Q2 2020 Euronet Worldwide Inc Earnings Call
Ladies and gentlemen, please standby. This is the operator today's conference is scheduled to begin momentarily until that time your lines will be again placed online music old. Thank you for your patience.
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Greetings and welcome to the Euronet worldwide second quarter 2020 earnings Conference call. All lines have been placed on mute to prevent any background noise and after the speaker's remarks, there will be a question and answer session. If you'd like to ask a question. During this session. Please press star followed by the number one.
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Now my pleasure to introduce you to your host Mr. Scott Clos.
General Counsel for Euronet worldwide. Thank you Mr. block you may begin.
Thank you good morning America welcome everyone to Euronet quarterly results conference call will present, our results for the second quarter 2020 on this call we have Mike Brown, our chairman and CEO, Rick Weller, our CFO and haven't happened Aktiv, the CEO of our easy pay 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 will be making today.
Statements made on his call that concern Euronets words management's intentions expectations or predictions of future performance are forward looking statements you weren't at the actual results may vary materially from those anticipated in such forward looking statements. As a result of a number of factors that are listed on the first page of our presentation.
You are in that does not intend to update these forward looking statements and undertakes no duty to any person to provide any pets update under any circumstances.
In addition, the Powerpoint presentation includes a reconciliation of non-GAAP financial measures will be using during the call. So they're most comparable GAAP measures.
Now I'll turn the call over to our CEO, Mike Brown Mike.
Thank you Scott and welcome everybody who are joining us today, we certainly hope that you are all healthy and safe.
Well well that 2020 Covenant 19 pandemic has continued to provide us with challenges in our results certainly reflects those challenges I am pleased that we were able to exceed the results we anticipated in April.
Hi, as I reflect on why this was possible I would start with the strength of our balance sheet.
Now with more than $1.2 billion in cash and no debt maturities for the next five years, we've been able to focus on opportunities as opposed to figuring out how to survive so rather than our employees worrying about whether the company would survive and whether they had a job or could pay.
Our bills are incredible employee base has been able to focus on business activity like providing world class service to our customers and being diligent about expense management, while also identifying and delivering new business opportunities in March and April our leadership team together with our board of directors.
Sided to retain our employee this was certainly the right decision. This commitment to our employees continues to be repaid as they have been working harder than ever not only to ensure that our business continues to operate efficiently, but to do whatever it takes to drive the business forward and ensure country.
Good growth in the future I have never been more proud to lead this organization and it is truly their dedication that has driven all of the successes that I get to tell you about today.
As we moved through the second quarter, we were pleasantly surprised that the transaction levels. We are seeing in the business in April when we provided you with our anticipation for the quarter, where about the low point of the covered Pam damage.
From that April snapshot, we have continued to see improving trends, particularly in epay and money transfer.
To provide a little more color on where the segment stand today I will hit a few highlights for each any at Ti to offset the significant transaction declines, particularly in our high value Cross border transaction that DFT theme has achieved in the second quarter near like 25 million in cost.
David.
The run rate of these cost savings should continue to benefit that third in the fourth quarters as well.
Moreover, we have identified additional quarterly cost savings of approximately $15 million.
As shelter in place orders were lifted we began to see domestic transactions on our ATM is ramp up in both Europe and Asia.
This trend appears to be continuing ended the third quarter with many European countries beginning to open their borders to other E U member States I.
I should also point out that in the event that we see greater transaction volumes than anticipated, we would need to roll back some of the cost savings I guess mentioned, but this would be a good thing that I truly hope happen.
And finally on cost savings, while ft led the way with nearly $25 million.
The total company achieved approximately $35 million as identified and it with additional ended and we have identified additional quarterly savings of approximately 15 million.
Some of these quarterly savings you can see that we are in line with what we showed you last quarter roughly a goal of $130 million in cost savings.
We have started to see a slight pickup in international transactions in Europe, and our Asian markets. The borders for international transient travelers remain largely close and on the outsourcing Brian as we have progressed to the global economic uncertainty we have found banks still interested in outsourcing.
Ends or even selling their ATM its state.
We will continue to evaluate these opportunities to help drive the business forward, we still expect and our managing the business anticipating a more significant recovery in 2021 as travel schedule to resume.
In April we mentioned that we're seeing good sales of self use prepaid content during the start of the pandemic.
Strength continued through the second quarter, we experienced strong sales in both physical stores and through digital means physical retailers, such as grocery pharmacy and convenient stores were deemed essential and so their doors remained open allowing customers to continue to purchase content.
In many markets are leading digital market position and expanding digital platforms enabled more online and in App sale.
Our technological leadership made it possible.
To have connections to more wallet in India, and Brazil, which drove App initiated mobile digital media transactions even higher.
In fact in Brazil, our mobile top up transactions in the digital channel grew more than 900% over the prior year and in India. We are now processing more than 5 million transactions that day through mobile wallet based on the current transaction trends, we're cautiously optimistic the growth trends any.
Pay will continue.
Finally in money transfer as shelter in place orders were lifted and unemployment rate started to relax transactions bounce back more quickly than we anticipate this is consistent with our experience that immigrant sending money home are very responsible and think of their family first when they received their pay.
Okay, well government stimulus programs has certainly helped to stabilize the money transfer volumes, we have seen signs of our smaller competitors struggling with liquidity issues during the pandemic, while our customers an agent have benefited from the strength of our balance sheet.
For some insight on how the business is performing around the world outside of the U.S. domestic business and Malaysia, where shelter in place orders resulted in a complete shutdown of our retail an agent network through most of May International outbound transfer it grew 8% in the second quarter.
North America.
North American originated outbound transactions grew 11% in the quarter accelerating to over 20% year over year growth in the month of June.
We also saw a strong rebound in Europe, and Africa business, which grew 5% over the same quarter last year, but finished the quarter with June growth over 25%.
Finally, digital transactions initiated through our website or a mobile app grew 98% in the second quarter accelerated to 120% year over year growth in June I should also point out that through the through July 26.
All of our regions and channels were performing better in July compared to the already strong June results that I just mentioned.
In fact in the USA and Canada, we're seeing a nearly 30% growth rate in July and a nearly 40% AD growth rate in Europe, and Africa, while Asia expanded 10%.
And our digital business improved throughout the month, reaching 145% growth aided by our expansion into new markets that I'll tell you about in a few minutes. So well I think some of this is kind of a catch up for the volume that wasn't sent in April and May I also think some of it is a more permanent pickup a business.
From smaller competitors and those who have exited all together.
Additionally, the industry draws the distinction for so called self service or some in the industry call them quote digital transactions, we don't quite believing that term.
These transactions referred to a transfer that is either initiated or terminated in the digital or physical channel with something other than cash. So a bank account, a wallet and ATM card or other noncash instrument using this definition Ria self service transactions now account for 24.
Or percent of Rias International outbound transaction total and 31% of its volume.
Finally for Xcede transactions were up mid mid single digits during the quarter, but the international payment volumes trailed last year as a result of the uncertainty from the pandemic combined with continued uncertainties related to Brexit.
Given these trends for the entire segment, we anticipate anticipate that we will produce year over year transaction growth in the third quarter and that approaches double digits, assuming no major changes in the global economy and no pervasive lockdown stemming from a second wave as a crown avanir.
In addition to managing our business, we've used our leading edge technology to implement new products for our customers to allow them to be responsive to their business needs during cove. It.
For example, we quickly implemented cardless cash out options that ATM to allow local consumers to collect the social benefits provided by their government.
We enabled the use of expired cards for bank partners.
When they were unable to reissue cards are delivered new cards to their customers are easypay team created especial employee card to allow to leading European grocers to reward associate that continued to work during the pandemic and in money transfer, we expanded our mobile app and online capabilities to reach 21.
Pedantry in Malaysia, we launched a hybrid channel solution to accept orders via the phone online for our safety Nap, where customers can pay by account at an ATM or a cash deposit machine when traditional retail agents were closed we were able to help our customers and these ways. Thanks to our flexible technology.
And our single Apiay connection capabilities.
As you can see while we continue to navigate the pandemic and our financial results are not what we hope to report for 2020, we continue to drive the business forward and we have been successful on many fronts over the next few slides I would like to hit on some of the pilot. So let's go to slide number six.
The strength of our balance sheet has really allowed us to leverage our other strengths our digital focus our flexible technology, our global footprint, our diversified product portfolio, our culture of growth and our people. It take advantage of the opportunities that will drive this business forward.
This quarter, we have provided highlights in categories to help you understand many of the ways that we have further the business.
Through expanded distribution of our existing product portfolio expansion of our product offering additional advancement of our leading edge technology platforms, Red and Rab answer cost saving measures across the business I'll start with our product expansion during the quarter in Italy, we added mobile top up voucher sales to.
Burnett own ATM network across the country, another cross divisional product offering.
We also enabled cardless payout for BNP Paribas customers in Poland and.
In Australia, we expanded our digital media content, including silver Netflix and spot of five with our new digital retail partner after pay.
In APEI some of our most significant product distribution expansion came through mobile wallet in India, we use our existing connections to the Google pay an Amazon pay wallet to launch numerous digital media products and in Brazil. We had two important developments first we established a direct connection to Sony to launch.
Hi station digital code and second we launched I food credit the largest food delivery AP services in the country.
And money transfer we expanded in further improved our physical network during the quarter, we launched 15, new correspondents in 11 countries. While also signing 12 additional correspondents for the future.
These additional correspondent drove a 13% year over year increase in our network, which now reaches 435000 locations and 159 countries.
Ria continues to build successful relationships with post offices around the world and as we've mentioned these institutions remain among the strongest channels for money transfers abroad.
And we have seen strong stable volumes through co bid with our recent launch of depots in Belgium. In addition to launching money transfer services, what the Austria post during the peak Lockdown in April our team also launched caught cash pickup service at over 3000 locations with post finance the new Crane.
And finally Ria signed agreements with the Indonesian post for therefore thousand locations as well as the Jordan post.
Let me pause here to talk a little bit about the significance of our expansion with post office.
Like with retail with large retail chains in the us.
Post offices have historically largely been served by our two largest competitors when euronet acquired Ria, We had 42000 global locations and we couldn't command the attention of our large retailers are international post offices.
We have spent more than 10 years investing in our global network and service and we have grown the network 10 fold to 435000 locations and offer safe secure well price transfers to our customers. These attributes combined with our ability to continue to grow our business across all money transfer channels with independent read.
Taylor's with large retailer in digital Ria has gotten the attention of these post offices.
They realized that a partnership with Rio represents growth for them improve commissions and affordable pricing desired by their customers and we are off certainly happy to serve them.
Also in the second quarter, we launched money transfer services at more than 19000 OXXO location.
Leading convenience store chain in Mexico, the big ones.
We also added two new cat pickup partners to our network in Vietnam.
Finally, our digital team responded to the sudden limitations that cobot lockdown placed on our customers in many markets. The team worked hard to launch our app in many new markets in Europe throughout the quarter, including France, Italy, Germany, the Nordics, Austria, the Netherlands, Belgium and others.
We now have mobile web or staging capabilities in 21 country.
We also increased our digital marketing investment in Q2 by nearly 100% compared to the prior year.
All of this drove a 90%.
Transaction growth rate, we told you about earlier, but it's also important to understand that our digital channel is profitable and we expect to produce meaningful results heading into 2021.
Let me remind you that our original timeframe to rollout. These countries was by the end of the year.
And our team has put forth extraordinary effort to launch them all six months early.
But we also have a long road map ahead of US that includes the launching the app and several more markets over the next 12 months launching new web product, improving our product analytic and adding many more features for our customers.
Slide please slide number seven.
We could and we continue to expand our product portfolio as I mentioned earlier, we're seeing more opportunities to outsource as an anchor look for ways to save cost amid economic downturn.
This quarter, we signed an agreement with Millennium Bank in Poland to drive the Euro Bank hundred 40, ATM that were acquired by with Millennium Bank. We also signed a new ATM driving and card management agreement with standard chartered Bank in Pakistan and a similar agreement.
Our or risk a bank in north Macedonia to drive their ATM.
During the quarter, our money transfer teams launch that service to enable deposits into bank accounts through hourly pay wallets. This partnership with World first recently acquired by hand financial allows any of the almost 1 billion users the valley pay to receive a transaction into their bank account do their wallet. We also launched.
Several real time account deposit services during the quarter, including real time deposit services to China, and Vietnam as well as deposit services coined dot ph a mobile wallet in the Philippines that has 5 million users account deposit represents about 25% of renewable.
Funnel outbound remittance volume of figure, we believe is likely the highest in the industry. Among the traditional money transfer providers last year, we processed about 65% of this volume on a real time basis, we see real time payments as a key differentiator for our account deposit product and its import.
And it's an important reason why our account deposit transactions have been growing at a 25% CAGR for the last 10 years.
It is worth repeating again that we can send money to more than 3.6 billion bank account in over 120 countries with strong mobile wallet coverage as well so while cash pickup probably represents 80% to 85% of the payout preference for remittance.
In the market today account deposited quick adoption and we believe we are the leading network to capture the growth for both remittances and payment.
In addition to expansion of our products and network in April we mentioned that we had a plan to achieve a 130 million in cost savings to preserve cash and to offset some of the financial impact of the shelter in place orders on the unemployment brought about by covered 90.
As I mentioned previously during the quarter that ft team achieved 25 million in cost savings well across all segments, we achieved approximately $35 million.
And assuming current trends, we expect to achieve another 15 million per quarter as we move to the rest of the year without any reduction.
Thanks.
Next slide please slide number eight.
As we've shared with you our technology is one of the leading factors driving our success.
During the quarter, we expanded our agreement with yes Bank limited at large private sector bank by providing license. The Indias first generation in real time payments system called I MPS.
Yes bank will be able to leverage the ran ecosystems modern architecture and open systems for processing high volume mission critical transaction.
We also launched mobile top up through Amazon pay mobile wallet as well as mobile top up direct to home top up and Google play.
Recharge credits. These services were quickly added for the for these leading wallets due to a single Apiay connection Amazon and Google had already with Euronets ran ecosystem.
Romanian we signed an agreement with the rise tie them bank for additional web services that will report that will support their rape a mobile wallet.
And in money transfer, we added United payments interface or you guide the world's most advanced real time payments system developed by the National payments Corporation of India to Tokenized and simplify real time account deposit India.
As you can see we have continued to focus on driving the business forward and we remain in a very strong financial position to navigate this darn pandemic with improving trends and paying money transfer with weekly year over year transaction growth for the first few weeks in July and continued cost reductions and careful expense.
Management actions, we're cautiously optimistic that based on the recent trends and current global.
Cobot 19 management mandate that our third quarter EBITDA will be in the range of $50 million to $75 million and will produce approximately $10 million to $30 million and free cash flow.
This coven 19 pandemic has caused a global economic disaster, let's not forget it has negatively affected euronet in many ways, but it at all it has also hasten our digital expansion and offered us new or expanded opportunities in all three segments.
It has had a significant impact on our 2020 financial results, but the strength of our balance sheet, the diversity of our products and geographies, our flexible technology and our exceptional employee base have allowed us to continue to drive this business forward and I am confident will emerge a stronger more flexible company.
With that I will hand, it over to Rick.
Good morning, Thank you, Mike and thank you all for joining us here today.
As we did last quarter I will begin my comments with the balance sheet on slide 10.
As it provides the best picture of Euronets financial strength, and stability, which fuels our confidence in the long term growth prospects for the business.
The success as Mike mentioned during his comments have much to do with the strength of our balance sheet, we did not need to worry about survival, but rather manage through the implications of covert 19 and focus on what we can do to capitalize on the opportunities that present themselves.
We finished the quarter with 865 million in cash.
This increase from March 30, Onest was largely a shift of cash from ATM, we temporarily closed due to cope with pandemic matters together with approximately $4 million in cash generated from operations.
Well this amount of cash should be more than sufficient to see us through the pandemic. We also have about $410 million of cash still in our ATM that we could redeploy should we need to use it for operational purposes, given us more than $1.2 billion in cash to fund operations.
No significant debt service obligations for nearly five years. In addition, we have approximately 950 million of availability under our revolving credit facility.
Our total indebtedness was about 1.1 billion at the end of June largely unchanged from Mark.
Next slide please I'm on slide 11.
For the quarter, we reported revenue of 528 million, an operating loss of 101 million adjusted operating income of 3.3 million and adjusted EBITDA of $37 million.
As you May have read in our press release operating income includes a 104.6 million noncash goodwill impairment charge related to three of our business unit.
In the money transfer segment 82.7 million was recorded for Xcede as a result of declines in the international payments business stemming from economic uncertainty that started with Brexit and then exacerbated by cobot 19 uncertainties.
Additionally, in the ERP segment, we recorded a charge of 14 million for Inova as a result of the cobot 19 influenced decline in VAT refund activity directly related to the decline in international tourism in the EU.
And a charge of 7.9 million for pure commerce.
Again as a result of the Cobot 19 influenced decline in international Tourism in Asia Pacific. These charges are excluded from adjusted operating income adjusted EBITDA and adjusted EPS to facilitate comparisons to the prior years.
We delivered adjusted EPS of four cents, a share a 98% decline versus the prior year as a result of the transaction declined stemming from covert 19 next slide please.
Im on slide 12 now.
FC transactions declined 10% driven by fewer transactions in Europe, and Asia, including high value Cross border transactions related to cope with 19 pandemic, driven governmentally imposed cross border closures and shelter in place orders E.
Hey transactions grew 59% from increases in Europe in Brazil, as well is very strong contributions from India, which included a large volume of low value in App mobile top up transaction.
Money transfer transactions declined 11% strong growth in us international outbound trend that transfers and remittances in most of our international markets were offset by declines in U.S domestic transfers and transfers originated out of Malaysia.
Which as Mike mentioned in force strict and long lasting shelter in place orders that resulted in our stores and agents being closed through the better part of May.
These shelter in place orders also spanned through the majority of the Ramadan season. So we did not realize the same increases in transfers. During this period that we would have experienced in the plant in the past.
As Mike mentioned, the beginning of the second quarter seemed to be the low point in transactions, particularly in Epay and money transfer.
As the second quarter ended Epay transactions continued to trend higher posting year over year weekly improvements with strong expansion of online digital distribution media products and continued strong physical retail sales. Moreover.
Money transfer transactions were trending better in July versus June in all regions and channels posting promising weekly year over year results with some sectors posting strong double digit growth rates as a result of employment starting to rebound.
And slightly and opening of merely all of the agents and read aloud retail locations. Following the relaxation of governmental restrictions.
Finally ft transactions were trending slightly better, but will likely remain depressed throughout twentytwenty due to the slow openings.
International and cross border travelers across the globe.
Let's go to slide 13 please.
Here on this slide we present, our earnings 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 presented our results adjusted for currency.
On the next slide.
Im on slide 14 now.
For the second quarter Ft revenue declined 65% adjusted operating income declined to 148% and adjusted EBITDA declined to 116% driven by the cobot 19 induced impact of lower ATM transactions in Europe and Asia.
Especially high value cross border transactions across Europe.
Partially offset by nearly $25 million in cost savings achieved during the quarter as a part of the company's hundred 30 million dollar cost savings initiative for Twentytwenty.
Epay revenue grew 5% operating income grew 7% and adjusted EBITDA grew 6% driven by continued strength in sales of digital media content.
While constant currency revenue revenues grew year over year. The E paid segment to experienced the impacts of customer movement restrictions. While other markets were positively impacted we where we have a higher mix of digital distribution for a higher concentration to re.
Retailers.
The.
Where the demand.
That were deemed essential and remained open during the pandemic.
Money transfer revenue adjusted operating income and adjusted EBITDA declined declines were the result of transaction declined stemming from government ordered business closures and shelter in place orders required to manage the coated 19 pandemic.
Operating income and adjusted EBITDA were further impacted by SGN, a investments made throughout 2019 to support future growth, which was unfortunately blunted by the impacts of covert 19 pandemic.
In wrapping up it is clear that the coven 19 pandemic has had a profound impact on our business results, particularly in the segment, which we expect to continue into the third quarter.
As Mike said.
We will refrain from giving official guidance, because timing of a treatment or vaccine and the timing and extent of governmental restrictions together with the related economic recovery are still very uncertain.
However, we do believe that it is important to give you a couple of data points to help frame expectations.
We would expect third quarter consolidated revenues to approach 80% of the prior year.
He pay an F T revenue growth rates similar to those in the second quarter.
The recovery of transactions in the money transfer segment. It is possible to see money transfer revenue approaching double digit growth year over year over the prior year.
From these results together with significant.
Cost savings and careful expense management actions.
We expect the third quarter EBITDA to be in the 50 to 70 million dollar range and the company will generate free cash flows in the range of $10 million to $30 million.
In closing.
Mikes earlier comments are worth repeating we're very fortunate to have a strong balance sheet.
Diverse geographic and product revenue mix flexible technology.
And dedicated and talented employees.
That are not only allowing us to make it through this pandemic, but are allowing us to continue to drive our business forward. Despite the pandemic.
This gives us confidence that the long term growth prospects for the business are still very much impact and perhaps even stronger.
With that I'll turn it back over to Mike for any final comment.
Thank you Rick.
Well, that's covered 19 pandemic as hurt this year's financial results, particularly in the travel portion of Vfds ATM state.
But our economic model has always been and still is valid people will go on vacation.
Let's not forget that easypay that the pay segment posted year over year growth in the second quarter. Despite all this mess and we anticipate that both the paying money transfer or well post year over year growth in the third quarter as well.
So the only business that has not returned to growth is due to the continued travel restrictions and we're confident that as soon as there is a treatment and our vaccine that the two will recover.
Fundamentally our business is doing quite well and we continue to take advantage of opportunities that will drive future growth once the travel cycles returned to normal.
As we did in the financial crisis of 2008, nine we are using our assets not just to survive but to expand many of you have followed us for a long time, you know it's to be financially conservative, but also major investors and our own technology in our market expansion in good times and bad.
We still have more than $1.2 billion in cash, which has both comforted our current customers and impressed feature customers.
Our colleagues are busy as ever with a full intention of delivering stellar results in the future.
Thank you all four year continued interest in support of Euronet.
And now we will be happy to take question operators will you. Please assist.
And as a reminder, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad and our first question comes from the line of Rayna Kumar with Evercore go ahead. Please your line is open.
Good morning, Macon, Rick Thanks for taking my question.
It looks like you're starting to see some strong growth in money transfer and if you can discuss what regions, where you're seeing this trend then how much of it is coming through your digital channel versus your cash the cash agent locations.
Well, let's not forget most all family remittances in the world.
By far the largest portion are always going to come through cash because that's how many of these immigrants live they come from cash based economies will even when they get to a non cash more modern economy, they tend to budget that way.
You saw our digital transactions. This is a bad quarter, but our digital transactions were kind of through the rough you know we ended with 98% growth and digital transaction and we were and we were growing even faster in July. So that's that's going to be a larger and larger piece of what we do you have.
Why why are we winning I think at the end of the day, we now have a world class network. We've got the second biggest physical network in the World. We've got more bank accounts that were connected to for digital payouts than anybody.
And so we've got a really good value prop for that for that immigrant we no matter where he comes from we can send money back to his family and they can conveniently pick it up either at through their bank account through their wallet or in in physical location and our pricing is better and let's not forget to we share more of.
Economic model with our agents and all these agents or heard and right now right there they're retailers they do kind of money transfer on the side and so because we give these agents a better camino a larger cut of the proceeds of the customer feet agents have it tendency to follow the money and so we pick up.
Our agents and therefore those agents then recommend us to their customers. So it's the same reason that money transfer has grown three times to four times faster than the World Bank numbers for the last dozen years is the same reason that we grew now in fact when it when these agents or heard it tends to make us grow even for.
Yes, so thats the reason good value prop.
For all parties.
Great Thats very helpful.
Moving on to your SP business on your first quarter earnings you gave us a very interesting framework to think of the PSP business. In 2021, you mentioned that you would expect that tourism level to return to 80% to 85% at the level that was in 2019 and I'm wondering now that we've been through April.
The west of the pandemic.
We still do you still think of that is a good framework for thinking of your ft business in 2021.
You know Rana all we can test kit at mean, you kind of know what we know.
We read all these disease. These magazines, we see the airline travel both gains and so forth.
We know next year's got to be better than this year kind of no matter what.
Still was saying that has its interesting in Europe, where we basically have all these high value transactions the very first.
The countries that we saw a real pickup in international cross border transactions, where countries, where you could drive too. So people didnt have to make a reservation in advance that could just hop in the car with their family and go on vacation to Croatia or wherever they are going right.
And.
So as airplanes.
Become.
More use them, we're going to see more of a we're going to see an even bigger pick up right now I think I think the original.
Surveys, whereas said 50% of of everybody who are who are survey data like 2000 people said that you just unlocked me and I'll be on the kind of the Nexplanar. The next card to vacation within two months and that I think is pretty much starting to show itself.
But we've got another 35% as they might wait for the six month in the last 15% those they might wait over a year. So we've got to kind of see we don't have any new data to make us any more or less profitable comp comfortable but but this whole cobot thing is finite we're going to get Pip is going to go through the human population.
In one way or the other either through herd immunity or through vaccines and when that happens our economic model continues to shine.
Got it in your you paint business, you've now had double digit transaction growth for several quarters and you've been very innovative, especially with products like Ren and just wondering is that double digit transaction growth.
The new norm in that business and.
How should we think of normalized revenue growth.
I'm going to let that Kevin who's in charge of that answer the question.
So obviously, we're very encouraged by the transaction growth a lot of the transaction growth as we reported in the earnings call is coming from India, and Brazil, where we have a really strong digital presence.
We're finding that consumers that by digital media content through digital means tend to be a bit more sticky with us on an ongoing basis. The million dollar question is what happens to consumer behavior post.
Post pandemic to do they spend as much as they are today.
We've seen that that even if that drops we are picking up a lot of new customers.
Netflix as reported significant gains and and new users Google plays picking up a lot of new users. So the mix between sticky channels like digital.
New users and increased spend.
However, makes us optimistic that the growth rates the transaction growth rates will remain will remain high.
Great and just final question.
For me just any update on your capital allocation priorities any thoughts on share repurchase and acquisitions in this environment.
I don't think it would be very responsible to do.
Share buybacks at this point in time, none of its for sure now when and how long that pandemic is going to laugh and that's a very kind of tactical response to low stock prices I think things that we are keeping our eyes that we do have a big war chest, we're keeping our eyes out for more strategic acquisitions.
That will be kind of the gift that keeps on giving growing well afterward, so we're keeping our eye out for that don't expect share purchases.
In the short term for sure.
Thank you ran just on acquisition strategy.
Same thing were always looking and if we can find good acquisitions that will continue to grow a bike and with their assets on our assets I can get a one plus one equals three those are the kinds of things I'm looking for.
Yes, we're always looking I mean, I, we looked at three this week and Unfortunately, we pitched all three but we're always looking.
Got it thank you.
Your next question comes from the line those kinds of Chomsky with Autonomous Research go ahead. Please your line is open.
Hi, guys. Thanks, Thanks for taking my question.
I just want to focus in on SP, a little bit looks like you have almost 8000 ends temporarily shut down due to co bid. So I'm just curious what is it going to take that turned those back on are you looking for certain transaction level.
Well in years or here's an interesting a little interesting.
You are just looking at the actual numbers so so at.
At the end of last.
We plan, we got we were at about 8500 closed down when we talk to you. The last time, we actually got the 10700.
Close down kind of extended winterization than we were back down into the 8000. So we have begun to open them up we're opening them up kind of commensurate with travelers. So we save about 400 Bucks a month per ATM to keep on close but you don't want to say that 400, if that ATM can make.
610 in revenues that much so thats kind of where of where we're just being careful as more.
Travelers go to these locations you see that we've we kind of started opening them up kind of a north to south because it was the driving locations where the first ones that people went to those are the ones that we started open first and we're just going to open them as we see possibility to make more money and more.
Specifically, our our teams have schedules in local knowledge of what kind of.
Of travel restrictions border closures.
Shelter in place.
Orders are in place and so they monitor those and then as they start seeing those lift then we start lighten up an ATM because we know that once people are allowed to move about then they're going to start going about their their daily business, which includes access the ATM Sun. We can we can see from.
From the data that are transaction start to move north.
Almost immediately upon the announcement of a.
Movement restriction being uphold.
Thank you that makes sense and then and then just on money transfer the volume.
Gross had a nice rebound there in June and it looks like it continued into July and so I guess I'm curious how much do you think stimulus packages are helping the volumes in business and I guess period.
As you think about you gave the figures for Threeq, but how do you think about the sustainability of that transaction growth I guess over the next phase two to three quarters.
Well.
Yes, I think as we mentioned the and the script I think the the government.
Kind of little bailout packages of $600 or whatever a month and so forth have helped stabilize that certainly, but what we've seen too as our as has a number of our competitors are closing down.
There have been liquidity issues.
As I mentioned, a lot of the volume, but let's not forget of the $700 billion that has set and family remittances 65, 70% of that is done with small independent okay that where the king of that channel and these agents are small little shocked the do money transfer on the side they need to make money.
We help them make more money than our competitors do we go to more countries than our competitors do so.
You know I think a lot of this stuff is going to stick.
And we're also seeing I was also told by out one of our guys then.
Yeah over in Europe that because they're there it's always the and amount of money transfers family remittances sent to the Hawala channel, which is the informal I'll send it with my cousin or a friend of my cousin back home and with all the airplanes shut down around the world of Hawala has been shutdown and so.
People lot of these emigrants when they first come to town. They use their bodies and then now they are forced to use more formal methods and guess, what we get that money there instantly and at a very good cost and so I think we're going to end up a lot more trent transactions lot more customers. When this is all done.
Yes, just as it does this money transfer thing is nothing but good news.
Yes, the volume volume growth as impressive. So there is it's almost unbelievable through through all the chance I mean, we just keep looking at those numbers everyday and saying Wow.
I guess on that point as the money transfer business shift to digital how do you expect that to impact the revenue per transaction because it was quite strong this quarter and maybe you had some benefit from from higher principle.
Sense.
What would you say that the shift to digital as a net positive or negative at all because presumably there's theres more price transparency, there's lower switching cost there's there's more efficient distribution on the digital side.
Well don't forget if we're able to acquire that transaction ourselves digitally okay.
So a lot less than me paying an agent half of the agency. So you tend to start out with more but then the digital channel requires more direct amount of marketing so I could offset some of that but at the end of the day kind of it turns out to be a battle wash, maybe slightly better than the physical Jim.
Makes sense, thanks, a lot.
Yes.
Our next question comes from the line of Peter Heckmann from D.A. Davidson go ahead. Please your line is open.
Great. Thank you.
Can you talk about some of the mix shift we've seen within the pay division.
Historically, very very heavily reliant on self use but.
Some growth there in gift card how much.
I think that affects the seasonality.
In the fourth quarter chain.
Yes, Peter this is Kevin the mix is pretty much the same.
Gaming.
Streaming.
In App purchases.
Probably the shift from that we've seen is more in retail more purchase in convenience and pharmacy and grocery that remained open because they were essential during the pandemic and a huge growth rate in online and.
Wallets and online banking, so where we were really strong there's certain markets, where were particularly strong and digital channels, namely, India and Brazil, we saw really really large.
Growth in our digital channels, but even in our more traditional channels like Germany or Europe. We also saw double and triple our growth rates in our in our digital channels.
I would add to what Kevin said is that it's not just a fluke you end up there because we over the years as you know we've had added more and more names to our digital platform and so then when you have somebody like a wallet or whatever that's in a business in a market they need things to go into their wallet.
And we've got those kind of products that go in there nicely and then what's you know another element of our businesses. We've got a great technical platform that allows us to have a single AI connection in there. So not only one do we have a great platform of products. We've got a great technical platform to deliver so we're really.
So Brian I think starting to see a bit of the a bit of the momentum pick up here, where it's the intersection of three things and that's the the products we have the geography to geography as we serve in the technical platform that we can deliver improved.
Yes, Rick reflects a good pouring a lot of hundreds of channels. We had we were only doing mobile top up but we had a connection with the wallet and when covert hit they want to do produce more entertainment content and we were able to add it quickly because of the technology platform that we have.
Got it got it and with some of those in App purchases are those are you still acting as a principal on that transaction and recording it grows.
Yes.
Yes.
Same thing.
Thats that that's really accounting.
You got to do it.
Transaction, our fiscal transaction from an accounting standpoint, Peter is the same.
Got it got it and then just one last follow up with with this mix shift a bit in money transfer to digital I would've expected a little bit more pressure on revenue per click.
But I assume that was that mix shift to digital was offset by the lower domestic is that about right yes.
Got it you got to be alright. Thank you.
Our next question comes from the line of Andrew Schmidt City go ahead. Please your line is open.
Hey, guys. Thanks for taking my questions.
On your processing. Thanks for the comments about the beginning of quarter trends bring to comment on what you've seen over the last several weeks and then just a tab onto that.
As you see travel pickup to certain places has there been any difference in terms of conversion, leaving.
For for a certain number of people walking by an ATM People's willingness to go stopped by use that ATM, just kind of a read through to cash usage and comfort levels there.
Okay. So in answer to your second question, we really haven't seen any any change there are people that this was a really interesting question a lot of people said our people going to after being forced to go more digital are they going to stop using cash and we heard a lot of those rumors the reality is.
That has not borne out at all I mean, we in fact in that several of our market in Europe. Our domestic transactions now are higher than they were before covance and that's again there is something big overarching things that are occurring we have very convenient location. There are open.
All the time that you don't have to go into a branch to do it we see banks continually under financial pressures.
To justify and rationalize their cost structures are doing this by closing branches and therefore closing ATM. So what you end up with is kind of a guide walking down the street needs to get some cash you know you might see our our our ATM on this corner and another banks on the next quarter, but the other bank might be closed so he is.
As as arts and what the only other thing that we have seen.
Is that the amount that they take out is a little larger.
And it's also was kind of interesting to see that that experience that we witnessed was not a lot different than a.
Research report that I read out of Canada, where you're seeing that more people are using cash for transactions.
Not only more frequently but in larger amounts in Canada, and I think what that really speaks to is that people take great confidence in cash.
And they operate that way they run their lives that way if they're temporarily shut down they may have to shift to another means but their natural inclination is to operate with cash and so we saw that that that as soon as the restrictions are lifted as soon as the shelter in place restriction.
And people start going about their business they start coming back into taking the cash and an operating the way they did before and then some and let's not forget to some of our markets like India. As an example is still a cash based market and so we saw our Brownlow label ATM is that they had a really tough filter and play.
Yes restrictions, so nobody could even get out to get to anybody's ATM there for a while but now that those are starting to lift, forcing people to come right back to the EMS to do.
You know to go shopping like they always have.
Yes, I think operator, we've got time for one more question.
And it looks like our final question comes from the line of Andrew dress Jeffrey with Suntrust. Go ahead. Please your line is open.
Hi, Good morning, Thanks for squeezing me in.
I am looking your DFT business, Mike and when I look at revenue per transaction this quarter it looks like it's.
Stands to reason.
Actually all local business and you've taken a lot of cost that I, just wonder given the uncertainty.
Around Covidien return of tourism just theoretically.
Looking forward can this be a profitable business on materially local.
Volume if it comes to that and could you shift to more of an outsourcing strategy recognizing that the DCC part of the business is still critical available.
So this so and answer that first of all we love outsourcing, we're always going to look for outsourcing deals because those babies are profitable everyday of the weekend and the bank pay US every single month. Okay. So that's always a primary thing that we're looking at but that is an interesting question and we've actually had.
Those discussions over the last month, because we see our domestic transaction the growing in several of these markets that were wondering you know there might be we have a few markets right now that are primarily all domestic and that would be India, Poland and a couple of others. We get we're seeing opportunities there too but at the end of the day people.
Are going to go on vacation you know that this thing is limited and so those higher value transactions, where you might make four or five bucks the pop as opposed to 16 cents in India.
We're still going to go after the end of the day I think we've got a good we've got a good value prop every which way and while it was the number of years ago. When DCC was introduced in which really gave us that extra value on international transaction, we had a very profitable business without it but to your question can this.
To be profitable absolutely. It just you might change your focus to be more you know as Mike said domestically focused if you were to see that there was some kind of longer term trends, but I don't believe that we're going to see a longer term trend because people will go back to travel.
I think the real question lies in what ultimately happens with treatments and backs the vaccines and things like that and as those kind of measures are brought to the table.
As the study show people will again start.
Vacationing, making trips and things like that so we're not worried that it will go away, but as kind of fundamental to your question if something like that were to happen gosh, we make great money on domestic ATM is on outsourcing mgms. It's just a matter of where we're focused at.
Okay. That's helpful and just as a quick follow up.
Any updates on your thinking on the you assuming a lot of the trends you are describing.
Canada for example, and local transactions in Europe would seem to describe the U.S. too and it's a market where there may be some opportunity.
What we're always looking you know we made the the investment and and Dolphin debit and we think the US is ripe for some great outsourcing deals because the quality of outsourcing eight dan's in the U.S. is pretty darn pathetic and we've got.
Super set of features and functionality that we can do at these ATM. So we're going after that aggressively and the dolphin team has come into the Euronet group very nicely. They they've really been been bringing forward some exciting opportunities and and continuing right in line with taken advantage of the opportunities that we anticipated in the.
In the U.S. So so we're we're pleased with seeing are really are in three in the United States and and look forward to more more good production there right and there are probably got the opportunities. We didnt mentioned it anywhere on the that on the call. So let's not forget the whole rest of the world is still.
Bill are always start here for doing international transactions as travel continues.
Just in one South Asian country right now the the numbers on those ATM czars, our astounding wonderful.
We've got to go to more of the South Asian countries, We've got to get to South America, I mean, I look at it and I think theres doubled it triple our potential traveler.
Revenues.
Across the rest of the world over the next several years so.
And with that I want to thank everybody for taking your time with us today and thank you for your ongoing support.
This does conclude today's conference call you may now disconnect.
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