Euronet Worldwide Inc (EEFT) 2013 Q2 法說會逐字稿

Greetings and welcome to the Euronet Worldwide Second Quarter 2013 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a Q&A session and instructions will follow at that time. (Operator Instructions).

As a reminder today's conference is being recorded. I would now -- it is now my pleasure to produce your host Mr. Jeff Newman, Executive Vice President and General Counsel for Euronet Worldwide. Thank you, Mr. Newman. You may begin.

Thank you, Janine. Good morning and welcome everyone to Euronet's quarterly results conference call. We will present our results for the second quarter 2013 on this call.

We have Mike Brown our CEO; Rick Weller our CFO, and Kevin Caponecchi the President of Euronet Worldwide on the call. Before I begin, I need to make a disclaimer concerning forward-looking statements. Statements made on this call that concern Euronet's or 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, technology logical developments affecting the market or the Company's products and services, foreign currency exchange fluctuations, the Company's ability to renew existing contracts at profitable rates, changes in ATM or other transaction fees 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 maybe 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 update under any circumstances. The Company regularly posts important information to the Investor Relations section of its website. Now I will turn the call over to Rick. Go ahead, Rick.

Thank you, Jeff. And welcome to everyone on the call. I will begin my comments on Slide 5.

We had another strong quarter delivering revenue of $341.5 million, operating income of $27.8 million and adjusted EBITDA of $47.7 million. Our cash EPS of $0.48 was a 23% increase over the same quarter last year.

Each of our three segments contributed to this consolidated growth, which I will discuss further when I get to the segment reporting in a few slides. As I reflect on the $0.48 cash EPS this quarter, I would like to make a few observations that are not apparent, as immediately apparent. The $0.48 is $0.01 ahead of our guidance despite FX headwind. The $0.48 is a new all-time high for quarterly earnings.

The $0.48 continues a trend of year-over-year, quarterly, double-digit growth since early 2011. And finally is consistent with our trend of meeting or exceeding quarterly guidance. In summary, we believe, a very strong quarter. Next slide, please.

Slide 6 shows the three year transaction trend by segment. EFT transactions increased 2% year-over-year, driven by growth in Serbia, the Middle East, Pakistan and China. Tempering this growth was the transaction decline we mentioned last quarter related to the expiration of the IDBI agreement in India.

You may remember that, according to Indian law, IDBI was required to go out for public bid since the contract with Euronet was more than ten years old. Euronet processed a large volume of transactions through almost 1600 ATMs for IDBI, but did not generate a lot of revenue and profit.

When a lower bid came in for these ATMs, Euronet did not pursue the renewal. As you can see in the financial results, this decline in total transactions and ATMs did not adversely impact our earnings. Without the IDBI decline transactions and ATMs would have increased 9% and 11%, year-over-year, respectively.

Epay transactions grew 4%, year-over-year, primarily from growth in India, North America and Germany. This growth was partially offset by declines in the Middle East, the UK and Australia. Ria delivered another strong quarter of growth with total transactions increasing 20%. Money transfers grew 22% in the quarter with US originated transactions increasing 26%.

The US growth includes a 27% increase in transfers sent to Mexico. Transfers initiated outside the of the US grew at 15%, the fastest rate we have seen in several quarters. Next slide, please.

On Slide 7, we present our financial statements on and as reported basis. Foreign currency rates were relatively stable year-over-year, with the mix of weakening and strengthening currencies resulting in no impact on revenues at about1% increase to reported operating income and adjusted EBITDA, respectively.

To exclude impact of foreign exchange rates, I will discuss the segment results on a constant dollar basis on the next slide. On Slide 8, you can see all three segments continued to post year-over-year revenue, operating income and EBITDA growth.

EFT had another strong quarter with revenue, operating income and adjusted EBITDA growing 23%, 43% and 34%, respectively. The revenue growth was primarily from improved performance of our brown label ATM portfolio in India, an increase of sales of our value-added products, ATM network expansion and the January 2013 acquisition of Pure Commerce.

The growth in EBITDA and operating income reflects the leverage in the business. Revenue per transaction increased year-over-year and operating margins expanded year-over-year. Epay recorded growth in revenue of 6%, operating income of 23% and adjusted EBITDA of 7%. These increases were the result of continued expansion of our non-mobile products, particularly in Germany.

Growth of prepaid mobile sales in the US and the acquisition of EasyPay in New Zealand. Partially offsetting this growth were declines in Australia, as well as startup costs in Russia and Turkey. The larger increase to operating income also reflects the benefit of lower intangible expense in Spain, Brazil and Germany due to the net book value of certain intangible assets being fully amortized.

Without the benefit of these lower non cash expenses in the second quarter this year operating income would have been consistent -- our growth in operating income would have been consistent with revenue and adjusted EBITDA growth.

Epay posted an increased revenue per transaction over that of last year, as well as an expanded operating -- as expanded operating income margins. This is the second consecutive quarter we have seen the year-over-year growth rates restored to the epay segment, and we're optimistic our recent product additions will continue epay's growth.

Money transfer revenue increased 20%, operating income increased 30% and adjusted EBITDA increased 17%. This growth was driven by a year-over-year network expansion of 29% and transfer growth in all markets. We continued to see stable pricing within the segment. Money transfers, revenue per transaction remained fairly constant with prior year, and its operating margins expanded with volume.

Overall, all of our segments contributed nicely to our double-digit consolidated earnings growth in the quarter. With expansion across all businesses we are well-positioned for continued momentum in the second half of the year. Next slide, please.

On Slide 9, we present highlights of our second quarter balance sheet. Our balance sheet remains very strong. The cash increase reflects free cash flows generated from operations, and our debt remained largely the same.

As I conclude my remarks, I would like to comment on the guidance we provided in our press release. As you may remember, over the last couple of years we started to see our third quarter earnings coming more in line with our traditional seasonally high fourth quarter.

That is the difference between third and fourth quarters will narrow, not because of shifting, but rather because of strengthening of the third quarter. You can see that the third quarter guidance we have provided we expect this development to continue. We believe that our business has evolved, and we expect the second half of the year to include two seasonally higher quarters. With that I'll turn it over to Mike.

Thank you, Rick. And thanks everyone who has joined us today. It's great to talk to you in a quarter where all three of our businesses continue to grow, and where we delivered a strong 23% cash EPS growth over the same quarter last year.

Let's move on to Slide 12 and I'll share with you how EFT segment has contributed to this. This was another strong quarter for our EFT segment. In the last year, we have launched ATM networks in five new countries.

We have deployed more than 150 automated deposit terminals, ADTs, across two countries and value-added products to both our customers and our own ATM networks, and signed numerous other agreements across our markets. Our success in EFT is highlighted by our impressive 24% revenue and 46% operating income increase over the same period last year.

In the second quarter, our EFT team continued their momentum [playing] a number of new agreements including additional ADT and ATM network participation agreements, card issuing and acquiring contracts, ATM outsourcing agreements and new customers for our value-added products. I will tell you more about these in the next couple of slides, so we can move on to Slide No. 13.

Our team in Poland had a very strong quarter. As the market leader, we continued to see strong demand for participation in our ATM and ADT networks. These networks provide participating banks' customers with the opportunity to withdraw or deposit cash at an extended network of ATMs, without the bank incurring the initial or operating costs of installing their own ATMs.

This quarter we signed network participation agreements with Idea Bank, Getin Bank and Invest Bank for participation in our ADT networks. Invest Bank also signed an agreement to join our independent ATM network in Poland. Our Polish team also enabled China UnionPay acceptance on our network.

China UnionPay is the national card scheme of China, and the market leader for payment cards in circulation. While usage on these cards is still below other major card schemes, UnionPay is rapidly expanding and we are excited to offer this product on our largest ATM network.

In Asia-Pac we also achieved a significant milestone by successfully migrating Standard Chartered Bank Malaysia and Singapore to Euronet's ITM switch in India. These are the 10th and 11th Standard Chartered countries using ITM, and successful integration is key to continued future expansion to additional countries. Moving on to Slide 14.

In Italy we extended our relationship with Forexchange to install additional ATMs. Forexchange is the largest foreign exchange provider in Italy with close to 100 branches throughout the country. We are analyzing each site individually, but we expect a substantial amount of Forexchange branches to meet our expectations.

Our pipeline for value-added services remains strong. During the quarter we added these products to additional customer ATMs and POS networks and Slovakia and in Croatia. Additionally, our Pure Commerce team signed a number of new customers in the quarter.

As you may remember, Pure Commerce is the acquisition we made at the beginning of this year focused on value-added transactions on POS terminals in locations like duty-free shops in airports, hotels and retailers. We signed agreements with merchant-acquired Elavon in the US, Redeban in Columbia, Banco De Oro in the Philippines, and Bank of the Philippine Islands to offer DCC to their merchant partners.

Through new and existing acquires, we have signed [Charter Rich] merchants including leading airport duty free shops hotels and retailers in the US, Singapore and Korea. We ended the quarter with 17,242 ATMs. We added 865 ATMs this quarter, including 357 ATMs in India, 249 in Europe and 259 in the Middle East, Pakistan and China.

As I close my comments, I would like to address the article that was published last week on the EU proposal to cap card transaction fees. I want to let you know that this is only related to transactions initiated on POS terminals, and the proposal, if implemented, will not have a significant impact on Euronet.

This was an absolutely outstanding quarter for the EFT business. Now we will move on to Slide No. 16 and we'll talk about epayEpay continued to re-establish its growth trajectory delivering nice growth in the quarter. Our teams continue to focus on adding new contents our non-mobile portfolio, while finding additional channels for distribution.

As you can see in our results, these products are starting to take hold, offsetting softness in a couple of markets. Non-mobile content now makes up slightly more than 30% of epay's total growth profit, and is growing about 30% year-on-year. This was a good, solid posting from epay.

Let's go on to the next slide, and we will see some of the highlights of epay's success. On Slide No. 17, during the quarter, we continued to expand the value-added services we provide to our mobile operators. We launched and agent incentive payment program for prepaid wireless at Sprint MVNO. With this agreement, prepaid wireless can offer agent incentives for product sales and epay will calculate and pay agent commissions on behalf of the company.

In the first quarter I told you about our launch of iTunes on the PostFinance mobile banking app in Switzerland. Our goal in integrating epay products in this channel is to help the bank achieve their objectives, such as encouraging customers to perform more online or mobile banking transactions, which are more costs effective than a traditional branch transaction to the bank.

This new channel of distribution has been very successful, as demonstrated by PostFinance's continued support and marketing of this program. Additionally, in the quarter Boost Mobile and Wipit announced the launch of Boost Mobile Wallet. You may remember that in 2011, Europe -- Euronet made an investment in Wipit. The unique offering of Wipit was in line with our strategy to bring financial payment convenience to those who have not had it before.

Most mobile wallets focus on payments and online or physical retail locations. With Wipit those retail payments are made with a prepaid card tied to their Mobile Wallet account. And while the wallet focuses on quick, easy and convenient access to the most common financial transactions, which include top-up bill payment and money transfer. Euronet also integrated within the wallet with top-up being powered by epay and money transfers being powered by Ria.

In Germany, we signed an exclusive, long-term renewal with Rewe Group. This is a key grocery store chain in the German market, and we are excited to continue to provide epay contents within Rewe Group locations.

On Slide No. 18, we'll move to, we highlight the key developments within our non-mobile portfolio. In Australia and New Zealand we added mobile phone security products, Eset Mobile NQ, and Trend Micro. With more Smartphones and PC's worldwide, we believe this is an emerging product category and one we are pleased to offer our customers in those countries.

Additionally, we launched iTunes digital codes at Yandex, Russia's number one search engine and leading e-wallet. Yandex is the Google of Russia and accounts for two-thirds of all searches in the country. Customers in Russia can purchase iTunes through Yandex in two ways. Either through the Yandex wallet or at a kiosk supported Yandex.

We see this as an exciting opportunity in this new epay country for us. You may have seen our press release last week announcing the launch of Google Play prepaid cards in Germany. Google Play allows Android phone users to shop for apps, games, music and eBooks online or from their mobile phone or tablet.

In Q1, 2013, Android phones accounted for 75% of the total global mobile phone shipments according to International Data Corporation. We have seen great results with our non-mobile content in Germany, and with such great demand for Android products worldwide this agreement unlocks the other three quarters of the mobile phone market.

Finally, we signed electronic software download agreements with several content providers including Xbox, Microsoft Office, Windows and Adobe.. Now, in addition to selling prepaid cards within the store, our retail partners will have the ability to sell these products on their website or through their mobile apps.

As I said before, this was a solid quarter for our epay business. We continue to see significant opportunity to grow and distribute our non-mobile content. Now, I will move on to Slide No. 20 and we will talk about money transfer for a bit. Ria really hit on all quarters this quarter -- on all cylinders this quarter.

We saw Spain and Italy, two market where we had seen some softness over prior quarters, return to strong growth and our other major [phone] markets continued their rapid expansion. Our money transfer team is working hard to expand our network and product portfolio, and you can see the results in our earnings. Slide No. 21, provides the details of our 29%, year-over-year, network expansion.

We're pleased to announce a key addition to our network with the launch of Postal Savings Bank of China. These 1300 locations are in key Chinese provinces. This is our first direct relationship with a correspondent in China, which according to World Bank, is the second leading recipient of migrant remittances in the world, receiving an estimated $60 billion in 2012.

I would like to point out that Post Savings Bank is our largest EFT outsource customer in China, and this collaboration between our EFT and Ria segments is another example of the synergies between our segments creating additional value for our business. We also launched 3600 locations with Active Bank in Turkey.

Turkey is and important corridor for our German business, as 60% of Turkish immigrants live in Germany and adding these locations will drive additional volume through that corridor. We continue to have a strong pipeline of new correspondence. In the quarter, we signed 17 new agreements with correspondents, spanning more than 15,000 locations across eight countries.

The most notable of these are in India, Pakistan, Nepal and Latin America. Finally, we are excited to announce the launch of RiaMoneyTransfer.com. New and existing customers in the United States can now send money to their families around the world from the convenience of their home.

This new channel, which we have labeled our digital channel, is led by an experienced team of industry and non-industry professionals that we believe will bring new thought leadership to the online money transfer business. RiaMoneyTransfer.com stands out because of the flexibility it provides customers, allowing them to use multiple payment methods including ACH transfer, credit or debit cards.

Customers can also choose from multiple payout locations including bank deposits, home delivery and the most significant being our 204,000 global network location. There is a growing demand for online money transfer, and we believe this new digital channel will be a nice complement to our existing agent banks.

Moving on to No. 22, you can see Ria's transaction highlights. Our global money transfer transaction growth continued to accelerate with 22% growth, reflecting a new record of more than 7 million transfers in a single quarter. This is the ninth consecutive quarter we have delivered double-digit money transfer growth. US initiated transfers continued their momentum recording a 26% increase year-over-year.

This expansion is driven by a strong 27% in growth and transfers sent to Mexico, as well as 26% in transfers sent from the US to non-Mexican locations. We have also seen market share gains in other countries, including El Salvador, Columbia, Honduras and Nicaragua, and our (inaudible) from the US to emerging markets in Africa and Asia continue to grow at double-digit rates.

Transfers initiated in markets outside the US increased 15%, year-over-year, compared with 11% in the first quarter of this year. This increase is driven by increases in transfers sent from France, Germany, Italy, the Nordics in Spain. In Spain, more specifically, return to double-digit growth in this quarter. Our non-money transfer transactions also grew at 15%, year-over-year.

We continue to see strong growth in epay top-up, sold through Ria agents, with particular strength in the US and Italy, as well as check cashing and Ria pinless transactions. Our Ria team delivered a strong quarter with double-digit growth across all of our reported metrics. Now let's move to Slide No. 23 and we'll wrap up the quarter.

Slide No. 23. Here we delivered cash EPS of $0.48 growth, which is a growth of 23% year-over-year and exceeding our guidance by a penny. All three segments delivered nice quarters contributing to our double-digit consolidated earnings growth.

EFT benefited from growth of our brown label ATMs in India, continued sales of our value-added services in ATM expansion, particularly in Poland. Epay continues its turnaround with increases in sales of non-mobile content and prepaid mobile products in the US.

Money transfer realized earnings growths from continued sales successes and more network expansion. As Rick said, our balance sheet remains strong with strong free cash generation.

And finally, with all the segments hitting on all cylinders, we expect to have a very strong third quarter with cash EPS of $0.54.

With that, I conclude my comments, and I will be happy to answer any questions. Operator, will you please assist?

Thank you. (Operator Instructions). And the first question is from Greg Smith of Sterne Agee. Please, go ahead.

Hey. Good morning guys.

Morning.

Just wanted to make sure on the guidance and the commentary around 3Q and 4Q, you're base just saying that 3Q is now seasonally stronger than it's been before. So, there's no there's no taking of anything from 4Q going into 3Q. Is that correct?

That's exactly right. We tried to be clear about that because some people might think we're actually stealing from Q4 and put it in Q3, but the reality is based upon the evolution of our business, we have, particularly in the EFT segment, we've really stoked up our results in Q3. So now, you know, Q3 is there competing with Q4 as to be our seasonally highest quarter, which we're excited because it's basically it's all new found money.

Yes. Got it. Okay. And then the digital channel that you're rolling out on the Ria side, is there any chance that's going to require any significant stepped up investment that could impact the margin there at all?

We are, Greg, as we speak we are spending more money on that. We don't expect that it will dilute from the margin, but we are using some of the (inaudible) -- the -- you know, the extra margins we're contributing from the great growth that we see in that business to invest in that particular channel. So, we shouldn't see a depression in the margin, but we will, obviously, be spending against that initiative.

And you may not -- you don't see it, it was kind of masked by the spectacular growth in Ria over the last year and a half, two years, because we spent a lot just on the R&D side to bring this product to fruition. But luckily and nicely Ria has just exceeded everybody's expectations, so there is a little extra profit for us to pour back into the business.

Yes. Yes. Okay. And then just one last one from me. Just -- Mike, you commented on the interchange regulation and the EU not impacting Euronet, but is there any chance that the lower interchange rate at the point-of-sale bleeds into the ATM side and potentially pressure ATM interchange and then is that, you know, hitting you?

You know, that's a good question. We keep asking the regulators, as we have met with them many times. I can't say that it never could, but the reality is everybody around the world is focused, only, it appears, on the POS side. You know, you even try to get their attention on the ATM side and they just say they've got other fish to fry.

And, Greg, I would add to that is that if you recall here, a few years ago, we had a VISA rate MasterCard reduction in Poland, our largest market, where we, you know, obviously, benefit from ATM withdrawals. And if you did some math based upon kind of the average size of a charge card spend and what they've put the caps out at, you would see that those numbers aren't too different, and so I don't see that there's that much of a difference in the pricing that we've got for interchange on cash withdrawals in that part of the market compared to what this new set down rate on POS charge card transactions would be.

Got it. Thank you.

All right. Thank you, Greg.

The next question is from Mike Grondahl of Piper Jaffray. Please, go ahead.

Yes. Thanks for taking my questions, guys, and congratulations on the quarter.

Thanks, Mike.

The first question is really about margins. You know, it was great to see overall margins expand a little bit this quarter. Could you kind of talk about the main driver of that, and sort of how we should think about margins going forward?

I think the driver is as simple as volume. We did see a little bit of some mix. I think, particularly, if you look at the EFT -- I mean the e-pay segment there, our revenue per transaction went up a little bit more. As Mike said in his comments on EFT, we were successful in continuing to sell value-added services. Those are more margin rich products. So, it's really volume, together with continuing to put some, you know, better margin products in the portfolio.

And you know, too, Mike, you run the numbers. You know, as volume goes up your -- depending on each of our segments has a different kind of flow through average margin, but when you add them all up and you just have higher volumes, you're just going to end up with better corporate blended margins.

Got you. Because for several quarters margins were sort of flattish, and it looks like this quarter they stepped up a little bit.

Well, you know, we've been making some investments. We just mentioned how we are working on, you know, RiaMoneyTransfers.comWe've been, you know, putting ATMs in India, you know, by the hundreds. And those suckers take a full six months to ramp up, so you see some -- you know, that puts pressure on the margins, you know, but once they're in, you know, and six months finally gets there, then we start to see these things start to produce. So we're not afraid of making investments, but -- and, I think, those investments are paying off now, quite handsomely

Yes. One of those others that was in that mix, and we could, you know, probably have quite a few others here, Mike, but in -- you may recall about a year ago when we talked about the brown label rollout in India. That was having some, you know, some compression on our margins and this year, this quarter, we've actually seen a -- a little lift in our margin and -- because of the successes we're having in India on the brown label product. So, it's just a number of factors across-the-board that Mike articulated.

Great. And then on India, it sounds like that's ramping up well. I think last quarter you guys said you were slightly profitable on those ATMs. How would you characterize the contribution from the Indian ATMs?

More profitable, now.

Yes.

If we were in a baseball, game sort of what inning are we in?

Oh, I don't know. I think we're probably in maybe the fourth, kind of fifth in terms of the profit per ATM that we have now. In terms of the continued opportunities over there and how many more ATMs, I think we're probably in the earlier stages.

Great.

And, Mike, too, remember every time we put in another three or four hundred ATMs in a quarter, or in a half of a year, you know, those ATMs, you know, start at inning one. You know, so as long as we keep seeing opportunity where we can make good money in India, we'll still put in brown label ATMs.

Okay. Thanks, guys.

We end up with a blended thing so, you know, if we end up, you know, just theoretically, if we end up with 2000 or 3000 of these things and then we only put in 300 in a quarter, then you will see less impact, but now with our numbers, you'll see -- you see more as we're stoking up the number of ATMs.

Thank you.

The next question is from Tim Willi of Wells Fargo. Please, go ahead.

Morning, Tim. Did we lose you, Tim?

Mr. Willi,you may want to check your mute button.

Hey, Mike. I'm sorry. I apologize. Good morning. Can you hear me, okay?

Yes, you are fine.

We can, now. Yes.

Great. Thanks. Operator error on my part. So EFT. If I missed it, I apologize, but did youtalk, at all, about sort of budgets or plans around that ATM roll out for the rest of the year? I know you just referenced a couple hundred a quarter. Is that indicative of what you're thinking you will do throughout balance of the year, or is that just an illustrative example?

Well, I think that the -- you know, let me make -- remind everybody that it's ATM by ATM battle here. So if we can find a good site, we're going to put an ATM in and if we don't we won't. We're not going to just put them in to hit numbers, to hit quantities, but our guess is, and it's kind of a guess right now, is that we'll put in 450 to 500 more brown labels this year, and maybe around the same number across the rest of our patches, you know, in Europe, Middle East, China and everything.

So, you know, with a little luck, we'll put in 1000 between now and the end of the year. Don't know if we'll get that lucky, but I hope we do, because every time we, you know, can secure a good site -- and understand, too, that it's not just me deciding that this is a great site in downtown, you know, Madrid. You've got to have all the authorities and the architectural, you know, guys approve. I mean it just takes awhile to get to that point where you've got it installed and you never know. Those are all -- everyone, ATM by ATM, it's all -- you never know, so.

Okay. Fair enough. Thank you. And then a couple questions on epay. First, is you referenced startup costs for Turkey and Russia. I think that's the first time I've ever heard you mention those markets. They're pretty sizeable populations. I mean could you maybe talk about, you know, how much money has been invested, where you're with the with that. Would that be something that might, you know, go on for a couple more quarters before it stops weighing on what the ultimate margin in epay is, and then how you think about those countries?Is that Moore of an 2015 kind of plan for contribution, or do you think it's something you can actually start to see move pretty quickly? Do you have partners there on the Telecom side?How does that work?

I will let Kevin answer that.

Hey, Tim. We announced -- or Apple announced that they went into Turkey and Russia end of last year. We've been Apple's partner in those two markets. It's fair to say that most of our focus was once both markets, but the focus has been on Russia given its size and nine time zones. We don't specifically discuss how much we're investing. The focus is all on non-mobile. We're not doing any Telco in these markets, and they're both ramping up as we would expect.

Do you -- will this expand beyond Apple products, or when you talk about the investments you're making, is this laying ground for more and more (inaudible) and around the gaming in the software, this expanded Apple?

We, obviously, Walt talk about investment, but we will be adding other global content and we're also signing up local Russian content. So when we -- as we launch, it will be a combination of the world's best brands, along with content from the local market.

Okay. Great. And then my last question on epay was just looking at all the launches and the signings you had with some big retailers like Tesco and with some big brands like Microsoft, et cetera. It seems like, you know, a pretty impressive slide, I think, even relative to some prior quarters. I I guess, just to make sure we've got our heads around all these announcements you've put on that slide, you know, are any of these, in and of themselves, you know, pretty big deals like something with a Tesco, who is, obviously, a very large retailer in the UK, or should we just think about these as all, UL, very nice pieces of business. None of them, individually, being, you know, a big deal, as opposed to just all of them in aggregate demonstrating a momentum in the business?

Well, probably is best for me not to answer that directly just for competitive reasons, Tim. But you've seen, and we announced this time, that hour, you know, nonmobile margin, gross margin, was 30% of our total epay this time. And it's growing about 30% a year. And really, we don't have any one thing that will kill her in any place. What you really want to do is just put his many of these products out in as many countries as you can, because that's your value proposition to the retailer. Sometimes, a retailer, you know, for the more well-known products -- that might be, you know, Xbox and iTunes and now Google Play; those might be more well-known kinds of things, but they are going to want these other ones that are very [voluminous] because they want a full offering for their customers. So, you've kind of got to look at this as the group and and that's what's improving our margins.

Okay. Great. I'll get back in the queue. Thanks very much.

All right. Thanks, Tim. Next?

Our next question is from Chris Shutler of William Blair. Please, go ahead.

Hey, guys. Good morning.

Good morning.

Good morning, Chris.

On Pure Commerce, I know you said a couple of quarters ago, Mike, that you wanted to wait a little before talking about that business in a whole lot of detail, but I know you mentioned some wins in the prepared remarks, but just anymore color you can provide there, especially on -- I know there were some cross-selling potential given that Euronet and Pure Commerce had somewhat different geographical and customer footprints, so just any more color there on how that's progressing.

Well, I will tell you it's actually -- this little company can be a little barnburner for us. Everything is working well within the cooperation of them and then our current, you might say, footprint and assets. They continue to sign more and more business. They actually are signing business faster than they can implement it, and so what we're doing is utilizing the assets we have in the rest of the company to help them implement this quicker. So I'm not prepared to give numbers on that quite yet, but this is turning out to be a really nice asset. The leader there, Daniel Lavecky, is a very smart guy and working well with our people, so we'll be able to tell you more, I think, towards the end of the year but we're very pleased with how this has rolled out.

All right. Great.

And one of our customers, just recently, that we rolled out here in the US was duty free shops, DFS. That's owned by Louis Vuitton. And it's they've basically -- we've rolled out in four key airport duty freeshops here in the US, and that was in Honolulu and SFO LAX and JFK. And that took just a lot of effort by everybody to get that all to work, but it's going to be a very, very nice account for us as and example of how we work together.

Alright. Great. And then separately on the Google Play agreement in Germany, can you just talk about, I guess, how you're thinking about additional countries there? And I guess are there other companies out there like epay doing the same thing in some of those other countries with Google?

I will let Kevin answer that.

So, again, we won't, for competitive reasons, reveal the markets that we're going to go into, but one could assume that we'll expand the Google Play product into the other epay markets across the world. There are others that do it. Again, for competitive reasons, we won't discuss who has which markets and how Google Play is playing, but I think what ultimately plays out is the epay (inaudible) -- or the non-mobile market all depends on who you're connected to, which retailers you're connected to, and what we're doing is we're leveraging the connections we already have with existing retailers. So, we don't really worry about the other guys. We just focus on getting these new products through to the retailers that we have, which, as we've reported many times in the past, we're connected to some of the best large retailers in the world. So we're real excited about the product.

Okay. Great. And then just last question. I guess at a high level, obviously, growth rates across the Company are strong, right now, but walk us through how you are thinking about growth in each of the three segments, not just over the next one or two quarters but, you know, over a more medium term horizon like.

Well, I guess we could say that the rate of growth that we're seeing in both money transfer and in EFT, those are our two strongest growth areas with, you know, plus 20% growth rate both of them. We can't tell for sure what's going to happen, but I -- but it does not look like that's abating any time soon. On the epay side we're getting, you know, high single-digit kind of growth rates there. I think that can continue. And, you know, we really don't see this stuff slowing down.

Actually, as the economy -- I mean we've got to understand we're still in a depressed world economy. As any improvement there occurs, it helps us a lot. When you just think about our epay segment, and you think about markets, you know, like Spain or UK or whatever, and Spain, you know, it's something like 50% of all kids under 30 don't have a job right now. So, obviously, they're spending less on their phones than they did before, and they're spending less on apps and less on everything else because they don't have money.

As the economies starts to strengthen, you know, it's -- all of a sudden we are going to look like geniuses, even though we really aren't doing anything different other than enjoying the secular improvements.

Well, and benefiting from the assets that we have out there.

Yes. I mean that's the deal. We've been making big investments even when times were tough. A lot of our competitors didn't do that and the result is, and you can see this absolutely per share in money transfer, the result is increased market share.

Alright. Thanks a lot, guys.

Next question is from Jason Nacca of Sidoti & Company. Please, go ahead.

Hey. Good morning, guys.

Good morning, Jason.

Good morning.

Okay. Regarding the epay segment, provide me with a little color regarding Australia and Brazil, and also the strategy you employed this quarter in going forward to result -- reverse some of the results in these regions in previous quarters.

Yes. Yes, Jason. Well, first of all, in Brazil we have seen that trend flatten out so we're pleased to do that. We -- our strategies to do that have included, you know, a number of things, of repositioning ourselves with some of the mobile operators, repositioning ourselves with some of the retailers, some expense management, and, I guess, you know, all the kinds of typical things that you would expect.

We are cautiously optimistic that as we, and some content providers, overcome some what I would call like local tax hurdles that we will be able to take a stronger suite of non-mobile product into that market. And anticipate that that will begin to show up in our results as we leverage the large retail relationships that we've built there. So, that one has really been, you know, a multi front approach where it's been repositioning with retailers mobile operators, managing expenses and just working through the traps to get non-mobile in there. Australia, we've not been quite as successful in kind of bending the needle on that one yet.

We continue to work, obviously, with both our mobile and non-mobile product, work with our mobile operators to change the direction of that trend. We're cautiously optimistic that we will see some nice non-mobile growth come from the implementation of our transport product that's rolling out there. That product is well on its way to roll out. They've rolled that out to more of the transportation venues such us buses, trains, et cetera.

We expect to see that start to gather a little bit more momentum starting the first part of the 2014. And, you know, so I guess it's fair to say more work to do. Obviously, in both of those markets, a little bit more success here on getting after changing that direction in Brazil and we're optimistic that we'll change that direction in Australia in the not too distance future.

Okay. Great. Now switching gears here to money transfer. With US and Mexico transfers continuing to be pretty strong would you say that you're starting to see, you know, recovering in housing is driving this growth, or even possibly taking some market share there?

I'm sorry, Jason. Can you repeat that?

Yes. Within the money transfer segment, US to Mexico transfers continuing to be pretty strong. Would you say that you're kind of picking that up from some recovering in housing, or would you say it's also driven by some market share gains, as well.

Yes. I would say if you take a look at the Bank of Mexico remittance numbers, they're kind of in the sub 5% growth rate and I'm sure that's the industry. So when we're over here with multiples of that, we're, obviously, grabbing market share from competitors. Now, one of the things that certainly is helping and that's probably added to that 5%, you know, the reason we have the 5% growth is the construction, and new home construction in particular. I imagine that that is quite helpful, but the reality is, you know, we're growing our transactions to Mexico over four times faster than Bank of Mexico's numbers, so that just tells you that somebody is losing and we're gaining.

Okay. I think that's it, guys. Thank you.

Okay.

Thank you.

The next question is from Peter Heckmann of Avondale. Please, go ahead.

Hello, Pete.

Hey. Good morning. A couple follow-ups. Rick, on Pure Commerce and EasyPay, just in terms of trying to quantify the acquired revenue impact, would they have contributed about $7 million in the aggregate in the quarter? Is that fair?

Not too far off, Pete.

Okay. Great. And then as regards to the Ria digital effort, is that something that's live, currently, and can you talk about some of the target markets and some of the ways you may market to future customers.

Well, it is live, and we will continue to roll it out with more corridors and more (inaudible) countries, but we have just -- we have basically just turned it on. So we're just doing hundreds of transactions a months, not millions. But we believe that over time this could be a significant piece of our business. We don't really see it as a cannibalization of who we have, because our agent model as different customer all together than kind of the well-heeled software engineer in Silicon Valley sending money back to his family in India or that nurse or doctor who is educated in the Philippines and sending back their money.

You know, it's a different guy than a lot of the immigrants who use our agent way to collect the money, but we do believe it's complementary, and I would like to attack all the market not just most of the market. So, we will spend more money as time goes on, as we go into more and more markets, but we hope to -- we don't expect that's going to necessarily, you now e crunch our margins. And if we can keep growing money transfer, as we have been, then there's a little money left over, isn't there.

Yes. Fair enough. Then I was intrigued by the comments on the digital wallet initiative with Boost Mobile. It seems like that's a different way, certainly, than most are approaching mobile wallets or digital wallets. Do you have other initiatives that we may hear about in future quarters, and do you think there is a real opportunity for Euronet there given your strong point of sale presence with retailers?

Oh, absolutely. Actually we love our wallet, because, especially, on overseas markets, we need a -- those wallets needs a way to get charged up and in markets with, you know, with less credit cards than the US, cash collection seams to be at the point of sale. It seems to be the way to do that. It's just -- you know, ours is an interesting combination of both the wallet and content. You know, I mean a way to pay certain bills, to do money transfers and so forth. May be we can do more of those in other markets, but at a minimum, when somebody says a wallet is a threat to you, I say, "No, wallets are my best."You know, the more merrier. I mean when you think about it, iTunes is the most successful wallet out there.

We are addressing, Pete, the -- you know, a lot of wallets focus on how you're going to use the wallet to buy something. We have not reinvented that with this product. You use a card, a (inaudible) card, a prepaid card. The wallet, in our model, is principally being used for financial services, and we think that idea appeals to the cash preferred consumer and that there are opportunities with other partners.

Okay. I appreciate it. Great quarter.

Thank you very much.

Thanks, Pete.

Thank you. (Operator Instructions). The next question is from Mike Grondahl of PiperPlease, go ahead.

Yes. Thanks, guys. Just two follow-ups. One, Mike, could you talk a little bit about what you're seeing overall in Europe? You mentioned, I think, that Spain money transfers grew again. Just kind of what are you seeing is that as an overall market? Is it beginning to come back a little bit?

Actually, there was and article that I read this morning that said that the European economy seems to be strengthening up a bit. Maybe we're seeing a little bit of that, but we're -- it's -- we've been doing so good, competitively, particularly in money transfer overseas, I can't quite tell if it's just improvement in their economies or just improvement in our market share position. Generally, it looks like it may -- we've already seen maybe the bottom of the trough with respect to the European economy we're getting a little bit of growth rate. I think Germany is weighted about a half a percent, and Poland is at about 2% growth, GDP growth rate this year, so maybe those guys are pulling out. And I tell you when they do we're going to be really happy.

Okay. And then, lastly, could you just -- I don't know if I heard any comment on the US mobile top-up business. How did that trend in the quarter?

Well, I think we pointed out in the comments in the press release that US was one of the nice contributors to the epay results this quarter. So the net-net was -- in -- it was a good contributor in there, Mike.

Yes. The US epay group has actually done -- has been night innovative in a number of solutions that they've provided to certain of these very large mobile operators. You know, like Sprint with Boost and T-Mobile, et cetera. There's been a couple (inaudible), as well, and I think they are innovations, which are a lot more than just doing a transaction, just doing a top-up. These innovations have locked us into these customers, and we're providing these customers with ways to continue to market their products and be more competitive. This has resulted I think them making more money and us making more money.

That's good. Great. Okay. Thanks, guys.

Yes. I think we've got time for one more question if there is one, otherwise we will sign off.

The final question is from Chris Shutler.

Hi Chris.

Of William Blair. Please, go ahead.

Hey, guys. Thanks for taking the follow-up. I just want -- there's, obviously, been speculation in the press regarding acquisitions, and I just and to give you guys the opportunity to give us your current thought process on acquisitions, potentially -- particularly larger ones.

All right. Okay. I'm trying to figure out what do you mean by larger ones?

In the several hundred million dollars plus range.

Okay. Well, I guess I could safely say that we have -- well, we're looking at acquisitions of all sizes. There has been some scuttlebutt running around about, particularly, MoneyGram, and at this point, you know, we're not in any process. Haven't participated in it and have no interest. If that's what you're talking about.

Yes. Thanks a lot.

I am showing no further questions in the queue at this time, and would like to turn the conference back to Mr. Mike Brown, CEO.

Okay. That's all I've got. Everybody, I thank you for taking your time, and we'll look forward to talking to you after next quarter's results. Take care. Bye-bye.

Ladies and gentlemen, thank you for participating in today's program. This does conclude the presentation and you may all disconnect. Everyone have a good day.