Euronet Worldwide Inc (EEFT) 2015 Q2 法說會逐字稿

Greetings, and welcome to the Euronet Worldwide second-quarter 2015 earnings conference call. (Operator instructions). As a reminder, this conference is being recorded.

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

Thank you, Andrew.

Good morning and welcome, everyone, to Euronet's quarterly results conference call. We'll present our results for the second quarter 2015 on this call. We have Mike Brown, our Chief Executive Officer; Rick Weller, our Chief Financial Officer; and Kevin Caponecchi, the 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 it 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 technological developments affecting the market for the Company's products and services; technical 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 our website.

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

Thanks, Jeff. Good morning and I, too, welcome everyone to the call. I will begin my comments on slide 5.

As you can see, we continued our momentum and delivered exceptional second-quarter results with double-digit constant currency growth across all P&L metrics. We produced revenues of $425 million, operating income of $47 million, and adjusted EBITDA of $67 million.

Our cash EPS was $0.78 a share, a 34% increase from the $0.58 in the second quarter 2014. This $0.78 includes $0.03 to $0.04 of favorability from the stronger-than-expected earnings in the lower tax rate jurisdictions resulting in lower tax expense; and about three-quarters of a penny of favorability from foreign currency rates since we gave guidance in late April. And while the $0.78 is an impressive operational achievement, it also includes about $0.15 per share of headwind from foreign currency versus the same quarter last year which, if added back to this year's number, would have resulted in a 60% year-over-year constant currency increase in cash earnings per share. These exceptional results were made possible by contributions from all three segments. Next slide, please.

Slide 6 provides our three-year transaction trends by segment. EFT transactions grew 3%, with growth in Europe partially offset by declines in China. With our focus on expanding our ATM and POS networks to higher-value locations versus higher-volume locations, we will continue to see revenue and margin expansion outpace transaction growth rates.

Epay transactions increased 13% year over year, driven by growth in India, Australia, Germany, and the Middle East, which was partially offset by declines in Brazil, the UK and Poland. Transaction growth outpaced revenue growth, primarily as a result of increased transactions in India and the Middle East, which earn a much lower revenue per transaction than transactions in other markets.

Money transfer transactions grew 43%. This growth was the net result of an increase in money transfers of 52% and an increase in other money transfer transactions such as bill payment and mobile top-up of 2%. The 52% increase in money transfers was driven by continued double-digit organic growth, continued expansion of Walmart-2-Walmart and the May 2014 acquisition of HiFX and represents the 17th consecutive quarter we have achieved double-digit money transfer growth. Next slide, please.

On slide 7 you will find our results on an as-reported basis. While we didn't see a significant sequential quarterly change in foreign currency exchange rates, the declines in currency rates we saw earlier in the year significantly impacted our second-quarter results on a year-over-year basis. Key currency changes included a decline in the euro and the Hungarian forint by 19%; the Polish zloty by 18%; the Australian dollar by 17%; and the British pound by 9%; and finally, the Indian rupee by 6%.

To normalize the impact of these foreign currency fluctuations we have presented our results adjusted for currency on the next slide. Let's move to slide 8, please.

Our EFT team had another strong quarter, delivering 22% constant currency revenue growth, 23% operating income growth and 22% adjusted EBITDA growth. These increases were the result of a 14% expansion of our ATM network and more dynamic currency conversion transactions on both our ATMs and POS terminals. Revenue growth outpaced transaction growth largely due to a decline in cash net transactions in India where we earn a lower revenue per transaction than transactions in Europe. With strong double-digit growth rates across all P&L markets, this was a great quarter for the EFT segment.

Epay delivered a very solid second quarter, achieving constant currency growth or 8%, 34% and 21% in revenue, operating income and adjusted EBITDA, respectively. This growth was driven by an increase in non-mobile sales, partially offset by certain mobile declines. Operating income and adjusted EBITDA margins expanded as a result of a customer promotional campaign at cadooz last year that did not happen this year and increased non-mobile transactions in Germany. Overall, nice to see double-digit operating income contributions from epay for the third consecutive quarter.

Money transfer had another exceptional quarter with 44% revenue growth, 90% operating income growth, and 66% adjusted EBITDA growth. These remarkable growth rates were driven by a combination of strong double-digit organic growth, a record quarter from Walmart-2-Walmart, and a full quarter of contribution from HiFX. These results also include one month of contributions from IME, which were largely offset by deal costs.

And finally, for all three segments gross margins on a constant currency basis generally remained stable to improving, both year over year and sequentially, reflecting consistent product pricing and margin management.

On slide 9 you can see a few highlights from our balance sheet for the end of the quarter. Our cash balance increased primarily as a result of cash flows from operations and favorable timing of settlements within our epay and money transfer segments, partially offset by cash paid for the acquisition of IME, capital expenditures and income taxes.

The slight increase in our debt balance was largely due to temporary borrowings for increased cash requirements in our ATMs during the summer months. Looking forward, debt will expand a bit in the third quarter as we continue to add more ATMs in -- more cash in our ATMs to accommodate seasonally higher transactions in the quarter.

As I conclude, I think it's worth repeating that this was simply an outstanding quarter for Euronet, with both double-digit constant dollar operating income and adjusted EBITDA contributions from all three segments.

With that, I will turn it over to Mike.

Thank you, Rick, and welcome, everybody. I'll begin my comments on slide number 10.

As I kind of look at this second quarter, I've got a few bullets here I'd like to share with you. The first thing that you cannot miss is that our constant currency and operating income and cash EPS growth were 67% and 60%, respectively. These are simply outstanding results. I know we use that word outstanding a lot, but that's despite currency headwinds. We exceeded our guidance by $0.08, which was more than 10%. We had strong performance from all three segments. And this continues to demonstrate our commitment to delivering more products on more devices in more locations and in more markets.

Also this quarter we're going to talk a little bit about our eye to the future with two acquisitions that support the growth strategy of the money transfer business. The first was our Malaysian-based money transfer provider IME which we purchased, which gives us immediate access to the large and fast-growing Asia-Pacific money transfer market where we previously had little to no presence. We also acquisition XE, the world's most trusted online foreign currency website. This expands our internet presence by orders of magnitude and the potential user base. It also expands our digital money transfer strategy of attracting new customers to our digital sites. Both acquisitions will drive future growth.

But, let's move on to slide 12 and we'll talk about each of these segments, starting with our legacy segment which is EFT. On a constant currency revenue and profit basis, the EFT segment grew 22% to 23% year over year. This growth is fundamentally fueled by more ATMs and more value-added transactions.

Now, jump to slide 13 and we'll talk a little bit more about some of our developments. As you can see, we had a lot of activity in the second quarter, so I will only hit on a few of the highlights.

First, we continued to expand our ATM presence, launching new, independent ATM networks in three countries: Cyprus, Portugal and the Netherlands. We also deployed our own ATMs in Malaysia, a significant milestone for us because it represents our first independent ATM network in Asia.

Second, we expanded our software products into new markets. Honduras and Brunei will provide interest margin software, card issuing and ATM acquiring products in these two new countries.

We continue to grow in Romania, completing an ATM purchase and network participation agreement with Idea Bank, as well as a network participation agreement with Credite Agricole.

We signed an ATM driving agreement with Standard Chartered Bank in Thailand. This represents an expansion of our ATM driving partnership with that bank, with Standard Charter. It's now our 12th different country that we provide services for them.

Finally, we renewed several agreements, including our ATM services agreement with Financial Forces where we provide ATM services to members of the UK military stationed in Germany, as well as a network participation agreement with Getin Bank in Poland. Next slide, please.

We continue to expand our value-added services portfolio. In the quarter we added foreign currency dispensing on our ATMs in France and Spain and we signed agreements to expand our cardless cash payout to HDFC Bank in India These agreements highlight our innovative products and our ability to quickly and successfully implement these products into new markets.

We also successfully expanded our POS DCC products to several new merchants, including with Dufry, a global duty-free shop in Greece. We added the service at Legardere Services Travel in the Auckland airport, as well as with Schmidt Marketing and Qatar Airlines, our first two merchants in Malaysia.

We ended the quarter with 21,980 ATMs, a 14% increase over prior year. We added 1,117 ATMs in the quarter, but about 450 of those ATMs are a seasonal ATM which we redeployed in the second quarter, basically turned back on, and the remainder are new ATMs. The largest increases were across Europe.

Our EFT team continues to work diligently to add new ATMs in new markets and to add new products to our portfolio. Their efforts are paying off with another quarter of strong double-digit growth.

Now, we'll move on to the epay segment, so jump to slide number 16, please.

Epay produced constant currency revenue growth of 8%, which was nicely leveraged into a 34% growth in constant currency operating income. As Rick mentioned, this is our third consecutive quarter of year-over-year growth.

Now let's move on to slide number 17 for some of the highlights.

The percentage of gross profit in epay made up by non-mobile is now in the mid-40% range and continues to grow. We further expanded our presence in Germany, adding Gift Card Mall to 1,300 Vodafone retail locations. We also added Microsoft Xbox to Rewe, a very large supermarket chain in Germany. We expanded distribution of Netflix to Switzerland, adding the product to 1,800 post locations. In the US we signed gift card distribution agreements with Staples, Sears and Kmart. Gift cards for these three brands will now be available in the epay gift card malls in our convenience and petrol retail locations. And we continued to expand distribution of digital gift codes in the banking channel. During the quarter we added online digital gift codes to the Deutsche Bank and Postbank digital banking platforms in Germany and we added Amazon gift vouchers to ICICI's online banking platform in India. Next slide, please.

On slide number 18 we'll present some of our mobile highlights for the quarter.

In Romania we launched the Lukoil locations we told you about last quarter. We also added Mobile top-up to Coal and Sisa grocery store chains in Italy and we launched Mobile top-up distribution through SNAI, a new distributor in Italy.

In the US we signed an agreement with TracFone to expand our WebPOS activations and commissioning services. These products allow TracFone to monitor and control pricing and promotions across their entire distribution channel.

We also signed an agreement with Progressive to provide handset leasing to the independent channel. Progressive is a market leader in this category and this partnership will complement our other handset leasing channels.

In summary, this was another strong quarter for epay as its efforts to deliver growth of non-mobile products really show up on the page.

Now, let's move on to money transfer, slide number 20.

Well, what more can I say? We had a 44% constant currency revenue growth that was leveraged to nearly double operating income. Tongue-in-cheek, I was talking to Rick and I wondered if I should just end my comments here because what more can you say after almost doubling your operating income. But I knew there would be a few questions, so we'll move on to slide number 21 and I'll start to talk a little bit.

The money transfer segment continued its exceptional run, achieving a 90%, as I mentioned, constant currency operating income growth for the quarter. The growth was really a combination of both our organic growth, as well as contributions from acquisitions. We achieved strong double-digit organic growth in virtually all metrics, including money transfer transactions, which represent our 17th consecutive quarter with double-digit money transfer growth. Walmart-2-Walmart transactions set a record in the quarter. And HiFX continued to perform in line with our expectations. We will talk about IME more in a couple of slides, but with one month of result and integration work underway, we are pleased with the performance of our team in Malaysia. Move on, please, to slide number 22.

Slide number 22 highlights our network expansion in the quarter. Our total network grew 16% year over year, now reaching 272,000 locations in 147 countries. We continued our focus on expansion in India. India is the world's largest receive market, receiving approximately 70 billion in remittances during 2014 according to the World Bank. As we have mentioned before, strong payout in India is important for both aspects of Ria's business, the traditional cash-to-cash type transaction, as well as our growing digital business as both methods of money transfer are popular among Indian immigrants around the world.

During the quarter we launched two new correspondents which, combined, represent approximately 9,600 locations. Both correspondents have very strong presence in the Indian market and will provide our customers with a good customer experience and competitively-priced transactions.

We also shut down a few thousand India locations we previously provided service to from a relationship with an intermediary. Now, with direct access to Punjab National Bank and Manappuram, some of the locations were redundant and others were in close proximity to the locations offered by our new partner, so we made the decision to close locations to better manage the customer experience and offer more competitive pricing. These closed locations will account for the discrepancy you see when you compare the sequential increase in locations to the number presented on this slide.

We also added more than 2,500 high-quality locations with PJSC Commercial Bank. It's kind of called PrivatBank there in the Ukraine. PrivatBank is the largest commercial bank in Ukraine and this relationship should open doors to enable us to better pursue remittances to Ukraine from our European markets.

In addition to these launches we signed 9 new correspondent agreements which span 19 countries. We expect these locations to continue to go live in the second half of the year.

Finally, I'm excited to tell you that HiFX is up and running in the United States. We will continue to add functionality and make site improvements in the coming months, but this was a huge milestone in the integration of HiFX into our money transfer segment. Next slide, please.

Slide number 3 [sic - see slides, "23"] has a picture of a couple of very recent recognition awards that we are very proud of. As I mentioned, the Walmart-2-Walmart product continues to perform exceptionally showing strong transaction growth as we anniversaried the product's launch at the end of April. The value proposition, the extra money customers are able to save or spend on food or necessities at Walmart stores and the quality of service continued to strengthen our partnership with Walmart and our joint commitment to offer customers an affordable and convenient money transfer service. This was highlighted during the Walmart Services Annual Supplier Conference where Ria received the Walmart Services Supplier of the Year Award. As you may remember, Ria won the Supplier of the Year Award last year and this repeat win marks the first time a supplier has won the award twice since Walmart began recognizing superior suppliers with these awards. And in addition to the Supplier of the Year, Ria also won the Service Excellence Award. We are proud of the combined Ria and Walmart team that has worked so hard to ensure the success of this product.

Now, we'll move on to slide number 24 and give you more insight into the two new acquisitions we made during this quarter. Slide number 24.

As we shared with you in June, Ria acquired the Malaysia-based money transfer provider International Money Express, or IME as it's known in the marketplace. IME commenced business in 2002 as the recipient of the first money remittance license issued by the Malaysian regulator, Bank Negara, to an entity other than a bank or a post office in the country. This special approval enabled IME to develop a service focused on Nepali migrant workers and essentially marked the opening of the Malaysian market to independent non-bank providers.

Let's fast forward to today and IME is a leading provider and brand in the Malaysian market with a market share for outbound remittance among licensed money transfer business remitters of approximately 26%. The brand also remains strong in Nepal where the former owners of IME cultivated one of the largest payout networks in the country, which they continue to operate today. IME has over 500 employee in Malaysia, the Middle East and other countries. And after spending much time with them over the last two years as we prepared for this deal, we are excited and privileged to have them joining Ria where they will fit in especially well with our entrepreneurial customer-first culture.

I won't spend time explaining the business to you. It's really no different from Ria's. What is important to understand, though, is that this acquisition gives Ria an operations based in Asia, a strong customer base, and an immediate access to markets where Ria previously had limited or no presence. Organic entry into these markets would have required a significant investment of time and expense, whereas IME gives Ria a platform to expand across Asia and the Middle East send markets while also servicing and growing IME's existing payout base.

IME is one of eight non-bank providers holding a Class A license in Malaysia, which enables the company to offer both money transfer and currency exchange services and, most importantly, sell these services through an agent channel. Prior to the opening of the Asian channel in late 2012, money transfer providers could only sell their services through retail outlets. We believe the combination of IME's local market expertise and Ria's knowhow and execution record in the agent channel can drive further growth in the Malaysian market.

IME currently offers its services through 68 stores and over 50 agents in Malaysia and through agents in 10 other send markets, bringing a total of 11 new send markets to Ria's network. Of these 11 markets, 8 are in the top 25 send markets in the world, which account for approximately $135 billion in remittances according to the World Bank. IME provides customers in these countries with reliable, fast, high-quality service to the world's top payout markets such as India, the Philippines, Bangladesh and Nepal.

In order to give you an idea of the size of these send markets, I will make a comparison to the US with which most of you are familiar. In 2014 the US population totaled about 320 million people and the country covers 9.1 million square kilometers. Sends from the US totaled $131 billion in 2014 according to the World Bank. In comparison, the 11 new send markets that we acquired with the IME transaction have about one-third of the population and land area of the US, or a population of about 100 million people and land area of 3 million square kilometers. However, the sends from these markets totaled $135 billion, about the same size as the US. So as you can see, this is an incredible opportunity to immediately establish a presence and use our money transfer expertise to grow within this very exciting and growing market. Next slide, please.

On slide number 25 you have some additional information on IME's send and receive markets. I'll not go through all the stats, but provided them for additional information to illustrate the significance of the Asia-Pac market.

To wrap up my comments on IME, we view this company, its employee and its network footprint to be a near-perfect complement to Ria and we see this as a tremendous opportunity. As we mentioned in our announcement of the deal, we believe this transaction will be accretive to Euronet over its first 12 months by $0.08 to $0.10 a share.

Now, let's move on to the next page and we'll talk about our second recent acquisition in the money transfer segment, XE. Slide number 26.

While IME provides immediate earnings accretion, our second acquisition, XE, positions us for continued long-term growth. XE has a tremendous digital footprint with 3.1 billion total page views in the last 12 months from 200 million unique visitors. And the XE mobile app has achieved more than 39 million downloads since its 2009 launch. XE is ranked as a top 500 website with a ranking similar to that of the Wall Street Journal and Reuters. XE is also ranked as a top 5 business website according to the digital measurement company, Similarweb.com, ranking with the likes of businessinsider.com, bloomberg.com and wallstreetjournal.com. As if this expansive user base of more than 200 million unique visitors isn't enough, based on an XE survey, 49% have said that they have a foreign currency payment need and we're just right there to help them.

While XE offers customers international payments through a third party today, to truly unlock the value of what they have created, XE needed to become a payments company. By combining forces with HiFX and Ria Digital, XE's leadership is excited to bring the payment services in house to be more responsive to the 49% of customers who have a payment need.

At the same time, we've continued to invest in the digital money transfer space through both HiFX and Ria Digital. This acquisition brings a larger user base than we could have developed with years and years of efforts and advertising investment. As we have said before, we have been successful by adding more products to more devices in more locations. And it only further excites me to know that we now have the premier digital foreign currency consumer base, as well as a strong leadership team who are experts in digital customer attraction to drive the future growth of HiFX and Ria Digital.

With another quarter of exceptional earnings growth from our money transfer business and two important strategic acquisitions now included in the Euronet family of companies, this was a very exciting quarter for the money transfer segment; maybe its most exciting quarter ever.

Now, let's move on to slide number 27.

With cash EPS of 78%, a 60% constant currency increase, I'm not sure I need to say much more. This really was a fantastic quarter, but here's a wrap up of the key highlights from the quarter.

Our cash EPS was $0.08 above our guidance and the 10th consecutive quarter we have achieved double-digit cash EPS growth. EFT posted another strong quarter driven by continued ATM, POS, product and geographic expansion. Epay achieved its third consecutive quarter of double-digit operating income growth driven by continued sales of non-mobile content. Money transfer has an exceptional quarter with double-digit organic growth, record transactions from Walmart-2-Walmart and a full quarter contribution from HiFX. And as usual, our balance sheet remains strong and we have very good cash flow generation.

I know that with such strong earnings growth for the past several quarters several of you will ask me if we can keep this up. Well, my answer is yes. We continue to expand our products and our markets in all three segments and this quarter we made two really important investments in our future, entering into Malaysia in the fast-growing money transfer region of that part of the world, and XE, a digital foreign currency provider with more than 200 million visitors per year, all of which enhance our near-term and long-term growth.

And speaking to the more immediate horizon, we see all of this momentum continuing and it should yield outstanding results in the third quarter, where we expect our cash earnings per share to be $0.94.

And finally, I'd like to thank my colleagues here at Euronet and epay and the EFT division and in the money transfer division. They make my life very easy with this call this time. And also to our finance department that rolls up all these numbers and makes sure that they're accurate for you.

So with that, thanks. I will the move on to questions. Operator?

(Operator instructions). Peter Heckmann, Avondale.

Good morning, gentlemen. Exceptional results.

Thank you, Pete.

With xe.com, interesting acquisition and really seems to be a pretty valuable media property. You talked in the press release about converting some of the existing payment volumes off of the incumbent provider, which I think might be Currency Cloud, onto HiFX. Will you need to develop incremental technology or get additional licenses to convert all that volume and, if so, what would be the timeline for converting that volume onto your platform?

Well, first of all, Pete, it wasn't Currency Cloud. But second, the nice thing is we have the licenses. And so, what we have to do, basically, is give the current provider 12 months notice, which we're about to do, and then we'll be able to take over that volume with our current licenses 12 months thereafter.

And technology. No--.

Yes, no technology. The two founders who run that company are excellent technologists. They're strategic. They've built up a hell of a company. They've got a really strong group of people. We're really happy to have them on board with us as we kind of convert their website and their contributions into more of a payments generation hub than just an information hub.

Okay. And then I don't think you referenced it in the press release and maybe not -- maybe you can provide some additional color of how converting and limiting that incumbent processor might add to the accretion in kind of the second year of the deal.

We haven't and we'll let you know a little later.

Okay, great. I'll get back in the queue.

Thank you.

Rayna Kumar, Evercore.

Good morning. You spoke about some strong money transfer wins in the quarter but, going forward, how fast can you grow money transfer top line given tougher year-over-year comps? And where do you see the largest opportunities to win business over the next two years?

Well, I mean, our comps have been accelerating over the last two or three years. And this year -- well, it's kind of hard to double your op income darn near every single quarter, quarter on quarter. But the point is we've got a lot of momentum under us. We've made investments in our future. Just our core business. This is ex any kind of acquisition, ex -- even Walmart-2-Walmart continues to grow very well. Our basic legacy Ria business grows very well and then you add all of these things on top of it and you get growth acceleration.

So, I grant you that it'll be hard to kind of double our op income every quarter as I move forward forever and ever amen, but we've got a lot of important things in the pipe to continue to do that. And you can just look at it. I mean, this is the question that you -- not you, but people have been asking for the last several quarters. How do we keep winning more and more business? It's because we have a better value proposition than our competitors, we have some excellent professionals that run and work at Ria and the combination is what you see is kind of what you get.

That's very helpful. Just one follow up. Do you expect to win a cross-border money transfer contract with Walmart?

Walmart has not granted those to anybody. If they decide to do something like that, I hope that we're in a good position to do so. So, we'll just have to see what happens.

Thank you.

Chris Shutler, William Blair.

Hey, guys. Good morning.

Good morning, Chris.

Maybe let's just start with money transfer, Mike. I know you just said the trends have been pretty consistently strong in just the core business. Maybe can you quantify that? So ex Walmart and the acquisitions, are you still kind of in that low double-digit range for growth?

Yes, yes. I think that's about right. We've been hitting in that kind of 12% to 14% range for quite a while now.

Okay, gotcha. And then, on the Walmart-2-Walmart business, is that -- how is that kind of trending on a same-store basis and is your expectation of that growth rate -- or when is your expectation of that growth rate's going to begin to plateau?

Well, there's your question of the day. First of all, same store -- it's the same number of stores today as there were on May 1st of last year, because the number of Walmarts in the US really haven't grown in quantity. So, all the growth that you've seen in that business has all been same-store sales growth. We have lapped our starting point. We continue to see stronger and stronger months almost every single month.

I think that what you've got here is a little bit of the Econ 101 price elasticity curve. We offer a better value proposition for the Walmart customers than they can get anywhere else in the country. That has driven larger quantities than maybe even were there before, but we don't know the exact numbers before. So, it continues to grow. And people ask us how big can it get. I don't know. It just keeps growing. And it's exciting to know that more and more people are finding out about this service. They have a significant amount of our customers, our first-time users, and so that tells me that more and more new people are coming into the business.

Alright, great. That's helpful, Mike. And then how confident are you that, I don't know, in the next let's say 12 months, that you could maybe win another big box or two in that space, or is it still just too early to tell?

I think it's too early to tell, but I think that finally we've made a -- we are making impacts on the big boxes. I mean these big boxes have done things the same old way for 10 years. The same buyers doing it the same way without much thought. And now that we're starting to shake things up, I think people are starting to give us a fair shot at discussion. Whether that turns into an agreement in the next 12 months I can't tell you for sure, but I'd sure love if I could.

And then maybe one more if I could just sneak it in. So in the EFT segment, I guess if you take the roughly 1,100 ATMs, less the 450, of that remainder what was the rough split Europe versus India?

Most of it Europe.

Yes, most all Europe. There's like something like 667 or something like that was the net of the two gross. So we did 499 on the first quarter, 667 in the second quarter, so we're certainly on our way to our goal of 2000 for this year.

Yes. So, I'm guessing most of those machines are good possibilities for DCC rollout?

Well, actually, all of ours do it just right out of the gate.

Okay.

And so, yes.

Alright. Thank you, guys.

Michael Grondahl, Piper Jaffray.

Yes. Thanks, guys, and congratulations on the quarter. And maybe--.

Thank you.

A special thanks to Juan.

Yes. I know Juan's done a really good job and his team. He's got just a butt-kicking team.

Yes, he sure does. Hey, Mike, if you had to pick just one or two areas that outperformed your expectations, what were they in the quarter?

That is probably the toughest question I've had today because the reality is they all have, you know? I mean it's just across the board in every segment. It's just -- the only thing that I wouldn't say compared to maybe six months ago are our transactions in Greece were below our expectations, but not where they were maybe three or four months ago because we knew all the consternation that was going on in that country. But with that exception, I mean everybody -- all the -- every country -- it was just an amazing quarter of everybody doing a very good job.

Got it. Is there any way you can quantify your Ria online investment and do you feel that's paying off?

We do about six, seven--

Yes. This is no different than I think maybe somebody asked us maybe last quarter. So we're spending about $6 million to $7 million of investment in Ria. Our quantities are growing very quickly and I can't wait to leverage this new asset of XE to help that accelerate much, much faster.

Got it. And then last quarter you talked about your EFT software going on 17,000 ATMs in France at BCPE, 35,000 ATMs at Elan Financial Services, and then a big chunk in India. Have those been rolled out yet?

No, they have not yet. They're in the process and these are what we call pass-through transactions where the bank will actually operate its own ATM. And for some of these value-added products, and this might be selling top-up at the ATMs, selling an iTunes credit at the ATMs, doing a DCC transaction at an ATM, etc., etc. This pass-through transaction, when one of those requirements or one of those queries hits his ATM, he passes that transaction to us and we handle all of the detail of that for him and then just pass it back at the end. So it's not really software that runs on those ATMs, but it's kind of like an exit. It's a web call when those customers require those kinds of services.

Will those be live soon or by year end, or what's sort of the thought?

We're hoping by the last -- yes, by year end we should get most all of them live.

Okay.

So what we're dealing with here are banks and bank's IT departments tend to be challenged with a lot of things right now. So, just getting them to get it all done takes some time.

It's still to come. Okay. And then just two more quick. The gift cards in the US at Staples, Sears and Kmart, are those exclusive deals for you? And that's new to me that you're doing gift cards in the US. Primarily, you had been overseas before. Can you just kind of talk about those wins?

I'll tell you what, Kevin, would you answer that?

Yes, sure. So, we have Gift Card Mall. Some of the other competitors focus on large retail. We focused on convenient and petro stations, Mike, so we've had a Gift Card Mall -- if you go to a Pilot truck stop, for example, there will be a spinner rack with our content. And we've been in Pilot five-plus years. And so now we're starting to gain significant brands, like the ones mentioned. And so we'll take their gift cards and put it into our Gift Card Mall in the select channels that we focus on in the US, which are related to convenience and petrol chains.

Got it. And then just lastly, Mike, the $0.94, did you quantify how much -- what you're including in that from the recent acquisitions?

Oh, well, I mean we've said that IME -- we said that, first of all IME. We said that that would be about $0.08 or so in a year, right, in its first year, so in the first quarter of it we'll get around $0.02. With respect to XE, we said that that's basically going to be neutral in its first year. So, it's really only $0.02 of the $0.94.

Gotcha. Not much. Okay. Hey, thanks--.

And then we'll have -- and also, Rick, just to help him, what would be an estimate of the currency headwinds baked into that?

Well, let's see.

I think I caught him off guard.

But I'll give you a reasonable perspective here. Let's see.

We know 2Q was--.

It's probably in the ballpark of $0.10 to $0.12 a share.

$0.10 to $0.12. Okay.

That's assuming currencies stay just where they are right now--.

Because the--.

Compared to prior year.

The euro in last year in the third quarter was a 1.29. We're still at about the 1.10 level. So, call that 18-ish -- kind of 17%, 18% difference. And I'd have to look up and down the page on the other currencies, but knowing that many of the other currencies kind of fall in line with the euro there, that would probably turn out to be a reasonably close estimate.

Got it. Thanks a lot, guys.

Okay. Thank you, Mike.

Alex Veytsman, Monness, Crespi.

Hey, good morning, guys, and congrats on a strong quarter.

Thank you, sir.

My first question is around the money transfer transaction growth. I mean transactions grew from 13.9 million in the first quarter, I believe, to 16.5 million in the second quarter. Can you give us some more granularity as to which markets were the strongest? And specifically, what was the transaction growth from Walmart-2-Walmart?

What was that? Well, you're just talking about our sequential growth from first quarter--.

Yes.

From first to two? That's just seasonal. It wasn't any kind of unusual difference across our market. A lot of that's driven by Mother's Day. Mother's Day is the highest transaction volume day of the year. So, that's pretty consistent with what you would see in prior year kind of trends.

Also, don't forget first quarter for money transfer, for the typical remittance market, when you're in the Northern latitudes you have less construction jobs for immigrants, certainly less agricultural jobs. So, there's just less transactions always in the first quarter than there will be in the second quarter.

Got it. Got it. And what about the Walmart-2-Walmart, can you give us some ideas to what was the transaction growth for that particular business?

No, we don't give any information on that, but they were up nicely.

Alright. Sounds good.

As we mentioned in the last call, April turned out to be our largest month to date and we continued to surpass April month on month since then. So, it's just (inaudible)--.

Right. I think you said April was a bit better than December, right?

Yes, April was better than December and May was better than April and da-da-da-da-da.

Got it. And then just some housekeeping for IME. So, you mentioned $0.02 coming for third quarter and then $0.06 for the fourth quarter. Is there--?

No, no, no, no, no, no. No, no. We said $0.08 in its first 12 months of operation.

Okay, got it. So it's--.

So that's how we got to $0.02 in the quarter. And that's just kind of a rough guess, but probably won't be too far off.

Okay, so it's $0.02 each. It's not kind of $0.08 in the second half.

Right, right. Because we always -- we give that same kind of guidance every time we mention any kind of acquisition because you never know what point in the year you do them. And so we try to give kind of the next 12 months' outlook.

Okay, got it. That's helpful. And then as far as the top-line impact, how much of the revenue impact are you expecting in each of the quarters for the second half of 2015?

Yes, we hadn't put out numbers on that there, but IME is not a big revenue kind of a number, even if you just take that $0.02 a share and kind of explode it back upwards and then you'll come up with that. And in our release we put what the annual revenue number was of IME. And so I think for your estimate, essentially a fourth of that number would be a reasonable guess.

Got it. That's helpful. Thank you, guys.

Tim Willi, Wells Fargo.

Great, thanks. Good morning, Mike, Rick, Kevin. Two questions, one on money transfer, one on epay. First on money transfer.

Mike, with IME, obviously there's a lot of excitement about sort of bolstering your presence and entry into a lot of markets where you weren't or had a small presence. Could you maybe just even -- I know you don't like to give longer-term guidance, but if you just think about your own internal expectation for what this business would look like, whatever it would be, 24 months, 36 months, in terms of your plans to grow and build off the network they have and their market expertise. You've obviously shown you can do that by how you built Ria since you acquired it. So, I'm just really curious how you think about this property specifically and its geography and the population it can address and help you accelerate into more so than if you didn't have it.

Okay. Well, so, if I was to quote Juan Bianchi who runs Ria, if you would remember back when we purchased Ria in 2007, we were doing about 14% or 15% of our revenue and our profit in Europe at the time and the remaining 85% in the United States. And over this last 8 years that 14% has grown to about 50% of our business and continue -- our entire -- this is our legacy business and it continues to grow at these nice double-digit numbers.

So by buying IME, instead of it taking -- and then I might also mention that, even though we bought Ria in 2007, they had started their European operations about three years before that or so, two or three years before that. So, it took about a decade to go from zero to half our business. With IME we might be able to achieve similar kinds of things in quite a shortened timeframe. Maybe it only takes half that. So, it would be great if our Asian business accounted for a third of our business. And it isn't going to take 10 years to get there with the head start that we have with IME. So, that's kind of a qualitative thing. We don't have exact numbers on it. But with where IME is right now, we've certainly got an accelerated head start on the Asia-Pac business.

Okay, great. And then my follow up just on epay, two things. One was housekeeping. You've typically quote sort of the gross profit contribution of non-telephony. I don't recall hearing that today. If you had that handy, Rick?

Yes, yes. This was about mid-40s percent.

Okay. And then I'm just sort of curious. It doesn't get asked, myself included but, just competitively, what does the market -- what's it look like and evolve to around non-telephony? Obviously, people like Blackhawk are over in Europe, in parts of Europe. I think InComm's got some stuff over there. I mean, as you look at the landscape realistically, how many players do you feel like there's a widening chasm between those that really get it and those that won't make it in the non-telephony marketplace? Just how you feel about where you are competitively there.

Well, there's really only three players of significance in the non-telephony. You mentioned Blackhawk. They're public. And there's another company, InComm. And those two companies traditionally have been around the same size. Maybe there's some divergence.

Where we're strong is in the markets that we started with telephony, mobile telephony, and that's the Continental European markets and a bit of England as well. And so it's just -- the fact is, I think it's hard to unseat them from their long-term relationships with retailers, probably similar for them to unseat us. But we're very excited about where Europe is going.

And the brands, Mike. I'd just add there's two sides to it. There's the relationship of the brand, the connectivity that you have with the brand partners, i.e., iTunes, Google Play, etc.. And then there's the relationship or the connection you have with the retailer. And so that's hard for competitors to unseat.

Yes, yes. So, it's really a three-horse race more or less; not anybody--.

And really has been so for the last five years.

And you view it as rational competition? I mean have you seen the other two players (inaudible)--?

Oh, I think it's rational. Yes.

Okay.

It's competitive, but it's rational.

Yes. That's enough kind of competition. Good. That's all I had. Thanks very much, guys.

Thank you.

Matt O'Neill, Autonomous Research.

Yeah, good morning, guys. I just had a couple of quick follow ups. Looking at the Asian location or network location for money transfer, and if you backed out -- I think you'd mentioned in the release at the time with IME about 17,000, that would put you back at around 255 or maybe plus 9,000 locations. So, I was just kind of curious. What regions are those kind of more organic location growth coming from?

Yes. A lot in India and Asia.

Got it.

And we're real happy to get India on the map here. I mean we were mostly going through intermediaries. The problem with intermediaries is, on a profit side, of course, there's an extra mouth to feed. But more importantly, it all comes down to good quality service. So when you have a direct relationship with a payout bank and somebody loses their transfer or something isn't working, instead of having to call up an intermediary to find out where did that money go, we can look in our own system and find out where that money went so we can answer things immediately. So, that's why we closed down some of the locations that we had with the intermediary and then added the ones with our direct connects.

Got it. That makes sense. And then I had another question and clarification. I believe right now Ria Online is US outbound only. And I was curious, as you continue to implement HiFX if there's sort of a natural progression to having more send regions, adding the UK, etc., for online.

Yes, there certainly is and we'll announce those as we bring them live.

Great. And then maybe one final question. You guys quantified kind of full year in the slide deck for IME. I was wondering if you could maybe make a similar comment around XE. And I know it's not necessarily accretive this year and maybe it would be more interesting if you would discuss the kind of volume or transactions coming now.

Well, we don't really want to give away those exact numbers right now because we've got this issue with this third-party supplier that we'd like to become and that requires a 12-month, really, you're not going to see much change over the next 12 months from now. But then we can see us picking up a lot of volume from where this competitor was in today. So, that's why for the next 12 calendar months you're not going to see -- that's where we say kind of no accretion, no dilution. And then I would say by say this time next year we'll have a better idea of kind of what's happening as we supplant the current provider with ourselves and we can give you a little bit better estimate.

Okay, great. We'll stay tuned. Thanks so much.

Thank you, sir.

And our final question of the day comes from Peter Heckmann with Avondale.

Great. I thought I'd sneak in with a couple quick follow ups. On the -- I want to talk about the online side and echo Tim's question for online money transfer with the acquisition of Xoom, or pending acquisition of Xoom by PayPal and some of the other funded startups. Are you continuing to see the digital side of the business be rational from a pricing perspective and are there other motivations for some of these players just in terms of gaining share that you may be seeing some irrationality in the pricing scheme?

So far it has been rational. And in fact, to tell you the truth, in my opinion it's been a little bit overpriced. I think there's probably a little bit of price competition that we might be able to inject. So, we'll just kind of see what happens with that but, so far, we feel really comfortable with that market and its profit potential for ourselves.

Okay. And then just as a follow up there, the PayPal-Xoom pending partnership, they've been talking more about international mobile recharge. And I know Euronet does that. We haven't heard as much about it. Is there something there that other competitors are targeting in terms of functionality or marketing and do you see this--.

Well, that's -- I'm trying -- I didn't know that they were saying that exactly. We are really experts at that. We've been doing that for a lot of years now. The tricky part about that is every destination country has three to six or seven even kind of different mobile operators between MVNOs and regular mobile operator. And so to get all this content and then to settle that all in multiple currencies is a challenge. So, I can't imagine it's going to change their numbers much, but it is -- I'll give it an interesting watch.

Great, great. Alright. Great quarter again. Thanks for all the input.

Alright, thank you. And thank you, everybody, for taking time with us and we'll look forward to talking to you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect.

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