Euronet Worldwide, Inc.

Good morning, everyone, and welcome to Euronet's third quarter 2025 earnings conference call. On the call today, we have Mike Brown, our chairman and CEO, as well as 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 will be making today. Statements made on this call that concern Euronet or its management's intentions, expectations, or predictions of further performance are forward-looking statements. Uranet's actual results may vary materially from those anticipated in these forward-looking statements. The number of factors that are listed on the second slide of our presentation. In addition, the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures we'll be using during the call to the most comparable GAAP measures. Now I'll turn the call over to our CFO, Rick Weller.

Thank you, Adam, and good morning, everyone. Thank you for joining us today. I'll start my remarks on slide five. We delivered revenue of 1.1 billion, operating income of 195 million, adjusted EBITDA of 245 million, and adjusted earnings per share of $3.62. Revenue growth was below our expectations due to softness in certain areas of the business, which we believe was largely attributable to macroeconomic and policy decisions surrounding immigration around the world. However, the diversity of our business model, share repurchases during the year, and effective expense management allowed us to offset those impacts and deliver another quarter of solid results. Finally, I want to highlight that our consolidated operating margins expanded by approximately 40 basis points over the prior year. quarter. Next slide, please. Year over year, most of the major currencies we operate in strengthen compared to the dollar. To normalize the impact of currency fluctuations, we have presented our results adjusted for currency on the next slide. I'm now on slide seven. Our EFT segment delivered another good quarter where revenues grew 5% operating income and adjusted EBITDA, each growing 4%. While results were somewhat lighter than expected, the business continues to drive growth led by continued expansion in developing markets such as Morocco, Egypt, and the Philippines, where we are expanding services, adding ATMs, and strengthening banking and FinTech relationships. Our merchant services business in Greece also delivered its strongest quarter since the 2002 acquisition, with operating income up 33% year-over-year, driven by robust transaction volume and continued merchant expansion. Across Europe, travel volumes remained steady through the summer, supported by sustained demand for leisure travel. According to the European Travel Commission's report, overall tourism in Europe grew approximately 3.3% year-over-year. At the same time, routers noted that tourism-related sales in Spain grew about 3%, roughly half the pace of the prior year, as visitors curtailed discretionary spending on leisure and dining. Taken together, these reports highlight somewhat of a mixed picture across Europe. While consumer demand, travel demand remained solid, spending patterns were more selective. Even so, our EFT business outpaced the broader European trend, growing about 5%. Although this remains slightly below our expectations, our broader geographic diversity Steady travel activity and continued network expansion position us well for sustained growth and resilience heading into year end. In our ePay segment, revenue declined by approximately 5% compared to the prior year, while operating income increased 4% and adjusted EBITDA 2%. The reduction in revenue reflects a shift within our wholesale mobile top-up business where a high-volume, low-value product exited the portfolio. While this change reduced top-line revenue, it only marginally impacted our operating income. Moreover, its impact was largely contained to the third quarter and accordingly will have no meaningful impact on future quarters. excluding this product discontinuance, our constant currency revenue would have grown at a rate similar to the operating income constant currency growth rate. Our core digital content and payment processing activities remain stable and continue to provide a solid foundation for future growth. Money transfer revenue grew 1% year over year, while operating income and adjusted EBITDA decreased by 2% and 1% respectively. Revenue growth was driven primarily by a 32% increase in direct-to-consumer digital transactions, reflecting continued strong demand for our digital money transfer products. However, this growth was partially offset by softer transaction volumes across certain corridors. Mixed information on global economic uncertainty and recent immigration policy changes in the United States, as well as in other areas of the world, have slowed migration inflows and reduced remittance activity in key money transfer sending markets. According to routers, remittances to Mexico declined more than 12% year-over-year in mid-2025. Underscoring how this shift, how shifts in immigration policy can impact transaction volumes in real time. Remittances between the U.S. and Mexico represent approximately one-fourth of our U.S. remittance flows and only about one-tenth of our global transfers. This quarter, our U.S. to Mexico corridor was flat year over year. It's somewhat of a bittersweet feeling to have flat year-over-year growth to Mexico. Bitter in that Reuters estimates a 12% year-over-year decline, but sweet in that our money transfer business outperformed the market by 12%. Interestingly enough, that's consistent with how RIA has performed over the last 18 years. It's this strength that gives us confidence for solid future growth. Operating income and adjusted EBITDA also reflected incremental year-over-year marketing investments to support continued expansion of our digital business and the Dandelion product. Despite some pressures, we delivered solid third-quarter consolidated earnings. And as we look to the fourth quarter, we expect to finish the year with year-over-year earnings growth to be generally similar to the third quarter, thereby supporting our confidence of being within the range of 12% to 16% year-over-year earnings growth as we previously provided. Next slide, please. And slide eight presents a summary of our balance sheet compared to the prior quarter. As you can see, we ended the third quarter with $1.2 billion in unrestricted cash and debt of $2.3 billion. The decrease in cash is largely due to stock repurchases offset by cash generated from operations, cash returned from ATMs following the summer season peak, and working capital fluctuations. In the third quarter, we completed a $1 billion convertible bond offering at an attractive interest rate of 5 eighths of a percent, maturing in 2030. The proceeds were used to pay down the majority of our revolving credit facility. This transaction strengthens our financial flexibility to invest in growth opportunities across our payments, money transfer, and digital asset infrastructure initiatives. As we think about capital allocation, we look to maintain a debt level commensurate with an investment grade rating, acquiring growth driving businesses in line with our digital initiatives, and share repurchases. As for share repurchases, including the shares we've repurchased, we made through the first nine months of this year, we have repurchased on average approximately 85% of our annual earnings over the past four years. Said differently, 85% of the earnings have been returned to shareholders through share repurchases. In this quarter, we repurchased approximately $130 million of our shares. These repurchases were beneficial in a number of ways, including the stabilization of our share price on the day of marketing the bonds and offset against any future dilution of convertible shares, which I sure would like to see happen. And finally, a locked in pre-tax ROI of approximately 13% given consensus 2025 adjusted EPS. With that, I'll turn it over to Mike.

Thank you, Rick, and thank you everybody for joining today. In the third quarter, we delivered adjusted earnings per share growth of 19% year over year, another quarter of double digit earnings growth. As Rick mentioned, that keeps us on track to deliver our 12 to 16% 2025 earnings growth. This quarter's performance reflects effective execution across many areas of our business, And you'll know I'll call out some of those wins in just a minute. But I also think it is important to note that our growth was tempered by lighter than expected revenue across all three segments. As we inspected our business, it became clear that the broad global economic uncertainty played a role. The UN's Department of Economic and Social Affairs stated in their mid-year update, the world economy is at a precarious moment Heightened trade tensions and policy uncertainty have meaningfully weakened the global outlook for 2025. We felt that uncertainty across most of our business, from travel and consumer spending to cross-border remittances and payment processing. That said, we view these challenges as transitory headwinds, not long-term obstacles. The underlying fundamentals of our business remain strong, and we expect these pressures to ease. On top of the global uncertainty impacting all three segments, immigration policies in the U.S. and other countries have pressured the money transfer segment. The tightening of immigration reform, added enforcement, and delays in work authorizations, which most of us in the U.S. see often in the press, have slowed cross-border remittances. But there are reform actions in other countries most of us don't see. U.S. transfers to Mexico have a quarter that represented about 10% of our global remittance volume, has seen the strongest pressure. In the third quarter, transactions in that quarter were flat compared to last year, which is unusual, given the consistent growth we've historically seen. While these policy changes have clearly weighed on our results, we believe they, too, are transitory in nature, and we would expect volumes to rebound once these conditions stabilize. Now, we can't control the timing of these external factors, but we can control how we execute and invest for the future. I recently spent some time with our global leadership team, and the energy in that room was unmistakable. From new market expansion and a strong pipeline for Ren and Dandelion to exciting work integrating AI into our operations and expanding our stablecoin on-ramp and off-ramp capabilities. All right, let's move on to slide number 11, and we'll talk about the quarter. Slide 11, this slide provides a high-level view of how and where we will drive our growth strategy into the future. As a reminder from our discussions over the past year, our business model is really built on two key revenue pillars, payment and transaction processing, and then cross-border and foreign exchange, which drive our growth opportunities that continue to expand as payments become increasingly global, digital, and flexible. The first pillar is payment and transaction processing, with which we facilitate high-volume transactions for banks, merchants, and brand partners, continually expanding our use cases to stay aligned with evolving demands. During the quarter, we signed additional new merchants in our merchant services business, continue to move forward to complete the acquisition of CoreCard, and sign a new RAN and strategic network participation agreements. Excuse me. We'll get into more detail on these exciting deals later in the presentation. Excuse me a second. The second pillar is cross-border and foreign exchange, which powers our FX-related use cases and distributes FX services through both owned and third party channels across both physical and digital touch points. This forms the foundation of our global money transfer business and the innovation behind our Dandelion platform, which delivers real time cross border payments to bank accounts, cards, and digital wallets worldwide. In the third quarter, we signed a major new Dandelion partnership with Citigroup, enabling Citi's clients to make near instant full value payments into digital wallets across multiple markets. This agreement reinforces the End Alliance position as the world's largest real-time cross-border payment network and highlights the value global banks place in our platform. During the quarter, we entered into a new partnership with FireBlock, the leading digital asset infrastructure provider. This collaboration establishes an important element for our digital asset strategy, enabling interoperability with blockchain systems for faster, more efficient money movement. It also supports stablecoin-based remittances, consumer wallets, and real-time settlements, advancing our long-term vision for integrating digital assets into our network. Now let's move on to slide 12 and discuss our stablecoin use cases. A lot of people talk about stablecoin, but they don't quite know what they're talking about. Here's what we're doing. The passage of the Genius Act marks an important milestone for digital assets. It legitimizes stablecoins within regulated financial frameworks, bringing much-needed clarity to the industry. While Uranet was blockchain-ready well before this legislation, this new framework opens the door for established players like us to responsibly integrate blockchain technology for stablecoin or tokenized payments across our global payment ecosystem. Through the utilization of our on and off ramp capabilities, including the ability to use our global ATM network to convert stablecoins into local currency, we're enabling customers and partners to move seamlessly between digital assets and fiat currency. In practical terms, this means that consumers can instantly convert digital assets to fiat currency to pay for everyday essentials, things like groceries, medicine, rent, utilities, through our trusted payout network. By combining our REN and data line platforms with the global reach of our RIA and XE distribution networks, we are making digital money usable everywhere, securely and at scale. We plan to launch our first set of stablecoin-enabled use cases in the first quarter of 2026, beginning with treasury settlement, cross-border transfers, and consumer cash-out functionality in select markets. These pilots will demonstrate how our network can bridge digital and fiat ecosystems in a safe, compliant, and practical way, creating new efficiencies for our partners and new choices for consumers. Finally, we'll leverage stablecoins or tokenized payments within our treasury operations to move funds between accounts and jurisdictions faster and more efficiently, reducing idle cash and enabling always-on settlement. In summary, while we move money fast today, stablecoins will bring even more efficiencies and create new opportunities. I'm really excited to leverage our industry-leading global on- and off-ramp assets to deliver real-world stablecoin use cases to the world. Now let's go on to slide number 13. Slide 13, the EFT segment. It's comprised of three key components, banking services, the rent payments platform, and merchant services. Each plays a key role in driving both transaction growth and digital expansion across our global payments ecosystem. Our banking services continue to have steady growth reflecting the strength of our value proposition for consumers, financial institutions, and merchants. In Poland, we expanded our footprint by adding three new merchant partners to support ATM deposit functionality. In the Philippines, we signed an ATM outsourcing agreement with Banco de Oro, the largest bank in the Philippines. And as we move on to REN, on the heels of our agreement with a top three U.S. bank, we continued to gain momentum. This quarter, we signed a software licensing agreement with IDFC First Bank, one of India's leading private sector banks. Under this agreement, REN will power the bank's ATMs, debit cards, and transaction switching through a unique AWS architecture, the first of its kind in India. With the pending acquisition of Core Card, we'll extend further into credit processing with provable scalable revolving credit technology. Together, REN and CoreCard position us to deliver a full suite of real-time cloud-based solutions across issuing, acquiring, and credit management. While subject to completion of the pending merger, the response from our customers and sales prospects has been very, very encouraging. Now, here are a few comments on our merchant services business. This quarter, we processed the highest number of card transaction volume since the acquisition and added 7,000 new merchants. These results reflect continued momentum in our acquiring business and highlight how our digital initiatives continue to shift our revenue mix. Overall, it's been an exciting quarter for the EFT business with the combination of continued market expansion and the pending core card acquisition we're well positioned to deliver sustained growth. Now let's move on to ePay. As you know, ePay is a leading global provider of payment processing and prepaid solutions, specifically focused on connecting brands to consumers through innovation and our expansive distribution network. Our brand partners include the biggest names in tech, Apple, Google, Sony, Microsoft, Amazon to name a few, along with thousands of others. Through a platform as a service model, ePay enables retailers, mobile operators, and brands to manage transactions, payments, and content in a manner that best aligns with their customer base. Increasingly, consumers are embracing the convenience of a fully digital experience. Today, about 70% of all ePay transactions are digital. flowing across e-commerce merchants, digital banks, or leading financial wallets around the world. As digital grows, ePay continues to invest in security, scalability, and compliance to offer the most trusted services in the industry to consumers, brands, and merchants. During the quarter, we had several notable signings and launches that further expand ePay's global footprint. and strengthen our partnerships across digital content and payment ecosystems. On the success of our proprietary Prezi card in New Zealand, we launched Gipzy, ePay's own branded non-reloadable open loop Visa card in Australia. We expanded our partnership with Epic Games, introducing fixed denomination cards that enhance how players purchase digital content. Previously, users could only purchase Fortnite in-game currency called V-Bucks. Now users can use this card to purchase all content available in the Epic Games Store. We signed a new distribution agreement with Riot Games in India, broadening our reach with one of the world's fastest-growing gaming markets. We also signed a gift card distribution agreement in Mexico with Mercado Libre, Latin America's largest e-commerce and marketplace platform. In our payment processing business, we continue to see strong momentum. We're cross-selling payment services to our existing ePay content distribution merchants, both retail and online, and that strategy is paying off. Revenue from payments grew 27% year-over-year, reflecting the strength of our omnichannel approach. The pipeline remains robust, with several exciting deals we expect to close in the near future. Now let's move on to slide number 15, and we'll talk about money transfer. As I mentioned earlier, changes to immigration policy and broader economic challenges weigh on our money transfer segments revenue and transaction growth this quarter. However, as Rick mentioned, REIA continued to outperform the broader market decline to Mexico by 12%. Despite these near-term headwinds, we remain confident in REIA's ability to outpace the market. supported by its strong fundamentals and differentiated business model. Our omnichannel approach, expansive geographic presence, channel diversity, and industry-leading real-time payments network set us apart from both digital-only and legacy multichannel competitors. This foundation differentiates us from our competitors and positions us well to capture new opportunities in cross-border payments. particularly through our Dandelion strategy, which continues to gain traction. Excuse me. Building on this momentum, as previously mentioned, we announced a new collaboration between Dandelion and Citibank. This partnership enhances the city's cross-border payments and remittance offering and expands its reach into the business and consumer uses, such as payroll, social benefits, and gig economy payments. We also launched Dandelion's service with Union Bank, the 10th largest bank in the Philippines, and will soon launch Commonwealth Bank in Australia, another top 50 global bank. This and several other signings and launches during the quarter further validate Dandelion's role at the center of a faster, more modern global payment ecosystem. Within the remittance space, our digital business continues to perform well. Direct-to-consumer digital transactions grew 32% year-over-year and now represent 16% of total money transfer transactions, demonstrating continued adoption of our digital channels. Rhea also achieved a key retail win this quarter through an exclusive partnership with Heritage Grocers Group, which operates 115 Hispanic-focused grocery stores under brands including Cardenas Markets, and Tony's Fresh Markets. This was a competitive win and followed a successful mid-September launch. We are excited about the growth prospects with this partnership. On the network side, I want to briefly highlight again the partnership with Fireblocks and what that means for our money transfer segment. This collaboration will unlock interoperability between traditional and blockchain systems for faster, more efficient money movements. Within money transfer, this infrastructure will support stable coin-based remittances, on and off ramp capabilities, consumer wallets, and real-time settlements, advancing our long-term vision for integrating digital assets into our network. Bear in mind, these on and off ramps are not easy to build. They're built one by one, a real advantage that we are excited to leverage. With that, We'll move on to slide 16 and we'll wrap up the quarter. As we wrap up, I'd like to highlight the growing traction across our REN and Dandelion initiatives. While these opportunities often evolve long sales cycles and reference customers, our recent wins with Citi, the Commonwealth Bank of Australia, and a leading US bank demonstrate that our investments are paying off. We're entering a phase of accelerated adoption And there's a lot to be excited about, including we delivered record-setting third quarter results with adjusted EPS of $3.62, a 19% increase over the prior year. We continue to make steady progress towards completing the core card acquisition with core card shareholders scheduled to vote on the merger next week, an important milestone in expanding our digital payment capabilities. In August, we completed a $1 billion convertible debt offering at 5 eighths of a percent interest rate, maturing in 2030. The proceeds strengthened our balance sheet and increased our flexibility to pursue strategic growth opportunities. We signed a new partnership with Citibank, which will enable Citi's institutional clients to deliver near instant full value payments into digital wallets around the world through our dandelion network. further validating Data Alliance leadership in real-time cross-border payments. And finally, we entered into a strategic agreement with Fireblocks, a leading digital asset infrastructure provider to bring blockchain stablecoin technology within Uranet's global payment network, positioning us at the forefront of the next generation of financial connectivity and opening new and exciting opportunities to leverage our world-class on- and off-ramps. Together, these achievements demonstrate the continued strength, adaptability, and innovation of Euronet's global payments network. As we look ahead, we are confident in our strategy, our technology, and our ability to deliver sustained growth well into the future. We are looking forward to the fourth quarter, and once again, we are pleased to reaffirm our earnings expectations of 12% to 16% growth for the year. With that, I will be happy to take questions. Operator, would you please assist?