Greetings and welcome to the Euronet Worldwide second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during this session, you will need to press star-one-one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-one-one again. Please be advised that today’s conference is being recorded. It is now my pleasure to introduce your host, Mr. Adam Godderz, General Counsel for Euronet Worldwide. Thank you, Mr. Godderz, you may begin.

Thank you. Good morning everyone and welcome to Euronet’s second quarter 2024 earnings conference call. On today’s call, we have Mike Brown, our Chairman and CEO, and Rick Weller, our CFO. Before we begin, I would like to call your attention to the forward-looking statements disclaimer on the second slide of the PowerPoint presentation we will be making today. Statements made on this call that concern Euronet’s or its management’s intentions, expectations or predictions of future performance are forward-looking statements. Euronet’s actual results may vary materially from those anticipated in these forward-looking statements as a result of a number of factors, including those listed on the second slide of our presentation. In addition, the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures we’ll be using during the call to the most comparable GAAP measures. Now I’ll turn the call over to our CFO, Rick Weller.

Thanks Adam. I will begin with my comments on Slide 5. We delivered a record second quarter on all key consolidated P&L line items. We delivered revenue of $986 million, adjusted operating income of $134 million, adjusted EBITDA of $178 million, and adjusted EPS of $2.25. Leading the way for these results was EFT with double-digit constant currency growth on all financial measures. For epay, results were similar to the prior year, and money transfer delivered constant currency revenue growth of 8% for the quarter with a modest increase in operating income on a constant currency basis. Our quarterly adjusted EPS was up 11% over the prior year, and when considering the first six months of this year, it’s up about 16.5% over the prior year. You can see we are well on track to meet our earnings guidance range we’ve shared with you and lining up for an opportunity to exceed the range. Moreover, this quarter we continued our track record of producing strong free cash flows, producing more than $80 million, and because we didn’t have any larger pending acquisitions or other requirements for the free cash flow, we repurchased $114 million of our shares or about 2% of the shares outstanding. Given the timing of the repurchases, there was only a marginal benefit to the second quarter adjusted EPS, but we know this repurchase will improve earnings per share by 2% for future periods. I’ll also point out that our consolidated operating margins expanded by about 90 basis points over the prior year, and we expect to see continued expansion through the second half of the year. On Slide 6, we present a summary of our balance sheet compared to the prior quarter. As you can see, we ended the quarter with $1.27 billion in unrestricted cash and debt of $2.27 billion. The increase in cash is largely due to cash generated from operations of more than $80 million in the second quarter, offset by stock repurchases and a minor impact from the completion of the MEPS ATM network acquisition. Our next slide has as-reported numbers for the segments, but let’s go to Slide 8, where we present the results neutralized for FX translations. I’m on Slide 8 now. On a constant currency basis, the EFT segment revenue grew 10%, adjusted operating income grew 24%, and adjusted EBITDA grew 20%. The strong results in EFT were made possible due to continued improvement in travel trends across Europe, strong performance from our merchant services business, expansion into new markets and the rationalization of our ATM estate, together with effective expense management. Both revenue and effective cost management contributed to nearly 300 basis point operating margin expansion in EFT. The epay results were similar to the prior year across all measures, while the core epay content distribution business grew 10% across the same range of metrics. As has been the case over the last couple of years, the timing of epay’s customers’ promotional activity can create unevenness in quarterly results. In the second quarter of last year, we had strong promotional activity that did not recur in this year’s second quarter; however, we have a nice pipeline of promotional activity that we expect to execute during the remainder of the year with more weight on the fourth quarter, which coincides with seasonal sales in the epay business. While these second quarter results show muted growth for the quarter, we continue to believe that epay will produce mid to upper single-digit operating income growth and, depending on consumer demand, we could see a path to double-digit operating income growth year-over-year. Money transfer revenue grew 8%, operating income grew 2%, and adjusted EBITDA declined 1%. The 8% growth in constant currency revenue was primarily driven by near double-digit growth in cross-border transactions, offset by a decrease in intra-U.S. transactions. Direct-to-consumer digital transaction growth accelerated to 24%, highlighting the benefit of some increased spending on marketing and promotional campaigns in the quarter. Based on the success of these campaigns to acquire long term customers and our increasing confidence in delivering strong double-digit consolidated earnings growth for the full year of 2024, we made a choice to increase this marketing and promotional spend by about $3.9 million during the quarter. Had we not made this $3.9 million promotional and advertising investment, money transfer operating income would have expanded year-over-year, producing operating margins similar to the prior year. We will continue to have a somewhat higher level of spending on marketing and promotion, but we expect to see operating profit margin expansion over the second half of the year, producing full-year operating margins near or similar to 2023. Overall, we are very pleased that we have delivered two quarters of double-digit growth. These growth rates, inclusive of some timing differences in epay, and the flexibility to make some investments for future digital growth in money transfer give us even more confidence in our ability to deliver earnings growth in the 10% to 15% year-over-year range, and you can rest assured that we are always looking to deliver results beyond that range. With that, I’ll turn it over to Mike.

Thank you Rick, and thank you everyone for joining us today. I’ll begin my comments on Slide No. 10. As you can see looking at the green trend line, that little dotted one on the chart, we continue on our path of double-digit earnings, reflecting the consistency of the consolidated annual earnings results. As I have reflected on these results, I think they provide an opportunity to highlight the success that we have delivered diversifying and expanding the business across all three segments, fully accepting that this diversification may result in fluctuations on the timing of when each segment delivers its contribution to the annual consolidated results. In EFT prior to COVID, our financial results were largely tied to how many people traveled in Europe during the summer months. While the travelers are still important to our annual results, we are seeing the diversification of our revenue and earnings contributions from non-tourist-related ATM transactions in Europe, from ATM transactions in new markets outside of Europe, and POS transactions in our merchant acquiring business, along with the benefit of new acquisitions such as Infinitium. In epay, the growth of our core business has remained strong, as Rick said, growing our core 10% this quarter over the same period last year. We continued to grow this core business with new products and new market expansion. We have also found success outside of the core business in running promotional campaigns for some of our large retailers and by making investments in our internal software to productize and sell it to external customers. These promotional campaigns are not always consistent from year to year, let alone quarter to quarter, but our top line, bottom line and free cash flows have all benefited from our success in managing these promotions. In money transfer, we have continued to expand our network, expand our customer base, expand the types of payments available to our customers, and expand our channels to reach new customers. The continued growth in the business has provided us with an opportunity to choose when to invest in certain advertising and promotional spending to drive future growth. Additionally, we have added two products, Ren and Dandelion, and both have significant pipelines for long term future growth. As we go through the highlights, you will see a consistent theme. Our focus remains on taking advantage of key growth opportunities in each of the three segments. Having now delivered double-digit growth rates across each of the first two quarters and knowing the opportunities that remain for the second half of the year, I remain confident that we will deliver very strong results for the full year 2024. As this chart illustrates, the momentum continues. Now let’s go onto Slide No. 11, and I’ll give you the updates for each of our three segments, and we’ll start as usual with EFT. During the second quarter, EFT delivered double-digit growth across all metrics. The double-digit growth was made possible by improvements in tourism in Europe, expansion into new markets, and the growth of our merchant services business. Finally, because I know you will ask, we continue to see increases in tourism in Europe compared to 2023. EUROCONTROL reported tourism increased from about 90% recovery rate last year 2023 compared to 2019, to an expected 95% this year 2024, representing a 5% year-over-year increase. Our results through the second quarter were generally in line with the EUROCONTROL data. To highlight the success of our expansion strategy, adjusted EBITDA compared to the prior year’s second quarter grew 60% across four areas: merchant services, EFT Malaysia, EFT Philippines, and EFT North America. Each of these businesses was new to Euronet within the last few years through either expansion into new markets organically or the acquisition in the case of merchant services. In the last 12 months, EFT has launched ATMs in three new markets, Albania, Belgium, and Mexico, and closed two strategic acquisitions, Infinitium in Singapore and the acquisition of those 800 ATMs in Malaysia. In addition to these acquisitions, EFT has two markets scheduled for launch in the second half of 2024 and two more in the works for 2025. Beyond expansion into the new markets, EFT has several revenue expansion opportunities for the existing estate of ATMs in Europe. An example of these expansion opportunities includes: first, we rolled out domestic direct access fees in Denmark, Norway, and Malta in the second quarter. We are beginning to pilot the rollout of access fees in the Czech Republic, Cyprus, the Netherlands, and Romania, and we plan to launch access fees in three more markets in the fourth quarter. In all, 10 markets will have domestic access fees by the end of 2024. Second, we launched international access fees in one country in the second quarter and we plan to launch seven to eight in the second half of the year, and third, over the last few years, MasterCard and Visa increased domestic interchange in quite a few markets. As an example, domestic interchange increased in the Netherlands by 60% and in Romania by 100%. These interchange rates have come into sharp focus over the last couple of years as banks demand increases to match their cost increases. As a result, we expect this trend to continue to more countries in the future. The EFT discussion would not be complete without mentioning our merchant services business. Our merchant services business has added over 15,000 new merchants in each of the last three quarters, and we have a pipeline of additional opportunities for further expansion. In addition to these revenue opportunities, we also expanded our outsourcing business. In Poland, we signed an ATM outsourcing agreement with Alior Bank for 120 ATM recyclers capable of receiving deposits and dispensing cash. Alior Bank is the eighth largest bank in Poland with over 1.3 million customers, and this agreement further expands both our leading ATM cash withdrawal and deposit returns in Poland. In addition to this outsourcing agreement, we remain on track to add between 3,000 and 3,500 ATMs in 2024. Further, we have removed certain unprofitable ATMs. This coupled with the ability to add access fees will continue to improve our margins. Our strategy remains simple and has proven to be successful. We continue to grow the business through the launch of new countries, more products, more convenience, and strategic acquisitions. As we reflect on the EFT quarter, we should point out that a number of these growth drivers are not dependent on tourism. Now let’s go to Slide 12 and we’ll discuss Ren, the best-in-industry technology platform that runs our EFT business. During the second quarter, we continued to execute our go-to-market strategy for Ren. For those of you who may be new, Ren is a proven product we trust to run our own payment processing business and a product we sell into the market with many different uses. Remember, in the first quarter I introduced Infinitium, a company we acquired in Singapore to complement Ren. Infinitium is a market leader providing risk management and payment authentication services to prevent fraud in e-commerce or card not present transactions. While Infinitium is already contributing, we are excited about how this product pairs with Ren to offer a more complete solution for online acquirers and merchants that require a modern cloud-native online payment gateway. Now let’s discuss Ren market wins in the second quarter. During the quarter, we signed a software license agreement for a card management system with ICICI Bank Limited in India. If you know India, you know ICICI - it is the third largest bank in India. In Brazil, we signed a payment processing agreement with Onnipro. The company is the chosen provider of Elo, Brazil’s largest employee benefits card program serving 12 million customers. We are excited about the future of Ren, and we will continue to enhance the product offering through continued development and strategic acquisitions like Infinitium. Let’s recap our EFT segment. Man, what a quarter. What are the drivers of this business? First, the strength of this segment is our Ren platform. Second, we continue to grow our merchant services business, which grew adjusted EBITDA 32% compared to the prior year and added over 15,000 new merchants. Third, we have continued to grow our ATM network through acquisitions, expansion into new countries, and simply adding ATMs to existing markets. Lastly, we have started to expand revenue by adding domestic and international access fees at existing ATMs to optimize our profit margins while maintaining transaction volume. As we conclude our discussion of EFT, let me remind you we achieved double-digit growth across all financial metrics in the second quarter and operating income growth of 24%. The quarterly results, the pipeline opportunities and the tourism recovery data make it hard not to be excited about EFT in the coming quarters. Now I’ll go to the next slide. As I begin my comments on epay, I want to repeat for you what Rick discussed earlier. Our core epay business grew revenue, operating income and adjusted EBITDA by 10%, excluding contributions from customer promotional activity in the prior year. Epay has a strong pipeline of promotional activities for the remainder of 2024. We delivered gross profit growth in most geographic markets, including digital channels, payment processing, Prezzy, which is our branded open loop prepaid debit card, and core content in existing and new retail. Simply put, unevenness in the timing of our promotions business resulted in flat year-over-year segment results. We believe that it makes a lot of sense to continue leveraging our assets that generate free cash flows. I understand that the market prefers more consistent and predictable results, but I would encourage you to think beyond a quarter and consider the full year. I want to provide a quick update of two of our own product offerings, Conductor and Skylight. During the second quarter, we signed an agreement to issue Google Workspace on the Conductor platform to be sold across both online and physical retailers. Moreover, we have a pipeline of opportunities we are pursuing for Skylight, so stay tuned for future updates there. We also signed an agreement to provide our extensive retail network to Transport Canberra for the MyWay project in Australia. The MyWay card is a form of electronic ticketing used for public transport, including light rail and buses. Customers can recharge their MyWay card at any of our participating retail locations. Now we want to highlight some of the agreements that we launched during the quarter. In Belgium, we launched branded payment content with Aldi. In the U.K., we launched B2B distribution of Sony Playstation and the Meta Quest gift cards. In Turkey, we launched branded payment distribution through Migros, one of Turkey’s largest supermarket chains, along with gaming content to Bynogame, a leading gaming website. In Germany, we launched B2B content distribution with Tillo, a rewards and incentives platform. Lastly, we launched Xbox Game Pass distribution on Paytm and Fanpay in India. As you can see, epay is more than just a content distributor. It is a diverse business with a strong pipeline of opportunity. While some of these new products will take some time to make an impact on the segment results, I remain confident that epay will continue to produce strong growth into the future. Now let’s move onto Slide No. 14, and we’ll talk about money transfer. In money transfer, we have developed the world’s most strategic payments network for both consumers and businesses. We didn’t become the second-largest player in the world overnight by accident. We have consistently diversified our business, including who we sell to, the products we sell, and the channels through which we sell our products. Our money transfer business is so much more than the immigrant money transfer business that we acquired in 2007. To understand what drives money transfer, you need to understand the who, the what and the how: who buys from our money transfer segment, what do we sell, and how do we sell it. Over the years, we have been successful expanding the who on who buys from us. When we acquired RIA, it was largely a U.S.-based immigrant remittance business providing cross-border payments to family members in Latin American countries. We expanded the network globally. Through the acquisition of XE, we expanded that customer base to high-net-worth individuals and small to medium-sized businesses. We then further leveraged our network expansion through fintechs and financial institutions. While we still sell cross-border payment transactions, we have expanded from simple remittance payments to family members to include payments to a broad array of cross-border payments ranging from general business payment, worker payment, cross-border payroll, and online purchase settlement. The question of what is simple: we sell the movement of money or payment from Point A to Point B. Our network gives our customers access to send money to 198 countries and territories by way of nearly 600,000 correspondent locations, 4 billion bank accounts, and 2 billion wallet accounts. Finally, how do we sell? We started with 42,000 physical bricks-and-mortar locations 17 years ago and expanded that to digital send options through our apps and web channels and expanded to banks and fintechs through API. Today we have a multi-brand strategy helping us find growth outside of our traditional core. By leveraging our XE brand to penetrate adjacent high-income consumer markets and small to medium-sized businesses, we are expanding our total addressable market. In addition, our capabilities combined with evolving market trends and needs are positioning Dandelion Payments, our payment-as-a-service brand, as a preferred partner for banks and fintechs who are trying to close the gap in global reach. The World Bank has estimated that the remittance market will grow by 2.3% in 2024. In prior quarters, you have heard me talk about how we have been growing three times faster than the market. We continue to outperform the market and take market share. Our transactions grew by 9% in the first quarter and by 11% in the most recent quarter. You can do the math - that is over four times faster than the market growth rate. I am often asked whether I believe that this growth can continue. My answer is a resounding yes. As I’ve said many times, this is a huge market and we only have 7% of it, so there is still plenty of market share to gain. We can continue to outpace the market by continuing our geographical expansion of our network both on the send and receive side of the transaction, by continuing to enhance the usability of our network with more use cases for remittances, and by continuing to compete for larger customers in the marketplace that our competitors never had to defend, and finally by continuing to make investments in digital expansion. So what about our digital channel? A lot of people ask that. Our digital channel has become increasingly important as emerging markets continue to modernize, creating increased financial inclusion and expanded use cases leading to demand for digital send and receive payment methods. While others have struggled to modernize their payments infrastructure, our strategic enhancements in digital capabilities have positioned us to embrace these market trends. Our digital transactions growth accelerated to 24% compared to last year, and our new customer acquisition grew to 44%. We now have a digital presence in 24 countries and we’ll be adding a new market in the coming weeks. Our execution of these strategies are highlighted by the market wins included on the slide. Some of the more significant ones include: during the quarter, our core business signed 16 new correspondent agreements across 14 countries and 21 new correspondents in 15 countries, and we launched them. These launches include we launched a partnership with Banco Activo in Venezuela, augmenting real-time bank deposit capabilities to all bank accounts in the country. Remittances in Venezuela exceed $4 billion, which is more than 5% of their GDP and are received by around 29% of the Venezuelan households according to the Remittance Industry Observatory. We launched our partnership with Al Fardan Exchange in UAE, which connects us with one of the largest exchange houses in the region. According to Nomad, the UAE was the second largest remittance send market in the world. We launched a partnership with Al Mulla in Kuwait, the 10th largest send market in the world according to Nomad. Al Mulla International Exchange Company is the largest exchange house in the country. Lastly, we signed an agreement with WeChat in China. A lot of you have probably heard of WeChat. WeChat is one of the largest mobile wallets in the world and China is the third largest remittance receive market in the world. As we head into the second half of 2024 with momentum and optimism, we are confident that our strategic investments will drive future growth. We have a lot of opportunities in the money transfer pipeline, including our scale and continued investment in new capabilities, new use cases, new geographies and continued expansion of our real-time payments, which will drive our growth. Now let’s turn to the next slide, and we’ll talk about our Dandelion Network. Throughout the second quarter, we continued to win in the marketplace. Technology, connectivity, and global banking are evolving quickly, and it is shifting market needs. Our global payment network is positioned to meet those needs not just for today, but for the future. Simply put, Dandelion capabilities are unmatched by any single competitor. It is the heart of our money transfer segment and it has enabled us to outpace the market growth in our RIA and XE products. Dandelion’s existing client base continues to expand their usage of Dandelion rails, including HSBC which grew transactions by 170% sequentially just since Q1 of this year. In addition to the strong demand that we have seen from our existing clients during the quarter, we also signed agreements with Wirebarley, a leading South Korean fintech and digital money transfer company; with LightNet, a high growth Singapore-based payments service provider serving consumers and businesses; and Sokin, a U.K.-based company which processes cross-border payments for small businesses. Moreover, in the second quarter of 2024, we also launched Flash Payments, an innovative Australia-based fintech that provides payments and FX services to SMEs, as well as Orcapay, a payments company based in Lithuania which supports SMEs in Europe for the import-related and business-critical payments. I also see a robust pipeline that I look forward to updating you on as soon as we close those deals. To wrap up our money transfer segment, our growth trajectory is healthy, profitable, and we are well positioned to capture market opportunities with our expanding pipeline. Now let’s wrap up the quarter. If we go onto the last slide, I can’t emphasize enough my excitement about the growth our teams continue to deliver, another record-breaking quarter and, as I mentioned earlier, one of our strengths is the diversity of our three segments. While we continue to strive for double-digit growth in each of the individual segments, our goal is to deliver consolidated double-digit growth results for the company. This quarter, EFT was the biggest contributor to our growth, however we have a strong pipeline of opportunities for all three segments to grow in the future. As we turn to the second half of 2024, what has driven our growth and what will continue to fuel that growth for the remainder of 2024 and beyond, our strategy for growth is proven and we have executed that strategy for the last 30 years. We will continue to take advantage of market opportunities and execute by making strategic investments, like the MEPS investment in Malaysia, expanding into new countries like we did this quarter in Albania, growing and expanding our existing businesses like we have with our merchant services business, adding access fees to certain domestic and international transactions, closing deals in our pipeline of opportunities in all three segments, by adding new correspondents in the money transfer business, by continuing to grow our ATM outsourcing arrangements, by adding epay content to both digital and physical channels, and making good capital allocation with a focus on growth, acquisition, and share repurchase as appropriate. As I conclude my remarks, I want to repeat - we look forward to the second half of 2024 with a pipeline of opportunities to drive our results. Our management team’s proven history of delivering these opportunities is great. We continue to be optimistic about the remainder of 2024, and for 2024 we affirm and remain consistent with our expectations that earnings will grow in the 10% to 15% range, and of course you know us - we are driving to be beyond that range. With that, we’ll be happy to take questions. Operator, please assist.

Our first question comes from Andrew Schmidt with Citi Global Markets. Your line is now open.

Hey Mike, hey Rick. Thanks for taking my questions and for all the comments. I wanted to start by discussing money transfer - it's great to see the ongoing share gains in that area. Could you talk more about the competitive environment you're observing? There have been some positive changes in the market structure in the U.S., so if you could share some insights on that, and also provide an update on the marketing expenses. Specifically, I'd like to know where those funds are being allocated; it seems like it's digital, but could you confirm whether it's digital or retail, and what the expectations are for the rest of the year? Thanks a lot.

Well, with respect to the competitive dynamics of the industry, you’ve got to understand the money transfer business is hyper-competitive, always has been. We really haven’t seen much difference. You can see that our revenues per transaction, our margins per transaction really haven’t changed over the last couple of years, so even though we hear about competition, we really haven’t felt it. Maybe one of the reasons for that is we’re growing four times faster than the market - I don’t know, so with respect, I don’t see much change there. With respect to your second question of where did we spend the money, most of that was digital. You saw that our digital growth was 24% over the prior year, was 44% growth in our new customer acquisition. We’ve realized that our marketing is working, we’ve got a new set of executives who have been working on that over the last few quarters. We see the results, so we thought that would be worth making additional investments, so mostly in digital.

Thank you for that, Mike. Regarding the EFT segment, I appreciate your insights on the travel recovery. Could you clarify how the tourist ATM performance compared to your expectations? Last year, we experienced some fluctuations in transactions. I'm curious about the early observations in the third quarter. Thanks, Mike.

Yes, last year we didn’t miss transactions; we missed spending per head. This year, it looks like spending came in about where we expected. Regarding the travel recovery, we are at 95% and likely to grow a bit beyond that. Overall, the travel concerns are behind us, and from here, it’s about expanding our network and improving its efficiency by phasing out underperforming ATMs. Additionally, with EFT, we anticipate a significant influx of business from our EMS and merchant services. I'm excited about the introduction of access fees, which I've hoped for a long time. This means that when travelers within the eurozone move between euro countries, the recipient country now benefits from the access fees, allowing us to potentially earn two to three times more on those transactions than before, and this applies to multiple countries. We added three countries this quarter, with more on the way, which should give us a nice boost in margin since we are processing the same number of transactions but making significantly more revenue.

Absolutely. Yes, you’ve been talking about those for some time, so it’s good to see those come through.

Finally!

Thank you. Our next question comes from Pete Heckmann with DA Davidson. Your line is now open.

Good morning, and thank you for the question. Regarding the ATM access fees, I believe you mentioned that there are plans to implement them in three more countries later this year. It seems that the countries where this has already been introduced aren't significant markets for Euronet. Am I correct? Are there any larger markets, such as Poland or Spain, where you might also consider implementing these ATM access fees?

Yes, so yes, they are a little bit smaller countries. Some of them are really good little tourist countries, like those island countries of Cyprus and Malta, etc., and they were all euro countries, so being able to add access fees is a great thing for us. With respect to the bigger countries, you mentioned Spain. Spain, we already have surcharge and access fees in Spain, so that’s not going to change too much. I think access fees for locals may come too, but that’s going to be later in the year, we would expect. But the point is it’s coming now, finally after hoping for a long time. We should be able to have access fees in most countries. It would be nice to get them in Poland - I don’t see that happening this year, but we’ll have to wait and see.

Okay, then just

But it’s all pure margin, Pete. I mean, that’s the nice thing, and in a lot of these markets, you can make money on a cross-currency transaction, but the locals manage to get by for 30 cents, so that will help us.

Definitely.

And the interchange increases are happening as well. The reality is we’re not the only ones who own ATMs in Europe. The banks own them, and the big banks with significant overhead are allowing internet banks to utilize their ATM infrastructure at a fraction of what it really costs them, effectively subsidizing their competitors. As a result, the big banks are pushing for interchange increases, which is why we’re starting to see that happen as well.

I wanted to follow up on the money transfer segment. I believe there was a mention of some competitors either leaving markets or there being some consolidation among them, and you noted that new agent accounts increased by 35% year-over-year. Could you provide more details on that?

Okay, so yes, that’s happening, but you know what? To be honest, that’s always kind of happening. It’s a hyper-competitive market. We saw two larger guys kind of go belly-up this last quarter, so, but there’s always somebody, you know? Their transactions, their money transfers get spread out across the industry. Because we’re growing faster than everybody else, we kind of get more than our fair share.

Got it, okay. I’ll get back in the queue. I appreciate it.

Thank you. Our next question comes from Charles Nabhan with Stephens. Your line is now open.

Good morning and thank you for taking my question. With the acquisition of the ATMs in Malaysia this quarter, I was wondering if you could just kind of level-set for us and give us a sense for what the fleet looks like from a geographic standpoint in terms of how much is in Asia, how much is in Europe, how you think about that fleet from a travel versus local or domestic concentration standpoint.

So we’ve got a little bit of a mixed bag here. The ATMs we just bought in Malaysia are focused more on locals, but of course there are international travelers to that. In the other markets, where we deploy our own ATMs, we’re really focusing more on travelers but we’re catching a lot of the locals too, because those developing markets are just under ATM-ed, you might say, so both the locals and the international tourists do need access to cash. As far as the total number, Rick, maybe you can help me here?

In Malaysia, it was about 800 ATMs, and they’re all in Malaysia. None of those are in Europe or whatever.

Right. But regarding areas outside Europe, we've mentioned Asia and North Africa. In total, we likely have around 3,000 to 3,500 ATMs in those regions, I imagine.

Yes, and I would tell you that the concentration of ATMs deployed during the first half of the year, it’s been a larger focus outside of Europe than inside of Europe. We’ve been talking about that for some time, that we see a number of new markets to go to. We see good opportunity in the Asian markets, those North African markets, the South American markets, and I would expect that we’ll continue to see that kind of progress.

Got it, helpful color. I appreciate that. As my follow-up, I believe you had commented on epay, the comps getting a little easier in the back half of the year and potentially exiting ’24 at mid to upper single digit operating income growth. I guess first, I wanted to make sure I heard that correctly; and then secondly, I wanted to get some color around the revenue side of that equation. If we’re exiting at mid to high single digits operating income growth, how should we think about that from a revenue standpoint?

Yes, our operating income is expected to grow slightly faster than our revenue due to the benefits of leverage. You heard correctly that we anticipate operating income growth to accelerate in the second half of the year. We will benefit from the execution of promotional programs that were not present in the second quarter. For the full year, we expect our epay operating income growth to fall within the mid to upper single-digit range. This implies that as we progress through the second half of the year, we are likely to see even stronger results to achieve this target. So, indeed, we should expect increased momentum for epay in the latter half of the year.

And a little bit more, as Rick said, it’s a little bit more weighted for the fourth quarter. I mean, these promotions are signed up, we will implement them, we kind of know what’s happening, we know the timing of them, so they’ll be more in the fourth quarter than in the third quarter.

Thank you. Our next question comes from Darrin Peller with Wolfe Research. Your line is now open.

Hi, this is Daniel Krebs on for Darrin. I wanted to talk a bit about merchant services and Piraeus. Has this expanded beyond Greece yet, and how should we think about the sizing and impact of expansion into Spain, Portugal, and Italy across the coming years? Thanks.

Most of the impressive growth you saw in the second quarter was in Greece, but we are now expanding. We’ve established sales teams in Portugal, Spain, and Italy to promote our product, which gives us a solid platform. Our success in Greece has been tremendous, and we aim to attract similar merchants in these other Mediterranean countries. We expect to see more developments in the coming quarters as we are just getting started, but we’ve added 15,000 new merchants each quarter recently, which is quite remarkable. We will continue to grow that number.

Got it, understood. Do you expect that 15,000 merchant per quarter number to step now with this geo-expansion, or more of the same going forward?

Well, we’ll just say that we’re growing well faster than the market, and we’re going to continue to do our best. We’ll find out what those numbers are. Obviously if we can get into new markets, that would help us because most all those 15,000 were just in one market. Greece is a great market, but it’s 10 million people and it’s only so big, so being able to get into three new huge markets would be really nice.

Thank you. Our next question comes from Ken Suchoski with Autonomous Research. Your line is now open.

Hey, good morning Mike and Rick. Thanks for taking the question. Maybe just on the direct access fees, did something change in the market that allowed you to introduce those fees, and I guess, is there any way to quantify the upside to revenue and operating income, either this year or next year, from direct access fees and higher interchange rates? Thank you.

Well yes, quantification, we’ll hold off on that. I mean, we’ve tried to give you some good perspective that we expect our earnings to be growing 10% to 15%. As we’ve shown you, we’ve already grown it well outside that range for the first half of the year, and we feel very good about our opportunities to continue forward. This will just give us more confidence at delivering those kinds of results and puts us in a good position to continue that growth trend into next year, because obviously this year, we’re only going to get a small part of it because we’re only getting a part of the year of it. In some of those cases, we may only be getting a month or two of it, which means that next year, that’s going to be lining up for growth contributors there. We’ll hold off on giving sizing of numbers, but suffice it to say it really reinforces our confidence for growth this year and puts us in a very good position to see a path to similar double-digit growth rates for next year, again consistent with what we’ve done over the last 10 to 20 years.

Okay, and just to be clear, can you go into other markets and add these surcharging fees, or does a rule have to be put in place for that to happen?

There is a complex network of factors that need to align, including card scheme regulations and compliance rules. However, if we look back over the past several quarters, we’ve been discussing this matter extensively. We can interpret the trends. As Mike mentioned, banks have experienced years of rising costs without any corresponding increases in interchange rates. Furthermore, the competition is intensifying from non-bank entities in the market that do not operate ATMs but benefit from the actions of their rivals. The market dynamics are evolving. Banks seem to be reaching their limits in this regard. We recall that in the U.K., a few years back, Link reduced the rates, leading to a decline in ATMs, but they've since reinstated the requirement to maintain ATMs and provided incentives for owners to do so. We've witnessed this trend developing and while we cannot specify how many additional countries will open up next year or when that might happen, we are quite optimistic that momentum is shifting in our favor, both regarding access fees and interchange rates.

Okay, great. That’s really helpful, Rick. Then maybe just regarding the increased digital marketing spend in money transfer, why do this now? Was there something you saw in the market from an opportunity standpoint and you wanted to grow your digital footprint - I think digital is just 12% of transactions, or was it more of a response to what competitors are doing in the market?

Yes, it didn’t really have anything to do with competitors. We’ve got a new digital marketing team over the last year, their results have been quite improved over the last year, and so we just wanted to put a little bit more gasoline on the fire of expansion because we saw the results. At the end of the day, digital marketing should bring results, and if they’re not bringing enough, you use less marketing; but we’re happy with what we’ve seen.

Well, we saw those results, which is the first and most important piece, and then secondly we feel very good about what our earnings contribution for this year is going to be and we felt that we had the earnings stream to be able to invest in it.

Okay, great. All right, thanks Rick, thanks Mike.

Yes, and still pick up a million shares of stock on the side.

Thank you. Our next question comes from Mike Grondahl with Northland Securities. Your line is now open.

Hey guys, just a follow-up. The $3.9 million marketing advertising spend for money transfer, any regions to call out where you spent more of that, or was that kind of even across the globe?

It’s kind of even with where our transactions come from. We get the bulk of our transactions from the U.S., so most of it was there, but we spread it out. And by the way, that $3.9 million was the increase of spend. It doesn’t mean that if you take that way, we have no spend. That was just an increase this quarter over the run rate that we’ve had.

Yes, the incremental amount. Great, great. When you mention access fees, is that a fee on top of domestic interchange?

Typically, a domestic access fee refers to a surcharge, and in these markets, the process works such that if you can manage a domestic access, you won’t receive the interchange fee. This means that the interchange fee, whether it’s 20 cents or 30 cents, is eliminated, but you can earn two or three dollars from the domestic access fee.

Got it. I know you guys won’t comment on a range for, let’s say, 2025 from these DAFs, but on average, is the fee going up, I don’t know, 10 cents, 20 cents per transaction? Is there any metric you can give us to help us kind of size it?

You need to be cautious because we have a variety of transactions. For instance, if you have a euro card issued in France and it is used in Cyprus, which also uses euros, before we would receive about one euro in international interchange fees. Now, we can earn three euros.

Network participation, where we have arrangements.

Yes, we have network participation agreements in a lot of these markets. Actually, when DAF comes to a market, it gives us an opportunity to actually acquire even more transactions by signing these network participation deals, which allow us to sell our transactions on a wholesale basis to people like these internet banks. There’s just a whole bunch of different things.

Sure. Well, hey, I’m glad you’re getting a little.

But at the end of the day, it’s pricing pressure up, you know?

The other thing that this does, which is so different than interchange, bear in mind that interchange, we have no say in what that number is going to be. We have to take the 30 cents and that’s it, that’s all you get. In the access fee world, we have some decision-making that we can make on the price of that transaction. We could set it at two, we could set it at three euro, we could set it at one euro. It really gives us more flexibility to manage our business than just simply take whatever the card schemes are going to give you.

Yes. You can really use some price elasticity algorithms to figure out what maximizes for us.

Thank you. Our next question comes from Gus Gala with Monness, Crespi, Hardt & Company. Your line is now open.

Hi Rick, hi Mike. Thank you for addressing the questions. Reflecting on the Piraeus acquisition in merchant services, you mentioned a structural margin reduction related to EFT. We’ve now seen two quarters of over 60 incremental EBITDA margins. Considering the updates on the ATM fleet beyond access fees and how the geographic mix may evolve over time, Ren, do we believe the margin structure is possibly closer to or even better than our expectations from a year or two ago?

Reflecting on the last year or two, I would definitely say yes. However, if we look back to 2019, we had a significantly lower cost structure then. As we've mentioned, costs have increased substantially over the past few years. So, compared to a couple of years ago, I feel more optimistic now about the operating margin in EFT than I did six months ago, as we're starting to see the benefits from some of the access fee opportunities. Additionally, the management team has effectively managed costs, which contributes to this sentiment. Also, the Piraeus merchant service business has been growing well, and its margins are aligning more with the lower end of the average EFT business. This rapid growth helps stabilize and support that margin. Therefore, while I feel somewhat more optimistic now, it may not be as strong as it was back in 2019.

Great, I appreciate all the color.

Yes, no problem. Thank you Gus, and I think we’ve got to shut down now because it’s top of the hour. But Gus, thank you for your question, and for everybody else on the line, thank you very much for listening. We’ll catch you next quarter.

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