Euronet Worldwide, Inc.

please continue to standby. Today's conference is scheduled to begin shortly. Thank you for your patience. Thank you. THE END Greetings, and welcome to the Euronet Worldwide First Quarter 2022 Earnings Conference Call. It is now my pleasure to introduce your host, Mr. Scott Steele. Cleason, General Counsel for Euronet Worldwide. Thank you, Mr. Cleason. You may begin.

Thank you. Good morning, everyone, and welcome to Euronet's quarterly results conference call for the first quarter 2022. On this call, we have Mike Brown, our Chairman and CEO, and Rick Weller, our CFO. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the second slide of the PowerPoint presentation we'll be making today. Statements made on this call that concern URNS or its management's intentions, expectations, or predictions of future performance are forward-looking statements. URNS actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors that are listed on the second slide of our presentation. Acceptance may be required by law, Euronet does not intend to update these forward-looking statements and undertakes no duty to any persons who provide any such update. In addition, the PowerPoint presentation includes the reconciliation of the non-GAAP financial measures we'll be using during the call to their most comparable GAAP measures. Now I'll turn the call over to our CEO, Mike Brown. Mike?

Thank you, Scott, and thank you, everyone, for joining us today. I'll begin my comments on slide number five. Finally, I am pleased to be here today to talk to you about our strong growth rates in what is typically our seasonally lightest quarter, Q1. The strength of our balance sheet continues to afford us the opportunity to make investments that will allow us to continue to grow the business. During the quarter, we were able to close the acquisition of Piraeus Bank's merchant acquiring business, We repurchased $70 million worth of shares. We added more than $100 million of cash to our ATMs to support increasing transaction trends that we are seeing. And we made an investment in a company called Marketrex, who previously announced will utilize our REN technology to further grow their business. All of these items are strategic decisions that position us to continue to deliver strong returns for our shareholders. our EFT results continue to improve, driven largely by a strong recovery of travel, stemming from reduced COVID restrictions across the globe. In fact, we saw a constant currency revenue in EFT to exceed the first quarter of 2019 revenue, albeit from a different mix of transactions, with our most profitable transactions still lagging 2019 levels by about 30%, as we move into the second quarter. ePay continued to see strong demand for digitally distributed products. The money transfer results were generally similar to the trends we saw in the fourth quarter, with double-digit growth in our direct-to-consumer digital transactions and our U.S. and Europe outbound transactions, partially offset by declines in Asia from the lingering effects of the COVID restrictions, together with continued declines in domestic transfers and investments in our network and our new product expansion. And while I am extremely pleased with the double-digit consolidated results, this quarter wasn't without its challenges. We commenced the first quarter under the presence of the Omicron variant. And as soon as we thought we were on the other side of that one, we saw the onset of Russia's invasion of Ukraine, which created uncertainty across the globe. Additionally, we have started to see inflation creep into discussions across our business. And while the invasion of the Ukraine and inflation did not have significant impact on our first quarter financial results, we would be remiss not to acknowledge the additional uncertainty caused by these events. We are pleased that the diversity of our products and markets has enabled our core business to remain strong, and we continue to be optimistic for 2022 in our outlook. Let's go on to slide number six, and I'd like to tell you a little bit more about our response to Ukraine. Slide six, Russia's invasion of Ukraine has left the Ukrainian citizens, including our 26 Ukrainian colleagues, scrambling for safety and necessity. While we can't fathom what they are experiencing, we have undertaken many measures to help support our employees and more broadly, the Ukrainian refugees during this time. We have taken a significant number of steps across the business to ensure that the Ukrainian citizens that have left their country can access their cash. And while we have closed our 450 Ukrainian ATMs, we removed ATM fees from all Uranet ATMs for cross-border transactions made with Ukrainian cards in the bordering countries of Poland, Hungary, Slovakia, Romania, and the Czech Republic. We have added the Ukrainian language as an option across our ATM estate. We have opened our deposit network for cash deposits into the Polish Humanitarian Action Account, together with waiving fees on these deposits. We have instituted an indefinite fee waiver for domestic money transfers and money transfers sent into Ukraine that are initiated on the Myria app and on any Polish ATMs. We have also partnered with the United Nations, Santander, and Blix to offer cash assistance to people from Ukraine through the Polish offices of the High Commissioner for Refugees, known as the UNCHR. The UNCHR wants to make monthly payments to eligible refugees from the Ukraine. These payments will then leverage our cardless transaction technology to be paid out on Euronet ATMs, of which we have over 8,000 in Poland, using a code from Blix. This provides a convenient way for all Ukrainian citizens to collect money that they may need. And while all of these measures provide some level of relief for Ukrainian citizens, I am most proud of how our URINET employees have come together to support our colleagues in the Ukraine. As our Ukrainian colleagues and their families face uncertainty and the need to find safety outside of Ukraine, without being asked, our European employees from as close as Poland and as far west as Spain have stepped up to help. They have paid for flights and train tickets to get these families to safety. They have taken these families into their homes. They have provided cash donations for food, clothing, and whatever other necessities are needed. I am extremely grateful for the dedication of our teams every day, but these selfless actions highlight exactly why I am proud to be the CEO of Euronet. To date, the war has had minimal impact on our financial statements. We are monitoring the impact of travel across Europe, particularly in Eastern Europe, where we have seen a downturn in travel to Eastern Europe compared to that prior to the invasion. But that seems to have been made up by better than expected travel to Western Europe. Let's go on to slide number seven, and we'll discuss the travel trends in more detail. On slide number seven, you'll see an updated view of the graph we have provided the last couple of quarters. This graph shows actual projected European flight data for this year versus 19, overlaid with our international cash withdrawals for the same period, as well as our transaction recovery from non-EU cardholders. Ukrainians who left their country... resulted in a substantial increase in their international transactions, which we do not expect to continue long term, nor do they reflect what the travel recovery trends really look like. Accordingly, we have presented this graph, excluding these transactions, to provide a more accurate picture of what we see in the tourism transaction recoveries. As you can see, about halfway through the first quarter, we began to move past the impacts of the Omicron variant, and the actual flight data regained its improvement trajectory, as depicted with the green line on the graph. Eurocontrol has provided three scenarios on travel improvement through the year, with the blue line representing the most optimistic case scenario, the extension of the green line representing their base case, and the yellow line representing their low case scenarios. In all three scenarios, travel trends improved throughout the remainder of this year, although even in the best-case scenario, we don't get back to 2019 travel levels in 2022. In comparison, you can see that our international transaction recovery, represented by the tan line, recovered just about in lockstep with that trend. with the actual flight data trends for February and March. However, our most profitable non-EU transactions continue to lag the travel recovery, though we are pleased to see such a sharp recovery in these transactions as COVID restrictions were lifted following the Omicron variant. Everything we see in the news points to a strong travel recovery this summer. Yesterday, in fact, United Airlines announced that they plan to fly 25% more flights across the Atlantic this peak travel season compared to 2019. Moreover, many sources have noted that travel will only be muted because there has not been a full recovery in supply for travelers, airlines, hotels, restaurants, and tourist attractions are still struggling with labor and supply shortages. It is quite pleasing to see that it appears we are on the other side of the pandemic, and people are once again comfortable and willing enough to travel. Now let's move on to slide number eight. Our EFT teams continue to deliver new agreements that will grow this business. During the quarter, we launched JCB card acceptance on our ATM network in Ireland, opening our network to a new population of users. We signed a network participation agreement with Medellin Bank, a digital bank in Italy. Now the bank's customers will have convenient access to their money by using any of Uranet's ATMs in the country. We expanded our deposit network in Poland through an ADT outsourcing agreement with BNP Paribas. And in the U.S., Dolphin signed 16 new ATM outsourcing agreements with credit unions across the country. We continue to add more ATMs in our existing markets. During the quarter, we added another 400 deployed ATMs, 415 outsourcing ATMs, and we reactivated 738 ATMs in anticipation of the upcoming travel season that had previously been closed due to COVID or the off-season. While we have seen some changes, compression from supply chain issues and the war in Ukraine, we continue to believe that we will add somewhere in the range of 4,000 to 4,500 ATMs for the full year. Now we can go on to slide number nine and discuss the most substantial EFT highlight of the quarter, the completion of our acquisition of Pereus Bank Merchant Acquiring Business. Why not? As you likely read in our press release, we have now closed this acquisition of Piraeus Bank's merchant acquiring business, and with this purchase, our acquisition gets us a 20% share of Greek's physical in-store acquiring volume, and more strategically, a 40% share of the Greek digital acquiring volume. Piraeus will provide distribution and shared services as part of an exclusive long-term agreement. The purchase closed on March 15th. All of the merchants and operations have been successfully transitioned to Uranet. And Uranet and Piraeus also extended their long-term processing agreement for 5.5 million Piraeus-issued debit and credit cards for another 10 years. Through the acquisition, we will leverage our proprietary technology and expand our omni-channel payment strategy. The Piraeus merchant acquiring business is expected to complement our history of double-digit growth rates. We are pleased to see that this business has continued its growth trajectory since we announced the acquisition in early 2021, and it supports our view that we'll end the year with consolidated earning results similar to those of 2019. As we always have, we continue to look for ways to continue to deliver value for our shareholders, and we expect this acquisition to contribute nicely over the coming years. As I close my comments on EFT, I think it's worth repeating that we are very pleased with the current travel trends that we are seeing in Europe, particularly in Western Europe. We expect to have a strong travel season this year, and as others in the travel sectors anticipate, a full recovery in 2023. Now let's move on to slide 10, and we can talk a little bit about ePay. Slide 10. The ePay team continues to expand its leading content portfolio and distribution channel. As you can see in the ePay segment numbers, the first quarter was essentially flat. I'll spare weaving through some of the puts and takes and reiterate that we continue to expect that the ePay team will deliver low double-digit earnings growth for the full year this year. However, as we mentioned in the fourth quarter, as we add more products to ePay's portfolio, particularly more promotional campaigns at Caduce, our B2B unit of ePay, the ePay results are going to be a bit more uneven through the quarters. That was true in the first quarter where we did not have the same promotional activity as the first quarter of the prior year. However, based on our discussions with customers, we anticipate strong growth in our B2B business and expect more promotional activity in the third and fourth quarters than we have ever had. So while the comps for the quarterly period are a bit difficult, we continue to expect a nice year of earnings from EPEC. During the quarter, ePay continued to expand digital branded payments sales through digital distribution methods. We added Apple's App Store code service on Paytm, a large mobile wallet in India. We launched Google Play at Sea Discount, the second largest online retailer in France. In Turkey, we added our digital branded payment portfolio to three new online retailers. And we continued to expand our digital distribution of mobile content by launching mobile recharge service on Tata New, a leading digital platform led by the Tata Group in India. Our physical distribution also continued to expand. In Spain and Portugal, we launched our digital branded payments portfolio in large retailers including Carrefour, Wharton, and Orozco. We launched Nintendo Distribution in Harvey Norman and the Good Guys in Australia. And we launched Microsoft Xbox All Access Distribution with Ingram Micro in Mexico. And as you can see on this slide, we continue to sign new agreements for more products distributed through all of our channels. With our continued product development, distribution expansion, and technological advantage, we remain optimistic ePay will achieve nice annual operating income growth. However, as we mentioned last quarter and we have seen in the first quarter results, as we introduce more products to EPA's portfolio, the EPA business results will become more uneven through the quarters, ending the year with an annual growth rate, as I mentioned earlier, that we expect to be in the low double-digit range. With that, I'll move on to slide number 11, and we'll talk about money transfer for a bit. We continue to expand our industry-leading payments and remittance network, which now reaches 495,000 physical locations across 164 countries, as well as 3.6 billion bank accounts and 443 million wallet accounts. While our money transfer network physical locations grew at 4% rate over the prior year, in response to the Russian invasion of Ukraine, the segment suspended its service to Russia, Belarus, and Tajikistan, which resulted in a decline from the year-end count by approximately 20,000 locations. Our country count was relatively stable as we added two new countries to our distribution network. During the quarter, we extended our Walmart agreement, now taking our partnership through 2026. In addition to the renewal of our Walmart to Walmart and international outbound services, We expanded our Walmart to Walmart partnership to Walmart Mexico. Walmart continues to be a great partner, and we are pleased to extend our relationship through April 2026. We expanded our XE business, reach, and product. Customers in Malaysia can now enjoy XE's world-class service, and XE clients in Europe and the Americas can now enjoy the convenience of cash payout across RIA's networks. Finally, we continue to expand our real-time payments availability to Kenya and Costa Rica. Our money transfer business continues to deliver strong revenue rates, growth rates, and we expect that the operating margins will improve in the second half of this year as we lapse some of the investments we made in technology last year. Now let's move on to slide number 12, and I'll provide you an update on our technology platforms beginning with Analyze. Slide 12. If for some reason it is not registered with you yet, Dandelion is the world's largest international real-time payments network. Since we announced the launch of Dandelion in November, we have continued to improve its reach and functionality. And even more importantly, grow with existing customers, add new customers, and develop our sales pipelines. Moreover, as we have continued to review with prospects the breadth and the capability of the network, we are consistently confirming through those prospects that Dandelion is the world's largest and most advanced ubiquitous network available. As for expansion, Dandelion now has account deposit service to 132 countries, a number we expect to grow to about 150 by the end of this quarter, second quarter. We accomplished a key milestone this quarter by joining the Single Euro Payments Area, you might know this as SEPA, Instant Transfer Scheme, as a direct participant, which will allow Dandelion to offer instant money transfers and payments originating and terminating across the 36 SEPA region countries and the financial institutions participating in the scheme. We're excited to be part of SEPA, and we anticipate that this will allow us to expand our product offering to customers across Europe. We're also making good progress on the sales pipeline. DataLine is already trusted and used by the likes of Microsoft, Sage Intact, Zoom, and Remitly, and we also added Reptel, a Nordic-based telco startup that offers international calling and financial services to over a million users. Our pipeline continues to grow. We have added an impressive list of both established financial institutions and an ever-growing list of FinTechs, both established and emerging ones. A consistent theme we continue to hear is the global payment utility Dandelion has to offer folks has done a great job at attracting customers, essentially enabling FinTech customers to more efficiently and effectively get value from their accounts. So stay tuned as we build more and more momentum with Dandelion. Now we'll move on to slide number 13. And we'll talk about red. As shared with you previously, fintechs and the emergence of digital banks coupled with the emergence of real-time payment schemes for consumer and merchant payments are at the forefront of innovation in the digital payments ecosystem. The consumer and merchant or supplier demand for real-time payments and all the underlying data and settlement requirements provide a great opportunity for Euronet where our modern REN technology is best suited to deliver innovative solutions on the back of these macro trends. To demonstrate the growing interest and acceptance of our REN technology, we signed an agreement with East West Bank in the Philippines. REN will allow the bank to connect to Instapay, the real-time payments infrastructure in the Philippines. Under this agreement, Uranet will provide an end-to-end service to the bank, including an ISO 20022 connection to Instapay, facilitating peer-to-peer, peer-to-biller, peer-to-merchant transactions, and all of the overlays, including requests to pay, apps for merchant payments, and more. This is another example of where we are providing this bank with a full complement of the most advanced fintech services currently available in the world. We also signed a REN self-service and POS merchant management agreement for a banking network Suriname known as BNET. BNETs will be migrating to REN to deliver on a central bank objective to become a national switch for the country and to enhance financial inclusion with the underbanked population of Suriname. In Botswana, we signed an agreement with Spachi, a fintech that works with financial institutions, corporates, and retailers. Spachi will implement REN to provide an integrated payments gateway, offering consumers and businesses the easy movements of funds and purchases. In the United States, we made an equity investment in Markertrex, a Las Vegas-based fintech company that is disrupting the multibillion-dollar gaming industry with a digital casino marker system. You may remember last year we signed an agreement with MarketTrack, which licensed our REN payments technology, where REN is powering the MarketTrack solution, including patron identity verifications, underwriting, payments processing, settlement, and more. While not a requirement for the selection of our REN technology, this equity investment will accelerate MarketTrack's growth, allowing them to capture a larger share of the casino market market. Finally, we launched a cross-border QR code processing capability for member banks of PT Jelin in Indonesia with the central bank infrastructures of Thailand and Malaysia. This is an important project. Through this project, consumers from all three countries will be able to make and accept instant cross-border payments for goods and services using a mobile app. This is another example of how RTP systems are disrupting the archaic legacy cross-border scheme. As you can see, we continue to develop the capabilities of REN. We are starting to see an uptick in our sales pipeline as banks and fintechs recognize the significant benefits of this technology. As I close my comments, I'd like to reiterate this was a good first quarter, particularly from where it started with that Omicron variant. We continue to see improving travel trends, and each day more and more stories come out supporting strong travel demand. Our technology platforms are making really strong advancements, and our EPAN money transfer teams continue to build networks, products, and distribution channels to continue strong contributions to our consolidated results. With that, I'll turn it over to Rick.