Q3 2020 Euronet Worldwide Inc Earnings Call
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Greetings and welcome to the Euro net worldwide third quarter 2020 earnings conference call at.
At this time all participants are in a listen only mode. After.
After the speaker's presentation, there will be a question and answer session.
Yes. Good question during the session you will need to press star one on your telephone if you require any further assistance. Please let's start there.
It is now my pleasure to introduce your host Mr., Scott Wilson General Counsel for your own it worldwide. Thank you Mr. Clossin you may begin.
Thank you.
Good morning, and welcome everyone to the Euronets quarterly results conference call, we'll present, our results for the third quarter 2020 on this call.
Mike Brown, our chairman and CEO, Rick Weller, our CFO and seven cap and Nike are the CEO of R&D 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, we'll make today.
Statements made on this call that concern Euronets sports management's intentions expectations or predictions of future performance are forward looking statements.
During its 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.
Youre not does not intend to update these forward looking statements and undertakes no duty to any person to provide such update 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.
Now I will turn the call over to our CEO, Mike Brown Mike.
Hi, Thank you Scott and good morning, and thank you all for joining us today.
I'm excited to be able to tell you that we considerably exceeded earnings expectations that we had set in July as a result of that.
Well did it year over year growth and are you paying money transfer segment.
Together with better than expected ATM transactions as we benefited from a much quicker return to travel than we had initially anticipated.
As you will see as we go through the quarterly highlight these results are a testament to our diverse product and geographic revenue mix.
Flexible and scalable technology, our strong balance sheet, and our dedicated and talented employee base, who are working harder than ever to drive the business forward.
There's no better example of this in our announcement yesterday that Ria is now kroger's second money transfer provider.
Any of T., we benefited from stronger than expected resiliency, an ATM cash withdrawals at least on local and international government eat their movement restrictions in countries opened their borders to some international arrivals.
And they pay we continued to see strong sales of prepaid self use content in both physical retail and digital channels as well as mobile increases in digital channels in certain markets.
In fact, our digital channel transactions grew at triple digit rates on a year over year basis.
Finally in money transfer we continued to deliver strong growth rates as a result of very strong 22% growth in U.S. international outbound remittances.
Well its 26% increase in international Cross border remittances, partially offset by declines in the U.S. domestic business and in Malaysia did.
Digital transactions initiated through our web site for our mobile App also continues to accelerate delivering an exceptional hundreds and 26% year over year growth in the third quarter.
I am extremely proud of the strong double digit earnings growth in two of our segments and the flexibility of our E. M. P team to enable ATM is on short notice to take advantage of the changing travel trends, which resulted in significantly better results that win and then we expect it.
All of which was made possible by our strong balance sheet now, let's move on to slide number six and I'll give you. Some additional details on how we achieved this remarkable performance in the quarter.
Slide six so we've got four graphs here for US a look through because over half of it you're in F. 2019 profit came from our E. S. P Division and a little over half of those profit came from travelers we get questions about the recovery of this segment.
Here on this slide if we want to give you a perspective of how responsive our ATM transactions are to the lifting of restrictions by focusing on what we have seen on our own branded ATM networks across Europe.
To that end the three most relevant questions are number one after COVID-19 will people return to using cash in their daily lives, both while traveling and when at home number two how fast do you think you have t. will return to transaction then cash levels, we saw in 2009.
I see.
And finally number three are there any lessons that we can learn from 2020 that can be extrapolated to 2021 and beyond.
So first I will try to answer the question on domestic transaction search.
Certainly in March through May we saw virtually every country in Europe establish very tight domestic locked down.
Bars of restaurant businesses and offices were closed and even leaving one calmer apartment could be met with police question.
As you can see in the first graph graph number one.
Even without a cure for COVID-19, we thought domestic transactions come back very quickly once the shelter in place restrictions were lifted this.
This did vary by country, ranging from 85% to 95% of last year's transactions. This is a substantial recovery considering that virtually every country still has some coping restrictions in place, including limited restaurants seating reduce bar hours mandated work from home orders.
Yeah, and no long term care or vaccine.
I would also like to point out that for one country, which we did not include in the graph statistic.
We saw incredible growth in domestic transactions, where we had a 43%.
<unk> growth over the prior year, because the banks close their branches or didnt load their ATM. So while we don't expect all branch bank branches.
To close our all bank ATM could be left idle without cat we continued.
To see opportunity to meet the cash needs of customers.
To answer the rest of the question, let me remind you of the timetable associated with various cross border changes.
Through April may and even into June virtually all European countries had closed their borders to all other countries around the world. So.
Surprisingly on June 15th that you agreed on opening their borders to one another beginning July one.
These borders work to remain close to all non E U travelers and are still up.
Urinate gets about a quarter of that European traveler transactions from folks visiting from outside the U.S. So.
So even in the best of situation.
We did not expect to achieve in this third quarter, even roughly three quarters of 2000 Nineteens volume accord.
Accordingly that part of our transactions will be dependent upon borders being fully open.
What we found was that with such short notice periods vacationers, who are more apt to travel by car to their holiday destination and as you can see in the graph number two beginning on July one there was a steady increase in transactions through August resulting in about 50%.
That of 2009 teams transaction.
At September came up on Europe, more covert related restrictions were added and that number fell to about 30% of 2019 level.
Being that three quarters of all 2019, euronet own ATM a Europe.
European transactions, where from a card holders within Oh three quarter within Europe. This shows amazing resilience.
Hearing grab number three we see countries in which air travel brings in most of the turret bearing in mind, the blind required advanced reservations more preparation and travels a surety as well accordingly, we were pleasantly surprised to see these levels reached about 20% of 2000.
On a 19 volumes finally.
Finally in graph number four you can see the international transactions index with European International flight on.
On a real time basis, you can see that our international transactions outpaced, but roughly correlate to flight information. This serves as another data point that demonstrate the desired travelers have to withdraw cash and used cash when they travel abroad.
So what is our conclusion. Unfortunately I can tell you that none of us know exactly what 2021 will bring but what is empirically clear is that people in large numbers are ready to go on holiday even right now if the government only would lift their travel restrictions and open their borders.
Both our European and for foreign passports.
It is also a method to government on how much thoughtful planning is essential to ensure a full recovery.
The economic disadvantage to Europe is huge so we are cautiously optimistic that in 2021, it could be a good year for DFT, assuming government heed. This past summer as a guide to opening their borders for those who are anxious to go on holiday.
Now, let's go on to slide number seven and we'll discuss some of the recent CFP highlights.
Okay Slide number seven just this week, we launched a new I.D. network in Egypt, the fourth country outside of Europe, where we have deployed euronet branded ATM.
Prior to co bid when asked if we were able to continue to deploy 4000, plus ATM the year I always answer yes, with the belief that the opportunity outside of Europe is just as big or bigger than the opportunities in Europe. We maintain this belief and have not stopped pushing forward to be ready for the post.
Over the world with new ATM in new markets.
In Europe, we launched a new initiative that we're calling ATM for the community, which aligns with our mission to bring payment convenience to everyone.
Despite the reports the cashier, becoming extinct it is estimated that cash still accounts for 60% of the transactions used across Europe with this initiative. We are working with leaders in communities across several countries primarily in more rural areas to ensure that their citizens have convenient secure act.
The cash as these communities have been impacted.
The most by Europeans continuing trend a bank branch and ATM closures.
We also launched the managed services agreement with IDFC first bank, a leading private sector bank in India, and we used our technology to launch digital banking services for AI and GE bank in the Philippines.
In Spain, we signed an ATM network participation agreement.
With calmer bank whereby to Hammer bank customers can now use euronet branded ATM is under similar terms as their own banks ATM.
These agreements reflect the value of our ubiquitous ATM network, which allows customers to access their money wherever they are this is also a strategic advantage for euronet as we are the only player in the market with ATM across all of Europe. We also launched acceptance of postcard on a hearing that branded ATM networks in Denmark.
Sweden, Switzerland, Romania in the UK, and we launched ATM, Pos and card management outsourcing for Abby I'd Bank in Albania. Finally, we ended the quarter with 43956 active ATM.
The sequential increase in.
Includes a reactivation of 3800 18 Oems that were closed at the end of June to capture the increase in ATM transactions as movement restrictions were lifted and 444, new ATM deployment work across the business. These were offset by the removal of about 1300 out.
Sourcing ATM and 563 low margin ATM, which were removed due to the acquisitions by larger banks and the desire to Insource ATM operations, it's important to note.
That this insourcing as due to M&A activity and doesn't diminish the outsourcing pipeline, we continue to see within the segment.
We also expect a decrease of another 2000 very low margin Indian ATM in the fourth quarter.
Net income of which to us is marginal insight.
In summary, there is no doubt that Covance has had a profound impact on our ft segment results, but the resiliency of our ATM transactions as restrictions were lifted together with our ability to continue to launch new markets diversify our product portfolio and signed new agreements underscore the health of our core EPS.
The business and that the post cobot growth prospects for this segment remain intact now we'll move on to slide number eight and we'll talk about FX.
It's worth repeating that I'm thrilled to be paid double digit earnings growth in the quarter driven by continued growth trends in digital media content and expansion of mobile content in certain markets.
This growth came from continued strength in our physical retail network as well as triple digit transaction growth in the digital channel, which resulted from our ability to deliver both mobile and digital media products to a growing list of mobile wallets and ecommerce site due to our industry leading technology our.
Transactions through mobile wallets continues to grow at had very strong triple digit rates.
As an example have continued growth in mobile wallet you may remember a few quarters ago that we told you about our partnership with Amazon pay in India.
As you can see in our transaction count we continue to see tremendous growth in transactions through Amazon pay this.
This quarter, we have further this partnership by adding to Billers of bottled gas a key cooking utility in India. We now have all three pillars, providing bottled gas in India, and our processing 30000 transactions a day through Amazon pay just in this one category.
During the quarter. We also added credit card Bill payment services, and Google play recharge codes with the Amazon pay wallets.
And are seeing nice transaction adoption in these other new categories as well our technology has allowed us to further expand our mobile distribution in Brazil. This quarter, we added mobile distribution services to be a town card app. The mobile app of the Tao Bank Brazils largest private sector bank with over 50 million accounts.
Additionally, we further expanded our mobile distribution in the U.S. through the acquisition of the coveted contract with eight TNT, allowing paid to activate and distribute their prepaid mobile airtime.
And finally, our technology also allowed us.
To expand our longstanding distribution agreement with Microsoft Epay will now manage the monthly recurring billing between Microsoft and select telecommunications retailers for the sale of X. box again past ultimate and X. box all access subscriptions worldwide. This is the pace first game.
In subscription service and the first gaming bundle distribution agreement with Microsoft Our APEI segment May provide the most evident example of how powerful our technology suite is.
Continuing to attract customers from both new and long time customer our pop pipeline of new launches remains robust, which will which will you expect to drive similar year over year growth rates in the fourth quarter as we saw in the third quarter now, let's talk about money transfer in slide number nine.
Slide nine.
I couldn't be more excited and talking about money transfer on the heels of the last couple of days of announcements, including Kroger, which has expanded its financial services marketplace and have selected Ria has been second provider or money transfer services inside approximately 2000 Kroger locations here in the.
You bet.
You May remember last year that E Bay implemented a new customer service solution for Kroger, which greatly reduce the complexity of financial transactions for Kroger staff and the transaction time required kroger's customer well, we wanted to partner with Kroger since we acquired Ria in 2000.
Seven and the success of the paid SAP solution demonstrated to Kroger, our superior technical capabilities, which combined with Rias secure affordable product offering and unyielding commitment to compliance led kroger to choose Ria through a competitive RFP process.
We are very excited to work with Kroger to provide their customers with the Ria money transfer experience that service will be live inside Kroger stores in the next couple of weeks and is a significant addition to our US money transfer network. This is a remarkable accomplishment achieved by teams from both our.
Pay and money transfer segments.
We also signed an agreement with the EPS the Mark a large Texas based grocery store chain to offer Rias money transfer service and be EPS, the Mars in store customer service centers across Texas.
This agreement builds upon a 10 year retail model partnership Ria has had with Bodega Latina, which owns both be EPS, the Mart and in Texas and also L. Super branded stores in California, and this was another competitive win for Ria, We look forward to helping Bodega Latina built.
Similar customer traffic transaction volume and growth rates, it's the EPS the mark that we've been able to achieve an l. super over the last decade, we continued to expand upon our success of adding post offices to our send and receive network. Let me remind you that outside the U.S. post offices are they.
The equivalent of large chain retailers here in the U.S. with the largest volume of transfers going through these locations.
Due in large part to their ubiquity.
Like many large retailers. These post offices have historically had exclusive agreement with our competitor and this together with the Kroger agreement are two more data points that highlight that large retailers and post offices are opting for growth and responding to their customers preferences for choice and compare.
The pricing.
This quarter, we added both sand and payout services for the post of Serbia, which has more than 1300 locations across the country and we launched payout services more than 250, Jordan post branches. We also signed agreements with the Indonesian post in the middle of oppose which we expect.
The launch in the coming months.
Aside from the post offices, we added and then B L in Sri Lanka, which has been an exciting thanks.
Which has been exclusive with one of our competitors for nearly 25 years.
We also added Asia commercial bank and Vietnam, Lulu exchange in Kuwait and several others. In addition to the physical distribution expansion. We also launched payout services to and peso wallet.
In Mozambique through the pay as well as Airtel wallets in Malawi, Rwanda, and Tanzania through our recently announced partnership with those with these countries. Our mobile wallet network provides access to 160 million users across 17 countries.
Another exciting agreement re launched during the quarter as a digital money transfer service partnership with French Neal banks nickel.
Along with its online money transfer Platte.
Platform partner Monistat, Ria will offer digital capabilities and its network to customers of both companies wishing to send money abroad.
I would like to put our strong money transfer growth numbers into some kind of perspective.
Ria has about 5% market share of the roughly 700 plus billion dollar international family Remittance market.
By our estimate roughly 25% of this market is acquired digitally.
The 75% remaining all through bricks and mortar agent Ria has almost six of those 75% with our agent revenue growth in the mid twentys percent range compared to last year.
We are positioned for total market share of total market share a heck of a lot bigger this brick and mortar business is performing extremely well, perhaps arguably better than any pre cobot quarter that we've had in years.
We are growing with roughly five times as fast as the World Bank says the market is growing and.
And that is not even including our 126% year over year digital growth in the third quarter.
And all of this by the way is without Kroger without yes.
I apologize operator would you just tell me if I'm still on the line.
And yes, you are connected and we can hear you clearly okay perfect I apologize everybody.
We're having some telecommunication drops here in Kansas City.
So let's figure out where we were.
Okay, yes so.
Like I mentioned, we are growing roughly five times as fast as the World Bank is.
And that's not including the 126% year over year digital growth in the third quarter and.
And all of this is without Kroger without the EPS and our new post office. These new agreements, we will continue to fuel growth in our money transfer segment, where we saw tremendous growth in remittances during the quarter, except in Malaysia, and the us domestic business. These strong growth rates are a testament to the selflessness of our image.
And customers, who prioritize their families back home on payday over the abundant economic uncertainties, they face as well as the strong value proposition that we offer them.
We have also benefited from strong execution in the digital channel.
The struggles of some smaller competitors and continued expansion of our network both.
Both.
Our direct to account network, including banks, wallets and card as well as our physical network of agents and retail stores.
The network now reaches almost 450000 physical locations and 159 countries and quickly growing digital and wallet payout networks, we anticipate that for the entire money transfer segment, we will continue to deliver double digit international outbound transaction growth in the fourth quarter.
Assuming no major changes in the global economy, and now pervasive locked down stemming from a second wave of the Corona buyer.
It was an exceptional quarter for money transfer punctuated by our new agreements with Kroger and EPS. The Mark now, let's move on to slide number 10, and I'll give you some technology highlights.
From the quarter.
Thanks.
Slide 10.
As you likely know by now our technology as a key factor in our continued success in.
In this quarter there are more significant accomplishments that we'd like to highlight start.
Starting with the bank of Mozambique that I've talked to you about for the last couple of quarters I'm pleased to tell you that we are in line with our rent Foundation payment solutions. We launched the first bank in late September on time meeting our original timeline, despite the pandemic and travel restrictions that prevented us from working in person with the banks.
March how's that for powerful technology, we expect several more banks to go live in the coming days I am extremely proud of our rent team have worked tirelessly to overcome many pandemic related obstacles well exceeding our customers' expectations here in Mozambique.
We also signed an issuer processing and payment services agreement for go pay in four key markets, Indonesia, Philippines, Thailand and Vietnam.
Okay is the largest payment wallet in Indonesia and originates from go Jack a right a ride hailing apps, they kind of like Hoover in the U.S. like.
Like to burn go Jack has expanded into a multi service platform covering food delivery shopping local delivery and more well amassing over 100 million active users across southeast Asia.
Jack launch go pay has a close loop wallet to enable their customers to seamlessly payments without carrying cash.
For those not familiar with the term closed loop implies acceptance only within a network of merchants on border by go pay.
To drive more broad based acceptance.
Jack wants to convert go pay into an open loop wallet.
Through our partnership go pay will connect via our Rev payment cloud Euronets issuance platform Euronet will convert the closed loop wallet balance into a virtually into a virtual internationally branded prepaid card balance in this way a customer can effortlessly.
We use the go pay wallet at any physical or online merchants that accepts the branded card scheme. This.
This is a great example of one of agents fastest growing fintech leveraging nearing its technology to strengthen and improve their customer offerings.
From our press release last week, you saw we signed an agreement with connected processing services Cps.
You EPS base processor of independently owned ATM networks.
EPS will leverage our rent foundation from a cloud based installation. This is a perfect example of a customer using our cloud based technology to modernize their payment infrastructure.
This implementation may be the first or one of the first example of ATM or Pos.
Processor, using modern scalable and less expensive cloud based technology to drive their business.
Finally, consumer payment patterns have dramatically evolve with the advent of ecommerce and the development of alternative payment option payment.
Payments are no longer confined to regular business hours than traditional payment channels, resulting in new challenges for funds transfer traditional payments that involve delayed funds availability pending settlement between sending and receiving institutions are no longer in line with customer expectations.
Real time payment is a new way to exchange money and purchase services insects. These schemes combine immediate funds availability settlement finality instant confirmation and integrated information flows again all in seconds.
The interest in real time payments creates two exciting new opportunities for Euronet.
First in markets with a deployed real time payment scheme, many financial institutions find it difficult to connect their legacy platforms to the real time payment clearing house, resulting in lower than anticipated adoption rate.
The reasons are numerous but Iran Foundation can be used as a gateway providing simplified interfaces that minimize the impact to customers legacy systems and accelerate adoption.
We call our solution ran connect and the interest is high and Weve already secured two bank agreements in Asia for this second there are many countries around the world without a real time payment scheme and they are seeking potential solutions.
We have further developed and configured the Red Foundation as a real time payments clearing house. This solution could reside within the national switch private processor or Central Bank and provides the overall real time payments ecosystem required for payments modernization.
We call our solution ran RTP and we are currently involved in bidding for several of these large opportunity.
I'm really excited as we travel.
Toward becoming one of the go to technology providers for real time payment solutions around the world.
In wrapping up COVID-19 continues to dominate most of the headlines and has negatively impacted many companies in 2020, including Euronet.
But with two segments growing at double digit rates, a strengthening balance sheet art.
Our exceptional employee base and powerful technology I am more than confident that our long term growth strategy remains fully intact, perhaps even stronger than pre cope with that I'll turn it over to Rick.
Yes, good morning, and thank you Mike.
Thank you to all who have joined us today.
As we have in the last few quarters I will begin my comments on the balance sheet on slide 12, as it continues to provide the best picture of Euronets financial strength and stability and underscores our confidence to continue to achieve accomplishments like Mike just mentioned.
We finished the quarter with more than a billion dollars in unrestricted cash and our ATM cash remained largely consistent.
This increase was driven by approximately 50 million of cash generated from operations combined.
With favorable working capital management.
Our total indebtedness was $1.1 billion unchanged from June.
Next slide please on slide 13.
For the quarter, we reported revenue of 664 million operating income of $66 million adjusted operating income of $67.6 million and adjusted EBITDA of $105 million.
As you likely read in our press release operating income includes a $1.5 million impairment.
Previously acquired customer relationship intangible assets.
This charge has been excluded from adjusted operating income adjusted EBITDA and adjusted EPS to facilitate comparisons to the prior year results.
We delivered adjusted EPS of $1.12 compared to 284 for the prior year with the decrease being the result of the transaction declines stemming from Cove at 19.
So next slide please.
Here on Slide 14, we show you our three year transaction trends.
50 transactions increased 14% driven by increased points of sale driving and card processing transactions in Europe, together with payment processing growth or low value transactions of a customer's bank wallet and E Commerce site.
Partially offset by fewer transactions in Europe, and Asia Pacific related to the COVID-19, pandemic, driven governmentally impose border closure and shelter in place orders.
He paid transaction grew 66% from increases in Europe, and Brazil, as well as very strong contributions from India, which include a large volume of low value in App mobile top up transaction.
Money transfer transactions grew 5% with a very strong 22% growth in us international outbound transfers and 26% growth in internationally. This year internationally initiated cross border remittances, which were partially offset by declines.
In us domestic transfers and transfers initiated in Malaysia next slide please.
On slide 15, we present, our results on an as reported basis.
On one hand, most of the major currencies, where we operate increased year over year at low to mid single digit rates.
The other hand, a few currencies such as the Indian rupee declined in the low to mid single digit rate range.
To normalize the impact of currency fluctuations, we have presented our results on a constant currency basis on the next slide.
I'm now on slide 16.
For the third quarter EPS Ti revenue declined 55% operating income declined 96% and adjusted EBITDA declined 84% driven by the COVID-19 induced impact of lower ATM transactions in Europe, and Asia, especially high value.
Cross border transactions across Europe Harsha.
Partially offset by more than $30 million in cost savings achieved during the quarter as part of the company's cost saving initiative in 2020.
Epay revenue grew 3% operating income grew 9% and adjusted EBITDA grew 11% driven by continued strength in sales of digital media content and mobile sales through digital channels in certain markets. While revenues grew year over year, the epay segment to experience.
The impacts.
Customer movement restrictions in certain markets, but other markets were positively impacted where the company has a higher mix of digital distribution or a higher concentration of retailers that were deemed essential and remained open during the pandemic.
Money transfer revenue adjusted operating income and adjusted EBITDA grew 13%, 35% and 30% respectively.
This growth was driven by strong double digit growth in us outbound and internationally originated money transfers.
Partially offset by declines in U.S domestic business revenue and gross profit per transaction expanded nicely as a result of a shift in transactions to higher margins higher.
Higher earning countries and a decline in us domestic business, which earns a lower gross profit per transaction.
These expanded operating margins in both the Epay and money transfer segments underscore the leverage strengths of their respective operations.
Now as it relates to all segments I would like to give you an update on our cost savings initiatives in introduced at the onset of Carbonite team to help limit the impact of pressure on earnings.
You will recall that we gave you an estimate of approximately 130 million in cost savings and then the second quarter call. We shared with you that we achieved $35 million in the second quarter as expected to see additional savings of approximately 15 million per quarter.
Bear in mind that this initiative was to blunt the impacts of COVID-19, which we anticipated would give us a second quarter adjusted EBITDA of nearly breakeven and the consumption of approximately $25 million cash more.
Moreover, there was no way to know when things might begin to recover.
Since then as you now know when reading through our earnings release, we have produced well more than breakeven adjusted EBITDA since then.
In fact 142 million more than breakeven.
And with our current expectations for the quarter fourth quarter that number will increase to somewhere around 210 million.
While these results were certainly supported by our aggressive cost cutting measures, especially in the segment. The real driver has been the growth in the Epay and money transfer segments together with the resilience and travel benefiting transactions in the F.T. segments.
Due to the resilience of travel we found the need and clearly the motivation to make more cash bills reactivate ATM sooner and even deploy the ATM in new markets mind, you on a very methodical basis.
To that end, we incurred upwards of $5 million of additional cost to support the resilient travel volumes and we can curtail nearly $10 billion in cost we had on the radar screen for the money transfer and Epay segment to support the robust volumes and opportunities.
We see now that we better understand the COVID-19 impacts on all parts of our business.
So in summary, we have achieved approximately $70 million of the targeted savings through the third quarter.
Upwards to 5 million of which was rolled back in the business.
In the Epay and money transfer businesses, we're going to hold off as we did in the third quarter on approximately $10 million in cost savings. It is important to note that we took these actions in light of seeing resilience in travel and year over year double digit growth in E Bay.
And money transfer segments.
And we look forward.
As we look forward, we continue to have a.
Approximately $20 million to $25 million per quarter targeted in say that's per quarter. Not in addition to included in our expectations.
Which.
Which is most most most of which is in the FTC.
Furthermore, as we did this quarter, if we see further resilience and the opportunities it may well be we roll back into the business. Some of these targeted quarterly savings I.
I hope you can appreciate that our pull back and targeted savings was in light of favorable results and the view towards supporting the momentum we see in all three segments together with an ever watchful eye on the future.
In wrapping up its worth repeating we're very pleased with the strong double digit growth rates, we were able to deliver across two of our segments. While the travel restrictions continued to weigh on our FTC business. However.
However, we are encouraged by the resilience of travel has restrictions were really were lifted we will refrain from giving official guidance because the change changes to movement restrictions and border openings are ever changing and the economic recovery can from co but remain.
Uncertain.
However, we do believe that it is important to give you a couple of data points to help frame expectations.
With that we would expect fourth quarter consolidated revenues to be approximately 95% or possibly better.
The prior year with Ft, Epay and money transfer to deliver similar to somewhat better growth rates to the third quarter.
For these revenue levels from these revenue levels.
With significant cost savings and careful expense management actions, we expect that fourth quarter, EBITDA will be $70 billion to $80 billion.
In closing Mike's earlier comments are worth repeating we are very pleased to deliver real results that exceeded our earlier expectations. This is a testament to our diverse product and geographical revenue mix powerful technology and our talented employee base.
Who make all this possible.
All supported by our strengthening balance sheet.
These results give us confidence that the long term growth prospects for the business not only remain intact and are becoming even stronger as we continue to be able to invest in products and technology that are driving the business forward.
With that I will turn it back over to Mike for final comments.
Thank you Rick.
As I close or as we close I don't want to hide from the impact of COVID-19 on this year's financial results, particularly in PMT. However, let's not forget that two of our three segments posted double digit year over year growth. This year, which has been very challenging by any business is standard.
We saw near immediate increase in key transactions as travel restrictions were lifted in Europe.
We were also able to bring ran live in Mozambique on time, we expanded our money transfer network with Kroger, leading grocery retailer in the U.S., our technology allowed us to expand with Microsoft and we also achieved triple digit expansion in our digital transactions Epay and money transfer.
This is quite a list of accomplishments, which has proven that our economic model is still valid and we are making the right investments to grow our business for the long term more.
Moreover, we see that people are still anxious to travel and we will continue to go on vacation as soon as they are able and maybe most importantly, our balance sheet is strong which continues to comfort our current customers and impress and attract new customers like Kroger the EPS, the Mart and money transfer in May.
Microsoft any pet thank.
Thank you all for your continued interest and support of Euronet and now we will be happy to take questions. Operator will you. Please assist.
As a reminder to ask a question so need to press star one on your telephone to withdraw your question press the pound or hash key please stand by we compiled today roster.
Your first question comes from the line of Ken Myszkowski from Autonomous research.
Hey, good morning, everyone hope you're doing well.
Asked about.
I wanted to ask about the just the revenue per transaction in the money transfer business.
You called out some mix shift, but if you control for the mix shift of the business how is that revenue per transaction trended.
How how's is consistently trended I'd say generally stable as we've said before you always see competition out there in the market.
So and I would generally say that those have been kind of like pockets of different comp competition from time to time, but you know overtime. Ultimately do you see that you know that the numbers will generally come in and our counter to that is to continue to expand the mix and to take advantage of opportunities. When they are out there so I would.
I'd say generally over time, we've seen reasonably consistent.
But in the generally in the money transfer business you would see it come in and we countered with mix shifting and actually Weve done quite good job over the last number of years of that.
Yes, that's helpful. Rick Thanks, a lot for that and then just quickly on the the margin in the money transfer segment I mean, I think when we look back that was the best margin that you printed in the company's history. So can you talk about what drove that outperformance and do you expect that to normalize in the coming quarters.
Well, yes, as I mentioned that really really refresh reflects the leverage ability of our business. We we while we did we did not take cost cutting actions is that as we pointed out in the call here, we saw the opportunity to continue to support the business. So it really is a very strong leveraging.
I would expect to see it come back into some more normal ranges there.
We had great growth quarter.
Great mix and and the team did a good job at managing expenses, so, but I would expect to see a kind of come back a little bit more in normal ranges, but again. This is really the benefit of continuing to add more and more volume onto the business.
Really helpful and then if I could just squeeze one last one in.
Just the Walmart business, how much is that business down and I guess, how how big is that business as a percentage of the money transfer segment.
Well that use it used to be a good 20 ish percent of the total money transfer segment.
It's down in the 40% range from last year, so and by the way that has something to do it. Those are the last question do you have because the contribution per transaction. There is considerably less than one that has an FX benefit so that and as we continue to grow our.
International Remittance at these.
Almost stunning volumes.
That brings up our average transaction.
Revenue per transaction.
Really helpful. Thanks, Mike appreciate it right huh.
Excellent.
Your next question comes from the line of interest Schmidt with Citi.
Hello, Andrew Hey, Mike.
Eric Thanks for taking my questions.
Just starting off with the EPS in segment, maybe talk a little bit about the expectations embedded in the fourth quarter outlook for performance and then.
If I could ask about halfway 21 appreciate the comments on the key transaction trends just talk a little bit about what a little bit more about.
You know what you saw on when things opened up more about your confidence and visibility for flight 20 results in some more detail there would be helpful. Thanks.
Well, we would try it on the last question when we try to project out next year, it's kind of hard to know that exactly but what was just really clear we tried to show that what the graph is that yes. The countries opened the borders people show up and so it's kind of like open the gate and the dog get out you know and and.
Thats just going to happen. So next year is going to be throttled.
By either opening or closing by the government by the governments, particularly in Europe.
And let's not also forget that when we said, we got up to 50% of last year's transactions than the cod in the countries that you could drive to vacation pretty quickly you didnt need to make you know very advanced like plane reservations and so forth that 50% was really 50 of 75, because still a quarter of the transaction.
We received in 2019 are still from countries like ourselves like.
Like the U.S., and North America, and Russia, and so forth, but still aren't even allowed into the market. So.
We saw resiliency is this the best word to describe it people are going and this is without a CFO but.
Vaccine without any kind of pure as people are just ready to go on vacation I think they're all tired of it so it really.
It really comes down to the countries on whether the opened their borders or not and with a you know how.
How much advanced notice when you when you say on June 15th we're going to we'll open our borders a two week at just doesn't give people a whole lot of time to get themselves organized to go on a trip on an airplane, which is why we saw.
Our airplane focus countries. These are like Portugal, Spain, and Greece, we saw those down considerably from the countries that you could write too.
At the end of the day people are flocking to vacation in their flock and when they are on vacation they are flocking to cash.
Okay and then the.
Fourth quarter expectations in terms of the performance well where did that.
Whereas whereas no mean that we're going to have.
Borders open issue like they are now we expect some small a small.
Small closures baby for some particular areas within countries fourth.
Fourth quarter was not ever one of our biggest.
Quarter's four ft remember, our two big part about Q2 and Q3.
Right.
Just to add to that as as I mentioned in my comments is that we would expect to see that the ft revenues on a year over year basis.
Would it be similar and I think I would be a little optimistic, saying they'd probably be a little better than what we would see on the growth rate as you kind of compare it to third quarter growth rate. So if you look at third quarter's year over year growth rate, probably going to see a similar growth rate if not better free ft.
Let's keep our fingers crossed.
Exactly right just just one last question I want to make sure I touched on it yeah right.
Ren ecosystem that payments glad some really interesting updates there it sounds like you have a good pipeline.
Can you talk a little bit about that that sort of thing.
The sales distribution process, what's in the pipeline from a use case perspective, just curious it seems like there's a lot of opportunity to address a variety of different use cases. So just some comments about sort of the sales process and the pipeline would be helpful.
Yes. This is Kevin so.
As Mike articulated we kind of view with the win ecosystem sort of three big opportunities one modern and modernizing banks leg structure that is work that we've all.
I see of.
The company little more im joined with Kobe, because it's more difficult to reach the banks, but we're actively reaching out to banks around the world about modernizing legacy systems with the RIN ecosystem. So thats one opportunity the opportunity that the two opportunities that may.
Mike will have for instance in the scripts were related to our GP and the first one being countries, where RG Peter already deployed this about 55 of those countries.
That was in that mix of 55, there's varying degrees of a function of the RTP network.
We are targeting those countries that have low participation or low adoption.
And focusing on helping participants connect to the existing RTP through Ren connect and the way we're doing that is through our local sales teams and these various various markets then the third opportunity that Mike referenced is for those countries.
That does not have an art GP network and obviously, if only 55 tablet that means as a whole lot of countries that don't habit. Those countries are at varying stages of looking for RTP solutions, we're actively bidding on a handful of those as we speak they they involve of.
Very long sales cycle I would say 18 to 24 months and we are actively involved in several of those and Twentytwenty, one we envision a handful more becoming available.
So I hope I hope that addresses your question, Dan and when we talk about yet. This these are.
Hard to be systems that are currently installed around the world not one of those was architected in the last 20 years. So the advantage that we have is we have modern scalable technology. The guidance that you would see at Amazon or Google or one of these high tech players and that's really even though we're starting after some of the other guy.
Yes.
If people want to have a modern scalable system that is kind of future proof. We are kind of they are the best game in town. The other point Andrew I should have made was within each of those deployed RTP.
There is a market ranges from about 200 to 500 available participants.
So so for each of those 55, you've got 200 to 500 potential participants with varying degrees of adoption, so and long long sort of it is it's a big market, it's a big market for what we call them connect.
Got it okay. Thanks, a lot Kevin I appreciate the comments, Mike and Rick you guys that are fin Tech conference in November I. Appreciate it okay, and I'm going to apologize caught them in advance, we talked a little bit longer than usual that.
Operator will allow one more question.
Because we're already at top of the hour.
And your next question comes from the line of Peter Heckmann from I'm.
I'm, sorry, D.A. Davidson.
Thank you Hey, good morning, everyone just.
A lot of information is always is there any way to quantify the TNT, when and which markets you'll be active with a DMT is it primarily the U.S.
Yes. This is Kevin so.
As you might know 18 Tees prepaid is.
National all through the us.
There are only two of these contracts made available.
One through one of my competitors and the one that we acquired.
What's interesting about this opportunity is its focused on activations and so were.
Just doing a mobile top up the focus with this which is 18 GE relationship is around activating new users on ATM fees prepaid network 80, Mg and the rise in are relatively new to the prepaid game and they are aggressively pursuing customers.
For for prepaid.
We have got a and establish network.
For Activations and we're aggressively growing that activation network. So we're pretty bullish about the opportunity.
Long run it will take some time to get wound up but it includes a residual payment to us from the mobile operator, so from a margin standpoint, it's much more lucrative business than what you would associate with a traditional mobile top up.
Got it got it that's really helpful. And then I guess I missed it when you mentioned Mozambique, the first time, where there any success fees related to a go live in the third quarter do you expect during the fourth quarter and can you remind us a little bit of how you expect that revenue to ramp from that relationship. Okay. So that's what this was remember that so two things this was a a license.
And no additional fees and the and the third quarter, but it also we also cut a deal with them to have basically all there DCC traffic that happens in the country as we connect up all the bank.
Obviously, we're not going to get a lot of travelers.
To any country right now with all these borders close but.
That's going to last for many years.
From now so thats all good news so.
Got it all right. Thank you okay. All right. Thank you very much.
And thank you everybody for your time I think we're going to sign off thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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