentioned that it is looking at the Money Transfer industry.

And Western Union aid that they were having discussions.

Are you guys having discussions?

No, we are not having discussions with them and as you know Western Union is significantly higher priced than we are.

So they are probably the guys that, you would talk to the high price guy first before us.

Okay, But you haven't heard the CFPB claims to be looking at disclosure, but nobody really trusts them, I guess.

Now, if they are talking about the disclosure rules, a lot of times these guys get together and say you need to make this more clear to your consumer, how much they are paying, but we put that on our receipts now anyway.

So we can continue to disclose.

And an interesting thing to is, the average Money Transfer customer is no dummy.

You really can't pull anything over on them.

They know exactly what the foreign exchange rate should be.

When it goes high it is in their favor and they will do more transactions.

When it goes the other way they do less transactions.

So this idea that they are all getting, that something, that the wool is being pulled over their eyes is not really an accurate assumption.

And I think the other observation is just looking at it from a competitive market standpoint.

If you wanted to go to a bank and make a transfer, what do you think your wire fee is going to cost you on that?

I know my bank charges me well more for wire fees than if I would send money through our own RIA Money Transfer product.

So from a competitive, just a consumer competitive perspective certainly in the markets that we deal in, we see that the numbers are probably more competitive than the banking market would offer.

Thanks.

With regards to China, you guys have talked a little bit more about China ATM's.

I know that market is not easy to crack and you guys have been there for several years.

Are you getting some more momentum in that market, and what is the, I guess, the profit model?

Because I think they really restrict the fees you can charge to a very low-level at the ATM.

None of that is restricted by legislation.

This is an economy of scales game there.

Actually we make slightly more profit per ATM in China than we even do in India.

But our challenge up to this point has been we only have 900 ATM's as opposed to 2500ish in India.

But the nice thing is we put in 100 of those last quarter.

So maybe we are getting a little bit of a step up and after having been there for a number of years, we'll get maybe a little bit of an acceleration and acceptance.

Thanks, and just on your ePay, you lost the head of your ePay unit to Wright Express, is that correct?

What are you doing from a leadership perspective in that unit?

Kevin?

Yes, so the situation was in 2010, early 2010, our ePay leader left us.

It was a mutual arrangement.

I am currently now running the ePay division in addition to my duties as president of Euronet Worldwide and enjoying the challenge.

I am the managing director of ePay.

Thank you.

Thank you, ladies and gentlemen.

This concludes the Q&A portion of today's call.

I would like to turn the call over to management for any closing remarks.

Thank you, operator.

I would just like to thank everybody for joining us on the call and I look forward to talking to you in roughly 90 days.

Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference.

This concludes the program.

You may now disconnect and have a wonderful day.