Greetings, and welcome to the Euronet Worldwide Second Quarter 2022 Earnings Call. It is now my pleasure to introduce your host, Ms. Hope Gregg, Associate General Counsel for Euronet Worldwide. Ms. Gregg, you may begin.

Thank you. Good morning, everyone, and welcome to Euronet's quarterly results conference call for the second 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 Euronet or its management's intentions, expectations or preventions of future performance are forward-looking statements. Euronet's 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, Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such updates. In addition, the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures we'll be using during the call to their most comparable GAAP measures. Now I'll turn the call over to our CFO, Rick Weller.

Thank you, Hope, and thank you to everyone for joining us this morning. I will start my comments on Slide 5. For the second quarter, we generated revenue of $843 million, operating income of $101 million, and adjusted EBITDA of $147 million. We achieved adjusted EPS of $1.73, a 226% increase from $0.53 in the second quarter of 2021. These strong improvements in all metrics were driven by revenue growth across all three segments, particularly from a strong rebound in domestic and international cash withdrawal transactions in the EFT segment as COVID restrictions have been lifted globally with the recovery of travel. Next slide, please. Slide 6. The strength of our balance sheet has enabled us to make investments and operate the business in ways that will continue to provide long-term shareholder value. We concluded the second quarter with over $1 billion in unrestricted cash and $2.1 billion in debt. The cash increase primarily results from operations generating around $75 million in the second quarter of '22, as well as short-term borrowings for ATM cash and certain working capital needs, which is reflected in the debt increase. This cash increase is partly offset by cash used for ATMs due to seasonal travel trends, share repurchases totaling $104 million, and working capital requirements. Slide 7, please. Before I briefly discuss each segment, I want to highlight the significance of currency changes year-over-year. As noted in the press release and on the first slide, reported GAAP revenue grew 18% year-over-year. However, on a constant currency basis, if exchange rates this quarter were identical to those of the second quarter last year, our revenue would have increased by 28%, a 10% difference due to currency translation effects, which had a substantial impact. Most of this change emerged as the second quarter progressed. Furthermore, without currency devaluations against the U.S. dollar, we would have achieved adjusted EBITDA within the range we provided at the start of the quarter. Keep the significance of foreign exchange changes in mind, and I'll discuss each quarter's constant currency results for the quarter on the next slide. Slide 8 now, please. The significant improvements in EFT revenue, operating income, and adjusted EBITDA were due to increased domestic and international cash withdrawal transactions resulting from enhanced travel trends following the lifting of COVID restrictions worldwide. We added more ATMs and reactivated nearly all our ATMs in anticipation of a robust recovery in travel. Year-over-year, revenue and gross profit per transaction also improved due to enhanced international transactions generating more revenue and profit compared to domestic transactions. Epay revenue increased by 2%, while operating income and adjusted EBITDA declined by 1% and 2%, respectively. Revenue growth stemmed from the ongoing expansion of mobile and digital branded product payments, along with the growth of the digital distribution channel. Similar to the first quarter, the year-over-year revenue comparison was influenced by three main factors: the prior loss of a key German B2B customer in the fourth quarter last year; the Indian government's halting of specific digital games; and the shifting of promotional activities from early 2021 to later in 2022. To provide perspective, if those three items had been consistent with the previous year on a pro forma basis, Epay's gross profit and operating income would have increased by 6% and 10%, respectively. As we enter the third quarter, we are already noticing an increase in promotional campaigns, reinforcing our view that this activity was merely postponed to the latter half of this year. Additionally, although not significant in the second quarter, we began to observe trends in our more discretionary products indicating that inflation may have affected the segment's results. Money Transfer revenue rose by 9%, operating income grew by 3%, and adjusted EBITDA increased by 2%. This growth can be attributed to a 10% rise in U.S. outbound transactions, 11% growth in international-originated money transfers, which included 11% growth in both Asia and the Middle East, and a significant 37% increase in direct-to-consumer digital transactions, offset by declines in the domestic market. The operating income and adjusted EBITDA growth lagged behind revenue growth due to ongoing investments in physical and digital network expansion, elevated costs associated with technology support, new product development, and advertising expenses during this period. Similarly to Epay, while not substantial in the third quarter, the Money Transfer segment has started to experience slight decreases in the average amount of transfers, suggesting inflation may have put pressure on the segment's results. Overall, we are pleased with the strong consolidated growth rates, especially considering the macroeconomic challenges we currently face globally. We have reaffirmed that our core business proposition remains solid, and we anticipate continuing strong growth rates. Now that I've summarized the highlights for the quarter and highlighted the significance of foreign exchange translation, let me focus on the future. To begin this discussion, let’s move to Slide 9 to examine the changes in FX rates over the past 18 months. As previously mentioned, FX rates have fluctuated significantly, making it the largest change item in our overview. We prepared this chart to illustrate the changes in three of our primary currencies: the euro, the pound, and the Australian dollar. You can observe the trend in these currencies over the illustrated period, especially noting the acceleration in the change over the last three months. Much has transpired recently, and it seems there may be more to come. Initially, we thought the Russian invasion of Ukraine would be a short-term conflict. However, Ukraine has proven resilient, and Russia remains entrenched. This situation has adversely impacted energy supply, agriculture, and grain supply, which in turn has affected currency valuations. Furthermore, the prolonged invasion has had direct repercussions on our business within Ukraine, in neighboring countries, and due to sanctions against Russia. I will not delve into an analysis of all the factors relating to FX rates, but as this graph demonstrates, when currencies weaken against the U.S. dollar, it affects how we translate foreign currency results into U.S. dollars for our financial reports. Now that I have addressed FX rates, let’s proceed to Slide 10 where I will outline several factors influencing our expectations for the rest of 2022. When assessing our expectations, we identified various factors significantly impacting our projections, especially regarding our goal to achieve earnings in 2022 similar to those of 2019, which recorded adjusted earnings per share of $7.01. With this context, I will outline several elements that influenced our estimates leading to our revised earnings expectation range of $6.30 to $6.40 for adjusted earnings per share. This chart illustrates the specific impacts on adjusted earnings per share from several components starting from $7 per share and progressing towards $6.35. I will not go into great detail on each item but will highlight key points. First, the benefit of share repurchases. Since we provided our full-year earnings outlook in October 2021, we repurchased around 3 million shares for approximately $400 million, which contributed about $0.35 per share to 2022 EPS. Second, we've updated our tax estimate based on our business’ distribution across various jurisdictions. A decrease of about 2% to 3% in rates will benefit us by about $0.32 per share. Third, we have accounted for a 1% tempering of revenue growth in the second half of the year for both Epay and Money Transfer due to potential inflationary pressures on consumer transactions. This aspect is challenging to quantify but reflects considerations on our business. Fourth, the invasion of Ukraine has had an approximate $0.10 negative impact resulting from ATM closures in Ukraine and reduced tourism-focused ATMs in the region, as well as lighter travel patterns to neighboring countries and sanctions affecting Russian flights to Europe. Fifth, travel industry inefficiencies have also affected us. Originally, we estimated our high-value transactions, particularly DCC transactions, would remain in the low 70% range. Early indicators were positive with encouraging recoveries compared to 2019 levels until June, when trends began to flatten and reverse, leading to disruptions in tourism at airports, hotels, and restaurants, resulting in capacity constraints. We have adjusted our expectations to align with mid- to high-60% levels, which translates to an approximate $0.20 impact per share. Sixth, interest rates have surged significantly since October 2021, as the Fed accelerated increases to combat inflation, with higher rates accounting for about $0.14 per share. Seventh, borrowing on our revolving credit has increased to support the Piraeus card business and share repurchases. We anticipate that these borrowings will ease as we generate more free cash flow, which accounts for around $0.08 per share. Eighth, inflation-related operational costs are also challenging to pinpoint, but we've estimated around $0.23 per share. Lastly, in regard to FX, as mentioned earlier, it has negatively impacted full-year EPS by approximately $0.51 per share. To summarize, when confirming our expectations last quarter, we were aware of the benefits from share repurchases, some increased interest costs, certain tax benefits, and FX pressures, which largely balanced each other. However, this quarter, we observed a quickening in FX changes, the Fed's aggressiveness on interest rates to address inflation, and the impact of travel industry disruptions alongside ongoing effects from the invasion in Ukraine. We believed it was essential to provide you with an updated outlook and clarify how we arrived at this point. If you distill all these elements, it is evident that key business components, such as travel disruptions, interest rates, and taxes, compensated for one another, leaving foreign exchange as the main factor; indeed, if FX remained stable, our outlook would have remained unchanged. I know there are numerous factors at play, but I trust this clarifies our expectations. Please note that if currencies weaken further, interest rates rise more rapidly, or travel disruptions intensify, these estimates will inevitably be adjusted. Thank you. Now, I will turn it over to Mike.

Thank you, Rick, and thank you, everybody, for joining us today. I will start my comments from Slide number 12. Well, those of you who have been following us for a while probably have figured out that Rick tends to be a little bit more conservative, while I tend to be a bit more optimistic. So while his observations on the business and how changes in the economy are affecting our results are all valid, I’m here to tell you that while over the last three months, everything has changed, I'll also tell you, really, nothing has changed. Let me repeat that, so I really think that nothing really has changed with respect to the future of our business. We can all open our favorite news site and see the travel and hospitality industries have largely become chaotic. There are canceled flights, airport capacity restraints, and who hasn't seen the picture of the baggage room at London Heathrow? Heathrow is one of the largest global travel hubs in the world, and their CEO announced last week that they were capping their capacity at 100,000 passengers a day for the remainder of the summer due to unacceptable service conditions. For perspective, that is less than 50% of the 220,000 passengers per day that were through Heathrow in 2019. I think it's important to pause here to help you understand what this particular example means to our business. Let's not forget, travelers from the UK are by far the largest producer of high-value international transactions on our ATMs because every card has a cross-currency component. So the limiting of passengers to and from British airports has had a more significant impact on our forecast. Further to the travel demand, we also heard Delta's CEO say during their earnings call last week that they're not going to increase flight capacity for the remainder of the year due to staffing and operational issues. And similar stories have been used to describe major airports across Europe, including Amsterdam, Frankfurt, and Paris, amongst others. So while we would have never predicted this outcome only three months ago, when every sign pointed to a robust travel recovery for this year, we have learned a lot from the travel recovery that we have seen, and it is good, maybe even great news. We have seen that when the flights land, our ATM machines light up, and the travel chaos in the future will be fixed. We have seen strong recovery in transactions as well as increased average withdrawal amounts. So we have validated that the underlying fundamentals of our business are still intact, even better. As you may remember, our ATM network is stronger than ever. We closed underperforming sites during COVID and replaced them with better locations. We have added new high-quality sites, and we have expanded into new markets with our eyes set to grow further into Asia, North Africa, and Latin America. And finally, we have further diversified the EFT product line with the acquisition of the Piraeus Merchant Acquiring business. Outside of travel, the other economic factors, like the extended conflict in Ukraine, rising inflation and interest rates, and changes in currency, all drove a pullback to our expected results for the year. However, Epay continues to see high demand for branded digital payment content and continues to expand distribution in the digital channel. And Money Transfer continues to expand and improve its network, driving strong transaction growth rates in both physical and digital channels. So while there may be a bit of pressure from inflation and currency changes, the underlying business is doing very, very well and getting stronger. And let's not forget about the advancements we have made with our industry-leading REN technology platform and our new Dandelion money transfer offering. Hopefully, you can see here that while all of our assumptions for 2022 changed, driven by external factors that we were not able to control, nothing has really changed in the underlying fundamentals of our business for 2023 and beyond. It is frustrating that 2022 will come in a bit short of our original expectations, but our excitement for 2023 is strong and validated. We are confident that we have made the right investments and are in the right places to continue to deliver long-term shareholder growth. Now let's move on to Slide number 13 and we'll discuss the segment-specific highlights. Here, you can see that we continue to expand the EFT business. This quarter, we launched a new independent ATM network in Iceland, making access to cash more convenient for travelers and locals. In India, we launched a multi-currency prepaid platform for EbixCash. EbixCash has emerged as India's largest end-to-end financial exchange, which includes a last-mile network of over 650,000 physical distribution outlets and an omnichannel online digital platform. EbixCash plans to issue about 1 million multi-currency cards over the next four to five years with an annual load of $600 million. The issuance of these cards will give EbixCash an end-to-end customer experience across domestic and international money remittances, foreign exchange, digital payment solutions, prepaid travel cards, insurance, and more. The addition of EbixCash, coupled with the Thomas Cook agreement that we told you about a couple of years ago, means that Euronet powers the two largest multi-currency prepaid cards in the huge Indian travel market. In Spain, we extended the program for ATMs in the community through an agreement with the Spanish Post Office to install at least 1,500 subsidized ATMs in rural areas across Spain over the next three years. These ATMs will provide more access to cash in the cities across Spain where bank branches have closed, and customers currently have a difficult time getting access to their cash. And because I know you are curious, we have been very pleased with the first full quarter of operations from the acquisition of Piraeus Bank's Merchant Acquiring business. During this quarter, we signed agreements with approximately 5,000 more merchants in Greece, including some of the largest, like IKEA, Attica department stores, and TGI Fridays, amongst others. These new merchant additions were in line or ahead of our expectations. Transactions are in line with our expectations and the transition to our platform has gone smoothly with no surprises. This has just provided greater confidence in the quality of the asset that we have acquired, and we look forward to giving you updates in the future. We continue to add more ATMs to our portfolio. During the quarter, we added 932 Euronet-owned ATMs, bringing our total to more than 1,300 ATMs so far this year. We also added 338 new outsourced machines. We reactivated 4,284 machines that had previously been closed due to COVID or were in the offseason. Further to what we've mentioned in the first quarter, we have been challenged with supply chain issues related to our ATM deployments. These issues range from manufacturers not delivering the machines on time to third-party resource issues installing them. Accordingly, we have relaxed our ATM deployment forecast based on supply and install issues, together with the slower-than-expected travel recovery given the issues we mentioned facing the travel industry. We now expect that we will deploy approximately 2,500 to 3,000 ATMs this year, with more next year as the supply chain issues are sorted out and travel hopefully returns to the pre-COVID level. We are pleased with the rebound of the ATM business as travel around the globe continues to become less restricted. We are confident in our business model and believe that our growth will continue to improve as the travel industry reestablishes its staffing and operational levels to those of pre-COVID. Our ATMs and our teams are ready to serve these customers. Now let's move on to Slide 14, and we'll talk about Epay. The Epay team continues to expand the distribution of its leading content portfolio in both physical and digital distribution channels. While the bottom line Epay results did not show this expansion, I'd like to remind you that these results include the comparative year loss of a key customer in our Cadooz B2B business, as well as lower promotional activity in the second quarter than in the second quarter of 2021. We continue to believe that based on discussions with our promotional partners, we will see strong growth in our promotional campaigns as the second half of the year unfolds. And while we have started to see some signs of inflation creeping into the Epay business and discretionary spending on certain categories of our products, particularly in the gaming category, we continue to believe the Epay business will deliver a very nice year of earnings. During the quarter, Epay continued to expand digital branded payment sales through digital distribution methods. We added branded payments through Aircash, a leading mobile wallet in Europe. We also added iTunes on the two largest e-commerce platforms, as well as through the two largest mobile operators in Turkey. In India, we launched distribution of Microsoft 365 through PhonePe, a leading digital payment app in India. This is our first launch of Microsoft products in this huge and growing market. We also signed several new agreements that we expect to launch in the coming quarters, including the distribution of branded payments through OPIA, a B2B promotion company in Europe. We also expanded our relationship with Disney+ to new geographies and new channels. We will be able to offer Disney+ in Germany, Austria, and Switzerland, as well as through digital channels and B2B channels. In India, we signed an agreement to add iTunes to Flipkart, a leading e-commerce company there. Finally, we signed an agreement to distribute Microsoft Xbox All Access with GameXpress, an Xbox console distributor for Amazon in Mexico. We continue to expand our content, our sales channels, and our geographic reach in the Epay segment. In fact, in July, we launched Apple's new gift card across 15 markets. Unlike the iTunes card, this new gift card is for everything Apple, hardware products, accessories, apps, and much more. The broad offering makes it a great option for gifting. The Apple Card was launched in North America earlier this year and has enjoyed tremendous success. We anticipate that it will complement sales and increase gifting in our self-use markets. Overall, we are optimistic that it will make a nice incremental contribution throughout the year. Consistent with Epay's history, we've added more products across our markets, which will help us forge through the relatively small inflationary impact we mentioned. We have some exciting products and promotions in the pipeline that give us confidence that Epay will still deliver strong results for the full year of 2022. Now let's move on to Slide number 15. We continue to expand our industry-leading payments and remittance network. Once again, eclipsing the 500,000 physical location mark, despite closing more than 20,000 locations in Russia, Belarus, and Tajikistan in the first quarter of this year. These 0.5 million locations are nicely complemented by our network of 3.6 billion bank accounts and 442 million wallet accounts across 182 countries in territories, which increased 8% year-over-year. During the quarter, we launched 20 new correspondents in 18 countries, including bank deposit services for corporate and individual clients to 30 countries through our partnership with Crown Agents Bank. And we signed agreements with 22 new correspondents across 19 countries that will launch in the coming quarters. And again, reflecting on the view that everything has changed, but nothing has changed, we've expanded our network to more countries, more locations, and more accounts where customers can send money. This ever-growing network across more countries is what fuels our money transfer growth. In Belgium, we launched Money Transfer, currency exchange, and VAT refund services in the Brussels airport. This is a nice example of our ability to use our industry-leading product portfolio to allow our partners to provide their customers with a one-stop shop for their payment needs. And we further expanded our relationship with Walmart through the launch of Walmart2Walmart money transfer app powered by Ria. Now our digital customers can enjoy Ria's world-class money transfer service at Walmart's everyday low price. On the digital front, our direct-to-consumer digital transactions increased 37%, and our account deposit transactions grew 24%. You may remember that Ria has the world's best bank account deposit network, and these transfers now represent 32% of Ria's total international outbound volume. Our Money Transfer business continues to gain ground and deliver results, and I will reiterate my first-quarter comments that despite seeing some early signs of inflation pressure on our transactions, we expect that the growth rates and the operating margins of this segment will improve in the second half of this year, as we lap some of the investments we made in our technology last year. Now let's move on to Slide number 16. And I'll provide you with an update on our technology platforms, beginning with Dandelion. Dandelion continues to be the world's largest international real-time payments network and is garnering more and more interest from banks, fintechs, money service businesses, and payments companies. Our goal is to disrupt and replace the ancient Swift B2B system with a real-time modern alternative. During the quarter, we signed an agreement with Atlantic Community Bankers Bank, known as ACBB, to improve their product offering for their 400-plus U.S. financial institutions, representing $500-plus billion in assets. Dandelion will enable ACBB to expand their bank-to-bank cross-border payment network and complete customer payouts in real-time. In turn, ACBB will make the capability available to the more than 400 financial institutions that they power, and our sales pipeline continues to build. We have been in conversations with more than 50 global, regional, and local banks, including four of the top 10, and 12 of the top 50 global banks. I can tell you that we're encouraged by their interest and these are meaningful and productive discussions. The banks are recognizing the power of Dandelion's platform, network, and technology. We will continue to work hard to add more countries, bank accounts, cash locations, and mobile wallets to our network while continuously improving our service. I'm excited about the continued uptick in interest in Dandelion, and I look forward to sharing the pipeline success with you as we move into the second half of the year. By the way, the little picture on this slide is our Dandelion offering at Money20/20 Europe. Now let's move on to Slide number 17. We'll talk about REN. As we told you last quarter, digital banks continue to see the value of our REN technology and its modern architecture. This quarter, we signed GXS, an open-loop issuer processing and switching agreement. The GXS is a joint venture between a subsidiary of NASDAQ-listed Grab Holdings and Singapore Telecommunications Limited. In November 2021, the monetary authority of Singapore issued GXS a digital banking license. The entire payment stack there is REN, and Euronet will now be considered the preferred provider as the joint venture expands through Southeast Asia. We also signed an issuer processing service agreement with Union Digital Bank in the Philippines. Union Digital Bank is a digital bank that aims to empower the country's digital economy. It enables Filipino communities, businesses, and regulators to leverage FinTech, blockchain, and open finance technologies to make digital banking and virtual assets accessible to everyone. Under this agreement, Euronet will again provide the entire payment stack for the bank. In Indonesia, we signed a digital payment and issuer processing agreement with Bank Neo Commerce or BNC. BNC is a digital bank that is a buy now, pay later type company with more than 13 million users, making it one of the fastest-growing digital banks in the country. Here, we will deploy our REN payment platform to provide end-to-end digital payment and issuer processing services. Euronet has been providing payment processing services to the local market from its PCI-DSS compliant Indonesian processing center for more than a decade, which has helped our customers launch programs in an accelerated manner. As we expand the capabilities of our REN platform, which is designed to be cloud-native with all the major cloud providers, such as AWS and Google, we continue to gain more and more interest, particularly from these digital banks. We often get questions on the significant increase in our EFT transactions. A large majority of this increase are transactions through our real-time payments network that are convenient for users and are in very high demand. While these transactions may be lower-priced, judging by the growth in the number of transactions, we know we're in the right place. So now let's go on to Slide number 18, and we'll wrap up for the quarter. As I close my comments, I hope you can see why I believe that really nothing has changed despite all the changes in the macroeconomic environment. We have a strong balance sheet that gives us stability and flexibility to continue to make sure we can expand in the right places to continue to deliver strong growth rates in the future. We've seen a robust travel recovery and corresponding increase in our transactions, providing confidence in our underlying business model. Our ATM network is stronger than ever and ready to go as travel demand continues to return to pre-COVID levels. Epay continues to expand its mobile and digital branded payment products together with its digital distribution channel and has exciting new products entering the market. Money Transfer continues to produce double-digit transaction growth on U.S. and international initiated transfers, as well as a whopping 37% direct-to-consumer growth in digital transfer. We have a strong pipeline of signed REN deals that we expect to deliver approximately $110 million in revenue over the next six years. And our Dandelion prospect pipeline continues to fill with top-tier financial institutions. I would also like to reiterate Rick's summary comments regarding the netting of all the items impacting our earnings expectations for 2022. Really, if not for the FX changes, our outlook for the year really wouldn't have changed much. And let's not forget that even at the low end of our guidance range, we are still 70% better than last year, clearly highlighting that we are on the better side of the pandemic with our results improving as quickly as the travel recovery can happen. With that, I will be happy to take questions. Operator, will you please assist?

Thank you. Your first question comes from the line of Pete Heckmann from D.A. Davidson. Please go ahead.

Hey. Good morning. Thanks for taking my question. On the FX headwind, it's certainly larger than what I was calculating. And I think maybe one of the issues is I'm kind of straight-lining the country percentages across the quarters where seasonally, clearly, you have a much greater percentage of euro transactions in the second quarter. But did I hear you say that your guidance for the second half essentially is based on current spot rates or essentially little change from the second quarter?

Yeah, kind of current run rate going forward, Pete. We don't try to outguess what's going to happen with it. So kind of that 101, 102 range for the euro as you're seeing it today.

Okay. That makes sense. Regarding the capacity issues in the travel industry, particularly at airports, do you think this is discouraging planned travel or just limiting travel days? What are the main impacts, and in addition to the U.K., which other countries might be affected?

You can find information online about the issues affecting airports worldwide. Nearly every major country with a significant airport is experiencing challenges, leading to flight limitations and cancellations. In the U.K., for instance, all three London airports—Luton, Gatwick, and Heathrow—are facing similar issues, restricting passenger numbers to less than half of the levels seen in 2019. These travelers are highly valuable to us. It's important to note that we were performing well, with March being strong, followed by even better results in April, and continued improvement in May. However, we noticed some flattening in June, resulting in approximately a 1% decline due to travel disruptions. Analyzing our quarterly revenue, we see 10% of traveler transactions occur in the first quarter, 25% in the second, 45% in the third, and 20% in the fourth. Historically, we’ve seen a significant increase in Q3 compared to Q2 prior to COVID, nearly doubling transactions and travelers. However, with flight caps in place, we do not anticipate that trend this year. We believe the situation will improve, but it will take until next year to fully realize the benefits.

Okay. Okay. I got it. And just...

It couldn't have come at a worse time. People weren't hiring for the airports until March, and it takes six months to get them cleared through security. It's just crazy.

Pete, I want to reiterate a point that Mike made earlier, which is that we are noticing a strong correlation between our ATM activity and the news about disruptions at airports across Europe. This trend reinforces our belief that when flights arrive, people head to the ATMs to withdraw cash. It gives us confidence that as these issues are resolved and travelers return, the pent-up demand will be evident, and we feel optimistic about this. While we would prefer not to see these disruptions, the behavior we've observed aligns with our previous experiences.

And just a little added thing. We saw another article where the average plane fare is 30% higher than it was in '19. And part of that is supply and demand; there's just not enough supply. And so that's also limiting the number of travelers because it just costs so much more to bring your family to a vacation spot.

And your next question will come from the line of Joel Riechers of Truist Company. Your line is open.

Hi, guys. Thanks so much for taking my questions. I was just wondering if you could provide a little bit of insight into what the revenue contribution was for as for the quarter and what that might look like for the rest of the year? And kind of whether or not that was a source of margin pressure? And then my last question, I was just a little bit surprised to see the cost structure suffer, given cross-border trends. And it looks like volume and revenue per ATM were strong, but like I said, kind of margins disappoint a little bit. Is this the cost of new ATM locations, renewing leases on existing locations, or something entirely different? And is there anything you guys can do on your end to address that? Thank you.

The first part is about the margin of the EFT. It's mainly due to the costs associated with ramping up the ATMs again. We have almost fully restored them; there are just a few that still need to be reactivated, but we are in the process of bringing those ATMs back online and ensuring they are stocked with cash. This is a normal aspect of our business. Now, what was the first part of your question?

What do you expect the margin profile to be going forward?

As we continue to increase our high-value transactions, we expect to see improvements in our margin numbers. However, I want to be clear that we won't reach the same margin level this year that we achieved in 2019, as we anticipate being short by over 30% of our highest value transactions. These transactions typically contribute more than 80% to gross profit margins. Although our margins this year will fall short of the 2019 level, we expect to see significant improvements as we move into next year and approach a full recovery. Additionally, our margin for the full year won't match the 2019 comparable levels since we've added more of our own ATMs and replaced some outsourced ones. While our new ATMs might not provide as high a margin in pure mathematical terms, they do contribute more to our overall profit, which is why we're consistently adding ATMs. You'll notice a slight impact on the margin, but it will become more evident in our profit line.

Your next question is from Andrew Schmidt of Citi. Your line is open.

Yeah. Hi. Good morning, Mike and Rick. Thanks for all the details. This is helpful. I want to start off with a question on just international transaction mix. Is there any reason to believe that high-value ATM transactions as a percentage of the mix, the total transaction mix shouldn't get back to where we were in 2019? Or do you think when all these issues are sorted out, we should be pretty close to back where we were in 2019? Just curious to get your thoughts on just the high-value part of the ATM transaction mix in EFT. Thanks a lot.

Thank you for the question, Andrew. Every data point indicates that if we resolve the travel chaos, our transaction mix should return to what it was in 2019, with one minor exception—Russian travelers are currently unable to use their cards. But that's a small issue.

And I would add, it won't change it much, but I think it will start moving it in the positive direction. As Mike said, we're continuing to expand in the Asia, the Northern African, and Latin American markets. And we should just bear in mind that those markets are all essentially different currencies. So as we see users of the ATMs there, we would expect that there will be a greater mix of transactions taken out that are going to be cross currency than if you're, for example, at an ATM in France because you've got a lot of euro-to-euro transactions there, whereas when we go into the Asian and Northern African markets, those are going to be separate currencies. So I think that kind of all lines it up to seeing an improving mix as we get back to a full recovery.

Prior to COVID, data from developing economies where we established ATMs, such as in South Asia and Egypt, have proven to be very profitable for us due to the higher proportion of traveler spending done in cash. We discovered that these ATMs can sometimes be twice as profitable as those in Europe. As we enter these new markets, each market operates in different currencies, creating cross-currency opportunities for every traveler coming from abroad. Additionally, these travelers will generally spend more, with a greater share of their spending being in cash. This gives us excitement about the expansion opportunities and how they will positively affect our margins over time.

And I would just say, if you're doing the math by just dividing the revenue numbers by transactions, bear in mind that we've had a lot of transactions come into the EFT segment because these real-time payment transactions that we're processing based on the success of our REN platform sales, so they kind of skew, if you will, the revenue or profit per transaction. That's not because of lowering amounts that we're getting on our ATM withdrawals; it's just that we've got a lot of these lower price transactions. And we also debated a bit, we from time to time, have called them low value where they're really very high value because they come to us through and they all drop kind of to the bottom line, if you will, but it reflects the acceptance of our REN platform as well.

That's helpful. It would be good to get an update on the mix of the overall EFT segment, especially since you've added many new products there, but we can discuss that later. While it’s a bit early to discuss next year, it might be useful to establish how you view earnings growth in a 'normalized environment' and what additional factors we should consider for next year beyond normalized earnings. There’s definitely the travel recovery, which should help boost things next year. I’d like to hear your thoughts on the potential framework and how to approach this moving forward. Thank you.

The most significant factor contributing to our earnings growth next year will likely be travel. As we navigate through the current challenges and return to more typical travel patterns, a substantial portion of that transaction revenue will directly impact our pretax income. This is expected to be our largest contributor next year. Additionally, we anticipate a strong second half for Epay, and Money Transfer is continuing to expand its market share. We're close to finalizing some significant Dandelion deals, and REN is also seeing growth. The Piraeus Bank Merchant Acquiring business is performing well, so we have numerous growth opportunities next year, particularly with the recovery of the travel industry.

Got it. Thank you, Mike. Thank you, Rick. Appreciate the comments.

Thank you. And our next question will come from the line of Vasu Govil from Keefe, Bruyette, & Woods.

Thank you very much for taking my question. Apologies if I missed this, but can you revisit your assumptions on the EFT segment in terms of the return of the high-value transactions? It sounded like you saw a full recovery to 2019 levels in sort of May and June and then it rolled over in July. And now you're expecting it to sort of be continually worse. If you could just like revisit those assumptions that you're making in the guide.

We did not experience a complete recovery in April and May, but the recovery was progressing as we anticipated for those high-value transactions. As we've mentioned before, our expectation for the full year recognized that the beginning of the year would still be in a recovery phase following the Omicron variant, which resulted in some additional restrictions. During May and June, we noticed ongoing improvement compared to 2019 levels. However, there was a stabilization in early June, which then reversed towards the end of June. While we have not yet returned to 2019 levels, we have seen progress, aligning with our expectation of that low 70% figure we discussed. We have since adjusted our outlook based on current trends, suggesting that the recovery rate for high-value transactions will be more in the mid to upper 60% range. This change represents a minor difference; for example, if we consider low 70s to be around 72% or 73%, and mid to high-60s to be about 67% to 68%, the difference would be around 5% or 6%. This is reflected in our adjusted EPS projection, as travel congestion affected us by about $0.20 a share. If the $0.20 correlates roughly to 5 to 6 percentage points, with a delta of 30 between that and 100, it translates to about 5 turns. With those 5 turns at $0.20, it's equivalent to an improvement of $0.80 on $0.20, leading to about an $0.80 to $1 increase in our earnings per share if we reach full recovery levels. We did not accurately state that we were at full recovery in May and June; however, we were getting close to the expectations we had set earlier.

Understood. Thanks for the information. My follow-up is about your guidance approach. It seems like you're starting conservatively based on some of the factors you mentioned. Is that a fair assessment of your guidance? Also, with the many challenges you've identified, where do you think there might be some leeway if conditions don't worsen from here?

I believe there is potential for growth in several areas. We've seen continued success with REN and Dandelion type sales. We might be a bit apprehensive about the current travel loads; hopefully, the airlines will resolve their issues quickly. However, as Delta mentioned, they plan to limit their flights for the rest of the summer, which may create some pressure. Regarding the rollout of the new Apple card product, I think we have factored that into our expectations appropriately. It has shown strong traction in the United States, so it could be beneficial for us. I don't believe there is a single major factor that we have been overly cautious about. We aim for our projections to be balanced, leaning slightly towards a conservative approach, but I don’t think we are significantly undershooting our targets.

Some people believe that they – because of these travel woes, that the travel season may be elongated a little bit this year. So that might provide us with some upside as well. So we’ll just have to see.

And we did see some of that last year as we went from the third to the fourth quarter.

Operator, I think that's the last question for the day, so you can kind of close this down. Thank you, everybody, for joining us. Really appreciate it.

Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect.