Q1 2020 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to stand by and thank you for your patience.
[music].
Yes.
Greetings and welcome to the Euronet worldwide first quarter 2020 earnings conference call.
This time, all participants on I listen only mode.
After the speakers presentation, there would be a question answer session.
Asked a question you're doing this time you would need to press Star then one on your telephone.
Please be advised that today's conference is being recorded.
People quite any further assistance. Please press Star then zero.
It's my pleasure to introduce your host the death Minha Casa Deputy General Counsel for you in that worldwide.
So cost as you may begin.
Thank you good morning, and welcome everyone to your net quarterly results conference call will present, our results for the first quarter 2020 on this call, we're Mike Brown, our chairman and CEO, Rick Weller, our CFO and getting capital gains year over each individual uncle.
Before we begin I need to call your attention to the poor looking statements disclaimer on page two of the Powerpoint presentation will be good today.
Statements made on this call that concern Euronet sports management's intentions expectations or predictions of future performance are forward looking statements. During its actual results may vary from does anticipate in such forward looking statement. That's it. There's also a number of factors that are listed on page two or presentation.
Your net does not intend to update these forward looking statements and undertakes no duty to any person to provide any such a big under any circumstances.
In addition, the Powerpoint presentation includes a reconciliation of the non-GAAP financial measures will be using during the call to their most comparable GAAP measures.
Now I'll turn call over to our CEO Mike.
Mike.
Hi, Thank you Desmon and thank you everybody for joining us today.
We hope that you. Your family's then your friends are safe and well I'll begin my comments on slide number five.
Two months ago, Euronet was poised to deliver another year of double digit revenue and earnings growth.
Add another 4500, ATM in new and existing geography.
So its fleet of 50000 to continue to grow its digital presence in both epay and money transfer and to continue to grow its brick and mortar transfer business two to three times faster than the Mark.
We were also fielding additional inquiries on our leading edge technology to lever to Iran platform.
And we were well capitalized to accomplish all these initiatives with over a billion dollars a cash in the bag or in our ATM together with $950 million availability on our revolving credit facility.
And then as you know the world Jay.
It was hit by the Cobot 19 pandemic borders workload shelter in place orders were issued airports restaurants and business is close stadiums and churches close local events or cancel and the millions of people across the globe were put on unemployment roles.
It was almost as if the world changed overnight.
Now many companies are just trying to survive a recent study pointed out that more than two thirds of businesses have been adversely impacted euronet being one of them.
So while we are one of the many business is impacted by the virus. We are one of the fortunate one.
We continued to have a very strong balance sheet with more than a billion dollars a cash and no significant debt service obligations for another five years.
To put it in perspective, we could cover several years of payroll, what's the cash that we have.
Because we are well capitalize was significant liquidity, we don't have to fight to survive, we can and are focusing on expanding our market share product line geographical markets.
And technological superiority in.
Looking forward well, we will work diligently to make the most out of this year, we're squarely focused on opposed Kobin world.
When we'll come out of the gates swinging.
In reflecting on the future like Jim Cramer sat on CNBC. The other day about earnings guidance amid cobot 19, He said that I think that like many people. We don't know what the future is and it's amazing that anyone gives you a forecast.
So in that vein, Rick and I will focus on three areas that we believe and bastards, most likely want to understand.
First how are we going to get through the second when is it going to end and third what is it going to look like when things are back to normal or maybe a new normal.
So let's start with how we're getting through that.
A couple of months ago, our first thoughts were ensuring the health and safety of our nearly 8000 employees.
As a result of our previous investments in our global network, including all the right preparations to ensure cyber security and remote access together with exceptional contributions from our employees, we weren't able to transition virtually all of our employees to remote work at home arrangement in about a week.
All while ensuring that that serve that our service was not in a rapid for our customer and remember a euronet started as an international multi country business. So conference call aim video calls file sharing and cloud computing are just part of the way that we do business every day it didn't require us to adopt new forms.
Operation.
We have also been drawing on our experiences from 2008 financial crisis.
Add to use this time to improve our market positioning in all three of our segment.
During the 2008 crisis, we focused on expanding geography product and distribution channels for each of our Threed segment.
We introduced new product and solution and we continue to invest in our technology in fact, our market, leading FDM ATM management software that gives us such a competitive edge was coded during those times, that's when we made the investment.
We chose to keep our employee workforce today and in fact, I mean back in 2008 and in fact back then we hired four to 500 more employees in 2008 nine to attack the market, we had a good balance sheet, which even the rating agencies recognized and they upgraded us.
Back then we emerge a stronger more diversified company with expanded market shares and we plan to do much of the same in this crisis.
We are financially conservative as you all know we have a much stronger balance sheet now than we did back then was more than 1.2 billion in cash.
We have had compounded earnings growth of over 20% for six years running and we added to our treasury and we capitalized our business with low cost long term fixed rate debt that has no maturities for five years. So we are fortunate that we'll get through this.
But as I heard it had a long time ago, you make your own luck.
Well, we will continue to make our own luck. We are actively working to ensure we are fiscally conservative during these challenging times.
We have implemented a cost reduction plan to save $130 million and ask DNA and third party cost, 80% of which has already been identified as being executed.
And all of these expense reductions are being made without any impact to our future growth potential.
For example, we have extended our ATM Winterization program to include more than 8500, ATM cutting our operating expense considerably.
It is unlikely that we will install the 4500 ATM we planned in 2020 due to the government mandated locked down orders in most countries.
Do you see installation of new ATM is generally isn't considered an essential service, but one countries states in cities began to restart the economy, we will accelerate our deployment plans as quickly as possible, we'll be ready because we have ATM sides ready to go and as I said earlier it is our design.
Higher and plan to keep all of our employees, we have not initiated any employee salary cuts today and we have communicated to all of our employees that it is our intention not to cut salaries are layoff employees. We believe that this will allow our associates the focused on growing our business while working.
From home rather than worrying about how to pay their bills and trust me, we are keeping them busy.
Our employees are actively adding new products and solutions, including Iran. Rav real time payment product for central banks wanting real time payment solutions.
We will continue to expand geographies and channel as well as further diversify our business into old and new business. Why for example, the acquisition of Us based.
ATM outsourcing provider dolphin to go after the large and attractive U.S. outsourcing opportunities.
And finally, we will can serve our balance sheet to ensure that we are here to grow for the long term next slide please slide number six.
Next year, probably wondering when this crisis will in well up too we're ready.
So while we don't know when it will land what we do know is that it will in three weeks ago. All we read about what country or stayed at Citi closings are extensions of closing.
Now, we're beginning to see promising side the city in country governments around the world begin to implement plans to re opened their economies.
And we're also hearing more and more news circulating regarding promising treatment emerging and emerging progress on a vaccine. So we believe at some point the world will return to normal or at least the new norm.
And what does that mean for our business well, let me posed for you a few questions that we ask ourselves do you believe that people will quit taking vacations.
Do you believe that immigration will stop do you believe that people will stop buying self entertainment do you believe that the use of cash.
We'll see.
While we believe that people will continue to take vacations. In fact, a survey of 11 countries from the International Air Transport Association I 88 shows that once restrictions are lifted more than 50% of the responded either don't plan to wait to travel or only plan to wait for a month or two.
Similarly, a recent survey of Americans by the New York posed indicated that nearly half of Americans plan to travel immediately after the restrictions are lifted.
We believe that people will continue to emigrate across the globe to seek better opportunities for their families as well. We believed that people will continue to play games and watch Netflix and we believe cash will continue to coexist alongside plastic and digital payment methods for very long time.
So the crisis will end and we believe that each of our three core businesses will still be there when it does that as we look across the business. Our business. We believe that that Epay segment will be the first to achieve full recovery.
The content, we sell any pay is largely for self use.
We're seeing good sales of this content during the pandemic and we believe people will continue.
To buy gaming product software and video streaming for everyday use.
We believe the money transfer recovery will lag a little because there's so many people temporarily unemployed around the globe you may have seen the world Bank report their predicts that money remittances Wilbur will decline by 20% in 2020, and you may be wondering how that will impact our business.
We believe that it will take some time for us to get through the unemployment, but we have a very strong track record of growing two to three times faster than the market and faster than any of our competition and we believe that will continue.
As people regain employment their first thoughts will be.
We'll be to continue to be with their families and their families well be in fact, many of our customers made great sacrifices to support their family in their home country.
And we know that some of our larger and many of our smaller competitors are not in his strong financial position. As we are we think that many of the smaller competitors will struggle to survive and we are well positioned to pick up their volume because we have done a good job diversifying.
By geographical expansion network expansion expanding in the independent channel and making inroads with large retail agents and expanding our digital offerings.
So when customers think about sending money to their loved ones, where there whether it's at small retail large retail online or even at ATM.
And finally, we believe that ft recovery will take the longest then is the hardest to predict the recovery early recovery will be largely dependent on how quickly travel gains momentum will be ready to take advantage of transactions that they occurred throughout this year, but in reality, we are operating our business what.
The assumption that travel and international tourism won't pick up to meaningful levels until 2021.
Even then we believe that it's logical to assume that there will be some negative halo effect of the Corona virus. So tourism levels in 2021 will likely not be equal to 2019.
We will they be 70%, 80%, 90% will there be a pent up demand from mis business trip and Miss vacations. This year, we'll have vaccine be developed no one knows for sure, but we would expect it to be somewhere in the 80% to 85% levels of 2019 next year.
We're not forecasting here just offering our view of what may be likely to happen.
Which leads that what we think the business will look like post cobot, let's move on to slide number seven.
Much like 2008, we're preparing our business to be stronger and more competitive as we emerge from these unprecedented times.
In each of our three segments, we believed that the total available market, maybe temporarily smaller but thanks to our financial strength, we will be able to grab a bigger share of this market a bigger piece of the bar.
And ft, we're continuing to expand our footprint in existing and new geography, where identify new side that are being abandoned by our competitors, who will not make it through this pandemic.
And then the next few months, we will have the operations set up and ready to go in five new markets. So that when we are able to install ATM than when travel and tourism resumed we will be ready to go.
And we are diversifying our business over the last years, though we have told you about our increased outsourcing pipeline.
This part of our business, which you may remember makes up 50% of our ATM base and has generally been unaffected by this pandemic as our revenues are less traffic dependent.
In 2019, we added 3600 outsourcing ATM through organic expansion and the acquisition of US based Dolphin Devon.
We have been fielding more and more calls for these services as the banks have felt the pressures of the pandemic.
The U.S. is a huge market and only 6% of the banking credit Union owned ATM their outsource the acquisition of Dolphin debit expands euronets market, leading technology to the United States and makes available to these banks and credit unions more modern banking our options with no investment.
Finally, an empty we continue to seek countries invest in their payment infrastructure to keep up with the changing payments landscape with our ran and ramp technology, we are well positioned to provide these needed solutions.
For payment modernization.
And in fact, our phones have been ringing, there's a lot going on out there and I am confident we'll see some success here even in the midst of the crisis.
And ebay.
Co bid, we have seen new users of gaming and streaming services and we predict that these users will continue to buy content following the pandemic.
We have seen increased sales of digital codes via digital channels, which we expect to remain and we expect that the content and physical retail will resume as soon as these retailers are back open.
We have also heard from our brand partners that many of them have delayed their advertising spend until after cobot. So we would anticipate that we will likely see some additional promotions from brands. When this is over hopefully later this year.
Finally, any pay much like DFT, we're beginning to see indications at some of our smaller competitors may not be financially strong enough to make it. So we are making sure that we are positioned to step in and ensure those customers needs are met.
In money transfer the largest piece of our businesses cash based consumer spending money to loved ones in cash based economy.
So we're confident in the industry, leading up to an accelerating during the past. This pandemic, we have invested into our digital platform and expect to launch our real money transfer mobile App in 19, new markets in the second quarter.
This will ensure the convenience of self service transfers to our customers from their living rooms, and during the stay at home orders, but also to ensure that we are well positioned for the future for customers, who prefer digital payment option.
Over the last year, we told you that approximately 70% of the global remittance market is comprised by smaller independent competitors or not addressed.
During these times many of those smaller competitors without inadequate balance sheet and without industry compliant programs may not make it and we're working to make sure that we're in a position to win their volume.
Over the years, we have continued to two to diversify our business into large retail six years ago. We entered large retail with Wal Mart and have continued to expand our relationship and product offering within the Walmart stores.
We are pleased to announce that we recently renewed the Walmart to Walmart domestic and the Walmart to World International agreements for another three years and we look forward to working with Walmart to continue to offer these exceptional product to Wal marts customers.
We have furthered our large chain operated by expanding to two new agreements with post offices in Europe.
Unlike here in the U.S., where a large portion of remittances are made at grocery stores or pharmacies in Europe. The largest portion of remittances are made through their national post offices. The post offices have historically been dominated by our larger competitive competitors, but they are beginning to prefer our value.
Proposition, our pricing, our customer service and financial strength for both both them and their customers.
Just this month during the height of co bid and the spread of the Lockdowns, We launched our service with Bank 99 in Austria post.
This follows our February to launch a b pose which is the Belgian post office.
And here again, our balance sheet strength is helpful. As these large players look to stability for long term business benefit.
So in summary, we are in all the right places for customers when they want to send money be at the small independent the large retailer online and in more and more places around the world.
Now, let's go to slide number eight and I'll give you a little update on our technology.
Our leading edge technology has really been the driver behind our business continuing to operate as close to normal as possible in our crisis environment. Here. We have we were able to service our customers with no downtime and even deliver new product and services to help customers meet the regulatory demands.
One of them, which were required due to the cobot 19 pandemic.
And the pandemic has given us time to dedicate significant resources and develop and time to new opportunities.
During the quarter, we continued to remain on track with our deliberate deliverables to install our Ren solution for the bank of Mozambique, We would expect the second quarter to be largely user acceptance testing before we take it live a little bit later in the year.
We also continue to use our ramp technology to bridge the gap between physical and digital banking services as digital banks continue to grow around the world. We have found that in a relatively short period of time Euronet can provide the bank with a full suite of payment services through apiay connections to our rep.
Processing platform. We can then provide the bank with access to Euronets ATM for cash withdraws content from our Easypay product portfolio and white labeling of our ex the international payment services. We have already signed three of these digital bags and have interest from several others.
Take a minute now though to talk about our real time payment capability. This is kind of a new one.
Real time payments combined funds availability settlement finality instant confirmation and integrated information flows all in a payment made in second.
This benefit and consumers with instant gratification from the account base person to person transactions and this benefits businesses large and small by allowing merchants to request payment directly from customers with instant settlement of fun.
Of funds the popularity of this trend is putting pressure on governments and regulators around the world to innovate and introduce new real time payments infrastructure within their country.
This new payments landscape.
Allows both banks and non banks alike to participate in creating new and exciting payment innovations we've never witness before.
Think of it has parallel to the card payment infrastructure that has evolved over the last 40 years, but the big difference is that RTP real time payments allows more participants and it plugs directly into the bank account of consumers and businesses, resulting in lower fee.
Further customers have the option to anonymized their banking credentials through our proxy or in alias, making this system, even more secure more robust and more appealing to use than standard plastic.
Our Ren Foundation is natively built for real time payments and settlements between participants in a network. Additionally, it includes modern design features like adaptive routing two factor authentication and micro services architecture that I have spoken about previously.
In summary, what the ran foundation Euronet is uniquely positioned to participate in the modernization of legacy payment infrastructure, along with the trend towards real time payments in virtually every country around the world.
As I conclude I'd like to reiterate our confidence in our business well covered 19 may delay us and delivering the double digit annual results. We have consistently delivered we will return.
Our strong financial position with plenty of cash our exceptional employees careful expense management and balance balance sheet conservation as well as our leading edge technology give us great confidence that we'll get through this.
We are using this time to prepare our business for a post co bid world and we believe that we have a lot to look forward to across each of our business segments. As we move into 2021 and these continued efforts to advance our business and take market share from our competitors and each segment will leave us.
Better position to deliver long term double digit growth rates.
With that I'll hand, it over to Rick.
Alright, Thank you Mike and thank you, everyone, who has joined us today.
Unlike previous earnings reports I will begin my comments with the balance sheet on slide 10, rather than the income statement.
As Mike mentioned, the first quarter earnings are not the type of results we are accustomed to reporting.
But the strength of our balance sheet will help to see us through this crisis.
As you can see here, we finished the quarter with $709 million, an unrestricted cash on hand.
The decrease in cash from December 31 was the result of cash generated from operations offset by capital expenditures and 240 million in share repurchases, which we curtailed upon seeing the significance of cope with 19 impacts on our business.
Yes.
While we believe this 709 million dollar cash balance is more than sufficient to sustain the business through the difficult times brought about by that pandemic. The company also has approximately $560 million cash in ATM at the end of the quarter.
Which could be redeployed to operations, giving the company more than $1.2 billion, the cash with no significant debt service obligations for five years.
Our total indebtedness was 1.1 billion as of March 31.
Largely unchanged since the end of the year.
And with a first maturity date of March 2025 next slide please.
On slide 11 for the quarter, we delivered revenue of $584 million operating income of 31.6 million and adjusted EBITDA of 68.7 million.
We delivered adjusted EPS of 55 cents, a 35% declined versus the prior year as a result of the transaction declines from Cobot 19, Mike mentioned during his comments next slide please.
On slide 12.
Ft transactions in the quarter grew 13% driven by strength in Asia Pacific in us markets in the quarter.
Partially offset by lower European ATM transactions, especially high margin cross border transactions impacted by Cobas 19.
He paid transaction increases were from the growth in Europe, and very strong contributions from India, which included a large volume of low margin mobile top up transactions.
Money transfer transactions grew 3% from continued strong double digit growth in international remittances and digital initiated transactions, partially offset by declines in us domestic transactions and transactions initiated in certain brick and mortar stores.
So despite the strong start to the year in each of the three segments transactions that drove the year over year transaction growth just reviewed.
As border closures and shelter in place orders have span the globe over the last several weeks. The company has seen transaction declines in the FTC segments, ATM business, ranging from minimal declines to as much as 95% with the most significant.
Lines in the cross border transactions.
In money transfer business. The company is seen both increases in certain transactions and declines in others.
The increases being more concentrated in the digital channels with decreases approximately 25% in the brick and mortar channels.
He pay business as well saw both increases and decreases in transaction categories with very strong transaction increases across the digitally initiated transactions as well as content oriented to self use.
And declines in transactions traditionally process out of retail based merchants.
While the Epay segment has been experiencing very strong digitally initiated transactions. The Missouri majority of those transactions have been low margin transactions out of India.
Overall as the first quarter came to upload and we entered into the second quarter on average the FTC segment transactions trends were down approximately 40% over similar weeks of the prior year the money transfer segment transactions were down.
Absolutely, 35% over similar weeks of the prior year and Epay transactions were up approximately 40% over similar weeks of the prior year again heavily influenced by low margin, India based transactions.
Next slide please.
On slide 13, we present, our results on an as reported basis.
Year over year, most of the major currencies, where we operate declined at low to mid single digit rates.
To normalize the impact of currency fluctuations, we have presented our results adjusted for currency on the next slide.
Here on Slide 14, you can see for the first quarter ft revenue grew 3% driven by growth in Asia Pacific in the United States markets, partially offset by the cobot 19 induced impacts of lower European ATM transactions.
Especially high margin cross border European transactions operating income and adjusted EBITDA declines with a direct result of fewer ATM transactions, especially high margin cross border transactions.
While measures to reduce certain costs were initiated in the latter part of the quarter little benefit of those initiatives were realized by quarter end.
Epay revenue grew 1% driven by continued digital media growth.
Digital product offerings played a key role in offsetting the decline in retail based transactions stemming from customer movement restrictions.
Operating income and adjusted EBITDA declines were the result of SGN a investments made throughout 2019 to support future growth, which was unfortunately blunted by the impacts of the virus.
Money transfer revenue.
Growth was driven by strong double digit contributions from us originated international remittances and growth in ex the stimulated by currency volatility.
Partially offset by year over year decreases in interest us transfer business.
Operating income and adjusted EBITDA were further impacted by additional charges taken to cover anticipated agent receivables receivable default.
As a result of ordered business closures required to manage the pandemic.
In wrapping up it is needless to say that co with 19 impact.
Pandemic has had a profound impact on our business in the first quarter and we expect the second quarter impact to be even greater.
Like Mike said earlier, we will refrain from giving guidance because none of us know when the co with 19 crisis will end or how quickly the economies will recover.
But due to these.
And extraordinary circumstances, we believe it is important to give you a couple of data points to frame expectations.
We would expect consolidated second quarter year over year revenue, including impacts of FX to be in the range of 70% of prior year.
With Ti revenue in the range of 40% of prior year.
Epay revenue in the 90% range of prior year.
And money transfer to be in the 80% range of prior year.
From these adjusted revenue levels.
Despite cost reductions and careful expense management actions.
We expect the second quarter adjusted EBITDA will be nearly breakeven.
And after interest taxes.
And the two thirds reduction in capital expenditures the business will likely consume approximately $25 million of its approximate 1.2 billion dollar cash.
Again, this is not guidance, but rather a macro view of how to frame expectations. Given these rather unpredictable unprecedented times.
Mikes comments earlier bear repeating.
We're very fortunate to have a strong balance sheet with plenty of cash to see us through this crisis.
We will continue to be fiscally responsible where we take advantage of opportunities made available to us by this crisis.
And we will continue to remain.
And we continue to remain confident.
That our business has very strong long term growth prospects, which we are fostering eve earned during this.
The closures.
With that I'll turn it back over to Mike for final closing comments.
Thank you Rick.
As I closed.
I want to reflect for a moment on our path there is a little picture on page.
And in Greece on like page 16, and I'd like you to look at.
We concluded a year last year, where we celebrated our 20 fiveth anniversary.
Many of the management team pictured here have been with us for a majority of those years.
And we have gone through a lot together from our session to regulatory rate reductions to de monetization you name. It we've seen.
We've drawn on these past experiences to get us through the crisis.
Next slide please.
We hope that all of these words have given you the same level of confidence in the long term growth prospects that we believe in.
This picture.
Right here was produced in greed.
One of our important markets looking to recover for the pandemic.
Like you, we're looking forward to more normalcy, and our daily life and in our business, but until we can all gather again on a beach in Greece.
Stay safe with that operator, we'll be happy to take questions.
Thank you, ladies and gentlemen, its reminded to ask the question you would need to press Star then one on your telephone.
To withdraw your question press the pound cake again next I wanted to ask the question.
Our first question comes from the line of Rayna Kumar with Evercore. Your line is open.
Good morning, Thanks for taking my question.
Some really good detailed on recent transaction trends and the framework for revenue can you help us better understand the impact on all three segments on EBIT Tal for the second quarter.
Hi, can you restate that arena.
Yes, it could you help us that give us a framework on how to think of segment EBITDA for two Q and beyond.
Well I won't go out on the limb on beyond.
Who.
But on there I think that you should anticipate that the EBITDA numbers for the money for the ft business will be negative.
And they will remain positive for the Epay and money transfer segments.
Got it that's very helpful.
Yeah.
Can you quantify how many he can do you expect to winterized in the second quarter unexpected cost savings and just separately do you view.
You foresee any problems with your ATM supply chain through evolved our NCR.
Well so far okay. So we've got about 8500 that our quote winterized thats, what we used to call it but now they're cobot eyes.
Right now we will continue to bring probably more of those into that into the winterize kind of.
Position here shortly we have been a little bit hamstrung, because we can't even get people out to visit our eight the EMS to do the right Winterization. So in places like airports that are closed Theres no reason to keep an ATM. There you know and pay all the additional fees that you may do so we'll probably do more we don't have any.
Exact number our goal is probably another 1500 or so more.
But.
So thats kind of what were looking at we'll just have to see how the nice thing is a new probably started to read them. There's article after article coming out over the last say weaker so about the consternation of Europe trying to figure out how to open up their tourists trade because in many of these markets, particularly the southern Mediterranean market.
25% of those countries GDP, sometimes is all about tourism. So that you know the year the EU understands that for them not to go into total total Rick recession, they need to open up.
They need to open up the tourism. So we'll just kind of have to.
Wait and see with respect to supply chain on the ATM, we had a number of orders in I mean, where everything is going gang busters until end of February and so all those orders are kind of in process, we would imagine that there'll be some.
Short interruptions, maybe a month or so.
From Diebold and NCR, but we'll have to wait and see but for the time being you know, we don't really need those ATM and we're also making doing as we always have done we're doing a good job of calling the nonperformers. Those ATM is end up coming up for redeployment in the same kind of market. So.
I don't anticipate them.
Being.
That the supply chain will be that well interrupt we're looking for sites. So every day because that just what we do I think the other thing range to keep in mind again, the benefit of our technology is we can run any ATM in our network, we don't have to be.
We don't have to rely on one particular brand so again, a real benefit of the flexibility and the the value of our our technology. So we can make use of we could even pickup refurbished ATM, we can pick up different brand ATM. So we don't see that.
As being a gating factor for our continued growth and because every we actually don't use the software that comes with.
Most people's purchase debate the brands, we have our own native ATM software called.
Yes that I mentioned before that we coated back in the last recession that allows us to treat every one of our ATM does that theyre just an IP device.
Our networks so it makes everything hazy.
Hi, it's really good detail. It's also get to see that you renewed both year Walmart contracts Mastec Cross border.
What are the terms of the new contract that you have to take any on new pricing concessions.
Theres substantially similar.
We didn't do anything on the revenue side.
We will work together with Wal Mart on some promotional activity, but it's substantially similar.
Got it thank you.
Thank you. Our next question comes from the Mom is Andrew Jeffrey with Suntrust. Your line is open.
Hey, Mike and Rick Good morning, Thanks for.
Future confidence as usual, Mike I think you're absolutely right.
Question for you on on money transfer and in particular.
Clearly digital commerce of all kinds stands to gain from.
The pandemic and I just wonder if you could sort of frame for us how confident you are with Euronets digital money transfer footprint today I know the business still has a lot of sort of cash on the counter remittance are there things you could do to accelerate your digital share and and do you feel like you're far enough ahead of the curve.
To continue to grow as you said two to three times faster than the market as as measured by the the World Bank in the long run.
Yeah, I think we do I mean that the reason we havent, we've been growing two or three probably almost three times average faster than the market for Frank in the last 10 years running it also theres no reason, that's going to slowdown we have a value proposition that everybody likes we have the second biggest payout network in the world.
Which gives us the ability to do more with people and then we've got a better value proposition for both the customers on the agent. So yes, we can do that but when it comes the digital you might hear that we.
That we have.
That we're planning on launching our new App in 18, new markets and this quarter.
We've got like five coming out in the next few weeks and then.
Another 13 or something after that so one of the biggest challenges to having a large digital presence is being able to send money and local language and lots of different market and have an licenses to do so we've got all that now pretty much buttoned up so you'll see a bigger.
A bigger focus there and finally of all the money transfer companies in the World. We have connections to over 3 billion bank accounts around the world back when we are little we didnt have because the two big guys had exclusive arrangements, we couldn't get cash payout. So we went to country after country.
After country and connected into their it to their bank account scheme. So that we could at least payout to bank accounts because of that we've got the largest bank account payout network in the world with 3 billion account that we have access to so all that again goes back to this digital side. When you go digital did.
Digital a digital the bank accounts and are also doing lots of these connections now to wallets payouts and wallets, we announced that last quarter. So we're feeling pretty comfortable that we're going to be very strong growth in the digital side.
Okay. That's helpful color appreciate it and then if I could just ask one on the ran ecosystem.
Especially as it relates to the Rev payments cloud, but maybe just generally I guess do you worry about or think about the health of Neo banks. Some news. This morning about a pretty sharp decline in some UK Neo bank App downloads, and then sort abroad.
Specifically, but then broadly.
How's the pipeline is this a market where you can continue to sell and or for our AR is to selling cycle, just kind of frozen points.
Well you know what this might do.
As as fourth a lot of those folks to take a hard look at the additional.
Feature functionality that they have versus their competitors and being able to connect into the Rev. Payment cloud will give them an advantage over their competitors, yes, we've seen that slowdown a little bit, but we've got they all need to survive and what we can offer them as pretty darn. Good. So while we want to do is just continue.
To make them.
Successful.
Well.
We will.
We plan.
Yes, when you look at it the biggest guys out there are people, who our customers you know the big it it was it in a Neal bank, but.
No more as our very first customer to take advantage our Rev. Cloud, but then went to remit Lee we've got several other Neal banks that we're dealing with now you heard about the neo bag connection that we had in.
As I had GE bank in Spain, we've talked about that where they where they have 3 million account than they used in our ATM. So it's not just on the digital side, but on the physical side do because all those guys need to.
Provide physical access for their customers as well and as Mike said in his comments, we've had a lot of.
Discussion with people about real time payment networks. These are these are not Neil bank that started up it's a whole country. That's shifting over to a real time real settlement kind of a network. So so you have to again take a look at the at the completeness of the Renren platform, it's not targeted at.
Any one particular thing the beauty of it is the simplicity of the CPI connection process. The richness of the product in the features that's within it.
And at a time when the world is changing and changing to real time payment real time settlement structures, whether that's with a Neal bank or a fed if you will have bed central bank of any country and in fact, let me I'll have Kevin Kabat, Nike Ramsey pay also runs Asia.
Pacific and.
PC in a lot of of movement here because these.
These markets in Asia are being.
Feeling that they've got to them got to modernize and so they're they're really pushing this real time payments. Thanks, I'll, let Kevin describe what we're doing they're a little bit because this is really really exciting I really believe that our rep.
Ran and Rav.
Solutions can can almost be I won't say another leg of the still but could be a significant portion of our business in the years to comp.
Yes. So this is Kevin so one of the things it's evolving in Asia, that's probably the most interesting. This the development of all these various wallets.
And the biggest challenge that a wallet has is source of funds how to why if I'm a wallet how do I can back to myself to the source of funds of the consumers.
So interesting about these real time payment networks as they basically enabled through an AI connection the issuer of a wallet can tap into the the our GP or the real time payment network and basically get access to all the bank accounts in that particular country. So the art.
Pete networks is basically rocket fuel for the development of these wallets and these wallets are really interesting to euronet because of the full breadth and basket of products and services that we have and we can then offer the wallet not only connections.
These are two the RTP network of our country, but then we can facilitate putting ebay content into the wallet. We can white label the various money transfer services to the wallet. So the walk becomes a perfect ecosystem for Euronet to service.
Awesome appreciate it thanks.
Thank you next question comes from the line of Andrew Smith with Citi. Your line is open.
Hey, guys. Thanks for taking my questions hope everyone is doing well in this environment.
So obviously there is not a lot of clarity or visibility right now, but I think it's helpful to provide a framework, particularly heading.
Into the back half if we were to see current trends continue.
Particularly into the third quarter should we expect to be similar impacts to what you're outlining for the second quarter. Obviously DCC is a large component but just.
Anything on that front would be helpful. Thank you.
Well as again, we're not trying to provide a lot out guidance, but let's just think about how we kind of constructed the second quarter and as we said earlier, we've identified a rather substantial amount of cost savings that we're actively working at at doing but as you can appreciate you can't get all of those affected as.
Quickly as you would like and so not all of those kind of savings numbers have been baked into the second quarter number so as as you articulated in your in your scenario if if it doesn't change much now through the third quarter, what I would likely expect to see is that we could have some resilience.
On the cost side, because we will continue to implement those cost strategies and we'll start seeing a little better cash flow coming out of that again, assuming that the transaction levels would remain relatively constant with now as you as you set up that that question. If if we start on the other hand seeing where country.
Restart opening up where airports are open we're travel begins to resume and things like that it will start adding to it but we didnt try to out guess when that could happen in the second quarter. So hopefully we see upside from here, but again, we're trying to be careful about how far out on the limb we.
No I mean, just as a as just a data point, we have ATM than something like a 130 airports now and when they're close obviously the and those are those are very busy.
Those are very busy ATM locations, all they're not busy now.
Yep got it that's super helpful guys. Just on the expense savings front is it fair to think about that 100 million is the addressable pie or is there is there more to do there and then.
It sounds like the majority of the cost savings will start layering in this third quarter. Just some some comments I guess does magnitude the opportunity timing would be helpful for us pertains to cost savings.
Well, we've we've got already identified an anticipated in our second quarter about half of those numbers okay.
So we would anticipate to continue to gain momentum for more and when I say half of it if you think of that as being a number for the year you divide that by three and you look at what's in there we got about half of that third if you will in there.
And like I say, we would expect to to increase that number as we go into the third quarter.
Got it. Thank you for that and then in the last question you guys you to good job of articulating.
The fact that you've been very opportunistic during these types of cycles.
As it relates to the M&A pipeline.
Obviously, it's important to get better visibility before.
Making larger more larger moves could you talk about just the M&A pipeline as it stands today and then if you were to be opportunistic should we think about.
Targets being more.
Complimentary to existing segments or would you look to add sort of a different flavor in terms of growth in terms of just area to grow into.
So as we said on prior calls our focus usually as as try to do more with what we have where you know either tuck ins are ways that we could add a new product or a geography, where you can kind of get a one plus one equals three kind of game.
We have also complained on probably the last eight calls that the price that people think their companies are worth has been kind of crazy. So we havent done very many acquisitions you know.
Where we are used to doing two or three acquisitions. The year, we've done like one in the last two years you know so.
What we're hoping is that this co bid crisis get these.
These opportunities that we're looking at to be more reasonably priced and if so we're going to take a hard look at them and and if it if one plus one does give us three then we're going to have to figure out how would pay for them or in the past we might have done mostly everything what cash we are all about conserving our.
Balance sheet, and making sure we survive this baby because we're going to come out on the other Han and try to crashes many competitors as we can and we can't do that if we've got a week balance sheet. So we might see more stock based equity based payments for acquisitions, then cash payments, so thats kind of where our thinking is.
Always looking or also noted thing I mean, I'm getting breaking cold calls from people I talked to a year ago, two years ago, who had as land is prices and now they're calling to make sure I'm healthy what Mike you know with respect to covert well that's another way of saying they realize that their prices gone down and they're getting their burning cash.
Cash to our they're not making much money so they're looking for an acquirer.
Got it that's helpful. Thank you guys.
Thank you.
Our next question comes from the line of my Mayank Tandon with Needham Your line is open.
Thank you Ed good morning like.
This may compel consumers to maybe not use cash as much going forward I'm just wondering on your thought process as you get.
Forward in terms of beyond the crisis, how does that sort of play into your DFT expectations. Do you think DFT will that operate at a lower growth and profitability levels. Once we come out of this crisis, given the potential shift away from cash up by consumers.
You know I, here's what I've been saying for a long long time consumers are going to use more noncash than cash payments. When you look at the house.
But the big picture, the likely say when you when you're at traveler or Euro vacationer and you're in a foreign country, you're always going to want some cash in your pocket you're going to pay for most things what the card you know, whether that's the hotel or an expensive souvenir whatever but you always like to have some cash R.R.R.R. folk.
This is just give people make it very easy for them to have access to the cash they need while they're traveling.
So I don't see a lot of impact we might get some impact.
Particularly in the domestic markets like we've seen.
The transaction numbers in the UK go down just through the crisis, but when we pop out the other end I don't expect to see a lot and I think to add to mikes comments as we have seen.
Theres certain other people that aren't necessarily going to be as as survivable through this so.
As as some players maybe go off the map.
And as some of the banks as Mike said in his comments.
Our dialing is up having some discussion about.
Whether or not there's an opportunity we could.
Have a bigger role in there.
I am processing, so it might very well be that you could see some contraction in the pie, but we're getting a bigger and bigger slice of the pie. So more opportunity. There is still many more places out there to deploy tpms, we've already started picking up some.
Some good spots in which.
The competitors have failed in and so I think when it's done we'll end up with a bigger piece of the pie.
And I think audit.
We're at nine o'clock now though.
I think we're going to have to end this call, but I want to thank everybody for listening we've got a lot going on look forward at talking to you and about one quarter.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect everyone have a wonderful day.
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