Q1 2023 Euronet Worldwide Inc. Earnings Call
Greetings and welcome to the urine that worldwide first quarter to 2023 earnings conference call. At this time, all participants are and listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star.
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Is now my pleasure to introduce your house, Mr. Scott Carson General Counsel for your network wide. Thank you Mister <unk> you may now begin.
Alright. Thank you good morning, everyone and welcome to the urinary first quarter of 2023 earnings Conference call.
Today's call, we have Mike Brown, our chairman and CEO and Rick Roller R. C F O.
Expectations or predictions of future performance are forward looking statements.
You already have the actual results may vary materially from they always anticipated in these forward looking statements as a result of a number of factors that are listed on the second slide of today's presentation.
Except it may be required by law, you are and that does not intend to update these forward looking statements and undertakes no duty to any persons provide [noise].
You should avoid placing undue rely on on any forward looking statements.
In addition, the Powerpoint presentation includes a reconciliation of the non-GAAP financial measures will be using during the call to their most comparable GAAP measures.
Thank you Scott.
Good morning, Thank you to everyone, who was joining us today I.
I will begin my comments on slide five.
For the first quarter, we delivered revenue of 787 million.
Operating income of 45.6 million adjusted EBITDA of 93 million and adjusted EPS of 87 cents.
Results were produced by strong double digit growth rates driven by improvement.
All three segments, but with a particular.
Typically strong contribution from high value cash withdrawal transactions in the E. M. T segment as a result of the continued recovery in the travel industry.
Next slide please <unk> sic presents.
Presents a summary of our first quarter balance sheet compared to the prior quarter and.
Here you can see that we ended the quarter with approximately $1.1 billion in unrestricted cash.
Decrease in cashiers, largely from 112 million of cash moved into our reactivated Atms in preparation for the summer travel season, together with approximately $28 million in share repurchases during the quarter.
These uses of cash were partially offset by cash generated from operations together with working capital in foreign exchange rate changes of approximately $75 million next time. Please slide seven presents are as reported results for the quarter.
When we spoke with you in February we were seeing some strengthening of our major currencies against the U S dollar.
As we move through the quarter those currencies, followed several roller coaster patterns.
But the net result of the movements produced virtually no impact on our reported results versus are early February guidance.
However, when comparing currencies on a year over year basis. We saw are more significant currency decline in the mid single digits to lower double digit range versus the dollar.
To normalize the impact of these currency fluctuations we have presented our results on a constant currency basis on the next slide.
E F. Key revenue grew 40% operating income grew 224% and adjusted EBITDA grew 98% as a result of improved domestic and international withdrawal transactions driven by continued recovery in travel and pass process.
From the March 22 acquisition of the merchant acquiring business I'd.
I'd also like to highlight that we saw a nice improvement in our newly deployed Atms in the Asia Pac region.
ATM transactions in Asia have not yet reached half of the pre COVID-19 levels as Asia pack is nearly a year behind the recovery rate of the rest of the world, but we are pleased that these machines were producing positive contribution profits in the first.
Quarter, and we expect them to contribute profits for the full year.
Revenue in gross profit per transaction for E. F. T segment remained consistent on a year over year basis.
E Bay revenue grew 5% operating income grew 11% and adjusted EBITDA gruel, 10% driven by the expansion of mobile and digital branded payments together with growth of the disc the digital distribution channel.
Transaction growth outpaced revenue growth due to a stronger mix of lower value mobile transactions in India.
<unk> business produced both gross margin and operating margin expansions over the prior year.
This was a result of 13% growth in U S outbound transactions, 16% growth in international originated money transfers.
Which included 14% growth in transfers initiated largely in Europe , and 18% growth in transfers initiated in the middle East and Asia.
28% growth and Etsy transactions, partially offset by a 17% decline in the U S domestic business.
Additionally, these transaction growth rates included 38% growth in direct to consumer digital transactions.
On a year over year basis, we saw a constant dollar decline in revenue and gross profit per transaction. This decline was largely the result of a shift towards lower average send amounts per transaction, particularly in the X C side of the business.
As higher end customers transferred viewer fun [laughter] due to economic uncertainties.
The lower send amount ultimately results in a lower revenue per transaction.
However, we were able to offset some of the lower send amounts with higher gross profits per transaction on the Rio remittance transfers, which resulted in higher margins.
Before I close I'd like to give you an update on our expectations for the remainder of the year.
You likely saw in our press release that we expected our second quarter adjusted EPS to be $2 per share.
For the full year, we continue to expect to see the business producing year over year earnings growth.
In the mid to upper teens too.
To that end it looks like the analyst consensus outlook is directionally aligned.
Accordingly, after walking through after working through the disruption brought about by Covid and with travel on a path to recovery.
We expect that 2023 will be a record year of revenue and adjusted EPS for the company assuming there are no significant changes to FX rates interest rates and the global economy and other unforeseen events.
I am pleased that we are off to a strong start for the year with near double digit constant currency revenue growth from all three segments with that I'll turn it over to Mike.
Thank you wreck and thank you everybody who is joining us today and I'll begin my comments on slide number can let.
Let me start by just saying that I am pleased to be talking to you about what feels like relatively a normal first quarter ton. We've added three years, one that feels very similar to our pre covered narratives.
Delivered strong year over year performance.
What is our seasonally slowest quarter in all three segments while.
While making mostly think will position us to continue our momentum throughout the year and beyond.
We continue to be encouraged by all the commentary on the news around the upcoming travel season has Rick mentioned, we saw a nice performance from our Atms in Asia. During the first quarter as Covid restrictions have now been fault lay lifted and.
In Europe , which has historically been our primary market. We continued to be optimistic about recovery Eurocontrol recently updated their base case, a flight moments in March and they now expect 2023 to improve to within 93 per cent of 2000.
19 level and we expect our transaction recovery trend largely in line with those improvements further Expedia has reported that interest for international travel from the U S.
Triple digits from the same time last year with additional good news that the average price per ticket is down $125 for the peak month of July and August and as you might remember last year that was a problem there are fewer seats available on airplanes.
And the prices were kind of through the roof. The.
The optimism about travel together with a good performance of our pls acquiring business and our expansion into new markets give us some confidence that we could experience a very strong earache Eft's segment.
Now, let's go on to slide number 11, and we'll talk about some of the <unk>.
Perfect highlight.
11th.
You may remember that over the last several quarters, we have continued to build our ATM deposit network across <unk> and several other countries.
This quarter, we were able to further expand the network and calling by signing a network participation agreement with Millennium Bank Millennium customers can now deposit cash into any participating urine at ATM across the country significantly expanding deposit convenience for millenniums customers.
Definitely we signed 10, new merchant to participate in our deposit network in the same market.
Mania, we lodged multi currency deposit processing for the ATM deposit network first bank in Singapore, We expanded our relationship with development bank to provide ATM card processing for their recently acquired bank in India <unk> Bank.
We continued to be pleased with the performance of the merchant acquiring business that we purchased <unk> bank a year ago.
This quarter, we added all week pay functionality.
I'll pass merchants and greed, which allows the marches to collect and use their revenue earned via card payments and their bank accounts. The very next day 365 days a year.
Additionally, we added approximately 5000, new margins and great.
Finally, we were able to renew several nice agreements during the quarter, including our ATM deployment agreement that the airport thing Copenhagen, and a railway stations across Italy.
Next slide please.
Flight number 12 provide you with an update on our ATM portfolio during the quarter, we continue to evaluate our a T M network in order to make it as strong as possible. This.
Valuation led to a decrease of approximately 150 of our own deployed machines most of them in the Philippines as we reviewed Atms performance at our first real travel season in that market.
Since 19.
Despite the reduction in the number of machines the business perform in line with our expectations and we now have a stronger ATM estate for the remainder of the year. We also reduced our outsourcing machine count, but this is largely from the removal of the remainder of the Atms for our bank and Paul and that we mentioned last quarter.
Additionally, we added more than 950 low margin Atms in India, and we reactivated almost 1600 50 devices that had been closed for the winter season.
Finally, with this that you are likely to ask about our a T. M deployment plans are the remainder of this year.
We still believe that we will be able to deploy approximately 3500 machines and new and existing market by the end of 2023.
To close my comments on E F T I'd like to reiterate that this was a really great start to the year for this segment, we see the macro travel landscape continuing to improve.
We had a very good initial travel season in Asia, we have strengthen our ATM portfolio and R. P. A S. P O S acquiring business is performing very nicely.
<unk> team really seems to be hitting on all sell a nurse and we are excited about the rest of the year now let's go on to slide number 13, and we'll talk a little bit about defense.
Our <unk> team continues to deliver strong results.
Banning its content portfolio across more retailers and of course more market.
During the quarter, we added Microsoft 365 renewals with new retailers in Spain, Netherlands, Germany, and Australia, We launched Alley pay plus in Australia, Disney plus digital and Austria, an air Bnb in Belgium.
In New Zealand, we added our present Mastercard and of foodstuffs, South Island, and Countdown grocery stores. Finally, we side Bill payment services with Fam pay India fastest growing neobank for students and teenagers. It's worth repeating that it was a great first quarter for R E Bay business.
Before we move on a money transfer I'd like to give you a bit more insight into what we expect for epay over the next several quarters.
You are likely familiar with the Lumpiness in our financial results.
That the promotional activity in our consumer rewards business creates with an outsize impact on revenue.
As we think about the second quarter, we expect to see some favorable result.
From the wrap up of some of the prior year promotional activity as well as a new campaign, which will occur during the quarter.
However, you may remember that we had a very strong promotional activity in the third quarter of last year, which will create a tough cop on a year over year basis.
So while the results may be lumpy in the next couple of quarters with a very nice second quarter in a more difficult third we expect this to a low double digit operating income growth for me pay for the full year.
This partnership will allow us to more rapidly expand our network across the 1500 locations in the country.
In Lebanon, we launched cash payout services at more than 550, which money branch locations.
<unk> to this nearly 7 billion dollar market grew 7% in 2022 and represent nearly 40% of its DDP. So we're excited to partner with wish to bring Rhea money transferred to this important market.
They agreement covered inbound and outbound cash pickup and bank deposit and Ria service will be available on wishes mobile App, we plan to add <unk> service in the coming quarter as well.
Finally, we signed 24, new correspondents across 19 countries, which were launched in the coming quarters. We continue to see strong transaction growth across most areas of money transfer business driven by a 38% growth in our digital channel and strong execution across and.
Nearly all of our physical sand channel.
As well <unk> continues to deliver strong account deposit growth what transactions growing 38% in principle transferred to bank and wallet account now representing 32% of total cross border principal transferred.
While Q1 is C as a seasonally soft card at a stop quarter for our money transfer segment, we expect double digit bottom line growth for this segment for the full year 2023 now.
Now, let's move on to slide 15, and I'll give you a little bit of an update on down the line.
During the quarter are active dandelion partners continued to leverage our money transfer network by expanding payments to 21, new countries, which resulted in a 57% year over year transaction growth from our existing partners.
This growth is made possible in part to the enhancement of our network, particularly our mobile wallet coverage mentioned on a previous slot.
Additionally, we continue to innovate this technology that powers dandelion with the addition of several new features in the first quarter you may remember that when we launched dandelion.
We offered our partners the ability to Querry a payment status at any time.
We have now enhanced our offerings to proactively provide customer notifications on the payment status much like when you order a package on Amazon and they tell you when they received the order when the packages shipped and when the package has arrived NASCAR dandelion partners can opt in for Proact.
Transaction tracking to several key destinations in the world and for partners, who are not ready to integrate with our real time API, we now offer batch processing capabilities, but with the same real time payment delivery and compliance monitoring as our API solution.
And our experienced larger banks in particular, often prefer to start with batch processing via their traditional Swift operations and then evolved to the dynamic a P. I N a second phase.
<unk> continued to advance the conversation for partners within our robots pipeline, a bank payment service providers and been fixed.
Please keep in mind that as we go to sign and implement these deals because of the nature of the business. There are heavy compliance reviews reviews by our banking partners and other steps that we must complete before a deal is finalized and occasionally like this quarter. These reviews can cause a delay in a deal being officially <unk>.
<unk>, we thought that we could get a couple of nights deals to tell you about and finish this quarter, but those are slipped into the second quarter. We have some pretty cool names close to the finish line. So I look forward to updating you more on the progress of our data line business during our second quarter call.
Next slide plates.
<unk> number 16 shows are ran highlights for the quarter, while the U S is not seen as significant adoption of real time payment processing and settlement of fun across southeast Asia. We continued to see a significant shift towards a railcard payments and settlement.
Ran his position to help banks with this transformation during.
During the quarter, we launch person to merchant real time payment was security bank in the Philippines now security bank customers can pay merchants directly from their account simply by scanning the QR code at the merchants location or by pushing the payment.
To a merchant via an app.
All of these transactions will be radically the real time domestic payment scheme in the Philippines.
In Latin America, we have now on board. It is a math we are now onboarded as a mastercard engaged partner the Mastercard engage platform connects businesses with qualified technology partners through this partnership with you know work with Ben text and others by Onboarding them as an affiliate and sponsoring them.
Under our scheme membership. We can then provide processing services through a compliant infrastructure connecting Mastercard network for their card program.
Finally, if our pipeline assigned ran deals as strong and we expect these deals to deliver approximately $143 million in revenue over the next six years. We can send you to see strong interests in Iran technology across the globe and we expect to see some nice contributions as we roll out more deals in the coming <unk>.
Orders.
And finally, let's go on to slide number 17, and we will wrap up the quarter.
As I said when I began my comment it's nice to share with you. Some good news for one and a more normal quarter. We continue to believe that <unk> well on a similar path.
On the set will be on a similar trend line with Europe control recovery reports Epay continues to add more products and markets, including some exciting new products were preparing to launch and money transfer continues to expand its physical digital bank in wallet networks, what transaction growth and nearly every.
Back to the business.
I'm extremely excited for 2023, as we intend to move into our post COVID-19 growth cycle as a stronger more nimble company and we expect to deliver a record revenue and adjusted EPS for the full year this year.
With that we will be happy to take questions.
Operator will you please assist and for each of those who are calling in let me limit you to one question before we move onto the next the next person cause there's a whole bunch of people in the queue and then we can you can get back at at the end if there's time. Thank you.
Thank you Mike at this time, we will conduct a question and answer session. As a reminder to ask a question I need to start to press Star One line on your phone.
For your names to be announced to withdraw your question. Please press star one one again, please stand by while we compile the roster.
Our first question comes from the line of Andrew Jeffrey with.
Securities.
Mine is now open.
Hi, Good morning appreciate you taking the question.
Mike the color on the APAC ATM recovery is helpful. Can you talk generally about your beyond Europe .
F T expansion ambitions and just how big that Tim can be and if we're going to be hearing more about non Europe .
Revenue and EBITDA drivers over the next several quarters.
Yeah, it's not just several cars, but several years you know it's I've got eight years that really said developed a network that we have in Europe and Europe .
It was 295 million and EBITDA higher sums of likelihood of 2019, so it will take us a little while to get there, but the nice thing is travelers go to places other than Europe , and I R. A R experience with both the Philippines and with Egypt before and during Covid gave.
That's a lot of confidence about these new markets. So in the Philippines right now Kevin's literally we have about 850 to 900 Atms.
Now they're travel.
The flip of Europe . So Q1 is the tail end of their travel season starts back again in October . So we will see a kind of a lull for the next couple of quarters, just like we do in the winter season for for Europe , and then it'll kick back in.
So we've got a lot of Atms there are Atms. There in 2019 were just screamers throwing up over twice a profit per ACM as our European ones that we're excited.
Egypt to which I don't hardly even understand why but even in the middle of Covid, we're profitable in that market. So people are going there I thought all the airplanes were cancelled, but they weren't somehow somebody got there and they were profitable. We're also have opened up in Malaysia and in Morocco, So you'll see.
As in more countries. This year each of those countries remember Andrew they're kind of a bugger to get started I mean, you've got a sponsor bags and central bank approval and lots of bureaucracy in markets that have never seen a nonbank on an a T. M. So it takes a while to get going but once you get going we found that these.
Market because they are primarily caspase when it comes to travelers are extremely lucrative for us. So we will we will tell you more and more the total Tam of that wouldn't surprise me to at least equal what we have in Europe and all these other markets combined and I haven't talked to you about south of our border there's a lot of opportunity.
There that we're trying to open up as well so.
I think you know.
T. Even though at some point in time Europe got to get to the point, where we start to cannibalize, our our own Atms. It start to have some kind of saturation. The rest of the world is right for the picking.
Super helpful. Thank you.
Thank you Andrew please stand by while we move onto the next question.
Next question is from Andrew Smith with City Global markets you May ask your question.
Hey by K <unk>.
Good morning, Thanks for taking my money.
What.
Could you see enthusiasm about the normalized travel season, I share that sushi awesome.
Given that is kind of the first let's call. It normalized travel season. Some time, what do you see if you can comment in terms of just.
April to date from a high value ATM transaction recovery perspective, and then you know how you're expecting that recovery trend throughout the second or third quarter. Just curious if you can give us any sense of direction. There. Thanks, a lot I think directionally or right. There in line with Europe control Eurocontrol has an improvement every single.
Quarter this year over the prior year, and we will probably improve every single quarter as well.
And that's what's exciting.
<unk> starting off nicely.
You know the big numbers of our in Q2 and Q3, if you look at 2019.
We did 70% of all of our training high value transactions and Q2, plus Q3 for the year. So so Q1 is only 10% and.
19, Q4 was 20% so the big the big money and the big opportunity is coming now it starts to ramp up right. After Easter and just you know hit the apex in July August . So we're pretty excited everything you know if everything just stays on board and you can you can go on the Internet and find all of these figures but.
They're getting better and better every quarter. So we're.
I'd like to remind everybody that prior to 2019, we had 10 years of bottom line growth where R. E. F. T Division group, probably no less than about 25% a year in profit for 10 years running and that's because we were able to expand into more and more new markets and now.
We're back.
Into the race, it's a little more difficult to get into these disparate new markets, because you need licenses and so forth and each one individually where the PSD license in Europe allowed us to have one license for all so it made it quicker, but we still we're pretty excited about what we should see this year and and even this year.
Very best case scenario will still be leaving probably 7% to 10% on the table for next year.
And Andrew I would add just a customized comments you may recall last year. It wasn't long after our first quarter concluded that you started seeing.
Airport problems and airline problems just handling the onset of the volume increases in these countries.
It's good to see that the reportings.
That are coming out now that folks are prepared for that.
They had essentially the off season to kind of get their act together.
And so we're seeing positive reports on the.
The industry, if you will being able to handle the logistics of the onset of of these travelers. So hopefully that continues to be the case as we go throughout this next couple of quarters.
But again it gives us a an increased level of confidence that will will be able to to see these kind of numbers come homeless. This year and add one last thing last year, we had kind of a half a year pretty decent recovery not nearly where we're gonna see this year, but what was Claire.
Clear takeaway was that even though there is COVID-19 and there is a lot of concern about cash based payments versus physical cash while we're finding for that small amount of cash that you need in Europe, because I do have pos's terminals all over the place.
We're still very relevant in cash is still needed.
Got it. Thank you very much guys American strapped destructive I appreciate the comments.
Thank you Anders Sandifer next question.
Mmm.
Next question comes from Darrin Teller of Wolf Research you May move ahead with your question.
Thanks, guys.
Rick I don't know if there's any way to give us a hand with the segment level of expectations for the remainder of the year, a little bit more detail on growth expectations on a segment basis, but like I also just want to help bridge. One last 0.1 last time on the improvement in travel if we were to bridge the mood that puts and takes remind us of what they are in terms of headwinds and tailwinds.
That gets you back to where the Euro control data is because we obviously have croatia sort of a headwind, but we have Asia reopening of the bill and and and.
And then some would you mind just walking us through those puts and takes one more time and if you expect that they get to the 90 <unk> 92 per cent of 19 levels by the end of the year. Thanks again guys.
Yes.
Well, let's see let's let's start with.
Kind of puts and takes.
I think if we reflect back to principally the 2019 era <unk>.
There is probably.
Three or four that principally come to mind here first one would be Russian travelers. Okay. We don't expect that they're going to come back because of the the conflict in the Ukraine and the sanctions that are there. So that's.
A piece that that will just have to grow over.
The next one then.
He is really the knock on effects of the of the Ukrainian impact and we have seen that it is put pressure on transactions and what I would call the border countries.
The I guess the good news about that is you know those are are are real.
Heavy as countries out there you know the the.
Heavy as countries when it comes to to.
To the tourism are your your standard European travel countries. The the UK the Frances Germany's the Italy's the Greece's the Spain's the Portugal's.
And I would say also.
The.
Croatia Okay.
And so again as Mike said, we're seeing we're seeing very consistent recovery in line with what our recovery numbers are versus the euro control.
Kind of as a reminder.
Going back to 2020 on the onset of <unk>.
Covid, we look to see if there were.
If there was a third party data that we could look to to try to track what we should expect to see in terms of our recovery.
And.
What we found is that wallet it's not.
Perfect match, it's very.
It has good correlation we could find that correlation prior to 2019, and so we look to see if that correlation would hold up after that and if you draw the lines on a sheet of paper you can see that they do so we continue to find that that our recovery is in lock step with what you're seeing out of.
Out of Eurocontrol, So and then another one of those.
Those items.
In there as I mentioned was was Croatia as you recall, Croatia went to the euro.
And what we said is that we find that there are other right opportunities.
That we have availability to that will largely offset that together with making the operational improvements by pulling out Atms that will no longer be be profitable under a higher rate structure.
So.
That we.
We essentially have largely covered that as we said.
And and so I think as we look forward in terms of getting back to let's call. It in theory, 100% kind of recovery levels of 2019.
It's really going to be the continued movement the improvement on the aquarian situation, how it resolves itself and the and then ultimately the.
Total travel recovery.
As I said.
Russia and transactions, we won't recover those but will grow over those through other initiatives.
So that's kind of what I would look at is the puts and takes.
And then the final point is on what our growth expectations are for each of the three segments and and we continued to share to have the same expectation Darren.
We expect that.
That will continue to see very nice strong double digit growth rates out of our Eft's segment.
That's driven by both won the continued travel recovery and to his mic set the the other country.
Launches and developments.
And as we've consistently talked about but the continued sales of our <unk> product that that will continue to have an an.
Enhancements and not to mentioned.
Forget to mentioned the the acquiring business that we picked up in Greece.
Mike said, we had nice growth out of it. So it will those all will really add to a nice strong double digit right there on the.
On the.
<unk> business as we've said, we generally expect that the revenue growth rate will be kind of in the upper single digit range with the operating income growth rate in the lower lower double digit range.
And again you can see that that's the same kind of results came came forward. This quarters as Mike said, we do expect a little bit of Lumpiness as we move throughout the year.
We will have a really nice second quarter.
Because of the completion of.
Some promotional programs the the launch of of some new ones.
And then tough com port last year in the third quarter.
But again wrapping up the whole year again, we expect to see that low double digit growth on operating income growth and E Bay, and then finally to round it out with money transfer.
We believe that our revenue number growth rate would be in the.
In the lower double digit kind of range kind of.
Put it in that 12 teen 13 niche kind of range.
With a little bit better on the operating margins operating profit side.
We as Mike said.
First quarter, there typically is a little bit.
A lighter it always is in our money transfer business we.
We expect to see that start to pick up its pace here in the second and third quarters.
Which will again give us those overall numbers that I mentioned there. So so that's kind of the the rundown.
Where we expect to see the growth rates in our segments and just to remind everybody to go to the things that Rick mentioned.
That we do it really didn't have in 2019 and that was ran and also are acquiring business you know our acquiring business on a run rate probably grew 50 per cent last year from where I only bought it.
It's going to have some good growth this year as well.
Ran it wasn't available then it's been almost doubling its revenue every year.
Since we started we're so so we've got new endeavors that just add that much more <unk> more momentum to or you might call it business as usual.
So that that's that's what but then a really good mood as we move forward and don't forget that last year, we threw off roughly 100 million and EBITDA more than we did at 19, when you add up the results of Epay and money transferred so they should through Covid. They continued to grow very very.
[noise] well and so as we walk into this year, it's going to be a little bit different distribution, where those two segments are going to take up a higher percentage of the total then they did a 19, while we are mostly driven by the Eft's segment and these high value transaction, so I like having that.
Your business coming from a lots of different places.
Very helpful. Thank you.
Mmm.
Thank you Darren please stand violent we get the next question cute.
Our next question question comes from Pete Heckman with da Davidson You May move ahead with your question.
Hi, This is <unk>, calling T activate more.
We're wondering if you're seeing any change in the option right Sir dynamic currency conversion on your Atms in Europe relatively 2019.
No we have not seen a change.
Really in that opt in rate for a long long time [laughter].
Further broader point is we haven't seen a change in consumer behaviour as Mike said <unk>.
People continue to take out cash we did see that they took out more cash following the.
The Covid thing so consumer behavior always remained very very consistent.
Okay. Thank you.
Hi, Thank you.
Thank you day Davidson please stand by for the next question.
Our next question comes from Mike <unk> of North on Securities make you May move ahead with your question.
Hey, guys. Thanks can you talk a little bit about the drivers that that could get the money transfer business.
From the sort of.
1% adjusted EBITDA margin growth in the first quarter to sort of double digits for the whole year like.
What's going to happen there that drives that that higher margin.
Okay. So there's a couple of things first of all.
You have a lot of overhead so when you have lower transaction as much like <unk> in the first quarter versus the third quarter, you've got all your overhead so when you're doing more transactions, you're gonna get more to float.
You're going to get a better margin in that particular quarter. So just as we grow as we see the seasonality of that business that would be helpful. The second thing is we are watching are expensive very carefully.
And we should see our growth start to outpace those those expenses as we move through the year, because we still good growth and the.
And the revenue line and so I'd say another thing to our digital business continues to be a bigger and bigger piece of that business. I mean, you saw that we saw 38% growth in direct to consumer consumer to consumer money transfers digital money transferred Etsy is screaming as well those.
Both of those cost us a little bit less per transaction to do because you don't have an agent involved so we have a little bit better margins on those so when you add it all up we see just plain revenue growth trying to it.
Sit down hard on expenses.
Combined with seasonality are probably the biggest size.
Got it okay.
Thank you Mike Please stand by for our next question.
Our next question comes from Ken should Celski of Autonomous Research can you may move ahead with your question.
Hey, good morning, My connect thanks for taking the question I just wanted to ask about the money transfer business.
Look at that that revenue per transaction and that segment the year over year growth was a little bit worse.
Could you talk about what's driving that.
And I know, there's some competitors putting in promotional pricing into the markets I'm just curious.
If you are seeing any of that and I guess, how are you responding to that activity.
First of all you've got to understand the money transfer business.
Has been and probably will always be a bit of a street fight when it comes to pricing we've had competitors they try.
They try it they have promotional activity in a given quarter for or maybe a given corridor for a month or two months and then they then they fall off of that and go to the next next.
The next corridor, so we see that all the time.
There is really nothing new on a competitive front.
People keep asking us that because one of our bigger competitors keeps talking about that but we don't really see much of an impact at all and because across the patch you know pay into 160 different countries. So we've got lots of court or pairs.
Somebody might have a promotional activity from the U S to India and then this this month and then next month that might be you know, Italy to Romania. So there's always these things going on we countered those as we need to and we do a pretty good job of it so.
Competition really is not the issue that.
Bothers me I, just want to make sure that we keep everybody fully employed when you're really when you're really gets down to it. If you have a huge recession like we had in 2009 that was really the only thing that really negatively affected our money transfer business because there were less people employ less people working construction et cetera, we don't have any of that.
That we are still in a world, where we can't get enough labor they make up that labour with an immigrant that's great for us.
Okay. Thank you very much.
Thank you can please stand by for our next question.
Our next question comes to US Marina Kumar of UBS Raina you can move ahead with your question.
Good morning, Thanks for taking my question could you discuss your M&A pipeline and what deals and the.
The money at this time and quickly <unk>. If you can just give us the underlying ethics assumptions embedded in your financial guidance. Thank you.
Okay. So as you know we're always looking at.
Acquisitions, and we're looking at two or three right now none of them, particularly large.
But where we probably started 330 to 40 acquisitions, a year and maybe we do one or two.
So we still have a pipeline we're still looking at them, we're not gonna do an acquisition just to make my numbers look good for a quarter. We want an acquisition that will continue to grow and keep pace with the growth of the rest of the company. So it's just hard to find us, but we're looking the reality.
<unk> of the of the financial sector right now is some of the prices are coming down. So that's good and some other these high Flyers are running out of money. So that's good too.
But we don't have anything pending for next week, that's for sure and then I'll, let the wreck cancer on the effects.
Losing the page [laughter].
I would I would add also that that we do have things that we're looking at in each of our three segments.
So there's there's there's things out there and.
The part is to have them on the table. The hard part is getting through them and see if they make sense.
As it relates to FX assumptions.
Generally it's about about the average of the last week. So let's take a look at what the what the currency numbers are looking like and I would tell you that there's not a whole lot of difference right now there might be just some slight.
Favorable nurse on a couple of currencies and we see a little bit of of of of headwind on a couple of other currencies, but I would say for the most part it looks like the currencies will be reasonably in line with what we have here even in the first quarter, but but but we generally we always take just what the most recent effort.
X rates are and we assume that they will remain flat through the rest of the quarter.
Very helpful. Thank you.
Thank you and please stand by for our next question.
Our next question comes from Chris Kennedy of William Blair, Chris move ahead with your question.
Good morning, Thanks for taking my question. Mike You mentioned that you are pleased with the performance of the merchant acquiring business in Greece can you talk a little bit more about the strategy and what's driving the growth.
Well for one thing is.
Virtually all the Pos acquiring was owned by.
Four or five of the largest banks and I really like competing with banks.
Because they you know they are risk averse, and they're more conservative or nimble and aggressive and so it just there's just more arm, there's there's better products to offer those customers in more ways to win and so that's why we're doing.
Better just that 365 pay.
Pay as you go every night feature that we added is something that nobody else has been great for somebody can and can't have access to the funds that they sold today tomorrow instead of waiting until it ends up in their account two or three days later or wait even more if it's over a weekend. So we.
We will continue to innovate there and we will continue to expand that to multiple market. That's the nice thing we're not doing just pure acquired we could sell epay products. There, we're going to turn some of those.
Some of those sites and to a money transfer agents as well. So we can cross sell or other products. So just a general you know that thing.
It grew like Crazy last year, and this year, it's going to grow very well too so it's going to be a bigger and bigger piece of our business.
As we go forward.
Really proud of those guys.
Thanks for taking my question.
Mmm.
Thank you Chris Please stand by for our next question.
Okay.
Late from another call, but Richter.
Rick did you call out your 2023 <unk> margin outlook.
Okay. It didn't.
Hadn't been brought up but.
I guess to give you a little bit of a little bit of history here in in 2019 are ESP operating margin was around 33% okay.
And since then.
What we've seen is we've seen a more.
A shift towards more of our owned Atms and and those owned Atms, we make more profit per Atms, but we don't make as much margin per ATM.
The second thing is.
We're we're clearly not at the 19 travel recovery level. So you know that.
Going from from something left to 100.
Something less than 100% to 400% all of that will will be very enhancing to the bottom line and then finally we.
We've seen.
A fair bit of inflation come into the cost structure.
Whether it would be on on head count side or third party delivery principally things like.
Maintenance and.
Cash delivery.
So with all that being said.
We don't anticipate that will be at a 33% level.
Oh and pass acquiring coming into our business, which is a lighter than 33% margin. So so those four things.
Really kind of wood.
A long term basis, I would anticipate that our margins will come back to being something in let's call. It the the the kind of high twenties okay.
As it relates to this year I would expect that we would be yes.
Somewhere in the mid twenties kind of range okay.
And and again.
We'll see how that shapes out, but that's kind of what we would anticipate this year would be kind of in that kind of mid twenties range.
Yeah, and I think that you know at the end of the day well. We're just trying to do is deliver more EPS and when more Atms more markets, even if it's a little bit less margin for all the reasons that Eft's segment is actually kind of evolved into.
We're still very excited and I think that as I that'll be the last question and I think as I leave you guys and gals.
I just wanted to say that.
I think our company is kind of bucking the trend of Wall Street right now I mean, we're looking at big growth this year, bringing ourselves back into the profitability in excess of the profitability, we've ever had and so I kind of like that we are we are going to buck the trend.
We're going to do well this year and we're going to do well next year, because we've got all the things lined up to do so so with that I want to thank everybody for taking the time with us and we will look forward to talking to you in about 90 days.
Thank you everyone for your participation in today's conference. This does conclude the program and you may now disconnect.
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