Q3 2021 Euronet Worldwide Inc Earnings Call
[music].
Greetings and welcome to the units worldwide third quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question.
Our request.
Ask the question you need to press Star one on your telephone if any time during the conference you need to reach an operator, Please press star zero and his stomach pleasure to introduce your host Mr. Scott Carter General Counsel for you in that room nights. Thank you. Mr. Buckland you may begin.
Thank you good morning, and welcome everyone.
In answer to <unk> quarterly results conference call, we will present, our results for the third quarter 2021 on this call.
We have Mike Brown, our chairman and CEO, Rick Weller, our CFO and Kevin <unk>, the CEO of our <unk> division on the call.
Before we begin I need to call your attention to the forward looking.
Since the disclaimer on the second slide of the Powerpoint pace, then we'll be making today.
Statements made on this call that concern <unk> or its management's intentions expectations or predictions of future performance are forward looking statements.
<unk> actual results may vary materially from those anticipated in such.
State looking statement as a result of a number of factors that are listed on the second slide of our presentation.
<unk> does not intend to update these forward looking statements and undertakes no duty to any person to provide any such update.
In addition, the Powerpoint presentation includes a reconciliation of the non-GAAP financial.
Forwarders will be using during the call to their most comparable GAAP measures.
Thank you Scott and thank you everyone for joining us today I'll begin my comments on slide number part.
I'm, so glad to be here talking to you.
Measure about these exciting double digit consolidated growth rate, especially given the uncertainty of border opening uneven vaccination effort and increasing virus spread due to the delta variant.
We're all in the mix throughout the quarter as I have reflected on these results a few key.
Today.
Stood out for me first we were able to achieve consolidated third quarter 2021 revenue the top the same quarter in 2019, which is particularly impressive given that <unk> is still being heavily impacted by the COVID-19 travel restrictions. This.
This means that the revenue from <unk> and money transfer has grown significantly supporting our view that we will emerge from this pandemic stronger than when we entered.
Our money transfer network now has surpassed the half a million physical network locations and our money transfer app.
Hi reaches 20 countries third ipe recorded its fifth consecutive quarter of double digit adjusted EBITDA growth, primarily from the continued strength of mobile and digital media sales through our digital distribution channels.
And our EFT transactions rebounded.
Bounded at a very strong pace as European borders were reopened to fully vaccinated passengers from inside of Europe, and select countries outside of Europe. Moreover, we have seen some elongation in the travel season due to the pent up demand for travel after nearly 18 months without it.
Now all of these achievements were made possible by our strong balance sheet, which has afforded us the ability to maintain our dedicated workforce to continue to invest in our industry, leading brand payments platform as well as our digital networks in both EPA and money transfer and also take advantage of the strategic.
Opportunities that have been presented to us.
And while our money transfer results were a bit uneven with strong U S and Europe outbound growth as well as digital transaction growth, we saw stronger than expected negative impact from the continued COVID-19 lockdowns in the middle East and the Asia Pacific.
T J <unk> region.
And they continued pressure on the U S domestic business aside from those two geographies. We've really continued to see very strong growth rates in our transactions and a lots of good progress in money transfer, which I'm excited to tell you about in the coming slides, but first lets go to slide.
Number six and we will talk about the European travel trends and the impact on our business.
This is a lot more optimistic slide than the ones that have been showing you over the last couple of quarters here on slide six we have updated the graph, we presented last quarter, which shows actual and projected.
Jack did European flight data for this year versus 2019 overlaid with our total international cash withdrawals for the same periods as well as our transaction recovery from non EU cardholders. When we spoke to you on our second quarter earnings call. This year the EU had just.
<unk> decided to reopen the borders to fully vaccinated U S. Travelers. However, the status of the borders in the EU, we're changing everyday causing a lot of uncertainty about when not if but when tourists would be able to travel again.
As the graph shows flight levels immediately.
<unk> responded to the opening of borders and our total international transactions responded almost as quickly.
While we were very pleased to see our total international transactions return to about 70% of 19 levels. The recovery of our EFT segment profit is a bit more nuanced.
And then let me take a minute to remind you of our different transaction revenue types. As you can see in the chart on the right side, our lowest value transactions are recovering much faster than our highest value transactions first we have domestic interchange in domestic surcharge. These transactions recovered quickly.
<unk> as they in country movement restrictions were lifted next we have the international interchange, which makes up most of the recovery in the international transactions. As these are largely be used citizens traveling to different countries within the EU. So these tourists were able to travel for much.
Of the travel season, beginning in the third quarter.
Then you have the transactions that apply to cardholders with non Euro bank accounts, which are our most profitable transaction.
Certainty of border openings, the quarantine requirements as well as the late decision to open borders to.
Certain travelers outside the EU caused a significant lag in the non EU based cross currency transactions. These transactions only recovered to about 40 ish percent of 2019 levels. So while we were thrilled that our international transactions bounce back.
Only similar levels to actual flight levels coming into the EU. The lackluster reopening caused a slower rebound of our cross currency transactions, which of course are the most profitable.
However, the good news is as the European borders are now generally open to most.
<unk> estimated travelers and to peak and people now have a year to plan their 2022 summer vacation.
We are also starting to see certain countries in Asia, starting to open their borders which will further contribute to next year's recovery, we don't control the virus and we don't control the government.
<unk> actions related to the virus. So our field of vision is somewhat limited in what we know will play out next what we do know from the last two travel season is that when the travel restrictions were lifted people very very quickly return.
To travel and they still.
Back through cash in fact, even more cash right now the vaccination efforts continued to improve therapeutics are now becoming available and people want to travel. If these factors continue in a favorable light we anticipate that our 2022 transactions will possibly recover.
To between 80, and 90% of 2019 level.
The results could be better than we expect of course.
And they were here in the third quarter versus the guidance. We gave you on the prior call nor are they could be worse, but right. Now this is our best view.
What I also know is that our <unk>.
Network is stronger and more far reaching than before Covid and this travel season. Once again prove that travelers are still going to use Atms.
We are excited for next year, when we hope that many of these hurdles will be behind US now, let's move to slide number seven and hit some of the ft highlights.
Here are a few slide seven here are a few highlights from our <unk> segment during the quarter, we launched merchant acquiring services at last semi attained a high end shopping mall in Paris.
<unk> is now offering payment services, there to more than 200 terminals with in the mall we.
<unk> also launched cartilage cash payout for BNP Paribas corporate clients in Poland further expanding our product offering and one of our most important markets in India, We launched Atms switching and card management services with F VC Cooperative Bank and.
Why.
Cooperative banks in India, expanding our offering with the community banks in the country. We also signed an ATM Recycler agreement with Vista Bank in Romania. Finally, we renewed several ATM and card agreements across Europe and India.
As we continue to see the flights increase and more tourists on the.
Ground in our countries, we invested further in our ATM network by adding more than 1300, Atms and we reopened about 730 Atms that were previously closed.
We also lost about 161 outsourced Atms, bringing our total active Atms to 45.
520.
We still had about 950, Atms and closed status either due to seasonal closures or because of COVID-19, lockdowns, bringing our total ATM network to 47474 with some elongation of the travel.
<unk> I mentioned earlier, we have kept more Atms open than we historically have had as of September 30, However, as we move through the fourth quarter and tourism starts to slow down for the winter, we will expect to seasonally closed some of our Atms like we've always done.
You know from.
Previous.
Quarterly earnings updates the EFT segment has been significantly impacted by Covid. So we're pleased to see such a strong rebound in our transactions as movement restrictions were lifted from around the growth of globe.
As we have shared with you over the last 12 months or so we believe then and.
And this third quarter transaction trend certainly confirms tourism will return and we will have a strong balance sheet and we have a strong balance sheet. So we'll be able to strengthen our network, adding more countries and adding more high value Atms.
We are looking forward to 2022, we will be ready to reopen all.
All of our Atms for the entire travel season of Covid conditions continued to improve as we have seen so far this year.
So now let's go on to slide number eight and we will talk about ebay.
In this third quarter, our <unk> team continues its nice rib met or beat.
The fifth consecutive.
<unk> quarter of double digit operating income growth. So how is this possible several years ago.
Excuse me.
Ipe disrupted the traditional content distribution market by recognizing the need to create digital distribution for items that had traditionally been distributed as.
As a physical product, including gift card software and gaming.
<unk> re imagined the way these things were purchased around the world by digitizing, the barcode, which eliminated the need for a physical plastic gift card or a CD to install new software or a new game. In addition.
Digital delivery of all types of content Ipe developed an industry, leading technology platform that can be leveraged to deliver this content to bank mobile operators E Commerce site or mobile wallets. All in addition to the traditional physical retail distribution.
Today.
To the a major transition in the traditional payments landscape. According to the most recent Mackenzie study over the next five years acquirers will grow by 40% from non acquiring revenue.
For years, we have been actively positioning ebay to make these types of non.
We static alternative payments and provide our merchants more ways to make money and for consumers a more efficient way to get their products.
Additionally, we have the technology in place to connect with emerging fintech to achieve real time payments and offer their customers more value.
<unk> added products in some cases, we are even doing two transactions and one we are providing the content that the fintech can offer their customers to purchase and we are processing real time payments of these transactions through our real time payments engine, we know that the future embraces digital.
<unk>, we have superior technology and connections to mobile wallets around the world, which combined with our leading physical retail network places ipe in the prime position to continue to grow well into the future.
This quarter, we launched several new agreements, including Microsoft Xbox subscription services.
So with Telefonica.
One of the largest mobile operators in Spain.
We expanded distribution of Microsoft Office 365 to <unk> the online store of one of France's largest retailers. We also expanded digital distribution with media markt in Poland and mobile content distribution.
Augie Bank, a Brazilian bank with more than 3 million customers.
In Italy, we signed an agreement with <unk>, formerly known as lot of America to distribute Nike <unk> live Airbnb and Blizzard and in New Zealand, we signed an agreement with BP a large petrol.
Station chain to manage their gift card program. Our <unk> teams continue to innovate our technology platforms, which in turn expands the services, which we were able to provide to our fintech retail and content partners.
And the fruits of their efforts show up in their earnings where they are posted double.
Digit growth for the past five quarters. Good prepay now, let's move on to slide number nine.
And we'll talk about money transfer.
Our money transfer network has eclipsed 500000 locations I just like to take.
Back and remind everyone that when we bought Ria, we were a very distant third in the money transfer industry with 42000 locations.
Mostly in Latin America.
We have grown that network more than a 1000% and built an account deposit network that now reaches three.
Step 6 billion bank accounts, and 416 million mobile wallet accounts and in fact, our account deposit transactions grew 31% during the quarter versus the prior year and our account deposit volume now represents 29% of our overall cross border principal.
<unk> this physical network combined with our digital payout.
And that reach gives us the most far reaching money transfer network in the world and that is one of the key drivers behind our seven fold money transfer earnings growth since the acquisition in two.
<unk> seven <unk>.
During the quarter, we significantly expanded our wallet presence with service into five strategic wallets G cash and pay Maya in the Philippines.
Pay in Nepal, we pay in Trinidad and Tobago as well as pay TM and India, which is one of.
<unk> largest mobile wallets in the world our partnership with <unk> is groundbreaking at ATM becomes India's first platform to accept international remittance remittances directly into their digital wallet.
I'd like to note that while <unk> has more than 330 million users currently.
Arsenal remittances.
Over the last few years, we have expanded with several post offices around the world.
It's been a couple of quarters. So let me remind you that outside the U S. Post office locations are like large retailers here in the U S and that they are the largest largest agents for money transfer.
<unk>.
And customer choice has historically been limited to just our other two money transfer competitors, we continue to disrupt the status quo and this quarter, we expanded our post office networks with cash pickup services and four more countries, including the India post.
The Vietnam pose the Uganda posts in Bhutan Post we also signed a partnership agreement with noble financials to transition all of its 117 agents in the U S to the Ria brand platform and network noble as an important brand and multi industry conglomerate in the librarian market and.
And Ed.
Developed a low loyal following a money transfer customers in the U S.
We launched money transfer services.
The 500000 users of <unk>, a Spanish Neo bank, we signed an agreement with as a moat a UK based digital money transfer provider to supplement its pay networks.
Network.
We also signed an agreement with Microsoft dynamics to enable <unk> payment offering with Microsoft dynamics 365 platform.
And launched an agreement with sage intact to enable X these payments offering within enterprise resource planning tool.
Which is used by small and medium sized businesses. All of these agreements are examples of companies needing real time cross border payments for their customers and realizing that our money transfer network can provide the most efficient and cost effective manner in which this in these transactions we continue to work on.
Beginning this product offering and we look forward to sharing more news on it in the near future.
Now, let's go on to slide number 10, and we will talk about our Ren technology.
As you reflect back to the comments from each of our three segments you can't help but here the significance.
So the role our cutting edge technology is playing in our success and to further underscore our technology success I'd like to highlight here on slide 10, a couple of exciting new agreements for our <unk> technology, We have signed an agreement with <unk> the national switching system of Indonesia, which you may remember is the.
The fourth largest population in the world Euro net will deploy Ren to modernize one of the largest switching infrastructures in south East Asia, replacing two competitive technology installations when fully implemented ran will drive approximately 43000 Atms in this country.
This is very exciting and this new installation of our Ren technology comes on the heels of a successful project in Mozambique.
Additionally, you may have read the press release announcing our signing ran implementation agreement with marker tracks marker track is disrupting the mark.
<unk> with its first of a kind regulatory compliant and cashless alternative to the traditional casino marker with this implementation ran is serving as a fintech enabler by powering the entire market track solution.
This is the first use of Ren in a non bank setting and will be a game.
Ranger in the gaming market, where casino patrons are forecasted to spend $516 billion globally, and 150 billion just the north American market alone in 2021 with significant growth expected as more states open the opportunity for online customers.
Once fully implemented in the <unk> cloud environment.
Dan will provide scalability for the growing user base and physical and online environments as well as transaction speed for enhanced user experiences and other key features including patron identity identity verified.
Verifications.
<unk>, scoring portfolio accounting underwriting ACTH payment.
And processing processing and more this is an example of a fintech using rens comprehensive suite to quickly scale to meet their growing demands.
When I think about.
My original mission when I founded Euro net it was to bring payment convenience to those who have not had it before as the payment industry has rapidly evolved.
So heavily and I think a quote from Gary lock on the Chief strategy officer at market tracts summarizes our future the best he.
He said we are also extremely excited to be the first to leverage the fintech, enabling technology of brand and a new market vertical like gaming that needs an innovative platform to support its rapid transformation to a cashless environment.
That really summarizes the power of this technology our network.
Our asset.
We can not only use them to further our core business, which continues to thrive, but to also position other fintech and neo bank to rapidly expand their businesses.
Because we have an entire suite of products, including issuing transaction processing settlement comply.
Lions reconciliation and more which will allow fintech to grow and achieve their goals.
And we are just starting at the starting line stay tuned for more exciting.
<unk> on rent and that technology to come with that I will hand, it over to Rick.
Good.
Good morning, Thank you everyone for joining.
I will begin my comments on the balance sheet on slide 12.
As Mike mentioned, we were able to achieve third quarter 2021 consolidated revenue above 2019 levels.
The mix.
Revenue has changed but to achieve more than 2019 levels, while still in the midst of this pandemic was only possible because of the strength of our balance sheet, which allowed us to invest in our digital and physical networks and take advantage of opportunities as.
You can see we ended the quarter with more than $1 billion in cash. The sequential increase is the result of cash generated from operations during the quarter of nearly $120 million.
ATM cash increased in line with borrowings on the revolving credit facility to fund the seasonally.
<unk> higher ATM cash needs for the peak travel season next slide please I'm on slide 13.
For the third quarter, we achieved revenue of $816 million or a 104% over the third quarter 2019 revenue.
With one segment still significantly impacted by Covid related restrictions.
Now thats impressive.
We also achieved operating income of $114 million and adjusted EBITDA of 155.
Those better than expected.
<unk> consolidated growth rates were the result of outperformance of our EFT segment, where we saw international transactions rebound at a faster pace than expected as borders were partially reopened to fully vaccinated individuals those with a negative COVID-19 test.
The COVID-19 recovered travelers.
We delivered adjusted EPS of $1 77, a 58% increase over the $1 12 in the third quarter last year.
Next slide please.
Slide 14 shows our three year <unk>.
Collection trends by segment EFT transactions grew 29% as a result of more domestic and international cash withdrawal transactions together with the continued benefit of a significant volume increase in low value point of sale transactions in Europe.
Trans and low value payment processing transactions from an Asia Pacific customers Bank wallet, an E Commerce site.
<unk> transactions grew 23% driven by continued strength in mobile top up and digital media content distributed.
And through digital channels money.
Money transfer transactions grew a net of 10%, including 18% growth in both the U S outbound and European outbound transactions and 58% growth in direct to.
<unk>.
<unk> digital transactions.
<unk> growth was partially offset by declines in the domestic business and a 32% decline in transactions from the middle East and Asia due to strict government mandated lockdowns, which remained in place.
Did the quarter.
On slide 15, we present, our results on an as reported basis.
Year over year, nearly all of the currencies in the major markets, where we operate increased in the low to mid single digit range overall about a one.
Through absent or less impact on our consolidated results to normalize the impact of currency fluctuations. We have presented our results on a constant currency basis on the next slide.
I'm on slide 16 now.
EFT revenue grew 56%.
<unk> operating income grew 908% and adjusted EBITDA grew 207% as a result of increased domestic and international cash withdrawal transactions benefitting from the partial lifting of travel restrictions across Europe and new.
One <unk> deployments as we continue to prepare for the full travel recovery.
<unk> revenue grew 19% operating income grew 17% and adjusted EBITDA grew 16% from increased digital distribution of digital media and mobile content.
The lower growth rates in operating income and adjusted EBITDA reflected an investment in our teams and our technology to expand our market leading digital distribution platforms.
Overall, a nicely balanced quarter for EP.
Money transfer revenue grew eight.
<unk> <unk> from the strength of 18% growth in both the U S and European outbound transactions as well as 58% growth in direct to consumer digital transactions revenue growth was offset by weakness in the domestic business and larger than.
<unk> predicted declines in the Middle East and Asia Pacific transaction.
These factors together with the FX rate volatility benefits realized in the third quarter last year higher compensation costs and investments in our network and new products in the third quarter of this year.
Expense attributed to the adjusted operating income and adjusted EBITDA declined, 23% and 20% respectively.
While we always see pockets of price pressure when setting aside the FX volatility rate benefits we.
<unk> in the third quarter last year.
Our money transfer segment saw relatively consistent revenue and gross profit per transaction when looking at it year over year.
Moreover, when looking at sequential quarterly results.
Here too we saw relatively consistent revenue and gross profit per transaction.
Now shifting gears a bit with regard to looking ahead.
As we provided in the press release, our best insight.
We realized into the fourth quarter would yield revenue relatively in line with the third quarter, producing adjusted EBITDA in the range of $120 million to $130 million.
Moreover, with the results of our seasonally strongest.
In third quarter in the history books.
We begin to think about what next year might look like.
As Mike mentioned earlier based on the tourism of this third quarter together with continued increases in vaccination rates across the globe new therapeutic.
<unk> introduced and fewer border restrictions it appears to US we could see 2022 tourism transactions breakthrough, 80% of 2019 levels may be higher.
If we see that level.
Reputed travel tourism recovery.
Together with the excellent growth, we've seen from our <unk> and money transfer businesses, we could see 2022 revenue approximately 30% higher than our 2019.
Level.
Producing earnings similar to those of 2019.
Fully recognizing that we are not expecting a full recovery of our most profitable cross currency transactions next year.
So as I draw.
Revenue comments to a close I think it's worth repeating that this was a great quarter for Euro net where we delivered revenue above pre COVID-19 2019 levels.
Signed and launched several new agreements expanded our technology to new countries and new verticals and continue.
<unk> to grow our digital distribution and networks.
With that I'll hand, it back to Mike to close out the quarter.
Thanks, Rick.
I'd like to close by emphasizing that all of these highlights were accompanied by a very strong set of financial results, which show that <unk>.
<unk>.
So it is not only as a leading fintech, but it further demonstrates our wrapper rapid evolved <unk> into.
And to be becoming a fintech enabler.
We have been able to transform ourselves because ran our modern flexible and powerful technology together with.
Our global reach and our strategy and our strong portfolio of assets.
We have built the most powerful and broad reaching money transfer network in the world. It appears that travelers are coming back. We expect this to continue as vaccination rates continued to improve and has had therapeutics come to the market now.
And because economies need travelers and EPA continues to develop digital distribution in merchant solutions that can directly.
Compete with acquirers today.
We have a lot to be proud of and even more to be excited about with this quarter now closed I look.
Telling you more next quarter and finally, as we alluded to in the second quarter Investor update call. We continued to make great progress in introducing new ways to leverage our collective existing assets into new <unk> product offerings were crossing the Ts and dotting.
Forward to notes, so I hope to be talking to you more about some exciting things in the near future stay tuned with that we'll be happy to answer your questions. Operator will you. Please us.
Thank you very much as a reminder to ask a question you will need to grasp our one on your telephone to anything right.
<unk> right.
Again Thats Star then the number one on your telephone keypad capacity Chris.
Your first question comes from the line of Andrew Schmidt from Citi. Your line is open.
Yeah.
Hey, Mike Hey, Rick Thanks for taking my questions good to see the step up in earnings power here and the significant expansion use.
Thank you Scott across the platform.
<unk>.
I just wanted to go off with just a clarification question, Rick I think you mentioned.
The expectation will be right now on a preliminary basis understanding its still little bit early.
2022 earnings will be similar to 2019 are you.
You're referring to adjusted EBITDA operating income net income just a quick clarification there to start off.
I was really kind of going down to the adjusted cash EPS number.
Andrew.
Rattle it all the way down the income.
Income statement.
Perfect Super helpful.
And then.
Talk about 90%.
Transactions recovered versus 2019, yet.
How does that translate to EBITDA because I know there is some mix assumptions need to be made in terms of domestic versus cross border and other.
<unk> in that segment.
What's the right way to think about that in terms of trends like EBITDA as a percentage of 22019 basis.
Well I'll, let Brad get right down to the nuts and bolts, but the reality is our most profitable transactions are cross currency transactions right.
No.
When you saw that.
Our cross currency international travelers, so anybody like going into Europe from outside of Europe, as a cross currency Guy right.
And those are our most profitable transactions, but those only recovered this year, 40% when we saw our intra European recovery and.
The neighborhood of $67 million.
80% dependent up their domestic or international so.
Those are really profitable transactions, that's the only difference really if you get down to it between 2000 and.
19 in this last in this last quarter. So if we can get more people go on overseas flights.
Right.
B Cook in next year.
To kind of add to mikes comments it gets to be some rather let's just call. It evolved involved are complicated math to let's say more more fully answer your question, but from a really macro perspective, I think as we've shared with folks before.
The richness of these transactions come into our P&L at about let's call it roughly an 80% margin rate.
And so you can see that if we can if we can move the needle.
A bit on the volume of these transactions and certainly you could see in our.
Our third quarter results that as these transactions come in better than expected.
<unk>.
Contribute nicely to the bottom line.
And then if you kind of do a little bit of macro kind of kind of math and looking at that next year number and kind of seeing where our <unk> and money transfer businesses grown you can see that that kind of margin.
Beverage comes through on ft to be able to get us to two.
19 earnings kind of level. So I guess the in summary, I would be with the view that that the way you should think about it is as we see those transactions come through they're going to come through with some very rich margin levels.
<unk>.
And <unk>.
It really nicely.
Contribute to that bottom line.
Very helpful and then it's great to have.
Psb's line out there for 2022.
But.
Obviously still a little bit early so I would imagine that.
Okay.
The level of conservatism in here it just makes sense to me.
As you can.
Just sort of.
Clarify that a little bit.
A.
A level of conservatism that's baked in here just because we are not even in 2014.
Well, we have we have.
We have two Andrew because it bleed.
No and we do know that when Americans want to travel abroad. It takes a lot more thought preparation and kind of hump to do that if you are just flying within Europe.
And it's a lot easier for us to go to New York than it is.
For us to go to row. So so we baked that in there we don't we don't know it could be better.
All of us are going to watch the tracker on how many cros.
Ocean.
Reservations are being made but that will change things.
Markedly and.
Looking at.
The average revenue per hour per transaction of of anything that is a cross currency, we'd probably make we make about a little over a dollar on a on a on an international interchange transaction, we might make two or $3 on a surcharge transaction, but when we get to make a spread.
And if you're in la and foreign currency.
Those transactions could be five to 10 docs. So you can see it doesn't take too many of those transactions are really off the top off.
Right. So it sounds like it's more prudent expectations about mix in 2019.
All about mix, it's a 100% about mix exactly absolute.
Absolutely perfect well, thanks, a lot guys. Thanks to the progress here I'll jump back in queue.
The quarterly results. Thanks, a lot.
Next question operator.
Your next question is from Andrew Jeffrey.
Your line is open.
Yes.
Brad.
I appreciate you taking the question.
Mike a question on money transfer.
On on ebay.
Can you talk a little bit about.
The investments Youre, making in the money transfer segment.
And how you think youre going to be able to monetize.
These connected wallets and connected bank accounts and can you give us a little color on the volume that's going into bank accounts can you can you talk about I guess, one specifically where youre investing in to whether or not you think monetization of some of these digital accounts.
No.
Cap are positive.
In particular in money transfer can drive yield and drive growth.
Well I mean.
You saw our numbers.
Just over this last quarter, where.
Our our account deposit transactions grew 31%.
During the quarter versus prior year and account deposit.
<unk> volume now represent.
Almost 30% of our total volume so what that's telling you is this huge asset that we have with basically 4 billion digital ways to drop money into an account or a wallet.
<unk> accelerated our growth and you've seen also.
Posit by the huge growth in our in our.
Direct acquire.
Acquired.
Money transfer transactions as well so the deal is if you if you want to grow into the future everybody goes digital digital digital but you've got to have the endpoint and that's our magic right.
As we continue to build out those those endpoints both for consumers and in the future. We've been mentioning this before where we intend to repurpose those for beta because of transaction because that market is many many times bigger than the family remittance market.
So having this head start having.
Now world's leader lead in that area is going to be an asset that's worth making investments in.
Andrew I would go on.
To elaborate on some of the technology comments, Mike made is that we have built a wonderful platform of technology that is easy.
Z to connect to and no different than some of the Fintech players that we mentioned that we've signed agreements with us.
Theres lots of there's lots of folks out there building things in the garage so to speak on an <unk>.
Ways to meet customer needs more efficient eloquent ways.
To get to the customers and when they do that they then need to make payments around the world. That's at least some of their opportunity and we've got the best network in the world. The other important part about it is not just the ease of integrating.
Integrating to our technology is that we cover all the payment means.
It's not just that you can send it to a card account or you can send it to a bank account, we can send it to wallet accounts you can pick it up in cash we could put it into crypto if we want to okay. We can move the money anyway that somebody wants to be able to.
Steve It and we can get it to.
Damn near everyone anyone in the world.
So a little bit of the few corners of the world that you cant, but we.
We've got truly the most impressive network. So how we monetize it is a combination of several of those things and it really starts with our.
<unk> knowledge, you being able to integrate into that technology, which then opens up and exposes the opportunity for all of our assets to be taken advantage of I mean, we really like the fact that a lot of companies are out there very well funded attracting customers what their you might call it their mouse traps to.
To attract customers and do transactions, but all of them need a payment methodology and we handle the whole thing soup to nuts.
Compliance and everything so and then if you remember on our Ren technology, where we are.
Putting our rent Tac into both banks and central banks to do real time.
<unk> payment so as the world moves towards RTP systems <unk>.
Who's got the expertise. So we do we're installing that stuff right now in that phase of the business that has one big advantage. We have in our company that we're not just a money transfer company, we're a technology company and network.
Enabling people to do that so these things really work hand in glove and give us just an edge over everybody else.
Okay, that's helpful and I guess.
To put a finer point on it should we expect to see all of that translate into better yield Rick I mean, that's one of the questions we get.
Let me think.
Attention between traditional.
Legacy money transfers and cash to cash versus digital I mean, do we start to tip over to better unit economics at some point here.
Yes, because.
I mean, as Mike said as you focus on <unk> and you move up that that market is they get to be bigger.
About the actions the cost.
Cost to terminate one of those transactions.
<unk> is rather small and.
So there is opportunity where if you take a look at what the let's say just average achievement on on sending money.
I am not.
Trends in about per se remittance money, but moving money around the world is in excess of 1% of the money moves so.
You can easily now start seeing that if you move a 10000 or a 20000 or a $50000 transaction and you've got 1% or even a half of <unk>.
<unk> those are nice transaction. So yes, it really does contribute to the ability to leverage the bottom line margins for this business.
Alright, Thanks, I appreciate that guys.
Okay.
We have a question from Doug.
Research Your line is open.
Thanks, guys.
Alright, I didn't hear what's your name was who is this.
Hey, it's Darren and Sarah.
Hi, Darren.
Hey, Mike.
Guys. When we look at the normalized potential of the business.
Business now so you've talked about the magnitude of improvement we've seen or do you pay your money transfer it through the last 152 years.
Just give us a sense of what you think based on the different trends around challenger banks, requiring more and pushing back on needing more opening up surcharge enrolls new governments.
What would you say in a normal world is the size of the ERP business versus 2019 from a revenue and profitability standpoint.
Because we can figure out we can see the acceleration on the money transfer in the ebay sides of the business. So I'm curious what a normal sized business could look like for you if you know.
So anyway.
I'll take a look I mean, it has taken us about eight years to build out Europe and you saw the profits that Europe generated in 2019 for doing those kind of transactions that maybe that was around $300 million in EBITDA.
Well now that visa has changed its.
Once again allowed us to accept similar kinds of transactions not just like we do in Europe, but everywhere in the world, where there's a visa card and Mastercard card.
<unk>.
The whole rest of the world is our oyster wherever theres a tourist on this planet I should go after you know give me some sand and the beach and I will be there.
So as I look at this.
There could be every bit of.
Another $300 million are more out there to go after and we're just beginning to do that we're live with just one country in southeast Asia right now that we'll be announcing at some point in time, we had 150 Atms there before.
Covid hit.
And they are extremely profitable Atms, so we know that.
That we've got something that works, we will be announcing other.
Countries in the coming quarters and so our.
Our challenge is just get ourselves expand it.
Now we've got.
So this is in these countries, we know how to manage all the sub pieces of delivery and the money to the Atms and reconciling and all of that so so.
It's big that that's probably people keep saying well how long is it will it take you to get back to 19 levels.
Yes.
We will get there. The question is what are you going to look like in 2022, or 2023 or 2024 or five when maybe we're twice that base.
We've invested in those markets and we continue to invest yes, we earn had we not we were actually on this whole idea of long before.
Life.
Two years before visa even started to change its rules because we felt like they were going to have to so.
As they change where we're now getting the licenses and some of these new markets and they'll be very lucrative for us.
When we think about the EPA and money transfer segments being somewhere around 40%.
<unk> or maybe more than that.
Higher than 19 levels already trending that way at least for 'twenty two.
Again, the ERP side of the business is kind of a question given the profitability level there and so.
If we were to normalize I remember estimates were expected to be somewhere around 20% higher for 2022 pre COVID-19 and their industry.
<unk> estimates are now and probably 30% higher than what you just said if it's similar to 19. So I guess the bottom line question is do you envision a normal scenario and can you move fast enough on all of the redeployment on Atms to make that happen if if we get real resurgence on travel.
Oh, absolutely and in fact Theyre already there the ATM.
We've added.
The industry more Atms than we had in 2019, all we got to do is turn them on now some of the ones that we've got close they're just they're just not cash their cashed out.
But they're technically alive and weekend respond.
Not quite instantly, but pretty darn fast.
Got it yes.
Yeah.
Added money.
When you say normalized.
It's always hard to compare what normally normal is but if you look at our at our 2019 revenue numbers for the EFT segment and using your assumption or your stated assumption of if we get back to travel at the same levels.
I would tell you that that if we were at same travel levels.
As 2019, no restrictions full movement of people that we would with our current set of assets, it's quite likely that our revenue numbers.
Well it would exceed 2019 numbers for ft, because we have taken some.
Let's call them. Some of these outsourced Atms that were brought back in house because of some acquisition those went out and we've continued to replace them with our own Atms.
<unk> and opening up in new countries that we have seen spectacular results out of so my sense is that we if we had no travel restrictions as you said.
And it was back to business as normal.
Your number for revenue on that EFT segment would exceed 19th.
Yes.
Okay. Okay.
Last quick follow up little more pointed on the money transfer segment given the volatility you've had in the last couple of days on competition concerns on pricing so to be clear I.
I mean, you have wise out there lowering price and you have Facebook and others trying new things with lower price alternatives potentially and so.
You guys are already generally lower do you consider yourself already generally lower priced than others in the industry and lower margin and higher Commission payout I'm curious how do you think you would stack up in a world where some competitors have to lower.
Well first of all you got to remember this is a dog eat dog business.
Family Remittance business warehouse.
We are out there competing every day on every street corner and on the digital side.
Now.
So.
That doesn't really bother us and actually if you take a look at.
At our numbers and you kind of dig deep into our numbers theres been some kind of squarely things that have happened.
Because of Covid and we had a lot of good currency volatility last year that allowed us to make money, but as Rick said in his.
Early part of this disc.
A discussion the reality is we haven't really felt much pricing pressure. So this idea that all of a sudden we're under.
And we could have gone on pricing I don't think is accurate.
Yes.
As we said, we see pockets of pricing pressure all the time I mean, this is a competitive world and we operate around the globe. So theres always going to be someone that's offering something for free or or something else like.
We have to respond to that.
And our response.
<unk> comes in different markets.
Ways, we deliver the products.
When Mike mentioned that we're doing nearly a third of our of our business is paid out to bank accounts now.
A more efficient.
That and we pay out on and gives us some better economics on that type of stuff.
So.
Since 2007, we've been out there.
And competing and we always generally been.
A better value play than the bigger.
<unk> weighs in the market out there.
So we've kind of let's say.
<unk> already been at a more competitive point.
As you know.
And I have not yet found the business that can survive with just given all of its product away free.
<unk>.
Got you have to be able to make money.
We've often seen where new entrants will come in at a very very compelling free offer but at some point reality asked to set in and you've got to be able to make money in this business because there is cost of compliance maybe some of these folks.
There aren't new and compliance cost of compliance it's cost of building out a network it's cost of of competing every day.
So we see it out there, but we respond to it every day and let's not forget even just looking at the family remittance market, we have about $5 five 6% of that.
Folks. So we look at it is there is 94% to go we've got a big market out there.
Yes.
Great and we will take one more question I think operator before we're going to have that.
And it.
Okay.
Your last question is from Mike Grondahl.
Northern Securities Your line is open.
Hey, guys.
On Joe Lynn and marker tracks could you kind of help us understand the revenue model a little bit there like per ATM or per transaction, how do you envision that working.
Yes.
This is Kevin So we've got two revenue models associated with wind.
One is a traditional software license model.
The other is a.
The transaction.
Revenue.
Sure model in the case of Chihuahua.
So if more of the traditional.
Software license model in the case of market tracks. It is a revenue share related to transactions.
Got it got it.
And a lot of our installation.
<unk>, we kind of want to.
Especially into these places that are putting in in real time payments or connecting the real time payment engine or a little bit more transaction based and software based because.
The transactions are low we can kind of the expense can grow along with the asset.
Yes, a lot of the fin techs, we're working with Mike prefer.
Transaction based because they want to preserve our capital. So so we're finding a lot of great opportunities.
Get them in a low with a transaction model and then.
Sure on the profitability as they grow we get to grow which we.
We really like because we believe in and the partners that were picking.
With regards to providing the technology stack.
Yeah.
On average we would say that our bias is always going to be towards transaction based because we also think that it's very lined up with the partners we're dealing.
Selling with we're kind of going into it with more skin in the game more risk taking if you will at the beginning of the transaction because we're not walking out of there with a big software fee and then we benefit on the growth of it. So I think that our interests are more aligned with the partners. When we have a transactional based process.
And it certainly helps them get into the business easier if they don't have to write a big check and as Kevin said use a lot of price the capital to be able to get the business going the market tracks.
We put out a press release about a week or so ago and Mike referenced in his and.
In the review.
We're particularly excited about that because they are playing such a large market hundreds of billions of dollars.
That market Hasnt changed.
Decades, and there is a push to try to move to cashless.
In our opinion these market tracks charge.
I've got a great vision for for the industry, and where it's going and we couldnt be more thrilled to be part of it.
Access our technology service provider I think that's got a lot of potential.
Got it and just lastly, as a follow up with market tracks.
You guys know like how many casinos your product is in.
And what that rollout might look like.
We do we're not at Liberty to discuss it but I'll tell you Mike.
The list is greater than our ability to implement.
Got it that's helpful. So thanks, Gus sales pipeline is extremely.
<unk>.
And we're having to pick and choose.
Because there is more opportunities to deploy and we have the capability right now to deploy into.
Good to hear thanks, guys.
Excellent Alright bulletin half last question I'd like to thank everybody.
Once again for joining us on the call today, we will look forward to giving you an update then another 90 or so days. Thank you very much.
This concludes today's conference call. Thank you for joining you may now disconnect.
Okay.
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Greetings and welcome to the Union have worldwide third quarter 2021 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer questions to ask a question you eat the press star one on your telephone if at any time during the conference you need to reach an operator, Please press star zero and they stomach pleasure to introduce your host Mr. Scott Kauffman General Counsel for you in that regard.
Do you what's your problem you may begin.
Thank you good morning, and welcome everyone to <unk> quarterly results Conference call. We will present, our results for the third quarter 2021 on this call we.
We have Mike Brown, our chairman and CEO, Rick Weller, our CFO and Kevin <unk> the CEO of.
The <unk> division on the call.
Before we begin I need to call your attention to the forward looking statements disclaimer on the second slide of the Powerpoint patients, we will be making today.
Statements made on this call that concern <unk> or its management's intentions expectations or predictions of future performance are forward looking.
<unk> statements.
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 second slide of our presentation.
<unk> does not intend to update these forward looking statements and undertakes no duty to any person to provide any such update.
In addition, the Powerpoint presentation includes a reconciliation of the non-GAAP financial measures, we'll be using during the call to their most comparable GAAP measures.
Now I'll turn the call over to our CEO, Mike Brown Mike.
Thank you Scott and thank you everyone for joining us today I'll.
I'll begin my comments on slide number part.
So glad to be here talking to you today about these exciting double digit consolidated growth rate, especially given the uncertainty of border openings uneven vaccination effort and increasing virus, Brad did as Delta variant which were.
All in the mix throughout the quarter.
As I have reflected on these results a few key highlights stood out for me.
First we were able to achieve consolidated third quarter 2021 revenue the top the same quarter in 2019, which is particularly impressive given that.
ERP is still being heavily impacted by the Covid travel restrictions. This means that the revenue from <unk> and money transfer has grown significantly supporting our view that we will emerge from the pandemic stronger than when we entered.
Our money transfer network now has surpassed.
The half a million physical network locations and our money transfer App now reaches 20 countries third ipe recorded its fifth consecutive quarter of double digit adjusted EBITDA growth, primarily from the continued strength of mobile and digital media sales through.
Through our digital distribution channels.
Our EFT transactions rebounded at a very strong pace as European borders were reopened to fully vaccinated passengers from inside of Europe and select countries outside of Europe. Moreover, we are seeing some elongation in the travel season.
Season, due to the pent up demand for travel after nearly 18 months without at.
All of these achievements were made possible by our strong balance sheet, which has afforded us the ability to maintain our dedicated workforce to continue to invest in our industry, leading brand payments platform as well.
As our digital networks in both EMEA and money transfer and also take advantage of the strategic opportunities that have been presented to us.
And while our money transfer results were a bit uneven with strong U S and Europe outbound growth as well as digital transaction growth, we saw stronger than expected.
The negative impact from the continued Covid lockdowns in the Middle East and the Asia Pacific Region region.
And the continued pressure on the U S domestic business.
From those two geographies, we really continue to see very strong growth rates in our transactions and lots of good progress in money transfer.
<unk>, which I'm excited to tell you about in the coming slides.
But first let's go to slide number six and we will talk about the European travel trends and the impact on our business.
This is a lot more optimistic slide than the ones I've been showing you over the last couple of quarters here on slide.
Six we have updated the graph, we presented last quarter, which shows actual and projected European flight data for this year versus 2019 overlaid with our total international cash withdrawals for the same periods as well as our transaction recovery from non EU cardholders.
Slide when we spoke to you on our second quarter earnings call. This year. The EU had just decided to reopen the borders to fully vaccinated U S. Travelers. However, the status of the borders and the EU are changing everyday, causing a lot of uncertainty about when not if but when <unk> would be.
Are you able to travel again.
As the graph shows flight levels immediately responded to the opening of borders and our total international transactions responded almost as quickly.
While we were very pleased to see our total international transactions return to about 70% of 19.
<unk> levels the recovery of our EFT segment profit is a bit more nuanced than that let me take a minute to remind you of our different transaction revenue types. As you can see in the chart on the right side, our lowest value transactions are recovering much faster than our highest value transactions.
First we have domestic interchange in domestic surcharge. These transactions recovered quickly as the in country movement restrictions were lifted next we have the international interchange, which makes up most of the recovery in the international transactions. As these are largely EU citizens traveling to.
Different countries within the EU. So these tariffs we're able to travel for much.
The travel season, beginning in the third quarter.
And then you have the transactions that apply to cardholders with non Euro bank accounts, which are our most profitable transaction the uncertainty of border openings.
Quarantine requirements as well as the late decision to open borders to only certain travelers outside the EU caused a significant lag in the non EU based cross currency transactions. These transactions only recovered to about 40 ish percent of 2000.
The <unk> level. So while we were thrilled that our international transactions bounce back at similar levels to actual flight levels coming into the EU. The lackluster reopening caused a slower rebound of our cross currency transactions, which of course are the most profitable.
However, the good news is as the European borders are now generally open to most vaccinated travelers and to peak and people now have a year to plan their 2022 summer vacation.
We are also starting to see certain countries in Asia, starting to open their borders which will further contribute.
Now into next year's recovery.
We don't control the virus and we don't control the government actions related to the virus. So our field of vision is somewhat limited in what we know will play out next what we do know from the last two travel seasons is that when the travel restrictions were lifted people very.
Very very quickly return.
To travel and they still grew cash in fact, even more cash right now the vaccination efforts continued to improve therapeutics are now becoming available and people want to travel. If these factors continue in a favorable light.
We anticipate that our 2022 transactions will possibly recover to between 80 and 90% of 2019 level.
The results could be better than we expect of course.
And they were here in the third quarter versus the guidance. We gave you on the prior call or they could.
But right now this is our best view.
But I also know is that our ATM network is stronger and more far reaching than before Covid and this travel season. Once again proved that travelers are still going to use Atms.
We are excited for next year, when we hope that many of these hurdles will be.
Be warned US now, let's move to slide number seven and hit some of the Eft's highlights.
Here are a few slide seven here are a few highlights from our EFT segment during the quarter, we launched merchant acquiring services at last semi attained a high end shopping mall in Paris.
<unk> is now.
Behind <unk> payment services, there to more than 200 terminals within the mall.
Yeah.
Also launched cartilage cash payout for BNP Paribas corporate clients in Poland further expanding our product offerings in one of our most important markets in India, We launched Atms.
Often in card management services with S VC cooperative bank.
And why urban cooperative banks in India, expanding our offering with the community banks in the country. We also signed an ATM Recycler agreement with Vista Bank in Romania. Finally, we renewed several ATM and card agreements across.
<unk> Suisse, Europe and India.
As we continue to see the flights increase and more tourists on the ground in our countries. We invested further in our ATM network by adding more than 1300, Atms and we reopened about 730 Atms that were previously closed.
We also lost about one.
Across 61, outsourced Atms, bringing our total active Atms to 45520.
We still had about 1900, 50, Atms and closed status either due to seasonal closures or because of COVID-19, lockdowns, bringing our total Atms.
Hundred to 47474 with some elongation of the travel season I mentioned earlier, we have kept more Atms open than we historically have had as of September 30, However, as we move through the fourth quarter and tourism starts to slow down for the winter we will expect.
Network to seasonally closed some of our Atms like we've always done.
You know from previous.
Quarterly earnings updates the EFT segment has been significantly impacted by Covid. So we were pleased to see such a strong rebound in our transactions as movement restrictions were lifted from around the growth.
As we have shared with you over the last 12 months or so we believe then and.
This third quarter transaction trend certainly confirms tourism will return and we will have a strong balance sheet and we have a strong balance sheet. So we'll be able to strengthen our network, adding more countries and adding more high value.
Globe Tms we.
We are looking forward to 2022, we will be ready to reopen all of our Atms for the entire travel season of Covid conditions continued to improve as we have seen so far this year.
So now let's go on to slide number eight and we will talk about <unk>.
In this third quarter.
<unk> team continues its nice rib medic beat that.
The fifth consecutive quarter of double digit operating income growth. So how is this possible several years ago.
Excuse me.
Ipe disrupted the traditional content distribution market by.
<unk> <unk> the need to create digital distribution for items that had traditionally been distributed as a physical product, including gift card software and gaming.
<unk> re imagined the way these things were purchased around the world by digitizing, the barcode, which eliminated the need for a physical plastic.
Our record gift card or a CD to install new software or a new game. In addition to the digital delivery of all types of content Ipe developed an industry, leading technology platform that can be leveraged to deliver this content to bank mobile operators e-commerce site or mobile wallets.
<unk>.
All in addition to the traditional physical retail distribution.
Today, we see a major transition in the traditional payments landscape. According to the most recent Mackenzie study over the next five years acquires will grow by 40% from non acquiring revenue.
For years, we have been actively positioning ebay to make these types of non plastic alternative payment.
And provide our merchants more ways to make money and for consumers a more efficient way to get their products.
Additionally, we have the technology in place to.
Connect with emerging Fintech to achieve real time payments and offer their customers more value added products. In some cases, we are even doing two transactions and one we are providing the content that the fintech can offer their customers to purchase and we are processing real time payments of these transactions.
Actions through our real time payments engine, we know that the future embraces digital we have superior technology and connections to mobile wallets around the world, which combined with our leading physical retail network places ipe in the prime position to continue to grow well into the future.
This quarter, we launched several new agreements, including Microsoft Xbox subscription services with Telefonica.
One of the largest mobile operators in Spain.
We expanded distribution of Microsoft Office 365 to <unk> the online store of one of France's largest retailer we.
We also expanded digital distribution with media market in Poland, and mobile content distribution was Augie bank, a Brazilian bank with more than 3 million customers.
In Italy, we signed an agreement with <unk>, formerly known as <unk> to distribute Nike <unk> live Airbnb.
And Blizzard and in New Zealand, we signed an agreement with BP a large petrol station chain to manage their gift card program. Our <unk> teams continue to innovate our technology platforms, which in turn expands the services, which we were able to provide to our fintech retail and content partners.
And the fruits of their efforts show up in their earnings where they are posted double digit growth for the past five quarters. Good prepay now, let's move on to slide number nine.
And we will talk about money transfer.
Our money transfer network.
As a clip 500000 locations I, just like to take a step back and remind everyone that when we bought <unk>. We were a very distant third in the money transfer industry with 42000 locations, mostly in Latin America.
We have grown that network more than a thousand.
Some percent and built an account deposit network that now reaches $3 6 billion bank accounts, and 416 million mobile wallet accounts and in fact, our account deposit transactions grew 31% during the quarter versus the prior year and our account deposit.
That volume now represents 29% of our overall cross border principal blow.
This physical network combined with our digital payout.
And that reach gives us the most far reaching money transfer network in the world.
And that is one of the key drivers behind.
Seven fold money transfer earnings growth since the acquisition in 2007.
During the quarter, we significantly expanded our wallet presence with service into five strategic wallets G cash and pay Maya in the Philippines IME pay in Nepal, we pay.
And our <unk> and <unk> as well as pay TM and India, which is one of the largest mobile wallets in the world. Our partnership with <unk> is groundbreaking at ATM becomes India's first platform to accept international remittance remittances directly into their digital wallet.
<unk>.
Like to note that while <unk> has more than 330 million users currently only a $115 million of those have been fully <unk> verified. So those are the only accounts. We include in our digital wallet reach we will add to the other $215 million and growing.
Into that account as they become fully verified and eligible to receive international remittances.
Over the last few years, we have expanded with several post offices around the world.
It's been a couple of quarters. So let me remind you that outside the U S. Post office locations are like large retailers.
Here in the U S and that they are the largest largest agents for money transfer in their country.
And customer choice has historically been limited to just our other two money transfer competitors, we continue to disrupt the status quo and this quarter, we expanded our post office.
Networks with cash pickup services and four more countries, including the India post the Vietnam pose the Uganda Post <unk> post we also signed a partnership agreement with noble financials to transition all of its 117 agents in the U S to the Ria brand platform and network noble as an important.
Brandon multi industry conglomerate in the librarian market.
And had developed a low loyal following a money transfer customers in the U S.
We launched money transfer services.
The 500000 users of <unk>, a Spanish Neo bank, we signed an agreement with.
<unk>, a UK based digital money transfer provider to supplement its pay network.
We also signed an agreement with Microsoft dynamics to enable X. These payment offering with Microsoft dynamics 365 platform.
And launched an agreement with sage impact to enable.
Importantly payments offering within enterprise resource planning tool, which is used by small and medium sized businesses. All of these agreements are examples of companies needing real time cross border payments for their customers and realizing that our money transfer network can provide the most efficient and.
Exit effective manner in which sits in these transactions. We continue to work on expanding this product offering and we look forward to sharing more news on it in the near future.
Now, let's go on to slide number 10, and we will talk about our Ren technology.
As you.
Cost to the comments from each of our three segments you can't help but here the significance of the role our cutting edge technology is playing in our success and to further underscore our technology success I'd like to highlight here on slide 10, a couple of exciting new agreements for our <unk> technology, we have signed an agreement with <unk>.
<unk> the national switching system of Indonesia, which you May remember is the fourth largest population in the world Euro net will deploy Ren to modernize one of the largest switching infrastructures in south East Asia, replacing two competitive technology installations when fully implemented.
<unk> ran will drive approximately 43000 Atms in this country.
This is very exciting and this new installation of our Ren technology comes on the heels of a successful project in Mozambique.
Additionally, you may have read the press release announcing our signing of a random.
<unk> implementation agreement with marker tracks marker track is disrupting the market with its first of a kind regulatory compliant and cashless alternative to the traditional casino marker with this implementation ran is serving as a fintech enabler.
The entire market track solution.
This is the first use of Ren in a non bank setting and will be a game changer in the gaming market, where casino patrons are forecasted to spend $516 billion globally, and 150 billion just the north American market alone in 2021 with significant growth expected.
As more states open the opportunity for online customers.
Once fully implemented in the market tracts cloud environment ran will provide scalability for the growing user base and physical and online environments as well as transaction speed for enhanced user experiences and other.
It features including patron of data <unk>.
The entity Verifications credit, scoring portfolio accounting underwriting ACTH payments and processing.
<unk> and more this is an example of a fintech using rens comprehensive suite.
Our key quickly scale to meet their growing demands.
When I think about my original mission when I founded Euro net it was to bring payment convenience to those who have not had it before.
As the payment industry has rapidly evolved.
So heavily and I think a quote from Gary lock on the cheap.
Technology Officer, Marc <unk> summarizes our future. The best He said we are also extremely excited to be the first to leverage the fintech, enabling technology of Ren in a new market vertical like gaming that needs an innovative platform to support its rapid transformation to a cashless.
<unk>.
That really summarizes the power of this technology, our network and our assets.
We can not only use them to further our core business, which continues to thrive, but to also position other fintech and neo bank to rapidly expand their businesses.
Because we have an entire suite of products includes.
And by issuing transaction processing settlement compliance reconciliation and more which will allow <unk> to grow and achieve their goals.
And we are just starting at the starting line stay tuned for more exciting.
Thats whats on ran in that technology.
<unk> to come with that I will hand, it over to Rick.
Good morning, Thank you everyone for joining.
I will begin my comments on the balance sheet on slide 12.
As Mike mentioned, we were able to achieve third quarter 2021 <unk>.
Holidayed revenue above 2019 levels.
The mix of revenue has changed but to achieve more than 2019 levels, while still in the midst of this pandemic was only possible because of the strength of our balance sheet, which allowed us to invest in our digital.
And physical networks and take advantage of opportunities.
As you can see we ended the quarter with more than $1 billion in cash. The sequential increase is the result of cash generated from operations during the quarter of nearly $120 million ATM cash increased.
In line with borrowings on the revolving credit facility to fund the seasonally higher ATM cash needs for the peak travel season next slide please I'm on slide 13.
For the third quarter, we achieved revenue of $816 million or a 104%.
<unk> over the third quarter 2019 revenue.
One segment still significantly impacted by Covid related restrictions.
That's impressive.
We also achieved operating income of $114 million and adjusted EBITDA.
<unk> of 155.
Those better than expected consolidated growth rates were the result of outperformance of our EFT segment, where we saw international transactions rebound at a faster pace than expected as borders were partially reopened to fully vaccine.
EBITDA at individuals those with a negative COVID-19 test.
Before the Covid recovered travelers.
We delivered adjusted EPS of $1 77, a 58% increase over the $1 12 in the third quarter last year.
Next slide.
Slide please.
Slide 14 shows our three year transaction trends by segment EFT.
<unk> transactions grew 29% as a result of more domestic and international cash withdrawal transactions together with the continued benefit of a significant volume increase.
In low value point of sale transactions in Europe.
And low value payment processing transactions from an Asia Pacific customers Bank wallet, an E Commerce site.
<unk> transactions grew 23% driven by continued strength.
Strength in mobile top up and digital media content distributed through digital channels money.
Transfer transactions grew a net of 10%, including 18% growth in both the U S outbound and European outbound transactions and 50.
8% growth in direct to consumer.
Consumer digital transactions.
This growth was partially offset by declines in the domestic business and a 32% decline in transactions from the middle East and Asia due to strict.
Government mandated lockdowns, which remained in place throughout the quarter.
On slide 15, we present, our results on an as reported basis.
Year over year, nearly all of the currencies in the major markets, where we operate increased in.
<unk> low to mid single digit range.
Overall about a 1% or less impact on our consolidated results.
To normalize the impact of currency fluctuations, we have presented our results on a constant currency basis on the next slide.
I'm on slide.
In the <unk> now.
EFT revenue grew 56% operating income grew 908% and adjusted EBITDA grew 207% as a result of increased domestic and international cash withdrawal transactions benefitting from the partners.
Slide full lifting of travel restrictions across Europe, and new ATM deployments as we continue to prepare for the full travel recovery.
<unk> revenue grew 19% operating income grew 17% and adjusted EBITDA grew 16% from.
Parse increased digital distribution of digital media and mobile content.
The lower growth rates in operating income and adjusted EBITDA, reflecting investment in our teams and our technology to expand our market leading digital distribution platforms.
Overall, our nicely.
<unk> balanced quarter for EP.
Money transfer revenue grew 8% from the strength of 18% growth in both the U S and European outbound transactions as well as 58% growth in direct to consumer digital transactions revenue.
<unk> growth was offset by weakness in the domestic business and larger than expected declines in the middle East and Asia Pacific transaction.
These factors together with the FX rate volatility benefits realized in the third quarter last year higher compensation.
<unk> costs and investments in our network and new products in the third quarter of this year contributed to the adjusted operating income and adjusted EBITDA declines of 23% and 20% respectively.
While we always see pockets of price pressure.
Revenue when setting aside the FX volatility rate benefits, we realized in the third quarter last year, our money transfer segment saw relatively consistent revenue and gross profit per transaction when looking at it year over.
<unk>. Moreover, when looking at sequential quarterly results here too we saw relatively consistent revenue and gross profit per transaction.
Now shifting gears a bit with regard to looking ahead.
A year.
As we provided in the press release, our best insight into the fourth quarter would yield revenue relatively in line with the third quarter producing adjusted EBITDA in the range of 120 to 130.
The $1.
Moreover, with the results of our seasonally strongest third quarter in the history books.
We begin to think about what next year might look like.
As Mike mentioned earlier based on the tourism of this third quarter together.
<unk> made continued increases in vaccination rates across the globe, New therapeutics being introduced and fewer border restrictions. It appears to US we could see 2022 tourism transactions breakthrough 80% of two.
Other with 19 levels may be higher.
If we see that level of travel tourism recovery.
Together with the excellent growth, we've seen from our <unk> and money transfer businesses, we could see 2022 revenue <unk>.
Leave 30% higher than our 2019 revenue producing.
Producing earnings similar to those of 2019.
Fully recognizing that we are not expecting a full recovery of our most profitable.
Roxanne cross currency transactions next year.
So as I draw my comments to a close I think it's worth repeating that this was a great quarter for Euro net where we delivered revenue above pre COVID-19 2019 levels.
Signed and launched several new agreements.
<unk> expanded our technology to new countries, and new verticals and continue to grow our digital distribution and networks.
With that I'll hand, it back to Mike to close out the quarter.
Thanks, Rick.
I'd like to close by emphasizing that all of these highlights were accompanied by.
<unk> strong set of financial results, which show that <unk>.
<unk> is not only as a leading fintech, but it further demonstrates our wrapper rapid involvement into being becoming a fintech enabler, we have been able to transform.
Variables because ran our modern flexible and powerful technology together with our global reach and our strategy and our strong portfolio of assets.
We have built the most powerful and broad reaching money transfer network in the world. It appears that travelers are coming back we expect.
Check this to continue as vaccination rates continued to improve and has had therapeutics come to the market now and because economies need travelers.
And <unk> continues to develop digital distribution in merchant solutions that can directly.
Compete with acquirers today, we have a lot to be proud of.
<unk>, even more to be excited about with this quarter now closed I look forward to telling you more next quarter and finally as we alluded to in the second quarter Investor update call. We continued to make great progress in introducing new ways to leverage our collective existing.
Assets into new <unk> product offerings.
Were crossing the Ts and dotting the eyes, so I hope to be talking to you more about some exciting things in the near future stay tuned.
That will be happy to answer your questions. Operator will you. Please assist.
Thank you very much.
As a reminder to ask a question you will need to press star one on your telephone.
Good question Bryce to banking again Thats Star then the number one when your telephone keypad capacity Chris.
Your first question comes from the line of Andrew Schmidt from Citi. Your line is open.
Hey, Mike Hey, Rick.
Thanks for taking my questions good to see the step up in earnings power here and the significant.
Expansion use case described across the platform.
Good to see.
I just wanted to start off with just a clarification question, Rick I think you mentioned.
The expectation at least right now on a preliminary basis understanding it's still over.
Early the two.
2022 earnings would be similar to 2019 are you referring to adjusted EBITDA operating income net income just for clarification there to start off.
I was really kind of going down to the adjusted cash EPS number.
Andrew.
Rattler.
Rattle it all the way down the income statement.
Perfect Super helpful and then.
Talk about 9%.
Transactions recovered versus 2019.
How does that translate to EBITDA, because I know, there's some mix assumptions need.
And to be made in terms of domestic versus cross border and other.
Other products in that segment. So what's the right way to think about that in terms of trends like EBITDA as a percentage of 22019 basis.
Well ill, let Bret get right down to the nuts and bolts, but the reality is our most profitable transactions are cross currency.
Currency transactions right and so.
When you saw that.
Our cross currency international travelers, so anybody like going into Europe from outside of Europe, as a cross currency Guy right.
And those are our most profitable transactions, but those only recovered this year, 40% when we saw our interest.
Interest European recovery and the.
The neighborhood of 60, 70, and 80% depending on what they are domestic or international so.
Those are really profitable transactions, that's the only difference really if you get down to it between 2000 and <unk>.
19.
This last in this last quarter. So if we can get more people going overseas flight.
Really be cook in next year.
To kind of add to mikes comments it gets to be some rather let's just call. It evolved involved are complicated math to let's say more more fully.
The answer to your question, but from a really macro perspective, I think as we've shared with folks before.
The richness of these transactions come into our P&L at about let's call it roughly an 80% margin rate.
And so you can see that if we can if we can move the needle.
<unk>.
A bit on the volume of these transactions and certainly you could see in our third quarter results that as these transactions come in better than expected.
Contribute nicely to the bottom line.
And if you kind of do a little bit of macro kind of kind of math and looking at that next year number and kind.
Seeing where our <unk> and money transfer businesses grown you can see that that that the kind of margin leverage comes through on ft to be able to get us to two.
19 earnings kind of level. So I guess the in summary, I would be with the view that that the way you should think about it as.
As we see those transactions come through they're going to come through with some very rich margin levels.
And.
Really nicely contribute to that bottom line.
Very helpful and then it's great to have.
Psb's line out there for 2000.
'twenty two but.
Obviously still a little bit early so I would imagine that you had.
Probably think of the level of conservatism in here because it makes sense to me.
If you can.
Just sort of.
Clarify that a little bit is there a.
A level of conservatism.
Tiffany that's baked in here just because we are not even in 2012.
Well, we have we have a if we have to Andrew because we don't know and we do know that when Americans want to travel abroad. It takes a lot more thought preparation and kind of bumped to do that if you are just flying.
Within Europe.
And it's a lot easier for us to go to New York than it is.
For us to go to Rome. So so we baked that in there we don't we don't know it could be better.
All of us are going to watch the tracker on how many cros.
Ocean.
Fly.
Reservations are being made but that will change things.
Markedly and if you look at the average revenue per hour per transaction of of anything that is a cross currency, we'd probably make we make about little over $1.
On an international interchange transaction we.
Two or $3 on a surcharge transaction, but when we get to make a spread on foreign currency I mean, those transactions could be five to $10. So you can see it doesn't take too many of those transactions are really off the top off.
Right.
Sounds like it's more prudent expectations.
Occasions about mix in 2000.
It's all about mix it is a 100% about mix exactly absolutely perfect well. Thanks, a lot guys. It's great to see the progress here I'll jump back in queue, but the quarterly results. Thanks a lot.
Next question operator.
Next question is from Andrew Jeffrey.
Your line is open.
Hi, Good morning appreciate you taking the question.
Mike.
<unk> on money transfer and a question on <unk>.
Can you talk a little bit about.
The investments Youre, making.
So the money transfer segment.
And how you think youre going to be able to monetize these connected wallets and connected bank accounts I think you gave us a little color on the volume that's going into bank accounts, but can you can you talk about I guess, one specifically where youre investing in to whether or not you think monetization of.
<unk>.
Digital accounts and deposit.
Yes.
Account deposit in particular money transfer can drive yield and drive growth.
Well I mean.
You saw our numbers.
Just over this last quarter, where are our account.
Some of these transactions grew 31%.
During the quarter versus prior year and account deposit volume now represent.
Almost 30% of our total volume so what that's telling you is this huge asset that we have with basically 4 billion digital ways to drop money into an account.
<unk> wallet.
As accelerated our growth and you've seen also that.
Huge growth in our in our.
Direct.
Acquired App money transfer transactions as well so the deal is.
If you want to grow into the future.
<unk> everybody goes digital digital digital but you've got to have the endpoint and that's our magic right now as we continue to build out those those endpoints both for consumers and in the future we've been mentioning this before.
Many times bigger than our family remittance market. So having this head start having the world's leader lead in that area is going to be an asset and thats worth making investments.
And Andrew I would go on to elaborate on some of the technology comments Mike made.
That we have built a wonderful platform of technology that is easy to connect to and no different than some of the fintech players that we mentioned that we've signed agreements with us.
Theres lots of there's lots of folks out there building things in the garage so to speak.
On an <unk>.
Ways to meet customer needs more efficient eloquent ways to get to the customers and when they do that they then need to make payments around the world. That's at least some of their opportunity and we've got the best network in the world. The other important part about it is not just the ease of.
Integrating to our technology is that we cover all the payment.
I mean, it's not just that you can send it to a card account or you can send it to a bank account, we can send it to wallet accounts you can pick it up in cash we could put it into crypto if we want to okay.
Can move the money anyway.
That somebody wants to be able to receive it and we can get it to.
Damn near everyone anyone in the world.
So a little bit of the few corners of the world that you cant, but we.
We've got truly the most impressive network.
So how do we monetize it is a combination of several of those things and it really starts with our technology being able to integrate into that technology, which then opens up and exposes the opportunity for all of our assets to be taken advantage of I mean, we really like the fact that a lot of companies are out there.
We've all funded attracting customers what their you might call it their mouse traps.
Two two.
To attract customers and do transactions, but all of them need a payment methodology and we handle the whole thing soup to nuts compliance and everything so and then remember on a ran technology.
We're putting our Ren Tac into both banks and central banks to do real time payment. So as the world moves towards RTP systems, I mean, who's got the expertise. So we do we're installing that stuff right now in that piece of the business that has one big advantage, we have in our company that we're not just.
Very well transfer company, we're a technology company and network.
Enabling people to do that so these things really work hand in glove and give us just an edge over everybody else.
Okay, that's helpful and I guess.
To put a finer point on it should we expect.
Some money to see all of that translate into better yield Rick I mean, it's one of the questions we get.
When we think about the tension between traditional or legacy money transfers and cash to cash versus digital I mean, do we start to tip over to better unit economics at some point here.
Yes, because.
I mean.
<unk> as you focus on <unk> and you move up that that market is they get to be bigger transactions the costs are.
Our cost to terminate one of those transactions is is rather small and.
So there is opportunity where if you take a look at what the.
It's let's say just average achievement on on sending money.
And I'm not talking about per se remittance money, but moving money around the world is in excess of 1% of the money moves so.
You can easily now start seeing that if you move a 10000 or a 20.
<unk> thousand or a $50000 transaction and you've got 1% or even a half a percent those are nice transaction. So yes. It really does contribute to the ability to leverage the bottom line margins for this business.
Alright, Thanks, I appreciate that guys.
Okay.
We have a question from Darrin Peller with Wolfe Research Your line is open.
Thanks, guys.
Alright, I didn't hear what's your name was who is this.
Hey, Darren and Sarah Hello, Darrin.
Eric.
Hey, Mike.
Guys. When we look at the normalized potential of the business now so you've talked about the magnitude of improvement we've seen or do you pay your money transfer it through the last one and a half two years.
Just give us a sense of what you think based on the different trends around.
Challenger banks requiring more.
And pushing back on needing more opening up surcharge and rules new government. So what would you say in a normal world is the size of the E&P business versus 2019 from a revenue and profitability standpoint.
Because we can figure out we can see the acceleration on the money transfer.
The ebay sides of the business I am curious what a normal sized business could look like for you in one day.
Well take a look I mean, it has taken us about eight years to build out Europe and you saw the profit Europe generated in 2019.
We're doing those kind of transactions that maybe that was around $300 million.
With that well now that visa has changed its rules on allowed us to except similar kinds of transactions not just like we do in Europe, but everywhere in the world, where there's a visa card and Mastercard card.
I mean the.
The whole rest of the world is our oyster wherever there is a tourist on this planet.
I should go after.
Give me some sand and the beach and I'll be there.
So as I look at this.
There could be every bit of <unk>.
Another $300 million are more out there to go after and we're just beginning to do that we're live with just one country in southeast Asia right now.
That will be announcing at some point in time, we had 150 Atms there before COVID-19.
Hit and they are extremely profitable Atms, so we know that.
That we've got something that works, we'll be announcing other.
Countries in the coming quarters and so.
Our challenge is just get ourselves expand it.
We've got licenses in these countries, we know how to manage all the sub pieces of delivery and the money to the Atms and reconciling and all of that so so.
It's big that's probably people keep.
Saying well how long is it will it take you to get back to 19 levels.
We will get there.
Question is what are you going to look like in 2022, or 2023 or 2024 or five when maybe we're twice that base.
We've invested in those and we continue to invest yes, we are.
Had we not.
We were actually on the whole idea long before two years before visa even started to change its rules because we felt like they were going to have to.
No.
As they change where we're now getting the licenses and some of these new markets and they'll be very lucrative for us.
No.
When we think about that you pay and money transfer segments being somewhere around 40% or maybe more than that.
Higher than 19 levels already trending that way at least we're 22.
Again, the ERP side of the business is kind of a question given the profitability level there and so.
If we were to normalize I remember estimates, we expect it to be.
Somewhere around 20% higher for 2022 pre Covid then there than the street estimates are now and probably 30% higher than what you just said if it's similar to 19 so.
I guess the bottom line question is do you envision a normal scenario and can you move fast enough on all of the redeployment on Atms to make that happen if if we get real resurgence on travel.
Oh, absolutely and in fact Theyre already there the ATM, we've added more Atms than we had in 2019, all we've got to do is turn them on and now some of the ones that we've got close they're just they're just not cash their cashed out.
But they are technically alive and weekend respond.
Not quite instantly.
It's a pretty darn fast.
Got it.
When you just when you say normal.
It's always hard to compare what normally normal is but if you look at our at our 2019 revenue numbers for the EFT segment and using your assumption or your stated assumption.
<unk> of if we get back to travel at the same levels.
I would tell you that that if we were at same travel levels.
As 2019, no restrictions for movement of people that we would with our current.
Totally but assets.
It's quite likely that our revenue numbers would exceed 2019 numbers for ft, because we have taken some.
Let's call them. Some of these outsourced Atms that were brought back in house, because there's some acquisition those went.
Set up and we've continued to replace them with our own Atms and opening up in new countries that we have seen spectacular results out of so my sense is that if we had no travel restrictions as you said and.
It was back to business as normal.
Number.
<unk> for revenue on that <unk> segment would exceed 19 number okay. Okay.
Last quick follow up little more pointed out of the money transfer segment given the volatility has had in the last couple of days on competition concerns on pricing so to be clear.
I mean, you have wise out there lowering price and you have Facebook and others triangle.
Now with lower price alternatives potentially and so you guys are already generally lower do you consider yourself already are generally lower priced than others in the industry and lower margin and higher Commission payout I'm curious how do you think you would stack up in a world where some competitors have to lower.
Well first of all you got to remember.
A dog eat dog business.
Family Remittance business, we're out there competing every day on every street corner and on the digital side.
<unk>.
So.
That doesn't really bother us and actually if you take a look at.
At our numbers and you kind of dig.
This into our numbers theres been some kind of squarely things that have happened because of Covid and we had a lot of good currency volatility last year that allowed us to make money, but as Rick said in his.
Early part of this.
Discussion the reality is we haven't really felt much pricing.
So this idea that all of a sudden we're under the gun on pricing I don't think is accurate.
Yes.
As we said, we see pockets of pricing pressure all the time I mean, this is a competitive world and we operate around the globe. So theres always going to be someone that's.
Offering something for free or.
Something else like that and we have to respond to that.
<unk> and <unk>.
Our response comes in different markets.
Ways, we deliver the products.
Mike mentioned that we're doing nearly a third of our of our business is paid.
Paid out to bank accounts now.
A more efficient way to pay out on and gives us some better economics on that type of stuff.
So.
Since 2007, we've been out there.
And competing and we always generally been.
In.
A better value play than the bigger guys in the market out there.
So we've kind of let's say.
<unk> already been at a more competitive point.
As you know.
And I have not yet found the business that can survive with.
Just given all of its product away free.
Somewhere you have to be able to make money, we've often seen where new entrants will come in at a very very compelling free offer but at some point reality asked to set in and you've got to be able to make money in this business.
Because there is cost of compliance maybe some of these folks aren't new and compliance.
Cost of compliance it's cost of building out a network it's cost of of competing every day.
So we see it out there, but we respond to it every day and let's not forget even just looking.
And at the family Remittance market, we have about $5 five 6% of that.
So we look at it is there is 94% to go we've got a big market out there.
Great and then we will take one more question I think operator before we're going to have that.
Andrew.
Okay.
Your last question is from Mike Grondahl.
Northern Securities Your line is open.
Hey, guys.
Grant's on Joe Lynn and marker tracks could you kind of help us understand the revenue model a little bit there like per ATM or per train.
Transaction.
How do you envision that working.
Yes. So this is Kevin so we've got two revenue models associated with when one is traditional software license model.
The other is a transaction.
Revenue.
Sure model in the case of Chile in more of the traditional.
Software license model in the case of market tracks. It is a revenue share related to transactions.
Got it got it.
And a lot of our installations, we kind of want to.
And especially into these places that are putting it in real time payments or connecting the real time payment engines.
Little bit more transaction based and software based because.
The transactions are low we.
The expense can grow along with the asset a lot of the fin techs, we're working with Mike preferred.
Auction based because they want to preserve the capital. So so we're finding a lot of great opportunities.
To get them in a low with a transaction model and then.
Sure and the profitability as they grow we get to grow which we we really like because we believe in the partners that we're picking up with regards to providing the technology stack.
On average we would say that our bias is always going to be towards transaction based.
We can can we also think that it's very lined up with the partners. We're dealing with we're kind of going into it with more skin in the game more risk taking if you will at the beginning of the transaction because we're not walking out of there with a big software fee and then we benefit on the growth of it. So I think that our interests are more aligned.
Because with the partners when we have a transactional based process and it certainly helps them get into the business easier. If they don't have to write a big check and as Kevin said use a lot of price the capital to be able to get the business going the market tracks thing.
We put out a press release about a week or so.
And then Mike referenced.
In the review.
Particularly excited about that because they are playing is such a large market hundreds of billions of dollars.
That market Hasnt changed in decades.
And there is a push to try to move to cashless.
And in our opinion these market tracks guys have got a great vision for for the industry and where it's going and we couldnt be more thrilled to be part of it and access our technology service provider I think that's got a lot of potential.
Got it and just lastly, as a follow up with market tracks.
Do you guys know like how many casinos your product is in and what that rollout might look like.
We do we're not at Liberty to discuss it but I'll tell you Mike.
The list is greater than our ability to implement.
Got it.
<unk> helpful. So thanks, Gus sales pipeline is extremely strong.
And we're having to pick and choose.
There is more opportunities to deploy and we have the capability right now to deploy into.
Good to hear thanks, guys.
Excellent.
Alright Bulletin that last question I'd like to thank everybody once again for joining us on the call today.
We look forward to giving you an update then another 90 or so days. Thank you very much.
This concludes today's conference call. Thank you for joining you may now disconnect.