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Q2 2019 Euronet Worldwide Inc Earnings Call on July 24, 2019 / 1 THOMSON REUTERS STREETEVENTS EDITED TRANSCRIPT EEFT - Q2 2019 Euronet Worldwide Inc Earnings Call EVENT DATE/TIME: JULY 24, 2019 / 1:00PM GMT THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2019 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 24, 2019 / 1:00PM, EEFT - Q2 2019 Euronet Worldwide Inc Earnings Call CORPORATE PARTICIPANTS Jeffrey B. Newman Euronet Worldwide, Inc. - Executive VP, General Counsel & Secretary Kevin J. Caponecchi Euronet Worldwide, Inc. - Executive VP and CEO of epay, Software & EFT Asia Pacific Division Michael J. Brown Euronet Worldwide, Inc. - Chairman, President & CEO Rick L. Weller Euronet Worldwide, Inc. - Executive VP, CAO & CFO CONFERENCE CALL PARTICIPANTS Andrew Garth Schmidt Citigroup Inc, Research Division - Senior Associate Andrew William Jeffrey SunTrust Robinson Humphrey, Inc., Research Division - Director Christopher Charles Shutler William Blair & Company L.L.C., Research Division - Research Analyst James Edward Schneider Goldman Sachs Group Inc., Research Division - VP Michael John Grondahl Northland Capital Markets, Research Division - Head of Equity Research & Senior Research Analyst Rayna Kumar Evercore ISI Institutional Equities, Research Division - MD PRESENTATION Operator Greetings, and welcome to the Euronet Worldwide Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Mr. Jeff Newman, Executive Vice President and General Counsel for Euronet Worldwide. Thank you. Mr. Newman, you may begin. Jeffrey B. Newman - Euronet Worldwide, Inc. - Executive VP, General Counsel & Secretary Thank you, Sarah. Good morning, and welcome, everyone, to Euronet's quarterly results conference call. We will present our results for the second quarter 2019 on this call. We have Mike Brown, our Chairman and CEO; Rick Weller, our CFO; and Kevin Caponecchi, the CEO of our Epay division on the call. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the first page of the PowerPoint presentation we'll be making today. Statements on this call that concern Euronet's or its 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 that are listed in the first page of our presentation. Euronet does not intend to update these forward-looking statements and undertakes no duty to any persons to provide any such update under any circumstances. In addition, the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures that we will use during the call to their most comparable GAAP measures. Now I'll turn the call over to our CFO, Rick Weller. Rick? Rick L. Weller - Euronet Worldwide, Inc. - Executive VP, CAO & CFO Good morning, and thank you, Jeff, and thank you, everyone, for joining with us today. I will begin with my comments on Slide 5. We delivered second quarter revenue of $692 million, operating income of $118 million, adjusted operating income of $117 million and adjusted EBITDA of $150 million. Our adjusted EPS for the second quarter was $1.69, a 28% year-over-year increase and in line with the guidance we provided in April. This 2 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2019 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 24, 2019 / 1:00PM, EEFT - Q2 2019 Euronet Worldwide Inc Earnings Call strong result was driven by double-digit constant currency operating income results from all 3 segments of our business. Versus guidance, we saw that a bit of tax favorability was offset by headwinds from changes in foreign currency rates. I'd also like to point out that our GAAP calculation of weighted average shares included about half of the total shares issued to settle the value in excess of principal of our 1.5% convertible bonds. However, you will notice that we have included all of the issued shares in our non-GAAP adjusted EPS calculation to be consistent with both the GAAP and adjusted EPS share calculation in the first quarter and the number of shares we considered in our second quarter guidance. With these shares fully included in this quarter in our adjusted EPS, you will not see any further dilution from the settlement of -- and the redemption of the 1.5% convertible bonds on our adjusted EPS calculation in future periods. Let's go to Slide 6. Here on Slide 6, we show our 3-year transaction trends by segment. EFT transactions grew 11%, driven by expansion of our ATM and point-of-sale network processing in Europe and Asia. Epay transactions grew 40%, with continued digital media expansion and significant contributions from wallet-driven mobile top-up transactions in India and digital code server transactions in the U.S., both of which earn a small amount of revenue per transaction compared to our more traditional commission-based revenue. Excluding these lower-margin transactions, Epay transactions would have grown 9%. From the Money Transfer Segment, total transaction grew 7% and money transfers grew at 8%. This growth was the result of exceptional double-digit growth from our international remittance business and digital sends, partially constrained by limited growth from our XE business stemming from Brexit uncertainties and declines in our domestic transactions as a result of additional ID requirements at Walmart. While we have seen some softness in domestic transactions, we are confident in our relationship with Walmart as evidenced by the previously announced domestic payout agreement with Walmart and our partnership with Walmart's Massmart in South Africa. We optimistically look forward to new products in the future. Next slide, please. On Slide 7, we present our segment results on an as-reported basis. On a year-over-year basis, the major currencies where we operated declined at mid-single-digit rates. To normalize the impacts of these currency fluctuations, we have presented our results adjusted for currency on the next slide. Here on Slide 8, you can see that for the second quarter, EFT revenue grew 26%, adjusted operating income grew 50% and adjusted EBITDA grew 42%. These strong double-digit growth rates were the result of a 13% year-over-year increase in active ATMs and an 11% increase in transactions, new outsourcing agreements and our ability to offer Visa DCC on all cards worldwide. ATM growth outpaced transaction growth as a result of an additional roughly 1,000 new outsourcing ATMs, which were added late in the quarter and, therefore, did not contribute equally to the transaction growth in the quarter. Transaction growth includes increases in our core domestic cash withdrawal transactions as well as value-added transactions on ATMs and point-of-sale terminals, including dynamic currency conversion, domestic and international surcharge, and foreign currency dispensing. Revenue and gross profit per transaction and operating margins all expanded nicely. EFT continues to deliver exceptional double-digit growth rates across all metrics. Epay revenue grew 16%, operating income grew 13% and adjusted EBITDA grew 12%. These double-digit growth rates include continued expansion of our digital media products and benefit from certain promotional activity where revenue was recorded on a gross face value basis versus commission basis. Gross profit per transaction came in slightly as we continued to see a stronger mix of mobile top-up transactions from India and digital code server transactions from the United States. As we continue to expand our technology and sign more and more agreements, our transactions profile will likely change some, but every new transaction will lead to more profitability in our Epay segment. If not for the additional gross face value recorded in revenue, operating margins would have remained the same. Overall, this was a great quarter for Epay and the third consecutive quarter where we have recorded double-digit operating income and adjusted EBITDA growth in Epay. Money Transfer delivered constant currency revenue, operating income and adjusted EBITDA growth of 9%, 12% and 11%, respectively. These growth rates include strong contributions from our international remittance business, partially offset by limited growth in XE business stemming from Brexit uncertainties and the decline in domestic transactions I mentioned on the previous slide. 3 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2019 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 24, 2019 / 1:00PM, EEFT - Q2 2019 Euronet Worldwide Inc Earnings Call Constant
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