Euronet Worldwide, Inc.

Greetings and welcome to the Euronet Worldwide's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce your host, Mr. Scott Klassen, General Counsel for Euronet Worldwide. Thank you, Mr. Klassen. You may begin.

All right. Thank you. Good morning, everyone, and welcome to Euronet's third quarter 2023 earnings conference call. 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're making today. Statements made on this call that concern Uranet for its management's intentions, expectations, or predictions of future performance are forward-looking statements. Uranet's actual results may vary from those anticipated in these forward-looking statements as a result of a number of the factors that are listed on the second slide of our presentation. Listeners should avoid placing undue reliance on these forward-looking statements. Except as may be required by law, URNF does not intend to update any forward-looking statement and undertakes no duty to any person to provide an update. In addition, the PowerPoint presentation includes a reconciliation of 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 CFO, Rick Weller.

Yeah, thank you, Scott, and good morning, and thank you to everyone who's joining us today. I will begin my comments on slide number five. For the third quarter, we produced revenues of $1 billion, the first billion-dollar quarter in Uranet's history. We achieved operating income of $167 million and adjusted EBITDA of $212 million. Adjusted EPS was $2.72 compared to $2.74 for the third quarter of 2002. Excluding the effects of share repurchases and FX headwinds during the quarter, the business performed in line with our expectations. Slide 6 presents the summary of our balance sheet compared to the prior year. As you can see, we ended the quarter with more than $1 billion in unrestricted cash and $1.7 billion in debt. The decrease in cash is essentially the share repurchases and working capital changes partially offset by cash generated from operations and cash returned from the ATMs. Slide 7 shows our results on an as-reported basis. Let's go to slide 8 and talk about our results on a constant currency basis. On slide 8 now, as we discussed in the second quarter of 2023, we saw a divergence in our international transactions compared to the international travel recovery. Mike will provide further comments on this subject a bit later, but we are pleased to have regained some footing at the end of the quarter. To that end, EFT revenue grew 2%, operating income and adjusted EBITDA decreased by 15% and 12% respectively. The decreases in adjusted EBITDA and operating income were the result of decreases in our most profitable international cross-border transactions, primarily driven by the decline in Croatia due to its switch from the CUNA to the euro at the beginning of this year. together with the impact of inflation, which reduced European travel budgets, leading to fewer ATM transactions. Transaction growth outpaced revenue growth due to continued growth in high-volume, low-value transactions in India. For ePay, Revenue grew 1% while operating income and adjusted EBITDA decreased by 6% and 5% respectively. These results were driven by continued digital media and mobile growth, which was offset by declines in promotional campaigns delivered on behalf of our retail partners when compared to the same period last year. As we have discussed in prior quarters, the ePay segment experiences fluctuations from these promotional campaigns. We will continue to welcome the opportunity to grow our promotional B2B business, but we have to understand that these promotional campaigns will create some uneven comparisons from time to time. Excluding our promotional activity, for comparison purposes, our core ePay business revenue grew 11% operating income and adjusted EBITDA grew 17% compared to 2022, highlighting the strength of our core ePay business. Finally, ePay revenue and gross profits per transaction were consistent year over year. Money transfer. Third quarter constant currency revenue, operating income, and adjusted EBITDA growth was the result of 7% growth in U.S. outbound transactions, 10% growth in international originated money transfers, which included 12% growth from Americas outside the U.S., 8% growth in transfers initiated largely in Europe, and 7% growth in transfers initiated in the Middle East and Asia. and 18% growth in XE transactions. These transaction growth rates included 20% growth in direct-to-consumer digital transactions. These growth rates were somewhat tempered by a dislocation of FX rates in the informal market channel, specifically Bangladesh and Pakistan. Money transfer revenue per transaction was relatively constant, while gross profit per transaction improved year over year. Moreover, average amounts sent by customers remained nearly the same this quarter versus last year third quarter. And finally, as was the case in the second quarter, the money transfer team posted another quarter of improved operating margins. not only improved, but the second best quarter operating margins other than the third quarter of 2020. So for all of those that have often asked whether money transfer could regain its operating margins, I know we consistently expressed the confidence that our money transfer team was committed to margin improvements. So net-net, commitment made, commitment delivered. As I conclude my discussion on the financial results, I cannot help but to reflect on the strength of our three segments. First, a record consolidated revenue quarter, first quarter to exceed a billion dollars in revenue. Second, double-digit growth from the core e-pay business across all metrics. Third, margin expansion and double-digit growth exceeding 20% in adjusted EBITDA and operating income in the money transfer segment. Finally, we saw EFT return to a solid footing with respect to international transactions, largely back in correlation with Euro control travel data in September of 23. With that, I'll turn it over to Mike.