Q1 2022 Euronet Worldwide Inc Earnings Call
Please continue to standby today's conference is scheduled to begin shortly thank you for your patience.
[music].
Okay.
Yeah.
Greetings and welcome to the Euro and that worldwide first quarter 2022 earnings Conference call. It is now my pleasure to introduce your host Mr. Scott Cleveland General Counsel for Euro net worldwide. Thank you Mr. Cleveland you may begin.
Thank you good morning, everyone and welcome to <unk> quarterly results conference call for the first quarter 2022.
On this call we have Mike Brown, our chairman and CEO and Rick Weller, our CFO before we begin I need to call your attention to the forward looking statements disclaimer on the second slide of the Powerpoint presentation, 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 forward looking statements. As a result of a number of factors that are listed on the second slide of our presentation.
Except as may be required by law <unk> does not intend to update these forward looking statements and undertakes no duty to any person to provide any 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 will turn the call over to our CEO , Mike Brown Mike.
Thank you Scott and.
And thank you everyone for joining us today I'll begin my comments on slide number five.
Finally, I am pleased to be here today to talk to you about our strong growth rates in what is typically our seasonally lightest quarter Q1.
The strength of our balance sheet continues to afford us the opportunity to make investments that will allow us to continue to grow the business.
During the quarter, we weren't able to close the acquisition of Piraeus bank's merchant acquiring business we.
We repurchased $70 million worth of shares we added more than $100 million of cash to our Atms to support increasing transaction trends that we're seeing and we made an investment in a company called market Trax, who previously announced will utilize our <unk> technology to further grow there.
Business.
All of these items are strategic decisions that position us to continue to deliver strong returns for our shareholders.
Our ft results continued to improve driven largely by a strong recovery of travel stemming from reduced COVID-19 restrictions across the globe.
In fact, we saw a constant currency revenue and ft to exceed the first quarter of 2019 revenue, albeit from a different mix of transactions with our most profitable transactions still lagging 2019 levels by about 30% as we move into the second.
Quarter.
<unk> continued to see strong demand for digitally distributed products the.
The money transfer results were generally similar to the trends we saw in the fourth quarter with double digit growth in our direct to consumer digital transactions and our U S and Europe outbound transactions, partially offset by declines in Asia from the lingering effects of the Covid restrictions together with continued declines in the.
Mastic transfers and investments in our network and our new product expansion.
And while Im extremely pleased with the double digit consolidated results for the quarter wasn't without its challenges.
We commenced the first quarter under the presence of the omicron variance.
And as soon as we thought we were on the other side of that one we saw the onset of rashes invasion of Ukraine, which created uncertainty across the globe.
Additionally, we have started to see inflation creep into discussions across our business and while the invasion of the youth.
The Ukraine and.
Inflation does not have significant impact on our first quarter financial results, we would be remiss not to acknowledge the additional uncertainty caused by these events.
We are pleased that the diversity of our products and markets has enabled our core business to remain strong and we continue to be optimistic for 2022, and our outlook. Let's go on to slide number six and I'd like to tell you a little bit more about our response to you Craig.
Slide six rashes invasion of Ukraine has left the Ukrainian citizens, including our 2006 Ukrainian colleagues scrambling for safety and necessities.
We can't Fathom, what they are experiencing we have undertaken many measures to help support our employees and more broadly the Ukrainian refugees during this time.
We have taken a significant number of steps across the business to ensure that the Ukrainian citizens that have left their country can access their cash and while we have closed our 450 Ukrainian Atms, we removed ATM fees from all urine at Atms for cross border transactions made with <unk>.
<unk> cards in the bordering countries, Poland, Hungary, Slovakia, Romania, and the Czech Republic.
We have added the Ukrainian languages and option across our ATM estate, we have opened our deposit network for cash deposits into the Polish humanitarian action account together with waiving fees on these deposits we have instituted an indefinite fee waiver for domestic money.
Transfers and money transfer sent into Ukraine that are initiated on the Maria App and on any Polish Atms.
We have also partnered with the United Nations, Santander and Blake to off.
If our cash assistance to people from Ukraine to the Polish offices of the high Commissioner for refugees known as the UN Chr UN Chr wants to make monthly payments the eligible refugees from the Ukraine. These payments will then leverage our cartilage transaction.
<unk> technology to be paid out on yearend at Atms of which we have over 8000 in Poland using that code from Blake. This provides a convenient way for all Ukrainian citizens to collect money that they may need.
And all of these measures provides some level of relief for Ukrainian citizens.
I am most proud of how our urine that employees have come together to support our colleagues in the Ukraine.
Our Ukrainian colleagues and their families faced uncertainty and the need to find safety outside of Ukraine without being asked or European employees from as close as Poland as far West as Spain has stepped up to help they.
They are paid for flights and train tickets to get these families to safety. They have taken these families into their homes. They have provided cash donations for food clothing, and whatever other necessities are needed.
I'm extremely grateful for the dedication of our teams every day, but the selfless actions highlight exactly why I am proud to be the CEO of year on that.
To date the war has had minimal impact on our financial statements. We are monitoring the impact to travel across Europe , particularly in eastern Europe , where we have seen a downturn in travel to eastern Europe compared to that.
Prior to the invasion.
But that seems to have been made up by better than expected travel to western Europe , Let's go on to slide number seven I will discuss the travel trends in more detail.
On slide number seven you'll see an updated view of the graph. We have provided the last couple of quarters. This graph shows actual and projected European flight data for this year versus 19 overlaid with our international cash withdrawals for the same period as well as our transaction recovery from non E.
New cardholders Ukraine.
Ukrainian to lap their country.
Resulted in a substantial increase in their international transactions, which we do not expect to continued long term nor do they reflect what the travel recovery trends really looks lot. Accordingly, we have presented this crap. Excluding these transactions to provide a more accurate picture of what we.
See in the tourism transaction recover.
As you can see about halfway through the first quarter, we began to move past the impacts of the omicron variant and the actual flight data regained its improvement trajectory as depicted with the green line on the graph.
Eurocontrol has provided three scenarios on travel improvement through the year with the Blue line, representing the most optimistic case scenario.
The extension of the Green line, representing their base case, and the yellow line, representing their low case scenario.
All three scenarios travel trends improved throughout the remainder of this year.
Even in the best case scenario, we don't get back to 2019 travel levels in 2022.
In comparison, you can see that our international transaction recovery represented by the Tan line recovered just about in lock step with that.
With the actual flight data trends for February and March However, our most profitable non EU transactions continued to lag the travel recovery, though we are pleased to see such a sharp recovery in these transactions as COVID-19 restrictions were lifted following the omicron variance.
Everything we see in the news points to a strong travel recovery. This summer yesterday in fact, United Airlines announced that they plan to fly 25% more flights across the Atlantic. This peak travel season compared to 2019. Moreover, many sources have noted that travel will only.
Muted because there has not been enough.
There has not been a full recovery in supply for travelers Airlines hotels restaurants, and tourist attractions are still struggling with labor and supply shortages. It is quite pleasing to see that it appears we are on the other side of the pandemic.
And people are once again comfortable and willing enough to trap.
Now, let's move on to slide number eight.
Our teams continue to deliver new agreements that will grow this business during the quarter, we launched JCB card acceptance on our ATM network in Ireland opening our network to a new population of users. We signed a network participation agreement with medical Leann made a land bank a digital bank.
In Italy, now the bank's customers will have convenient access to their money by using any of your <unk> Atms in the country, we expanded our deposit network in Poland through an ADT outsourcing agreement with BNP Paribas.
And in the U S Dolphin signed 16, new ATM outsourcing agreement with credit unions across the country.
We continue to add more Atms that are existing markets. During the quarter. We added another 400 deployed Atms 415 outsourcing Atms and we reactivated 738 Atms in anticipation of the upcoming travel season that had previously been closed due to the due to COVID-19 .
Or the off season, while we have seen some compression from supply chain issues and the war in Ukraine. We continue to believe that we will add somewhere in the range of 4000 to 4500 Atms for the full year now we can go on to slide number nine and discuss the most substantial ft high.
<unk> of the quarter, the completion of our acquisition of Piraeus Bank merchant acquiring business.
Slide nine as you likely read in our press release, we have now closed this acquisition appraise, thanks merchant acquiring business and what this purchase our acquisition gets us a 20% share of Greek physical in store acquiring volume and more strategically a 40% share of the great digital acquiring volume.
Chris will provide distribution and shared services as part of an exclusive long term agreement.
The purchased closed on March 15th all of the emergence and operations have been successfully transitioned to <unk> and.
And <unk> also extended their long term processing agreement for $5 5 million per ask issued debit and credit cards for another 10 years.
Through the acquisition, we will leverage our proprietary technology and expand our omnichannel payment strategy. The Piraeus merchant acquiring business is expected to complement our history of double digit growth rate. We are pleased to see that this business has continued its growth trajectory since we.
Now the acquisition in early 2021, and it supports our view that we will end the year with consolidated earning results similar to those of 2019.
As we always have we continue to look for ways to continue to deliver value for our shareholders and we expect this acquisition to contribute nicely over the coming years.
As I close my comments on the FTC I think it's worth repeating that we are very pleased with the current travel trends that we're seeing in Europe , particularly in Western Europe , we expect to have a strong travel season, this year and as others in the travel sectors anticipate a full recovery in 2020.
Three now let's move on to slide 10, and we can talk a little bit about ebay.
Slide 10.
<unk> team continues to expand its leading content portfolio and distribution channels and you can see in the <unk> segment numbers. The first quarter was essentially flat.
There we've been through some of the puts and takes and reiterate that we continue to expect that the <unk> team will deliver low double digit earnings growth for the full year. This year. However, as we mentioned in the fourth quarter as we add more products to eat based portfolio, particularly more promotional campaigns that could use.
Our <unk> unit or repay the ipe results are going to be a bit more on even through the quarters.
That was turned in the first quarter, where we did not have the same promotional activity and as the first quarter of the prior year.
However.
Based on our discussions with customers, we anticipate strong growth in our <unk> business and expect more promotional activity in the third and fourth quarters than we have ever had so while the comps for the quarterly period are a bit difficult. We continue to expect our ninth year of earnings from APAC.
During the quarter ebay continued to expand digital branded payments sales through digital distribution methods. We added apples App store code service on pay T. M. A large mobile wallet in India, We launched Google play at Sea discount the second largest online retailer in France, and Turkey, we add.
Our digital branded payment portfolio to three new online retailer <unk>.
And we continue to expand our digital distribution of mobile content by launching mobile recharge service on.
New a leading digital platform led by the Tata group in India.
Our physical distribution also continued to expand.
In Spain, and Portugal, we launched our digital branded payments portfolio and large retailers, including car for Wharton and Roski.
We launched Nintendo distribution and Harvey Norman and the good guys in Australia, and we launched Microsoft Xbox All access distribution with Ingram micro in Mexico.
And as you can see on this slide we continue to sign new agreements for more products distributed through all of our channels.
With our continued product development distribution expansion and technological advantage, we remain optimistic ebay will achieve nice annual operating income growth. However, as we mentioned last quarter and we have seen in the first quarter results. As we are as we introduce more products fee based portfolio the ipe busy.
Those results will become more uneven through the quarters ending the year with an annual growth rate as I mentioned earlier that we expect to be in the low double digit range.
With that I'll move on to slide number 11, and we'll talk about money transfer for a bit.
We continue to expand our industry, leading payments and remittance network, which now reaches 495000 physical locations across 164 countries as well as $3 6 billion bank accounts and $443 million of wallet accounts.
While our money transfer network physical locations grew at 4% rate.
Over the prior year and our response to the Russian invasion of Ukraine. This segment suspended its service to Russia, Belarus, and Tajikistan, which resulted in a decline from the year end count by approximately 20000 locations.
Our country count was relatively stable as we added two new countries to our distribution network.
During the quarter, we extended our Walmart agreement now taking our partnership through 2026.
In addition to the renewal of our Walmart to Walmart and international outbound services we.
We expanded our Walmart to Walmart partnership to Walmart Mexico.
Walmart continues to be a great partner and we are pleased to extend our relationship through April 2026.
We expanded our XD business reach and product customers in Malaysia can now enjoy ex these world class service and equity clients in Europe , and the Americas can now enjoy the convenience of cash payout across Ria as network.
Finally, we continued to expand our real time payments availability, the Kenya, and Costa Rica, our money transfer business continues to deliver strong revenue rate growth rate and we expect that the operating margins will improve in the second half of this year as we lap some of the investments we made in technology last year now let's move on.
Slide number 12, and I'll provide you an update on our technology platforms, beginning with Antelope.
Slide 12, if for some reason it is not registered what do yet data line as the world's largest international real time payments network since we announced the launch of Dandelion in November we can have continued to improve its reach and functionality and even more importantly grow with it.
Existing customers add new customers and develop our sales pipeline.
Moreover, as we have continued to review with prospects the breath and the capability of the network. We are consistently confirming through those prospects the dandelion as the world's largest and most advanced ubiquitous network available as far expansion Dandelion now has account deposit service to 100.
In 32 countries.
Number we expect.
To grow to about 150 by the end of this quarter second quarter.
We accomplished a key milestone this quarter by joining the single Euro payments area you might know this a sapper instant transfer scheme as a direct participant which will allow dandelion to offer instant money transfers and payments originating and terminating across the 36 separate region country.
And the financial institutions participating in the scheme, we're excited to be part of <unk> and we anticipate that this will allow us to expand our product offering to customers across Europe . We're also making good progress on the sales pipeline data line is already trusted and used by the likes of Microsoft.
Sage is.
<unk> zoom and remit Lee and we also added Rep tell a Nordic based telco startup that offers international calling in financial services to over 1 million users.
Our pipeline continues to grow we have added an impressive list of both established financial institutions and an ever growing list of Fintech, both established and emerging ones.
A consistent theme we continue to hear is the global payment utility dandelion has to offer folks.
Done a great job at attracting customers, essentially enabling fintech customers to more efficiently and effectively get value from their account. So stay tuned as we build more and more momentum what Dan the line now.
Now I'll move on to slide number 13.
And we will talk about rent.
As shared with you previously fintech and the emergence of digital banks, coupled with the emergence of real time payment schemes for our consumer and merchant payments are at the forefront of innovation in the digital payments ecosystem.
Our consumer and merchant or supplier demand for real time payments and all of the underlying data and settlement requirements provide a great opportunity for urine at where our modern ran technology is best suited to deliver innovative solutions on the back of these macro trends.
To demonstrate the growing interest and acceptance of our Ren technology, We signed an agreement with East West Bank in the Philippines ran will allow the bank to connect to instant pay the real time payments infrastructure in the Philippines.
Under this agreement <unk> will provide an end to end service to the bank, including an ISO 20022 connection to insert the PE facilitating peer to peer peer to biller peer to merchant transactions and all of the overlays, including a request to pay apps for merchant payment.
And more this is another example of where we are providing this bank with a full complement of the most advanced Fintech services currently available in the world.
We also signed a red cell service and Pos merchant management agreement.
Banking network, Suriname, known as BNET, B nets will be migrating to Ren to deliver on our central bank objective to become a national switch for the country and to enhance financial inclusion with the under banked population of Suriname.
In Botswana, we signed an agreement with spot cheap fintech that workforce financial institutions corporates and retailers.
Sparks, we will implement ran to provide an integrated payments gateway offering consumers and businesses. The easy movement of funds in purchases in the United States. We made an equity investment in market Trax Las Vegas based Fintech company that is disrupting the multibillion dollar gaming industry with a digital casino.
<unk> system, you May remember last year, we signed an agreement with Mark or track, which licensed our ran payments technology, where rent is powering the marker track solution, including patron identity.
Verifications underwriting payments processing and settlement and more while not a requirement for the selection of our ran technology. This equity investment will accelerate market tracks as growth, allowing them to capture a larger share of the casino marker market.
Finally, we launched a cross border QR code processing capability for member banks of P. T gel in in Indonesia, with the Central Bank infrastructures of Thailand, and Malaysia. This is an important project through this project consumers from all three countries, we will be able to make an excess.
Instant cross border payments for goods and services.
Using our mobile App. This is another example of how RTP systems are disrupting the archaic legacy cross border schemes.
As you can see we continue to develop the capability to rent we are starting to see an uptick in our sales pipeline at banks and Fintech recognize the significant benefits of this technology.
As I close my comments I'd like to reiterate the good first quarter, particularly from where it started what that omicron variant.
We continue to see improving travel trends and each day more and more stories come out supporting strong travel demand our technology platforms are making really strong advancements in our EP and money transfer teams continued to build network products and distribution channels to continue strong contributions to our consol.
Today the result with.
With that I'll turn it over to Rick.
Good morning, and I'd to welcome you for joining us today I'll begin my comments with.
With the balance sheet on slide number 15.
As Mike mentioned, we are extremely pleased to deliver.
Our third consecutive quarter of double digit growth on consolidated revenue and adjusted EBITDA.
The strength of our balance sheet allowed us to make investments during the first quarter that we expect will provide for continued value improvements for our shareholders in the coming years.
As you can see on this slide.
Ended the first quarter with $986 million in cash and approximately $1 8 billion in debt.
The decrease in cash and the increase in debt is the result of the closing of the Piraeus Bank merchant acquiring business.
The repurchase of approximately $70 million in our shares.
Cash used to build the Atms in anticipation of the travel season.
And an equity investment in marker Trax.
We generated approximately $20 million in free cash from operations, which partially offset the uses of cash.
On slide 16.
You can see that for the first quarter, we produced revenue of $718 million operating income of $36 7 million and adjusted EBITDA of $79 $5 million we.
Levered adjusted EPS of <unk> 69.
200% increase from the 23.
From the first quarter of 2021.
Next slide please.
Here on slide 17, we present, our three year transaction trends by segment.
<unk> transactions grew 44% as a result of the improving domestic and international cash withdrawals together with a continued benefit from a significant increase in low value point of sale transactions in Europe , and low value payment processing transactions in the Asia Pacific market.
Ebay transactions grew 30% driven by continued strength in mobile top up and digital media content distributed through digital channels.
Money transfer transactions had a net increase of 7%, including 10% growth in the U S outbound outbound transactions.
The 15% growth in international originated money trends per transactions.
Excluding the middle East and Asia, and a 38% growth in direct to consumer digital transactions.
This growth was partially offset by declines in the domestic business and a 9% decline in money transfers originated in Asia Pac and Middle East, where Covid restrictions continued to weigh on transactions during the quarter.
On slide 18 now please.
We present, our results on an as reported basis.
We have started seeing greater impact of FX volatility on our earnings brought about by uncertainty in global events, especially toward the latter half of the quarter with continued slippage following quarter end.
Year over year, most of the currencies in the major markets, where we operate declined in the mid to upper single digit range.
To normalize the impact of these currency fluctuations we have presented our results on a constant currency basis on the next slide.
On slide 19 now.
The strong improvements in DFT revenue operating loss and adjusted EBITDA were the result of increased domestic and international cash withdrawal transactions driven by improving travel trends as more and more countries lift their COVID-19 restrictions.
We also continued to add more Atms in anticipation of a strong travel recovery this year.
And a nearly full travel recovery in 'twenty three as predicted by Eurocontrol.
On a year over year basis revenue and gross profit per transaction expanded as a result of improving international transactions, which generate more revenue per transaction than do domestic transactions.
<unk> revenue grew 3%, while operating income and adjusted EBITDA declined, 3% and 4% respectively.
Revenue growth was driven by continued expansion in mobile and digital branded payments together with the continued growth of the digital distribution channel.
Offsetting revenue growth were three items, the previous fourth quarter announced loss of a key German b to b customer.
The India government's halting of certain digital games for data privacy concerns.
And lighter year over year promotional activity.
For perspective had these three items not been in play this quarter on a pro forma basis.
<unk> gross profit and EBITDA would have each grown approximately 9% year over year.
As Mike said, we do expect to have a much more robust level of promotion campaigns. This year.
So while some unevenness and again as Mike said, we'd still expect the full year results to be in the low double digit range.
Finally for ebay setting aside mix shift driven by the large increase in the low value transactions in India and the loss of the Conduce B to B customer revenue and gross profit per transaction expanded during the quarter.
Money transfer revenue grew 8% as a result of 10% growth in the U S outbound transactions, 15% growth in international initiated outbound transactions, excluding again, the middle East and Asia.
38% growth in direct to consumer digital transactions. This growth was partially offset by weakness in the domestic business and a decline in transactions in the middle East and Asia of.
9%, while Asia has recovered.
From the Covid restrictions more slowly than Europe . We are pleased to see an improvement in the rate of decline this quarter and in the first quarter most of the Covid restrictions in Asia, and the Middle East, where finally lifted and countries began accepting.
Migrant workers again.
As these migrant workers start to return to work, we would expect the momentum of our Asia Pac and Middle East business transactions.
Transactions to accelerate throughout the balance of the year.
These factors together with continued investments in our network new products technology and advertising resulted in both operating income and EBITDA growth of 2% revenue and gross profit per transaction remained relatively stable on a year.
Year over year basis.
Next slide.
Before I close my comments I'd like to take a minute to update you on our adoption of the new accounting standard related to our convertible bonds.
For all the accountants in you out there this is likely a real treat.
For all others. This is likely as dry and boring is it.
But since the new standard has an impact on a few lines in our financials, we thought that it would be good to provide you a map of what changed I don't intend to review all of these numbers, but I'll try to as briefly as I can to describe the most meaningful impact that is.
The calculation of earnings per share in.
In the old standard a portion of the convertible bond had to be assigned to deferred interest and was charged through the income statement as non cash interest expense about $16 million a year.
The fully diluted shares outstanding included potentially issuable shares determined using the treasury method.
Only.
Only if our share price was trading above the conversion price of about $189.
The new standard eliminates the assignment of the deferred interest as well as the treasury method to calculate the diluted earnings per share.
Essentially the new standard treats the bonds as if all shares possibly issuable upon conversion are outstanding and the diluted share count whether or not our current share price is greater than the conversion price.
Well, we're obviously obligated to follow gap, we have elected to be consistent in the way we present, our adjusted EPS, which means that we would not include the dilutive shares in our share count unless.
Unless our share price exceeds the convertible price.
For those of you that are experienced design am meaning older.
This is about the fourth time, the FASB has changed the accounting for convertible bonds.
Some of you might agree with me that.
It's going to take a fifth time for them to get it right.
As I close I'd like to reiterate mikes comments.
That the early travel season trends together with the positive news stories coming from the media and various travel research agencies underscore our optimism that we will see a very good travel season this year.
These improving travel trends together with the investments we have made to grow the business and our new product developments.
Would expect second quarter 'twenty to 2022, adjusted EBITDA to be in the $150 million to $160 million range.
This nice sequential increase reflects the more traditional seasonality patterns, we see in the business, where the first quarter is the lightest.
Followed by the fourth.
And third quarters.
And finally.
This second quarter outlook and the momentum we see in the tourism recovery, we continue to be confident the full year 2022 earnings will be similar to those of 2019. Despite recent FX pressures.
With that I'll hand, it back to Mike to wrap up the quarter.
Thanks, Rick.
Close I'd, just like to reiterate the confidence that I have in all areas of the business.
We are seeing all of the right travel.
All the right trends as travel returns and we are positioning our emt segment to capture those transaction we closed.
<unk> Bank merchant acquiring acquisition, which we expect will contribute nicely to our earnings growth in the coming years. He pay continues to grow its digital branded payments content.
<unk> expand its distribution channels, our money transfer team continues to deliver double digit transaction growth in the U S outbound direct to consumer digital and our international outbound transactions, Excluding Asia Pac we are beginning to see migrant workers come back to Asia, and therefore, we would expect good growth momentum.
In that region in the quarters to follow.
And our tech platforms continue to grow with Rand signing three more agreements, bringing the total revenue, we expect to more than $90 million over the next six years and dandelion is focused on enhancing his features and building its pipeline.
To sum it up after two years of crushing travel restrictions due to Covid I am finally in a good mood with that I'll close my comments and we'd be happy to take questions. Operator will you. Please us.
Certainly to ask a question you need to press star one on your telephone to withdraw your question. Please press the pound key.
And our first question comes from Peter Heckmann of Davidson. Your line is open.
Hey, good morning, Thanks for taking my questions I have several but I just wanted to start out you.
You may not be able to comment in any real detail, but just curious how youre thinking about that expansion of the Wal Mart contract to include U S to Mexico to answers.
Oh, well, we're certainly.
Happy about it.
Yeah.
I mean, we've been you know as you know we kind of broke the mold by doing domestic transfers with Walmart.
A decade ago and <unk>.
This expansion to Mexico is just more transactions. So we're very happy about it.
Okay. That's fair and then just in terms of the cost pressures and inflation.
One of the bigger manufacturers that came out yesterday and talked about some of the impacts on their business. How are you thinking about cost.
Cost pressures on your ATM hardware purchases and as well as Pos devices and how does that play into some of your deployment plans.
Well.
Pete we certainly given thought and consideration to it but in the Grand scheme of things.
Capex in our business for whether its Atms or.
Or Pos devices is relatively small and.
So we will deal with the cost as they come up I mean, we're seeing other cost.
Pressures across our business, whether they are from the labor fronts to the.
It's a cash delivery and maintenance and things like that so.
And then as we take a look at our business I think it's fair to say.
We probably feel more.
Bullish and optimistic about the.
Tourism recovery now than we would have even you know at the end of the.
When we announce our fourth quarter results.
But we've also now seen a couple of other things creep into the picture as Mike said.
Seeing inflation.
Inflation is a bit more we're seeing that some that inflation is having a little bit of impact on some of our customer trends not in a big way, yet, but kind of maybe seeing some leading indicators.
And as I mentioned FX.
But despite those we continue to feel confident that we will be at a similar 2019 earnings number. So clearly some of those moving parts are coming into the picture, but we've seen some robust numbers on the travel side, which give us confidence to be able to.
Manage within within that for the P&L for this ERP.
Okay. That's fair and then just on the seasonality on PB MAA on that $100 million of revenue.
Ft, or just a little bit more weighting to the fourth quarter for holiday seasonality, yeah, no it's going to be okay. So its a kind of a weird hybrid.
It will let's not forget that these are our lots of Pos terminals all across grades. So the bulk of their customer as you'd think would be the locals, there's 10 million grief, but let's not forget there's going to be 33 million visitors on a busy year degrees. So you get a bit of that travel kick and then.
Obviously like everybody else around Christmas time.
Alright, Thank you I appreciate it.
Thank you and our next question comes from Andrew Schmidt of Citi. Your line is open.
Okay.
Hey, Mike and Rick Thanks for taking my questions good to see the travel pick up here long awaited.
Right for sure.
It seems like you have a lot of momentum here, especially yes, T going into the second quarter and third quarter and I appreciate that there's some headwinds.
There might be a peering.
Yeah, just just reiterating that seven dollar number or the similar earnings to 2019.
Is that in your view kind of a beautiful thresholds based on where you sit or.
Or are there are these other offsets perhaps.
We'll restart the year inflation things like that relatively meaningful so the full year, just trying to get a picture if you could sort of size any potential impacts how you'd characterize that full.
Full year EPS pictures that'd be great. Thanks, a lot.
Yes, Andrew.
What I would say is that.
We're obviously optimistic about the travel there but.
It still is a bit of a wildcard I would tell you that what what I'm seeing what I'm hearing what's coming out every day in the press.
Even even some information.
Early this morning, I read a headline.
There.
<unk>.
Noted that that one some of the most significant hips or.
Searches were for travel related things I think more specifically like.
Islands, and beaches and stuff like that.
So we're.
We're seeing stuff come out daily that just continue to increase our optimism.
Four.
Really good travel so I think that that it would appear now there is a greater likelihood that we'll have a better travel season this year than a let's call. It a lesser one.
I, even read something.
Headline coming out from the U S CDC, where you're essentially now they've said well they've downgraded to.
The virus to no longer being considered a pandemic in the United States.
So.
It would appear as if there is less of a likelihood that a.
Concerning variant would pop up now so I think right now it looks like all the multi the momentum is moving in our direction and.
If I were to gas.
And I think that's what you're asking me to do here is to guess is.
Whats the likelihood of being better than the seven I I think it's it's a reasonably decent likelihood, but again, it's a wildcard on on just how robust the travel will be.
And if there'll be any of these kind of supply chain issues are.
Labor shortages at airports or whatever that will kind of muck it up a little bit, but I'd say everything pointing in the same direction. The airlines have made money in a long time, they're all trying to staff up and.
And there isn't going to be any deals go into Europe . This summer nothing is going to be on sale because demand is high.
But it's also encouraging to when you take a look I mean on that.
On the plus side for us when we look at the FX the drifting down of the euro while the Euro is now at about one O six or something like that it's nearly equal to the dollar right. So it's a it's a good value for U S persons to go to Europe right now so I think that.
Given the fact that they've not been able to travel.
The Euro is is is weaker against the dollar roll by them a lot more over there. So you know those are let's say at least some some positive factors as well.
So super helpful context, I appreciate that.
And then just to two questions just to wrap up I guess within has your outlook changed from that sort of 70% high value transaction recovery and then and then separately just to just to wrap up my questions, just curious where you're seeing the most demand from the rent side.
Thanks.
For components there. Thanks, a lot okay. So.
With respect to the 17th.
We mentioned in the first quarter that were down about 30% on non EU transaction. So that seems consistent that could get better as the as the season continues.
Thank the Americans are and which are the are the second biggest group of non EU people.
That would come to Europe .
I think theyre getting confidence so that number could improve we'll just have to wait and see.
With respect to Iran. Okay. So this is really interesting.
Our very first you might call it epicenter of of lots of deals originated in the Asia Pac area and primarily that's because the banks over there feel extremely threatened by all of these mobile wallet and you can read about everybody from how they pay to pay P M to X and Y and Z and.
India and all across Southeast Asia.
These wallets are kind of scared the bejesus out of banks banks, they're going to have to be more responsive less conservative better technology et cetera, and oriented perfect Tech stack for that were not built for ISO $85 83 transactions like everybody else in the world like all these other back offices.
Which was a standard of delivered 40 years ago. We're built for ISO 20022, all of these extra features and functionality like we just mentioned with east West Bank in the Philippines. So that's where it started but now we're starting to get deals in South America as well in Africa, We've got deals Cook.
So I think just between US guys I betcha the U S will be one of the later.
Areas to do this because the banks over here are kind of.
Fat dumb and happy right now so they don't feel the impetus for change and for upgrading their technology. Moreover, the.
The Central Bank system hasn't moved as quickly as you look at all across the world everybody to put it into RTP system and the fed now is is slow and delayed and won't allow international.
Remittances or anything he know transfers going into that for many more years. So the U S will be slow, but the rest of the world is a lot of the world.
Got it thank you very much guys.
Yeah.
And our next question comes from Matthew Go Vale, Okay. VW. Your line is open.
Hi, Thank you for taking my question and some really good trends in the numbers here. So that's good to see I guess my first question I know you guys referenced sort of some impacts on the business from inflation, maybe you could help put a finer point there on sort of what how you were seeing there was impact to the business you know for instance.
T Rowe price and impact to sort of sort of a single ATM business and then also interest rates, how does that sort of impact.
Interest expense for cash usage in the ATM business.
Yeah, well I think in both of those.
We are seeing some numbers go up here.
If I, if I'm going to take a look at what we've seen let's call it.
Kind of a macro relative way we've seen.
In the ballpark of $5 million to $8 million potential impact on the cost of of our cash going into the Atms.
And.
And we've seen probably that much or more in in labor costs.
In different precincts are around the business.
So without going through every line item.
And as I said earlier, we were.
I'm fortunate to see some robustness come through in the travel that gives us the ability to cover to cover that but.
That kind of gives you an idea of some of the increased cost that we have.
Baked into the expectations for the year.
That's super helpful. Thank you and then I just had a higher level question on Dandelion, which Mike you talked about and you touched a little bit on sort of the stunning afterwards that but maybe you could elaborate on that a little bit more where are you seeing appetite coming from in the market I know that most of the banks as its index and when could be starting to see some.
Shin from that initiative, and then I guess the other side of it is that a lot of upfront investment required as you bring clients onto that platform.
They're all I have to.
The second question first there is some investment certainly where we're hiring enough people to.
To deal with the opportunities that we have there more in the sales and implementation areas, but this isn't going to change our numbers you know marketed late.
You said, who is the most interested or fintech, they're kind of like kind of fall off the boat obvious because they want to give.
Their customers as much utility as they can with their apps and so and Nobody's got what we have with respect to digital distribution of funds I mean, that's one thing we need to point out there is no company on the planet that has access to the $4 billion break in bank accounts or one.
What accounts and so that just gives us utility that nobody else has plus of course, our roughly 500000 cash locations et cetera, et cetera, So that makes fintech like us banks.
Thanks, though are starting to.
The real serious interest players now were fed Texas is an easy one but banks you know what they are what they now have is they really only have swift as their methodology for payment.
Those plans that's just a messaging system. There's no. There's there's no compliance there's no settlement there's no nothing with those guys you never know when that that when that that payment will find its way to the destination you have no way to track it along the way so having a data line system is something.
That banks can then get to their customers to make them more competitive.
The other thing that we are seeing out there is that the.
The banks will become more and more interested in this type of product.
Product, because they're competing with the fintech or fintech, they're coming in they're agile.
They are they've been our first customers in because they can quickly snap it in they don't have to deal with old legacy technology there.
There also.
Probably.
Smaller more nimble.
Our group and Theyre, putting these kinds of features in the hands of customers and when those customers see that they can make real time payments and they can see on their phone that their payment was just completed and those kinds of things.
The consumers will consistently gravitate to quicker and simpler and better value.
And I think that as we see more and more fintech deliver these.
You know very highly appreciated products to customers the banks are.
Are playing catch up and they will need products like this to be really competitive with the fintech. So we're encouraged by what we see out there on both the Fintech front and the.
Traditional banking institutions.
That's super helpful. And then just one final modeling question from me I guess, what level of FX headwind are you baking into that $7 EPS expectation for the year.
We would.
In our numbers today include what I'll call as is generally the rate that we see.
Now like.
I'd say mathematically it probably was like the last three or little.
The last week or so, but it's a it's a more current rates that we have in there we take the current view of the rates and then we we assume that that view is going to hold through the rest of the year, we don't try to outguess. It.
It's basically current rate structures going forward.
Thank you very much.
Okay.
Operator, I think we've got time for another question herself.
Certainly our next question comes from Darrin Peller of Wolfe Research. Your line is open.
Yeah.
Darrin are you with us.
From your perspective are still underwater relative to what they should be if we didn't have a pandemic.
Theres been outperformance of money trend.
Darren would you mind to repeat Darren would you mind repeating that from the beginning you cut out the first half of the yeah can you hear me. Okay. Now, yes, now I can Uh huh.
Okay.
I was just trying to figure out if you could if you could just summarize the components of the business. You think are still really go underwater by the magnitude from a EPS standpoint relative to what they should be if we didn't have a bad that like in other words.
Versus 19, but more importantly, even if we didn't have it would've grown from 19, So cross border.
That's a really that's a really good point I mean, you've got to remember that.
If we can hit our number that we hope for this year, which is 2019 number that will be with a change in both the PE and money transfer adding.
They're probably going to be coming in $100 million and EBITDA more than they did at 19 this year.
So that's my kind of Ace up my sleeve for next year as we get full travel in 2023, you know you would think that.
We could bring in a big chunk of additional FTE revenue next year, just to get to where we were for travel.
In 19, so that's what's kind of exciting is I've got business as usual growth and all of the segments on adding more atms up going into more countries et cetera, but when travel comes back all the way next year I've got a big bump there too. So this is kind of a one two punch for the next two years.
Right, and then above and beyond that specifically travel, which sounds like it could be an incremental couple of box of EPS. When its full course I think there is theres other aspects right. I mean, you talked about the migrant workers moving now into market. So again, if we added it all up I'm just curious what your thoughts are on where.
We should be if dependent I've never occurred in terms of EPS.
Well.
Yes that will get into some real fine Matt.
Our very core.
Yeah, I was going to say, let's pull up to at least the scud missile kind of range here.
Mike said that we benefited from our other two businesses growing nicely over this pandemic period.
And he mentioned there that they'll contribute in the order of magnitude of $100 million.
Depending on how you model the splits between your.
The segments. What most of you will find is that you would see that there is probably somewhere in the magnitude of.
70.
$5 million to $100 million in EBITDA difference.
On the.
On the left side of the business. Okay. So again real macro level. So if if I just use the low end of that number.
I think you threw out you said could you could you add another dollar or two to your earnings per share I think the short answer to that is yes, but just some real macro math, if I use the low end of that 75 and I take your time.
About a 25% tax rate for.
Again macro math purposes. So it takes that time 0.75 is $56 million and we've got about 52 million shares so that would map out to being a little bit better than a dollar now.
When we're working with some real macro kind of math here. So I think it clearly would support your thesis of maybe another dollar.
Getting up to the two kind of dollar range I think would be more dependent upon how well our additional.
Owned Atms would perform.
<unk> 2019, our ATM count has remained relatively the same except we've changed out the mix a bit we've added more of our own Atms to replace outsourced Atms that went out of the picture and many of those outsourced were low value Atms now to the extent.
But those atms perform better than or at least equal to or what we had seen previously.
And that was about a 15% shift.
Well, yes.
And our <unk> our EBITDA.
And I should really used op income Darren instead of EBITDA, because that is where we have some dock we had about $300 million of op income out of it.
<unk> segment in 2019, so if I take that 300 million times 0.15, 45 million times seven five would be 33 divided by 52 would be 65 cents a share now again I'm working with some real big.
Big numbers here. So don't you know if any of this in stone, but I think just kind of mentally thinking through it would kind of support the thesis that you said, if we get back to our full travel recovery numbers, we see the benefit of these additional ATM mix change outs, we had we could we could add another dollar.
Maybe nearly two <unk> to our EPS number so so I think that macro math would kind of support your speculation.
One quick follow up thanks.
Just one quick follow up for you.
Rates interest rates and what that could mean for the business is it right as they increase when you think about the cash flow you have in the business.
We're anticipating that there's going to be.
Another several million dollars in the in the interest category here.
I would say kind of in the $8 million to $10 million kind of range.
Based upon what we've seen in the race and and what we anticipate.
We anticipate what the rate structures could bump up too, but that's kind of what we've got baked in our anticipation.
Got it.
Okay.
Yes.
Alrighty I think.
Operator, we're after the top of the hour so with that I'd like to thank everybody for joining today and I look forward to talking to you. After hopefully a really big Q2. Thank you very much.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
[music].
Okay.
Yes.
Okay.
Yes.
[music].
Yes.
Yeah.
Okay.
Okay.
Sure.
Okay.
[music].
Thank you.
Yes.
[music].