Euronet Worldwide, Inc.

Greetings and welcome to the Euronet Worldwide first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce your host, Mr. Scott Koston, General Counsel for Euronet Worldwide. Thank you, Mr. Koston. You may now begin.

All right. Thank you. Good morning, everyone, and welcome to Euronet's first quarter 2023 earnings conference call. On today's 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 these forward-looking statements. as a result of a number of factors that are listed on the second slide of today's presentation. Except as may be required by law, URNet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any updates. You should avoid placing undue reliance on any forward-looking statements. In addition, the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures we'll be using during the call to their most comparable GAF measures. Now I'll turn the call over to our CFO, Rick Weller.

Thank you, Scott, and good morning. Thank you to everyone who's joining us today. I will begin my comments on slide five. For the first quarter, we delivered revenue of $787 million, operating income of $45.6 million, adjusted EBITDA of $93 million, and adjusted EPS of 87 cents. These results were produced by strong double-digit growth rates driven by improvement in all three segments, but with a particularly strong contribution from high-value cash withdrawal transactions in the EFT segment as a result of the continued recovery in the travel industry. Next slide, please. Slide six. presents a summary of our first quarter balance sheet compared to the prior quarter end. Here you can see that we ended the quarter with approximately $1.1 billion in unrestricted cash. The decrease in cash is largely from $112 million of cash moved into our reactivated ATMs in preparation for the summer travel season together with approximately $28 million in share repurchases during the quarter. These uses of cash were partially offset by cash generated from operations together with working capital and foreign exchange rate changes of approximately $75 million. Next slide, please. Slide seven presents our as reported results for the quarter. When we spoke with you in February, we were seeing some strengthening of our major currencies against the U.S. dollar. As we moved through the quarter, those currencies followed several roller coaster patterns, but the net result of the movements produced virtually no impact on our reported results versus our early February guidance. However, when comparing currencies on a year-over-year basis, we saw our more significant currencies decline in the mid single-digit to lower double-digit range versus the dollar. To normalize the impact of these currency fluctuations, we have presented our results on a constant currency basis on the next slide. Slide 8. EFT revenue grew 40%. Operating income grew 224% and adjusted EBITDA grew 98% as a result of improved domestic and international withdrawal transactions driven by continued recovery in travel and the POS processing from the March 22 acquisition of the merchant acquiring business. I'd also like to highlight that we saw a nice improvement in our newly deployed ATMs in the Asia-Pac region. The ATM transactions in Asia have not yet reached half of the pre-COVID levels, as Asia-Pac is nearly a year behind the recovery rates of the rest of the world. But we are pleased that these machines were producing positive contribution profits in the first quarter, and we expect them to contribute profits for the full year. Revenue and gross profit per transaction for EFT segment remained consistent on a year-over-year basis. ePay revenue grew 5%, operating income grew 11%, and adjusted EBITDA grew 10%, driven by the expansion of mobile and digital branded payments. together with growth of the digital distribution channel. Transaction growth outpaced revenue growth due to a stronger mix of lower value mobile transactions in India. The ePay business produced both gross margin and operating margin expansions over the prior year. Money transfer revenue, operating income, and adjusted EBITDA grew 9% 2% and 1% respectively. This was a result of 13% growth in U.S. outbound transactions, 16% growth in international originated money transfers, which included 14% growth in transfers initiated largely in Europe, and 18% growth in transfers initiated in the Middle East and Asia. and 28% growth in XE transactions partially offset by a 17% decline in the U.S. domestic business. Additionally, these transaction growth rates included 38% growth in direct-to-consumer digital transactions. On a year-over-year basis, we saw a constant dollar decline in revenue and gross profit per transaction. This decline was largely the result of a shift towards lower average send amounts per transaction, particularly in the XC side of the business as higher end customers transferred fewer funds due to economic uncertainties. The lower send amount ultimately results in a lower revenue per transaction. However, we were able to offset some of the lower send amounts with higher gross profits per transaction on the real remittance transfers, which resulted in higher margins. Before I close, I'd like to give you an update on our expectations for the remainder of the year. You likely saw in our press release that we expected our second quarter adjusted EPS to be $2 per share. For the full year, we continue to expect to see the business producing year-over-year earnings growth in the mid to upper teens. To that end, it looks like the analyst consensus outlook is directionally aligned. Accordingly, after walking through After working through the disruption brought about by COVID and with travel on a path to recovery, we expect that 2023 will be a record year of revenue and adjusted EPS for the company, assuming there are no significant changes to FX rates, interest rates, and the global economy and other unforeseen events. I am pleased that we are off to a strong start for the year with near double-digit constant currency revenue growth from all three segments. With that, I'll turn it over to Mike.