Euronet Worldwide Inc (EEFT) 2014 Q4 法說會逐字稿

Greetings, and welcome to the Euronet Worldwide fourth-quarter 2014 earnings conference call. (Operator Instructions).

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

Thank you, Mr. Newman. You may begin.

Thank you, Ben. Good morning and welcome, everyone, to Euronet's quarterly results conference call. We will present our results for the fourth quarter and full year of 2014 on this call. We have Mike Brown, our CEO; Rick Weller, our CFO; and Kevin Caponecchi, Executive Vice President and CEO of our epay division, on the call.

Before we begin, I need to make our forward-looking statements disclaimer. Statements made on this call that concern Euronet's or its management's intentions, expectations, our 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 technological developments affecting the market for the Company's products and services; technological issues associated with the operation of our complex processing systems, including security breaches; changes in ATM and other transaction fees; and changes in laws and regulations affecting the Company's business, including immigration laws and anti-money-laundering regulations.

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 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 our CFO, Rick Weller.

Thank you, Jeff. Good morning and welcome to everyone on the call. I will begin my comments on slide 5. As you can see, we finished the year with very strong fourth-quarter results, fueled by double-digit constant currency growth from all three segments.

We achieved revenue of $462 million, operating income of $49.5 million, and adjusted EBITDA of $71.4 million. Last year, our fourth-quarter 2013 results included an $18.4 million non-cash impairment, which we excluded to arrive at adjusted operating income. We believe this analysis provides a more relevant comparison of operating results.

Our cash EPS was $0.74, a 17% increase from $0.63 over the fourth-quarter 2013, and $0.02 ahead of our guidance. And it's the eighth consecutive quarter we have achieved double-digit growth in adjusted cash earnings per share. This $0.74 includes about $0.01 of headwind from foreign currency fluctuations since we provided guidance in October, and about $0.03 loss from a write-off of an epay investment.

Last year's cash EPS also included about $0.05 of income tax benefit that did not repeat in 4Q this year. Unlike last year, this year, our quarterly results did not realize any extra tax benefits. So, when you do the math for the puts and takes, you will see that our fundamental business in the fourth quarter did well better than the impressive 17% cash EPS gross shows.

Overall, this was an excellent quarter for Euronet, and positions us well to continue the momentum into 2015.

Slide 6 shows the three-year transaction trend for each segment. EFT transactions grew 3%, primarily fueled by growth in Europe, partially offset by a decline in Cashnet transactions in India. Epay transactions grew 20%, driven by growth in India, Germany, Australia, Russia, and the Middle East, which was partially offset by declines in Brazil and the UK. Transaction growth outpaced revenue growth, primarily as a result of increased transactions in India, which earn a much lower revenue per transaction than transactions in other markets.

Year-over-year transaction growth for the money transfer segment came in at 59% in the fourth quarter. Money transfers increased 70%, driven by continued organic growth, including a launch of the Walmart-2-Walmart product and the acquisition of HiFX. We have now achieved double-digit money transfer growth for 15 consecutive quarters. And while Walmart-2-Walmart and HiFX contributed to money transfer's phenomenal growth, our core money transfer business continued to grow at double-digit rates. Non-money transfers increased 10%, largely from check-cashing transactions in the Americas.

Next slide, please. On a year-over-year basis, foreign currencies largely weakened, impacting our results up and down the page. For example, the Russian ruble declined 31%; the Hungarian forint, down 12%; the Brazilian real, down 11%; the Polish zloty, down 9%; the euro and the Australian dollar, each down 8%; and the pound, down 2%. The Indian rupee remained largely flat on a year-over-year basis. To normalize the impact of the foreign currency fluctuations, we have presented our results adjusted for currency on the next slide.

Let's move to slide 8, please. Our EFT segment had another outstanding quarter, delivering 21% constant currency revenue growth, 62% adjusted operating income growth, and 48% adjusted EBITDA growth. These increases were driven by an 11% expansion of our ATM network, more point-of-sale dynamic currency conversion transactions, and other value-added transactions.

Operating income and adjusted EBITDA margin expanded as a result of a greater mix of transactions in Europe, which earn a higher margin per transaction than those in the Asia-Pacific markets. Revenue growth outpaced transactions due to a reduction in Cashnet transactions in India. With growth across all metrics, this was an excellent finish to 2014 for the EFT segment.

Epay had a strong fourth quarter, achieving constant currency growth of 20%, 16%, and 11% in revenues, adjusted operating income, and adjusted EBITDA, respectively. This growth was driven by increased sales of non-mobile content across our markets, partially offset by certain mobile declines. Gross margins were constant year-over-year; but this year, we realized slightly more bad debt expense, as reflected in the lighter operating margin expansion. Overall, a strong fourth quarter for epay.

Money transfer revenues grew 61%, operating income grew 86%, and adjusted EBITDA grew 76%. These impressive growth rates were driven by a combination of strong organic growth, which includes the successful Walmart-2-Walmart launch, and the acquisition of HiFX. Gross margin remained constant on a sequential basis, reflecting stability in pricing. Operating and EBITDA margins expanded year-over-year, commensurate with volume growth.

Next slide, please. Slide 9 shows our balance sheet highlights for the quarter. The biggest two changes since last quarter were in cash and debt. At the end of October, we issued $402 million of 1.5% senior unsecured convertible bonds. The convertible bond issuance contributed to both the increase in cash and debt. The proceeds were largely used to repay draws on our revolver and to repurchase approximately $65 million in shares, or about 2% of the shares outstanding. The bondholders can first call the notes in October of 2020. The bonds are convertible at an initial conversion rate of $72.18, which represented a 35% conversion premium on the date the bonds were sold.

However, the bonds are subject to conversion at Euronet's discretion, starting April 2018, provided the closing stock price exceeds 130% of the conversion price, or $93.83 per share. The issuance of these bonds reflects -- bonds fixes most of our debt at these historically low interest rates; diversifies our debt between shorter- and longer-term periods; and provides greater operational flexibility, going forward.

Before I leave the balance sheet and quarter discussion, I should also explain a couple of the nuances of the bonds on the interest and EPS.

First, you will see a sizable increase in interest expense on our income statement. Most of that increase is due to certain non-cash interest required to be recorded under GAAP. You will equally notice that we exclude the non-cash interest accretion in our cash EPS reconciliation schedule.

The second point relates to the potentially convertible shares. This quarter, like future quarters, we will include in our EPS calculation shares only if the current trading price is in excess of the conversion price. That is the $72.18 per share. Upon our trading price reaching $72.18, we will then include only the number of net shares settleable, which is essentially the number of convertible shares, times the difference between the trading price and the conversion price, divided by the trading price, for those of you that like all the math.

Accordingly, there will be no dilution until our shares are trading at values greater than $72.18. Moreover, in that we have the right to convert the bonds if the share price reaches $93.83 per share in April of 2018 or thereafter, we would logically have the ability to limit the dilution to approximately 2%, assuming the share price doesn't appreciate beyond $93.83 within three years from now. Or, said differently, appreciate more than 28% compounded annually. If it does, that's a good thing, as a one-time 2% decrease seems pretty insignificant in relationship to three sequential years of 28% increases.

Now let's move to slide 11 and quickly review the full-year results. On slide 11, you can see that full-year revenues exceeded $1.6 billion, operating income was $158 million, and adjusted EBITDA was about $243 million. Net of expenses related to the debt, we produced free cash flows of more than $130 million.

The full-year 2013 results included the $18.4 million non-cash impairment I discussed in the quarterly results, as well as a $19.3 million non-cash gain we recognized in the third-quarter 2013 related to contingent consideration on an acquisition.

To more accurately reflect -- compare operating results, we will focus on adjusted operating income when we discuss the segment results. Full-year cash EPS was a record-breaking $2.59. I guess the best way to describe 2014 is to say that it is the reflection of four really good quarters.

Slide 12. For each segment, the transaction trend was virtually the same as we discussed in the quarterly results. For the full year, EFT transactions grew 6%, epay transactions grew 12%, and money transfer transactions grew 38%. These full-year transaction growth numbers were made possible by consistent, quarter-over-quarter growth for the full year.

Let's move to slide 14, and I'll discuss the full-year results on a constant currency basis. Here on slide 14, we have provided the full-year results, adjusted to remove the impact of FX currency fluctuations, as well as the non-cash impairment and contingent consideration gain from the 2013 results.

For the full year, EFT revenue increased 23%, adjusted operating income increased 47%, and adjusted EBITDA increased 34%. This growth was driven by ATM expansion, increased POS dynamic currency conversion transactions, and other value-added transactions.

Epay revenue grew 6%, adjusted operating income grew 8%, and adjusted EBITDA grew 5%, largely from non-mobile content growth across all markets. Money transfer achieved record results and marked a significant milestone: the segment recorded revenue of more than $500 million for the first time in its history.

This strong result drove a 42% increase in revenue, a 40% increase in adjusted operating income, and a 37% increase in adjusted EBITDA. Organic growth from Ria's core business, again including the successful launch of Walmart-2-Walmart product and the acquisition of HiFX, contributed to these strong results.

Next slide, please. Cash increased by $258 million from cash flows generated from operations, cash acquired with the HiFX, and proceeds from the convertible bond issuance, partially offset by the pay-down of amounts on our revolver with proceeds from the convertible bond, and $65 million in share repurchases. Debt increased as a result of the HiFX acquisition and the issuance of the convertible bonds. Overall, this was another outstanding year for Euronet, with double-digit consolidated earnings growth and record cash earnings per share.

Finally, before I conclude my comment, I would like to provide a little more clarity on the first-quarter adjusted cash earnings per share guidance of $0.54 we included in our press release. Based on current foreign currency exchange rates, the $0.54 has absorbed about 5% of FX headwind compared to the fourth quarter of 2014. Accordingly, if not for the FX math, we would be looking at a first quarter of almost $0.60 a share.

With that, I will conclude my comments, and turn it over to Mike.

Thank you, Rick, and welcome, everybody, to our call. As you may know, 2014 marked Euronet's 20th anniversary. I think these results speak for themselves. 2014 was, by far, our best year yet. As I reflect back on this 20-year journey, there are a few key indicators that sum up our exceptional run. We have moved from a startup company to one that generates over $130 million in cash flow from operations per year.

This year alone, we earned more than $1.6 billion in revenue. We achieved record cash earnings per share. We processed more than 2.5 billion transactions. Our EFT team exceeded 20,000 ATMs that we directly operate. Our epay team became the market leader in digital gift code distribution. Our money transfer segment exceeded $500 million in revenue for the first time.

Our business is not just about moving around bits and bytes. Our partners trust us with more than $72 billion in cash every year. And not only did we achieve the confidence of the world's largest retailer, but Walmart named Ria as their supplier of the year at the annual Walmart Services Supplier Conference.

And these are just a few of the exceptional accomplishments achieved by the hard work and dedication of our teams around the world. We have great momentum in each of these segments, and are well positioned for another great year in 2015.

Now, let's move along to slide number 19. This was simply an outstanding year for our EFT business. Our full-year adjusted operating income growth accelerated to 47% from 40% last year in 2013, and 35% in 2012. As I have mentioned before, these earnings are the result of the continued focus of our teams to work hard every day to find new, high-quality locations for ATMs and POS terminals, and to develop new products to offer on those devices.

Now let's move to slide number 20 and we'll discuss the details. In the fourth quarter, we expanded our IAD -- that means independent ATM deployer -- network to France. These new ATMs are located in high-traffic locations in that country. You may remember that last year we launched a Euronet store in the Alexanderplatz Railway Station in Berlin. In the fourth quarter, we expanded that model to Munich. The new Euronet store is located in the central railway station, and offers products from all three of Euronet's segments. We have included a picture on the next slide to give you an idea how these stores look.

Our European team also signed several new agreements, including an ATM outsourcing agreement with Credit Agricole bank in Poland, and Paywave Visa contactless card issuing and acquiring agreement with Hipotekarna Bank in Montenegro.

Our software business had a nice fourth quarter, as well, signing two new agreements. First we signed a software processing agreement with 4C's, a multi-institutional debit and credit card transaction processor, which is jointly owned by 13 banks throughout the organization of Eastern Caribbean states. We also signed an agreement to implement Euronet's IT and product suite for Finabank in Suriname. A Euronet software will support ATM and POS driving, card issuing, merchant relationships, and connections to regional gateways.

And finally, we signed several renewals, including an ATM and card outsourcing renewal with Nextebank in Romania; an ATM, POS, and card outsourcing services renewal with Credit Agricole in Serbia; an ATM deployment renewal with Real, a hypermarket chain in Germany; and a POS switching renewal with IKEA and Leroy Merlin in Greece.

Now let's move on to slide number 22. We continue to add new products to our portfolio. In the fourth quarter, we signed an agreement to provide bank note reports for Piraeus Bank in Serbia, which allows the banks to comply with new government regulations requiring reporting on all banknotes in the bank's ATMs.

We also added ATM text messaging alerts for Raiffeisen Bank in Serbia and Albania, which provides consumers with alerts for successful transactions, as well as text message alerts sent to key bank employees, noticing them when errors occur on their ATMs. We added American Express and China UnionPay card acceptance on Euronet deployed and client networks in Romania, Hungary, and Greece. And we further expanded our relationship with UnionPay, launching co-branded UnionPay cards for DSB Bank and Southern Commercial Bank in Suriname.

We implemented new functionality for Standard Charter Bank, including automatic deposit terminals, in Bahrain, and Visa Fast Fund in India. We also continue our promotional payout success by signing a repeat agreement with Philip Morris for new marketing payouts in Poland.

Finally, we have surpassed our three-year goal and finished our 20th year with 20,364 ATMs, with the largest increases in India, Europe, and Pakistan. This represents an 11% year-over-year growth. And excluding the approximately 1,600 low-margin IDBI ATMs in India that we walked away from last year, this represents the fifth consecutive year we have grow ATMs at double-digit rates.

Over the past few years, we have found good opportunities in deploying our own ATMs, which give us more control over our growth plans than several years ago when we relied more on outsourcing deals. As I have told you from time to time, I am confident that there is plenty of room in this business to grow at double-digit rates, which was proven again by our double-digit network growth last year.

As I said, our EFT teams did an exceptional job delivering ATM network and product growth during 2014, which in turn contributed to outstanding fourth-quarter and full-year results. While we expect to see a more pronounced seasonal effect in EFT in the first quarter of 2015, as I've mentioned to you in prior quarters, we expect still another great year for EFT across the full year of 2015.

Now let's move to slide number of 25 and we'll talk about epay for a bit. Slide 25. This was another solid year for our epay team, achieving revenue, adjusted operating income, and EBITDA growth for the full year. As Rick mentioned, this growth is largely driven by expansion of our non-mobile content. This growth wasn't just from one brand in one country, but rather from an expansion of most of our brands and growth in all of our markets.

Additionally in 2014, we established ourselves as the leader in digital code delivery, selling our content through PayPal in the US, Europe, and through numerous online banking platforms in Europe and India. We continue to sign new leading global content partners and expand our new and existing content to more retailers in more countries. I am pleased with the progress we have made in the epay segment and look forward to continued progress as we move into 2015.

Next slide, please. On slide number 26, you can see the highlights from our mobile business. In the fourth quarter, we signed a three-year extension with Sprint. Sprint is our largest epay partner in the US, and we are happy to extend this partnership.

We signed a mobile top-up agreement with Metcash Group, a grocery store chain in Australia with more than 1,500 locations. Metcash operates the popular IGA, Super IGA, and IGA Express brands in the Australian market.

We also continued to expand our SIM distribution. In the fourth quarter we launched SIM distribution for Lebara and Lycamobile in France and Belgium, and for O2 in more than 10,000 POS terminals in Germany. Finally, we launched real-time top-ups on more than 7,500 POS terminals in Italy.

Now let's move on to slide number 27, and we'll talk about our non-mobile deployment. It's a pretty full slide here, as you can see. Non-mobile content continues to become a larger and larger part of our business, representing 49% and 43% of our gross margin for the fourth quarter and the full year, respectively.

The 49% for the fourth quarter includes certain one-time transactions from a nuance related to a change in FX rates that we do not expect to recur. Excluding those transactions, our non-mobile gross margin mix would have been 47% for the fourth quarter.

During the quarter, we expanded iTunes distribution to the UAE. This is our first non-mobile content launched in the Middle East. We added a new leading global brand to our content portfolio, one that most all of you have heard of: Netflix.

Customers can now pay cash to purchase a gift card which contains credits for a one-, three-, or five-month subscription to this popular TV and movie streaming service. Netflix is now available through our REWE, Expert, and Shell retail partners in Germany, and through Media Markt in Austria.

Google Play sales also continue to increase. And during the fourth quarter, we launched this popular products into new retailers across Brazil, Poland, and Turkey.

We added Sony PlayStation digital codes through our PayPal distribution channel in the UK. With strong double-digit constant currency growth in revenue and earnings in the fourth quarter, our epay segment is well positioned for continued growth as we move into 2015.

Now let's move on to slide 30, and we'll discuss money transfer. As we mentioned earlier this year, our money transfer segment entered a new era in 2014, adding two large markets to our portfolio: the US domestic send market through our partnership with Walmart, and the very large international payments market through our acquisition of HiFX.

Over the last six or seven months, Walmart-2-Walmart has redefined the domestic money transfer market here in the US, offering customers a more affordable and reliable option to transfer money to their families in the United States. We and Walmart have been very pleased with the customer acceptance of this product.

The acquisition of HiFX, a provider of online initiated international payments in foreign exchange services, allowed us to enter the $1 trillion international payments market and expand our digital money transfer presence.

This acquisition has performed in line with our expectations, and we look forward to expanding HiFX's global presence in 2015. These two new products, combined with Ria's continued organic growth, led to a revenue of more than $500 million for the first time in the history of our money transfer segment, as well as record full-year earnings. 2014 was an exceptional year for the money transfer segment.

Now let's move on to slide number 31, and we'll discuss the details of the quarter. On slide number 31, you can see the three-year trend in money transfer transactions. Money transfer transactions grew 70% in the fourth quarter, fueled by continued organic growth, including the successful launch of Walmart-2-Walmart product as well as the acquisition of HiFX. Non-money transfers grew 10%, primarily from the growth in check-cashing transactions in the Americas.

Next slide, please. Here are the highlights of our network expansion in money transfer for the quarter. Our total network grew 13% year-over-year, and now includes 243,000 locations in 134 countries.

During the quarter, we expanded our bank deposit services to correspondent banks in French Guyana, Gibraltar, Iceland, Malta, and Monaco. The agreements with these correspondent banks extend our market-leading bank deposit presence and offer our customers more choice and flexibility when transferring money to their families at home.

We also had several key correspondent signings. We signed an agreement with Bank of China to expand Ria's network in China. According to the World Bank, China is the world's second-largest received market, receiving $64 billion in remittances per year. By way of comparison, Mexico receives approximately $24 billion in remittances per year. This is a significant global market, and another nice addition of this new market for Ria.

We also signed an agreement with the Polish Post. When it is live, we will add 4,000 high-quality locations to Ria's network in Poland.

Finally, HiFX signed three new partner agreements during the quarter, including two agreements with European banks to offer white label payment services and foreign exchange services.

Our money transfer segment had a record-breaking year, highlighted by the partnership with Walmart, the world's largest retailer; and the acquisition of HiFX. And as you can see with the highlights on this page, there are still more things to come.

Now let's move onto slide number 33, and we'll wrap up the quarter. Slide 33. Our fourth-quarter cash EPS was $0.74, a 17% increase over Q4 2013, and the eighth consecutive quarter we have achieved double-digit adjusted cash EPS growth.

EFT finished the year strong, eclipsing the 20,000 ATM market, and achieving fourth-quarter constant currency operating income growth of 62%. Epay contributed to revenue and earnings growth for the fourth quarter and for the full year on the strength of its non-mobile sales across all our markets. Money transfer constant-currency operating income growth accelerated to 86% for the fourth quarter, fueled by organic growth, the addition of Walmart-2-Walmart, and the acquisition of HiFX.

We issued $402.5 million in principal senior unsecured 1.5% convertible bonds. Our balance sheet remains strong, and we generated approximately $130 million in cash flows from operations.

We expect our Q1 2015 adjusted cash earnings per share to be approximately $0.54, which includes about $0.05 of headwind from foreign exchange rates compared to the first quarter of 2014, and assumes constant and consistent foreign currency exchange rates throughout the rest of the quarter.

To wrap up 2014 and our 20th year, I would like to recap a few of the more significant highlights in 2014. This is the 14th consecutive year Euronet has achieved earnings growth. We delivered record full-year earnings, the third consecutive year we have delivered double-digit constant currency growth across revenue, adjusted op income, and adjusted EBITDA.

For the fifth consecutive year, we grew our ATMs at double-digit rates by adding more ATMs in more countries. We added more non-mobile content into more markets to our epay product portfolio. We entered the online international payments market through the acquisition of HiFX. We partnered with the world's largest retailer to change the landscape of domestic money transfer business, which we did. And we earned their vote as Walmart Financial Services Supplier of the Year.

These consistently strong results are not just good luck. They reflect a lot of good things going on in our business -- actually, in all three of our businesses -- and are a testament to the strength of our leadership and their ability to take advantage of every opportunity.

Thank you to our global staff for your hard work and dedication. You make these results possible; you make it possible for me to look good on these calls. And even with all of this success, I believe the best is yet to come.

With that, we'll open our line for questions. Operator, will you assist, please?

(Operator Instructions). Peter Heckmann, Avondale.

Nice results. And there's a lot of information there. I just had a couple follow-ups. Can you talk about -- and based on the results, I don't think there was (technical difficulty). But can you talk about any pricing actions that have occurred in the money transfer market, either domestic or internationally, competitively; and any that you foresee here in the near future?

Well, we can't really foresee the future perfectly, but I can tell you, we -- as Rick mentioned in one of his comments -- we really have seen no -- really no pricing movements in really any of our markets. With the exception, of course, that after we launched Walmart-2-Walmart, I think the pressure that was put on one of our competitors there caused them to drop their US domestic money transfer price down to around $11.50, or something. But that, you can check on. But for us, we've seen no pricing pressures anywhere, really, other than the normal competitive stuff that we see on an everyday basis.

Great. And then within Europe, some of the discussions that are having there as regards to potentially capping a credit and debit interchange. Do you see that as a potential catalyst for more outsourcing agreements on credit/debit card processing, POS processing?

Probably not. And you know, because in Europe, we are 98% on the ATM side as opposed to the POS acquiring side. So whatever happens there, I don't even expect it to change much. But even if it did, it really wouldn't affect us much.

All right. Then last question, and I'll get back in the queue.

Rick, could you give us the total shares outstanding at the end of the period?

It was about 55 million shares. It's in our press release, the actual number, in terms of what our weighted average shares outstanding is, Pete.

I'm just -- given that you bought a lot of stock back in December (multiple speakers).

It's 54,337,000.

All right, thanks much.

Alex Veytsman, Monness, Crespi, and Hardt.

Congratulations on an excellent quarter.

Thank you very much.

Just wanted to ask you about one of your markets, about Russia specifically. First of all, if you could remind us the exposure that you have. And also, given that 2015 is looking relatively weak from an economic standpoint for the country; and of course there's a lot of uncertainties with the falling price of oil and everything else, with the sanctions -- could you just give us more color on that particular market?

Kevin, maybe a you answer that one, because it's mostly epay that's in Russia.

Yes, the only Euronet business in Russia today is epay. And our principal epay business in Russia is the distribution of non-mobile content, which makes up a relatively small portion of the total portfolio. So, in summary, our exposure to Russia is relatively small.

Got it, got it. So it wouldn't move the needle, basically?

No, no.

Okay, got it. And then as far as the Walmart opportunity, could you maybe discuss your next steps for 2015? Where are you seeing -- what are your targets throughout the year? What are some of the opportunities you are seeing?

It took us about, I would estimate, around seven months to fully ramp up the transactions that we did with Walmart in all their stores. But one thing that's interesting: through the ramp-up, all the time, the Walmart executives were telling us that their domestic money transfer business is seasonal. But we've never seen the seasonality yet, because we continue to grow month-on-month. And so, in fact, we had our largest week ever, last week, in numbers of transactions. So, all we're going to do is continue to keep our nose to the grindstone; work really hard on delivering a quality product to Walmart and its customers; and we'll see what goes from there.

As far as all of Ria, we're just going to continue to compete in all the segments. As Rick mentioned, we had strong organic growth just within the US within Ria last year, and we'll continue to do that.

Got it. Sounds good. Thank you.

Chris Shutler, William Blair.

So, first in the EFT segment, just wondering, Mike, what your plans are for expanding the ATM count in 2015. And I'm guessing it is still around 2,000 machines, but maybe you could clarify there, and what split of Europe versus India you are thinking.

Well, I'll give you the same answer I give every quarter: we can only put ATMs in once we find good sites. The nice thing is, last year we put in about 2,000 ATMs. We've got the staff to do so. We're out there looking for sites. We still see ourselves really at the beginning of this runway, as far as places and countries. We just expanded to France, as an example. We could see more countries expansion, more deeper penetration into the current countries.

So if I could get in another couple thousand this year, it would be wonderful. But it's not a number I can project, because I'm really at the mercy of finding the good locations that are going to generate a profit. We can find locations, but we've just got to find ones that will be profitable. But 2,000 sounds like a reasonable number.

As far as the balance between India and Europe -- Kevin, correct me if I'm wrong here -- but maybe it's two-thirds Europe, one-third India, would be my guess. But again, that's all based upon where I can find them. If these guys find more than 2,000, all the better. Because we don't say, your quota is 2,000; we say, your quota is as many as you can possibly put in that are great.

Yes, make sense. And then, Mike, anything new on the outsourcing front? I saw the agreement in Poland this quarter. Maybe just an update there, and any kind of additional opportunities you're seeing.

Well, we see a few. Every year, we announce a handful of these things. They are darn hard to sell because of all the labor and other issues that we have to fight within the bureaucracies of the banks. But we get bigger and bigger every year. The price and the quality of the services and the value-added services we can give the bank get better. So it gives us a pretty strong value proposition.

We're actually growing most of -- a lot of our outsourcing services are coming out of Asia-Pac. So we'll keep after them. But I don't want my future to rest only in the hands of outsourcing deals. That's why we're aggressively pursuing new locations of our own.

All right, great. And maybe lastly, in EFT, just help us think through, the profits there have obviously been growing a lot faster than transactions and revenue. Maybe you could just -- I know you've done this in the past, but break down a little bit the key drivers of that, in terms of DCC versus other value-added services.

And then help us think through the sustainability of the recent trends over the next couple of years. And how much of it will be driven based on existing ATMs that are already in place, versus new ATMs that you plan to add? Thanks.

Okay. So, if you remember the basic premise of how it all works -- so, when we do an ATM outsourcing deal in a market -- let's say, for example, we do this in one of the European markets, and we charge a bank maybe $200 or $250 per ATM per month to run their network of 100 or 200 or 300 ATMs. That maximizes our revenue because it's X amount per month. The only way it can get bigger is if that bank adds more branches and more ATMs. But as you can see across Europe, none of the banks have very good financials, so nobody is adding too many new ATMs right now.

And so the way you grow it -- and then, here's the deal. Because it's a fixed amount per month, per ATM, it becomes regard -- the number of transactions are irrelevant. So they can add more cards and you end up with more transactions; so when you do your little division, you notice that actually you could say if all you did was do driving deals, your revenue per transaction would continue to go down.

Now, the reason ours has gone the other way is because we haven't focused -- let's take Poland, where you might do 3,000 transactions in a month at an ATM. And if we're charging $250, you can see right there that that's going to be less than $0.10 a transaction.

But if I own that ATM, here the profit economics are different. Here we make more than the $250 per month, per ATM, assuming we pick a great location. And so -- and we get all the revenue for that. And so, if we're able to do a domestic transaction, that might be $0.28 in Poland and $0.45 in Italy, and they range around there. If you do an international transaction, maybe make $1 or $2.

So, depending on how it all works, as we continue to add more ATMs on our own, we're focusing on sites where we can acquire lots of local and lots of high-value transactions. So then your average goes up. We also have other things, too, other tricks up our sleeves. We have cash acceptance networks and other services, marketing services, across those ATMs and so forth, and just kind of add in two that revenue, and then you divide it out.

So that's -- probably, I made this even more complex than you wanted. But I could say, as we add our own ATMs faster than we add outsourced ATMs, you'll see our average revenue per transaction and revenue per ATM go up.

Okay. Thanks, Mike.

Tim Willi, Wells Fargo.

A couple questions, first on epay. I think that it's probably the strongest quarter for the top line that I can recall in years. And I guess I'm -- obviously non-telephony is going quite well. Are you at a point, when you look at that business, where you think you have crossed over the line where the impact of the non-telephony clearly is going to outweigh the issues that have been weighing on the telephony business? And maybe, sustainably, the top line here is going to look better over the next couple of years, versus the last couple?

Yes, Tim. This is Kevin. It's always a challenge. We see some stabilization of telephony in some markets. We still have some challenges in the mobile sector and other markets. But to your point, we're reaching a point of critical mass of non-mobile content. We continue to expand that in markets.

And I think the other thing that you heard Rick and Mike talk about was new channels, specifically the digital channel. We had a lot of success in the digital channel, launching brands through new digital channels in the fourth quarter, and that played out nicely for us in the quarter. And we expect that, as Mike said, to continue.

Okay. And then just a follow-up on epay. And then I want to ask a quick one on money transfer. But in terms of what you would call the content providers that are turning to you guys for distribution -- whether it be physical or, as you mentioned, digital, Kevin -- obviously you've launched products that outside of iTunes and Google, but getting into more stuff that seems to be getting traction.

How would you characterize the pipeline of people that are coming to you and talking about, we want to create something to be distributed and sold on a prepaid basis, whether it's physical or digital? Has that line at the door gotten bigger or smaller, then sort of sustainable, in terms of people that want to talk about trying to put a deal together?

Yes, that's an interesting question. So, Tim, I would say -- this is Kevin again -- I would say that it's continuing to grow because we're also seeing the trend of existing products changing how they distribute.

So, for example, Netflix: Netflix in the United States has traditionally been a subscription service that you pay for with a credit card. As Netflix looks to expand in markets outside of those that are dominated with credit cards, they need another vehicle to allow payment. And so, by putting it on a card or putting it on a PIN-on-Receipt, we can facilitate allowing Netflix to expand to markets they would otherwise not easily be able to expand to.

The success that we've had with the software category that's widely understood that certain brands are converting from CD-ROM to POSA cards. Antivirus software, the same scenario. So I would say that the pipeline is not shrinking; it's actually in the process of growing. This whole transformation from physical to virtual continues to open up new doors for us and new opportunities.

Great, thanks. And then just last one on money transfer, and I'll hop off after I ask it. In terms of the cadence over the course of the quarter, was there still acceleration in terms of foot traffic or transactions, to the best of your knowledge, as you look at how the business went, where we exited on a much stronger rate than we began the quarter? It sounded like that was the case, but I just want to verify that.

I think that's pretty accurate. And a lot of people asked us last quarter -- because, on Halloween, MoneyGram dropped their domestic money transfer price by a significant amount -- and a lot of people were wondering how that might affect us. And, honestly, we've seen nothing. So, if anything, I think that's just -- their drop in price is just helping making domestic money transfers more affordable to the average US consumer. And when you look at their alternatives, if you're sending $600, you might have paid $50 to send money; and now you pay $9.50 with us.

What this is doing, too, is bringing new people into this market. So the pie is actually getting bigger for domestic money transfers. So, all this, we don't quite know where it's all going to go, but we're happy that it continues to grow. Like I mentioned, last week was our best week in our history of Walmart-2-Walmart. So, who knows? We'll see where it goes.

Great. Thanks very much.

Mike Grondahl, Piper Jaffray.

Congratulations on another strong quarter. Couple questions. First off, is there any update on any new retailers out there, whether in the US or globally? And then the money transfer operating margin, at 10%, was quite strong. How should we think about that number going forward?

Well, I'll answer the first question, which was other retailers. We talk to retailers all the time, Mike. But our feeling is, to close a big deal with a big-name retailer takes a long time. And I don't want to mess up that deal before it gets announced. So we traditionally will announce that actually, not even after we sign it, but after we go live. So you guys just have to wait and see, and we'll wait and see as we sign more deals.

With the exception of the ongoing margin within the money transfer market, I'll let Rick handle that one.

Yes, Mike. I would think that you'll continue to see consistent to improving margins there, because we benefited in the second half of the year by the launch of the Walmart-2-Walmart product, and the acquisition of HiFX. So those pieces will continue to be in our business. And as Mike said, we had a good week, last week, on the Walmart-2-Walmart product, which will continue to enhance that number.

So it wasn't -- the fourth quarter wasn't a fluke. There wasn't any kind of unusual, weird, or one-time type of things that came into those numbers. As we continue to add more and more volume into the business, we should see that number stable to improving.

Okay, great. And then with HiFX, any update on the US or Canadian rollout? And then is the white label program they're doing for two banks, is that a big deal? Just curious how we think about that.

Well, with respect to the expansion, we're hoping that towards the very beginning of next quarter that we should go live here in the US with HiFX. We are trying to get it into Q1, but there's some regulatory gotchas that were slowing us down here, but we're getting through them all; licensing and that kind of junk. But it looks like towards the very beginning of Q2, we hopefully will be live in the US with HiFX, so that will add a new market. We're excited about that.

Your second question was -- I forgot.

Canada.

Canada. Canada will follow the US. So we'll get US live, and do that for a couple of quarters, and then we'll work on Canada.

And then the white label (multiple speakers).

Yes, white label. So, and then the last thing was white label -- so there are two banks now. We're not quite sure how big this could be, but these are banks that specialize with customers who live in one place, and then they have vacation homes in others. And so, they would be, typically, a perfect target bank to do a white label product. We have never done one before, so I'm reluctant to give any guesses on how that will happen. But we'll let you know. Maybe we'll give you some early indication on our next quarterly call.

Okay. And then just the last question here. You guys called out Pakistan for some ATM deployment. Would you describe that as a new, exciting market, or a small market? How should we think about that?

Well, you know we've been in Pakistan for -- either providing some of the largest banks there software to run their ATMs, or doing a joint venture that we have there, running ATMs kind of like what we do in India. We've been there for five years, probably now, Kevin?

And this deal -- Kevin, why don't you jump in -- but if I remember, this was another outsourcing deal.

Yes, so we have a relationship with the largest bank in Pakistan. That relationship has been going for a couple of years now. I've been focused on trying to expand that business beyond the one relationship that we have. It took a little time. Outsourcing is a new model in Pakistan, as it relates to their ATMs. And we had some success towards the end of last year. And we have a nice pipeline going into this year that we've got to get closed and executed. So I would say, Pakistan in terms of total ATMs is a relatively small market, but it has lots of potential.

Yes, it's one of those -- got over 100 million people in it.

Okay. Thank you, guys.

Doug Greiner, JMP Securities.

In the existing Ria money transfer business, what are the key drivers behind the healthy organic growth?

Honestly, I think --.

Hard work.

We've got the best value proposition out there for the agent. There's just no -- and I think that's really what it comes down to. And agent can make a larger percentage of the customer fees, and a larger take with us than they can with our competitors. We've got an aggressive salesforce. We understand the business well.

We're now adding -- we've now added the largest retailer in the world as a chain. So for prior to that, there were only two companies who really played in the chain business. So we've just got a lot of opportunity. It's just really hard work. I tell you, Juan's team does a great job around the world, both in Europe and elsewhere, and also in the US. They just do a really good job signing up those agents, and giving them a value proposition that they can stick with.

And then as you look out into 2015, just what are the puts and takes for growth areas where you could see acceleration or deceleration there?

Well, I think you could tell by Q4's numbers, we accelerated across all three of our segments. The only thing that I've got as a headwind is this fricking currency. As Rick said, consensus before all the currency changes and so forth was around $0.54, $0.55. And we're saying, had it not been for currency, we would have been dang near close to $0.60.

So we're beating everybody's expectations. And the only thing we've got is this currency as a headwind. But I told my guys, stop whining about currency, and get out there and sell faster. So that's what we're doing.

Great, thanks.

Thank you. And I'm showing no further questions in the queue.

I'd like to turn the conference back over for any closing remarks.

All right. Well, that's perfect. It's a couple of minutes after 9. And I thank everybody for your time, and I look forward to talking to you in roughly 90 days.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Have a great rest of your day.