Q3 2024 Euronet Worldwide Inc Earnings Call
<unk> grew revenue, 7% operating income, 12% and EBITDA, 10%. These growth rates were driven by improved travel growth in the merchant services business and growth within recent market expansions operating.
Margins benefited from transactions driven by continued travel recovery and effective expense management.
<unk> segment grew 10% operating income, 2% and EBITDA, 3%.
Double digit revenue and transaction growth was driven by continued digital media and mobile growth operating income and EBITDA growth rates were impacted by changes in product mix investments in proprietary product offerings and inflationary pressures we expect.
To see a nice lift in fourth quarter EPA results versus prior year from promotional activity related to our <unk> channel that was lighter in the prior year.
As we have mentioned before promotional activity in our produce incentives and rewards business is profitable and will benefit our quarterly results in the quarters, where these campaigns are occur which may not always be consistent from year to year.
With strong promotional activity benefiting the fourth quarter of this year, we expect full year operating income in the upper single digits. This year.
Money transfer grew revenue, 10% operating income, 7% and EBITDA, 4%.
We're all business. It is just one way that we reach our customers Harris here are just a few examples of our business that is not dependent on cash we offer many real time remittances, where cash is not involved in either side of the transaction like digital cross border payments and money transfer we have digital branded payment.
<unk> like <unk> at ebay, we process card based transactions with our ft merchant services business just to name a few so as I reflect on the past 30 years, our strength is our ability to evolve this business and be responsive to the market as we wrapped up our leadership meeting several.
Key themes stood out as we began our next 30 years.
and David Bank, Cautamers to Unbank Cautamers and Markets.
Second, Digital Growth. Each segment will continue to invest in our digital transformation efforts, growing real-time remittances, digital cross-border payments, and branded payment solutions. All of which are growing in excess of 20% per year.
Last, The Future of Growth at Uranite.
Expansion and did new in emerging markets are rent technology, a scalable, flexible modern payment platform, and they in the line, the largest real-time cross-border payments platform in the world.
Our business is thriving by continuing to develop new products and adapting to the digital trends in the market. Now let's discuss the segment results starting with EFT on slide 12.
During the third quarter, EFC delivered double digit growth in operating income and adjusted EBC.
The primary contributors included a largely recovered.
European Travel Arturism Season continued growth of our merchant services business.
Gross within recent market expansion, and lastly, we are beginning, albeit small at this time, to benefit from the recent additions of domestic and international access fees within our existing markets.
Now let's discuss some of the key highlights of the quarter. A result in the third quarter were in line with the Europe controlled data, which indicated the tourism in Europe increased from 90% recovery rate in 2023 compared to 2019.
2.99% recovery rate.
This year, representing a 6% year-over-year increase.
Our Merchants Services Business continues to grow.
We added over 4,600 new merchants in the third quarter. We saw growth within our new markets too. Albania, Belgium, Mexico, Egypt, Philippines and Morocco.
We grew the results of our recently acquired and finnitum business in Singapore and the recently acquired State of 888th of Malaysia.
In addition to these highlights, we see a lot of opportunities for expansion. Some examples include the following. We rolled out domestic direct access feeds in Denmark, Norway, and Malta in the second quarter.
We launched domestic access fees and Cyprus and piloted Czech Republic, Netherlands and Romania in the third quarter.
We launched International Access Feast to Euro Cartholders in Malta in the second quarter, Cypress in Italy in the third quarter, and planned to launch 4-5 additional countries in the fourth quarter.
Domestic Access Frees were permitted in 10 new countries in 2024, and you're up including the Czech Republic, Cyprus, Malta, Romania, the Netherlands, Croatia, Slovenia, Denmark, and Norway.
The third quarter EFT results are a great example of how urinate continues to diversify our business as consumer needs evolve. Moreover, the results highlight our consistent performance and our ability to grow. Now let's go on to slide 13 and we'll discuss ranobit.
As I start my discussion on ran, I would like to remind everyone that ran is not only a payment platform that we sell into the marketplace, but also a product we use in the EFT and EFT and E-Pay to process our own transaction.
We are a customer as well as a service provider. This unique relationship gives us the opportunity to constantly improve and develop our product as we receive real-time feedback from our own users.
As I've been...
Out visiting with many of you, you have asked for concrete examples of how our technology makes the difference in our business and in the marketplace So before we jump into the rent specific highlights I'd like to share with you one little example of how rent has proven itself in the market
Several years ago, we told you about our agreement to implement ran with the Bank of Mozambique and Seemal, the entity that owns the central bank switch in the country.
We delivered a new financial ecosystem for the whole country, with a full suite of advanced digital technical capabilities that elevated the country to one of the most advanced financial systems in the world.
And while you and I might not think of Mozambique often, it is important to note that it is a country of 30 million people or slightly larger than Australia.
This was Eurnet's first large scale customer implementation of our REN technology.
We deliver this new financial ecosystem for the whole country and most and big has become one of the most advanced financial systems in the world now.
Transaction Volumes continue to grow doubling year over year to approximately 4.4 million transactions a day across ATMs, POS and e-commerce channels.
Payment authorized from debit, credit, pre-paid, and digital wallets reaching record levels in the third quarter of 2024. These impressive metrics resulted in a signing.
of a 10-year expansion of this agreement during the third quarter. This is an exciting win and more importantly, a validation of the power of our RAND technology platform.
We also launched ran in Latin America to process the first virtual card offering for Bank of Benzhencia in Ecuador, which is the largest private sector bag in that country. Ecuador has 17 million people in GDP of over 250 billion.
We continue to be excited about the future of ran and will continue to enhance the product offerings through continued development and possibly through additional strategic acquisitions.
Let's recap our EFT segment. What's driving our growth today and into the future? First we continue to grow our Merchants Services business.
Eve at DAW has tripled since we acquired that business back in the first quarter of 2022. So we are two and a half years into this and our team has executed a successful growth strategy and we're not done.
Second, we continue to grow transaction volumes and we have a new in our new markets, like the Philippines, Albania, Belgium, Mexico, Egypt, North Africa and Malaysia.
Lastly, we continue to expand revenue by adding domestic and international access fees at existing ATMs to optimize our profit margin while maintaining transaction volumes.
We look forward to continue growing the EFT business and finishing the fourth quarter strong with the expectation of achieving double digit growth across all metrics for the fourth quarter and for the full year. Now let's go to slide 14 and we'll discuss E-Pay for a minute.
Our EPA team continues to make significant strides and diversifying our product portfolio while expanding into new markets and new digital channels.
A notable signing this quarter was taken to interactive to distribute content from Rockstar to K-Day Games in Zenga, Cross-Ura. In gaming, you've heard me talk about the importance of hero titles.
These are games that become so popular that they lift the sales of the entire gaming industry. Unfortunately, over the last few years, there hasn't been a game that's generated enough interest with players to create an impact.
However, take two is the publisher of the hugely popular Grand-Sept Auto François, which is launching its sixth installment in 2025.
Grant Step Auto 6 is highly anticipated and is expected to break all sales records with billions of sales worldwide. It goes without saying that we are excited about its release next year and the potential impact on E.P. sales.
EPA expanded its payment processing business at Drogory Market, a large drugstore chain in Germany with over 2,100 stores. In September 2024, our first full month of working with DM, we processed over 30 million transactions.
has stated previously, our digital channel continues to be a key focus.
A great example is the launch of digital branded content through status pay in Italy, one of the largest digital wallets in America. Status pay has over 4 million users and 400,000 businesses that use its payment processing and digital content services.
We launched Google Play Distribution through Zalopein Vietnam, Zalopei Serves over 14 million users, offering a diverse portfolio of more than 100 services. We're still in the early stages of launching Vietnam, but we are excited about the potential of this very large market.
Currently there is low penetration of branded content across Vietnam, so having the right digital distribution to conveniently reach large parts of the population.
is key. Finally, we are pleased with the successful migration of our President-Openingloop Mastercard to Ernets Ren platform.
As I have discussed before, President.
is our proprietary prepaid debit card. This is an example of us leveraging technology from our EFT segment for use fire e-pay segment.
Using Ren Technology as the processing platform for Prezzi, not only results in cost savings for eBay, but also helps to further establish the commercial viability of Ren as a product that we sell into the marketplace.
Now let's move on to the next slide 15 to talk about money transfer.
Speaker Change: I'd like to kick things off by expressing how, please I am with our double digit revenue and transaction growth in this third quarter.
Speaker Change: Our performance clearly demonstrates the position of strength in the marketplace and it's also highlights the increasing momentum we have across our distribution channels and geographies led by a healthy core business.
Speaker Change: I'm particularly pleased to report for the quarter.
Speaker Change: That U.S. outbound and international originated transactions grew 12 and 14 percent respectively.
Speaker Change: By the way, that is more than four times faster than the overall market growth. Overall the money transfer segment, deliberated and impressive transaction growth of 11% was stable pricing economics.
Speaker Change: I would like to focus on the role of partnerships playing our strategic growth. We continue to gain markets here from new and notable partnerships such as PLS Financial Services.
Speaker Change: For more than 20 years, PLS has offered a range of financial services.
Speaker Change: Including Money Transverse.
Speaker Change: with more than 200 locations across 12 states in the U.S.
Speaker Change: This collaboration delivers a customer-centric value proposition to PLS 3 million monthly customers and to the broader market.
Speaker Change: This partnership enables consumers to send and receive money whenever and however they need to ensuring safe, convenient, and economical transaction expertise.
Speaker Change: We went live with PLS at the end of the third quarter, which required extensive effort.
Speaker Change: And early results show that we will generate meaningful volume for our core business. I'd like to also emphasize that securing a leading industry partner and a highly competitive industry speaks volumes about the power of our value proposition.
Speaker Change: Reemforcing how well position we are to drive continue growth.
Speaker Change: Annudation.
Speaker Change: We are enthusiastic about the positive trajectory of digital money transfers. We have delivered sequential transaction growth improvement in each quarter of this year.
Speaker Change: and Proving Direct Concealer from 22% in the first quarter of this year to 30% in last quarter, third quarter of 2024. Simply put, digital issuing continued momentum as the fastest growing part of our business.
Speaker Change: and let me share with you some other key drivers of our digital success.
Speaker Change: First, we continue to intensify our new customer acquisition strategy, which showed an acceleration from 44% year to date new customers, ending with 58% growth in the third quarter.
Speaker Change: Second, our digital payout capabilities continue to be a significant growth driver. With 35% growth year over year, representing now 54% of our total volume.
Speaker Change: Third, we continue to enhance our competitive advantage. Investments in our product have yielded the best real-time cross-border payments network in the world.
Speaker Change: Reaching 4.1 billion bank accounts, 3.1 billion wallet accounts, and 595,000 cash pick up locations across the 198 countries and territories.
Speaker Change: And lastly, during the quarter, we launched WeChat in China expanding our mobile wallet reach by over a billion users.
Speaker Change: To summarize our progress in the money transfer segment, we continue to deliver great results, four times faster than the market, with continued strategic investments in digital acquisition, product enhancements, core business expansion and improvements in our operating margin.
Speaker Change: Overall, I'm thrilled about the momentum we see in our money transfer segment. Now let's go on to the next slide we'll talk about day in the line.
Speaker Change: We continue to grow our network participants and the momentum is building steadily. Dan DeLion already powers three of the top five digital money transfer operators in the world. Multiple syntax and PSPs as well as one of the top four global banks in the crossborder payment space.
Speaker Change: and we are onboarding eight new partners as we speak. During the third quarter, we fueled our Dandelion Momentum by signing an agreement with XT Transfer, a leading B2B Cross Boarder Payments platform serving over 550,000 corporate customers.
Speaker Change: We're launching Wallx, a payment service provider for SMEs in Singapore and Indonesia, and we're launching with a prominent global P to P platform that we hope to tell you about soon.
Speaker Change: We continue to remain bullish on the future growth of Dan the Lion because of these recent successes and the changes in the regulatory environment.
Speaker Change: You may have heard of the G20 Roadmap for enhancing cross-border payments, which aims to improve efficiency and accessibility of international payments.
Speaker Change: Banks around the world are striving to address these regulatory targets. And as a result, we've noted that it is increased by them and handled in the Dan of Lyons proposition, which helps address transparency speed.
Speaker Change: Productibility and flexibility to make the necessary connections to facilitate cross-border payments.
Speaker Change: With the momentum we have established through the third quarter of 2024 our team has developed a robust pipeline of 78 banks including 38 banks in the top 100.
Speaker Change: as well as more than 50% tax, PSPs and MSB.
Speaker Change: Daneline continues to build a roster of impressive customers with significant interest from global banks, spin-tech, and PSP.
Speaker Change: I am looking forward to sharing more exciting news about Dan Align, so now let's move on to slide number 17 and we'll kind of wrap up the quarter.
Speaker Change: I can't emphasize.
Speaker Change: and Nuff, my excitement about the growth our teams continue to deliver. Another record-breaking quarter, and as I mentioned earlier, our leadership team continues to deliver a common theme of consistency, network strength, product and market expansions, all contributing to strong momentum.
Speaker Change: While week will continue to strive for double digit growth and each individual segment, our goal is to deliver consolidated double digit growth results.
Speaker Change: Each and every year. This quarter, EFT was the biggest contributor to our earnings growth. However, we have a strong pipeline of opportunities for all three segments to grow in the future.
Speaker Change: As we turn to the fourth quarter of 2024 this year, what has driven our growth and what will continue to fuel that growth in 2025 and beyond?
Speaker Change: We have people on the ground and more than 70 countries who are experts in consumer payment preferences and emerging payment technologies from traditional ATM cash transactions to sophisticated digital payment.
Speaker Change: This expertise combined with our best-in-class network of assets gives us a competitive advantage which allows customers to interact with their money in their preferred manner, extending our revenue generating capabilities.
Speaker Change: Our strategy for growth is proven and we have executed that strategy for the last 30 years.
Speaker Change: We will continue to take advantage of market opportunities and execute by entering into strategic partnerships like we did with PLS financial services, by growing and expanding our existing businesses like we have with our merchant services business.
Speaker Change: by adding products and features such as access fees to optimize revenue and profits. And by continuing our digital growth, highlighted by real-time remittances, digital cross-border payments and digital branded payment solutions.
Speaker Change: As I conclude my remarks I want to repeat, we look forward to the fourth quarter of 2024 with a pipeline of opportunity to drive our results.
Speaker Change: And if you cannot tell from our results to date that 10 to 15% earnings growth for 2024 is in the bag.
Speaker Change: Not only in the bag, but we've got good prospects to drive through that race. We may need a bigger bag.
Speaker Change: So...
Speaker Change: Similar to the momentum going into the fourth quarter, we see this momentum carrying into next year, 2025, where we expect to deliver another year of double-digit earnings growth in the 10 to 15 percent range and like our ambitions this year, we will be working hard to deliver beyond that range.
Speaker Change: and consistently delivering double digit earnings growth year over year. With that, I will be happy to take questions. Operator, will you please assist?
Speaker Change: Thank you. At this time we will conduct the question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.
Speaker Change: Our first question comes from Andrew Schmidt from City Group, the floor is yours.
Speaker Change: i
Andrew Schmidt: Hey Mike, he Rick, thanks for taking my questions and I appreciate all the comments and the focus on Robert Turnroarning's growth, it's good to reiterate that. I think part of that is just getting comfort in the sustainability of some of the trends, particularly in...
Speaker Change: EFT segment in the ATM transaction directory. So, you know, if you'll back to slide 11...
Speaker Change: for a second, it's good to see the stability in the overall market, but international transactions are still down.
Speaker Change: I think you're performing that but maybe you can talk about the ability to sustain the same stress field's growth for international ATM transactions and then, Michael, I think you mentioned it.
Speaker Change: Transactions are trending in line, international transactions are trending relative in line with your control, but you can put a finer point on just the relationship there that be great. Thanks, Lock Guys. Okay, so as you can see by that graph and slide 11, you're right, international transactions are down, but they're only down by 0.7%. So we can call that roughly flat.
Speaker Change: I think the way we get around this even though that we may be that may be dropping off calling a percent of year or something as we need to move ATMs to new markets and that's what we're doing, we're expanding into new markets.
Speaker Change: where these numbers for us are excellent because those new markets are basically the turrets that are underserved with the ability to get cash conveniently.
Speaker Change: So, even though this is the worldwide numbers, we're still finding pockets and niches that give us the opportunity to run all this.
Speaker Change: I would add to that, I would say that we have an unequalled ATM network in Europe.
Speaker Change: and as you can see in this chart the domestic transactions are largely hanging in there actually even going up a little bit.
Speaker Change: and we offer to banks and opportunity to use our network of ATMs to serve their customers and as banks are closing down ATMs, closing down branches as banks are being challenged by the competitive nature of internet-based kind of banks. This becomes a very important kind of asset to them and so we've continued to add network participation agreements to our business. We see more and more opportunity there. So again, since, again, and hopefully with this graph really illustrates, as Mike said, you know, we do anticipate that there will be some grip down in cash transactions, but it's not falling off and we're getting a bigger part.
Speaker Change: of that pie by having, like I say, an unequalled network in Europe. And just to put a point on what Rick just said, branches are closing like crazy. Over the last five years, 25% of all the branches in Europe have shuddered with them when in ATM.
Speaker Change: So those same ATMs could easily have acquired a transaction from one of these tourists. So what we're saying here is that the pie is roughly flat, but we've got less competition for that next transaction. And I think that's going to continue to happen.
Speaker Change: Now, this is Europe.
Speaker Change: when you go to the emerging markets.
Speaker Change: people, places like the Philippines, Morocco, you know, Egypt and so forth that we're in. Those markets are way, way underserved. They just don't have the branch network and the ATM infrastructure that are that are need that are needed. So so we can really kind of these are just boots for us.
Speaker Change: Got it.
Speaker Change: Appreciate that and just maybe get squeeze one more in on the the money transfer segment You know others have called out weakness in US to Mexico UFLA doesn't seem like you're seeing that
Speaker Change: Part of that may be share gains, a lot of it might be share gains, but if you could just talk about what you're seeing
Speaker Change: In terms of you have to let them, you know, whether there's any impact from migration or other factors, that'd be great. And, you know, maybe a little more what's driving the performance there, you know, that that that may be happening, Andrew.
Andrew Schmidt: So somewhere in there, maybe it's weaker to this market or that, but overall, we continue to gain share. And so we really haven't felt it very much.
Andrew Schmidt: Adding these strategic partners like PLS is certainly helpful as well. We could, you know, with the exception of our Walmart transactions that are cash to cash that have kind of been falling off since Covid, you know, you take that out of the equation and we've got a screaming money transfer business.
Speaker Change: Got it. Thanks a lot, Mike. Appreciate the comments. Sure. Thank you.
Speaker Change: Thank you for the question.
Speaker Change: Our next question.
Speaker Change: It comes from Gus Gala, Amon S. Sespie, Hardit & Co. The floor is yours.
Gus Gala: Hi Mike. Hi Rick. I hope everything's going well. Thank you for taking our question. Wanted to talk again about the incremental margins in the EFT. You know, the last three quarters have been above 49%.
Gus Gala: One prior to that was 30-ish percent. And then you take into consideration the comments on the fee structure change in the ATMs. I think there's probably more ahead than in the rear view.
Gus Gala: And then the scaling you're doing in merchant, it sounds like you're still early in entering some of the newer geographies. Can you just help us think about how that old bogey in the high 30% range might have evolved higher? Or do you still think it's, you know, capped around there? Thanks.
Speaker Change: Well, I'll just comment on that briefly. Mike can talk a little bit more about expansion across other markets and that but
Speaker Change: There's a lot of discussions going on in several continents on that particular subject.
Speaker Change: So I don't think I would get at this point more bullish on driving that margin structure higher.
Speaker Change: Typically, you'll find that that, you know, merchant services businesses can be a little less on the margin side. But, you know, as we grow that incrementally, it'll add more into the picture. So, you know, I wouldn't get, you know, out over our skis on it here. I think we've got great volume opportunities, we will continue to expand our margins. As we look to next year.
Speaker Change: We expect that our operating profits will expand faster than our revenues, so that'll contribute to it, but I wouldn't get the Excel math wound up too tight.
Speaker Change: Unknown Speaker Okay.
Speaker Change: And, and Gus.
Speaker Change: If you just think about it, we mentioned in an earlier call that our even our margins in
Speaker Change: and Merchant Acquiring, which is basically tripled in
Speaker Change: The last two and a half years.
Speaker Change: are about 25%, so that's lower than those pre-COVID.
Speaker Change: The huge growth that we see in merchant acquiring tends to hold the margins for the segment down a little bit too.
Speaker Change: And with respect to your question about expansion.
Speaker Change: So we are now expanding, you know, what we've done in Greece has just been a killer. I mean, we just continue to gain market share, gain new retailers and merchants, we have additional products.
Speaker Change: Italy, Spain and Portugal. We've hired up those sales teams. They're now beginning to sell.
Speaker Change: So we're really on the nascent side of this.
Speaker Change: But we're very excited because a lot of these merchants in Greece
Speaker Change: look just like the Mediterranean-focused merchants in Italy, Portugal, and Spain.
Speaker Change: You haven't seen anything but maybe a little bit of extra cost. But hopefully we'll see some bottom line results of this over the next year.
Speaker Change: Thank you. That's super helpful. And if I can squeeze one more in, digging into ePay, just wanted to understand what are some of the investments that are being done there? And just kind of maybe help us think of like, what was the list? I don't know, last big games like GTA 5, or some big Modern Warfare title release. Thank you.
Speaker Change: Sure. Yeah, this is Kevin.
Kevin: So with regard to investment, we're just like the other divisions, we're trying to diversify the ePay business.
Kevin: iTunes and Google Play and Xbox and those products and we're trying to introduce ePay products
Kevin: Some examples of that would be a gift card we launched in the UK called YouTubes and a gift card we launched in New Zealand called Prezi.
Kevin: So we're spending money on basically developing these products and bringing them to market. Additionally, we're working on diversifying ePay into being a solution provider.
Kevin: So we've we've developed a fraud
Kevin: and a compliance product that we're that we're launching.
Speaker Change: Unknown Executive, Michael Brown, Rick Weller
Speaker Change: So, it's been a year, like Mike said, through COVID, we started these projects about two years ago. We've been developing them and you'll see us rolling these products out in a larger way over the next 24 months.
Speaker Change: With regard to your question about Grand Theft Auto,
Speaker Change: It's always hard to predict.
Speaker Change: The announcement that we typically will sell that content through a platform like Google Play or Xbox or Sony or Apple.
Speaker Change: Obviously, the margins in that are going to be better than if we sell through a platform. At this point, I wouldn't be able to comment on what the what the lift is. But obviously, since we highlighted it in the in the script, we were excited about its potential.
Speaker Change: Great, appreciate all of those callers.
Speaker Change: All right. Thank you, guys.
Speaker Change: Thank you for your question.
Speaker Change: Unknown Speaker 0.0.1
Speaker Change: Our next question comes from Peter Heckman from DA Davidson. The floor is yours.
Peter Heckman: Hey, good morning, everyone. Thanks for taking the question. Rick, I think it was Rick, did I hear you right? That you're thinking that ePay can generate about 8 to 10 percent growth in EBIT for the full year. And then that would be aided by the heavier promotional activity in the fourth quarter. Did I hear that correctly? Yes, sir.
Peter Heckman: Okay, and so, I mean, in terms of the relative pacing of these promotional campaigns, it looks like...
Peter Heckman: probably hard to tell at this point, but for 2025 should be model it reverting back to kind of a more normal seasonality.
Speaker Change: Well, yeah, there's probably a little bit more like that. As we said, you know, sometimes they can be a little bit irregular. Last year, we were a little lighter in the fourth quarter on promotional stuff.
Speaker Change: Unknown Speaker But I think you're looking at it generally right, Pete. Unknown Speaker Yeah, Pete, I mean, the reality is this
Speaker Change: These things are done by our customers and it's very lumpy. You've seen that over the last four or five years, sometimes a hit and cute.
Speaker Change: to sometimes in Q3 this year, most of it was in Q4. And so it's going to be lumpy. You've got this baseline, ePay business is growing actually not bad at all. And then you add these lumpy promotions on here, which could add, you know, three, four or $5 million of the margin in a quarter, and it just makes everything lumpy.
Speaker Change: You know, and that's, you know, Pete, you raise a, an interesting point here, because it's, it's, you know, it's kind of business that
Speaker Change: It's great profitable business. It's right in line with what we do. We really help these Help the merchant and their value proposition It does cause our quarter to quarter numbers sometimes to be a little irregular
Speaker Change: But again, when we take a look at what that business has done, just like I said, going through the pandemic.
Speaker Change: So we're always looking for ways to make that a little bit more consistent. But, you know, I think it's fair to look at that more on an annual basis.
Speaker Change: I understand. Okay. And then just as a follow up, if I can on the PLS financial
Speaker Change: you call it out as strategic and.
Speaker Change: Yeah.
Speaker Change: Just based on number of locations, it doesn't sound super significant compared to the base of, you know, 600,000 current locations, but
Speaker Change: Is there something about PLS in terms of the volume of money transfer they do and then I can't remember if it was in the press release or not, but was this something where you broke exclusivity and now you're another one of the remittance vendors or is this something where you go to exclusive? Yeah, so we do have an exclusive, we replaced an exclusive of
Speaker Change: one of our competitors there. When you look at 200 locations versus call it, you know, 600,000 or whatever,
Speaker Change: You've got to remember that 600,000 number is all the locations that we can send or receive from.
Speaker Change: But the reality is most of the send probably comes through 50,000 locations, something like that.
Speaker Change: and out of those, the remaining 550,000 are, you know, bank branches that could send but basically mostly it's for cash pickup in these emerging markets.
Speaker Change: You know
Speaker Change: So, and these guys are big, they do huge volumes. They're probably the biggest or the second biggest.
Speaker Change: check cashier in America. So they just get lots and lots of volume. Yeah, and I think the other way to think about this business is they are focused on that segment of customer.
Speaker Change: in in the you know, the PLS model, they are catering to this segment of customers.
Speaker Change: that cash checks and money orders and money transfers, you know, they essentially are the bank teller.
Speaker Change: for that group of customers. And so the concentration of business they do is so much more significant than your, let's just call it your traditional bodega kind of agent. Yeah, if you walk into one of those places, which I suggest you do if you're out and about.
Speaker Change: I mean, what you'll see is somewhere probably between four and six windows, teller windows.
Speaker Change: with ropes to control the crowds as they line up to go to the I mean they're busy busy stores that very you know a very a very
Speaker Change: well-organized operation, very focused on being customer-centric.
Speaker Change: I mean, it's that, you know, they're in the business to make sure that that customer has a wonderful experience when they come through the process. Yeah, they're, they're an impressive organization.
Speaker Change: Thank you for your question.
Speaker Change: Michael Grondahl, Ed Sheerl, Ed Sheerl, Ed Sheerl,
Speaker Change: Our next question comes from Chris Kennedy of William Blair. The floor is yours.
Chris Kennedy: Good morning. Thanks for taking my question. Can you talk a little bit or frame the opportunity around the domestic access fee in Europe expanding in the 10 countries just any way to think about the opportunity there?
Speaker Change: I'm going to let Rick do that one. Well, Chris, you may know me well enough now that I'm probably not going to start jotting a bunch of numbers out.
Speaker Change: as, as I think the real I think the real message when you read it behind here is that, and most of these countries that we mentioned here happen to be smaller type of countries and so we're just starting to see the momentum build. I think the bigger message is the movement in the industry here. As I've said before, we've gone years I mean, I'll take a Poland, for example, in 2010, Poland dropped the interchange rate by 60% to roughly 30 cents a transaction.
Speaker Change: There was a recent study done by the University of Warsaw there that says the cost of doing a transaction is about 80 cents.
Speaker Change: And so, you know, banks simply cannot afford to be, you know, to be making 30 cents and to be spending 80.
Speaker Change: and they're making that known, and so we're starting to see things.
Speaker Change: break open, that the arguments are being made that this fixed price structure doesn't work well, and that's leading to the shutdown of ATMs and the inconvenience of cash availability to customers. You're starting to see discussions now go on around measures taken to ensure that ATMs are available in marketplaces for customers.
Speaker Change: I think our bigger message here is the direction. We are seeing a positive direction on making either access fees available or increases in interchange. And what that means to us is, A, as Mike said, we're getting a bigger piece of the pie because bank branches are closing. And B, we're going to have the ability to make more profit per transaction.
Speaker Change: There was a question asked earlier about the margins in this business. We think that those margins will continue to go up, and this is exactly one of the reasons that give us that kind of confidence.
Speaker Change: Understood. Thank you for that. And then if you can just talk quickly about the digital money transfer business, it's growing like a weed, you're investing a lot in the marketing to drive that growth.
Speaker Change: Any way to think about the customer profile of that business? How sticky are those customers, unit economics, anything like that? Thank you.
Speaker Change: Okay, so a couple of things on this. So remember, the customer profile is different than
Speaker Change: than the general profile for people who do family remittance.
Speaker Change: Obviously, to do a digital transaction, you've got to have a bank account because you have to pay for the thing. Everything happens either at your computer, probably off your phone.
Speaker Change: So you've got to have a bank account. And with respect to stickiness, we seem to have
Speaker Change: They seem to be sticky
Speaker Change: you know, where we're looking at some of the people that started with us five or six years ago are still doing transactions. So we're measuring those cohorts and so forth, but it's when you look at the number, we had what, 56% growth in new customers this quarter.
Speaker Change: And that's killer
Speaker Change: So we keep bringing in new customers. Now listen, no matter what I say or any of my competitors say, a lot of people who do these transactions are kind of one and done guys.
Speaker Change: Okay, but the key is for the other group of people, maybe it's half or two thirds of them.
Speaker Change: If you can catch him for the next 18 months to...
Speaker Change: to, you know, 60 months, you've got an annuity stream that is excellent. So
Speaker Change: We so far all our math is hanging together
Speaker Change: and they're very profitable for us. Now, some people will also tell you that the profit on a digital transaction is so much more than a bricks and mortar transaction.
Speaker Change: We're kind of the independent bricks and mortar kings, so we know both sides.
Speaker Change: We have to pay that agent about 45% of the customer fee, which you don't have to pay if you acquire that transaction digitally. However, you do have to pay for that digital marketing. Like we mentioned, we were up 2 million bucks this year over same quarter last year.
Speaker Change: But as we do the full accounting on it, we find that the digital transactions that we acquire are slightly more profitable than the bricks and mortar transactions.
Speaker Change: But at the end of the day one of the things that you're wondering Why are we growing four times faster than the friggin market? Why are we number two going after number one? It's because we have both we have the best independent channel Distribution in the world for bricks and mortar and we've got a great digital product
Speaker Change: Very clear. Thanks for taking the questions.
Speaker Change: Operator, I think we're out of time now. So I would like to thank everybody for taking their time on the call. Happy to talk to you in about well, a little more than 90 days. All right. Thank you
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Speaker Change: Yeah.
Speaker Change: Sure.