Earnings Call Transcript - EEFT Q3 2020

Operator, Operator

Greetings and welcome to the Euronet Worldwide Third Quarter 2020 Earnings Conference Call. All participants are in a listen-only mode. After the presentation, there will be a question and answer session. It is now my pleasure to introduce your host Mr. Scott Claassen, General Counsel for Euronet Worldwide. Thank you. Mr. Claassen, you may begin.

Scott Claassen, General Counsel

Thank you. Good morning and welcome everyone to Euronet's quarterly results conference call. We'll present our results for the third quarter 2020. On this call, we have Mike Brown, our Chairman and CEO; Rick Weller, our CFO; and Kevin Caponecchi, the CEO of our Epay Division on the call. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the first page of the PowerPoint presentation we'll make 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 such forward-looking statements as a result of a number of factors that are listed on the first page of our presentation. Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide such update under any circumstances. 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 CEO, Mike Brown. Mike?

Mike Brown, CEO

Thank you, Scott, and good morning. And thank you all for joining us today. I'm excited to be able to tell you that we considerably exceeded the earnings expectations that we had set in July as a result of double-digit year-over-year growth in our Epay and Money Transfers segments, together with better than expected ATM transactions as we've benefited from a much quicker return to travel than we initially anticipated. As you will see as we go through the quarterly highlights, these results are testament to our diverse product and geographic revenue mix, our flexible and scalable technology, our strong balance sheet and our dedicated and talented employee base who are working harder than ever to drive this business forward. There's no better example of this than the announcement I made yesterday that Ria is now Kroger's second money transfer provider. In EFT, we benefited from a stronger than expected resiliency of ATM cash withdrawals, and we saw local and international governments ease their movement restrictions in countries and open their borders to some international arrivals. In Epay, we continue to see strong sales of prepaid self-use content in both the physical retail and digital channels as well as mobile increases in digital channels in certain markets. In fact, our digital channel transactions grew at triple-digit rates on a year-over-year basis. Finally, in Money Transfer, we continue to deliver strong growth at a rate of 22% in U.S. International outbound remittances, as well as a 26% increase in international cross-border remittances, partially offset by declines in the U.S. domestic business and in Malaysia. Digital transactions initiated through our website or our mobile app also continue to accelerate, delivering an exceptional 126% year-over-year growth in the third quarter. I am extremely proud of the strong double-digit earnings growth in two of our segments and the flexibility of our EFT team to enable ATMs on short notice to take advantage of the changing travel trends which resulted in significantly better results than we expected. All of which was made possible by our strong balance sheet. Now let's move on to slide number six and I'll give you some additional details on how we achieved this remarkable performance in the quarter. So we got four graphs here for us to look through. Because over half of Euronet's 2019 profits came from our EFT division and a little over half of those profits came from travelers, we get questions about the recovery of this segment. Here on this slide, we want to give you a perspective of how responsive our ATM transactions are to the lifting of restrictions by focusing on what we have seen on our own branded ATM networks across Europe. To that end, the three most relevant questions are: Number one, after COVID-19 will people return to using cash in their daily lives, both while traveling and at home? Number two, how fast do you think EFT will return to transaction levels of cash we saw in 2019? And finally Number three, are there any lessons that we can learn from 2020 that can be extrapolated to 2021 and beyond? So first, I will try to answer the question on domestic transactions. Certainly, from March through May, we saw virtually every country in Europe establish very tight domestic lockdowns. Bars, restaurants, businesses, and offices were closed, and even leaving one's home or apartment could be met with police questioning. As you can see in the first graph, even without a cure for COVID-19, we saw domestic transactions come back very quickly once the shelter-in-place restrictions were lifted. This varied by country, ranging from 85% to 95% of last year's transactions. This is a substantial recovery considering that virtually every country still has some COVID restrictions in place, including limited restaurant seating, reduced bar hours, mandated work-from-home orders, and there being no long-term cure or vaccine. I would also like to point out that for one country, which we did not include in the graph statistics, we saw incredible growth in domestic transactions, where we had a 43% growth over the prior year because the banks closed their branches or didn't have ATMs loaded with cash. So while we don't expect all bank branches to close or all bank ATMs to be left idle without cash, we continue to see an opportunity to meet the cash needs of customers. To answer the rest of the questions, let me remind you of the timetable associated with various cross-border changes. Through April, May, and even into June, virtually all European countries had closed their borders to all other countries around the world. Surprisingly, on June 15th, the EU agreed on opening their borders to one another beginning July 1st. These borders remained closed to all non-EU travelers and are still closed. Euronet gets about a quarter of its European traveler transactions from folks visiting from outside the EU. So even in the best of situations, we did not expect to achieve in the third quarter even roughly three-quarters of 2019's volume. Accordingly, that part of our transactions will be dependent upon borders being fully open. What we found was that with such short notice periods, vacationers were more apt to travel by car to their holiday destinations. And as you can see in the second graph, beginning on July 1, there was a steady increase in transactions through August, resulting in about 50% of 2019's transactions. As September came upon Europe, more COVID-related restrictions were added, and that number fell to about 30% of 2019 level. Given that three-quarters of all 2019 Euronet owned ATM European transactions were from cardholders within three quarters of Europe, this shows amazing resilience. Here in the third graph, we see countries where air travel brings in most of the income. Keep in mind that flying requires advanced reservations, more preparation, and travel certainty as well. Accordingly, we were pleasantly surprised to see these levels reach about 20% of 2019 volumes. Finally, in the fourth graph, you can see the international transactions indexed with European international flights. On a real-time basis, you can see that our international transactions outpaced but roughly correlate to flight information. This serves as another data point to demonstrate the desire travelers have to withdraw cash and use cash when they travel abroad. So what is our conclusion? Unfortunately, I can tell you that none of us know exactly what 2021 will bring. But what is empirically clear is that people in large numbers are ready to go on holiday even right now, if the governments would only lift their travel restrictions and open their borders, both for European and foreign passport holders. It is also a message to governments about how much thoughtful planning is essential to ensure a full recovery. The economic disadvantage to Europe is huge. So we are cautiously optimistic that in 2021, it could be a good year for EFT, assuming governments take the past summer as a guide to opening their borders for those who are anxious to go on holiday. Now let's move on to slide number 7, and we'll discuss some of the recent EFT highlights. Just this week, we launched a new IAD network in Egypt, the fourth country outside of Europe where we have deployed Euronet branded ATMs. Prior to COVID, when asked if we were able to continue to deploy 4,000 plus ATMs a year, I always answered yes, believing that the opportunity outside of Europe is just as big or bigger than the opportunities in Europe. We maintain this belief and have not stopped pushing forward to be ready for the post-COVID world with new ATMs in new markets. In Europe, we launched a new initiative that we are calling ATM for the community, which aligns with our mission to bring payment convenience to everyone. Despite reports that cash is becoming extinct, it is estimated that cash still accounts for 60% of the transactions used across Europe. With this initiative, we are working with leaders in communities across several countries, primarily in more rural areas, to ensure that their citizens have convenient, secure access to cash, as these communities have been impacted most by Europe's continuing trend of bank branch and ATM closures. We also launched a demand services agreement with IDFC First Bank, a leading private sector bank in India, and we used our technology to launch digital banking services for IMG Bank in the Philippines. In Spain, we signed an ATM Network Participation Agreement with Cajamar Bank, whereby Cajamar Bank customers can now use Euronet branded ATMs under similar terms as their own bank's ATMs. These agreements reflect the value of our ubiquitous ATM network, which allows customers to access their money wherever they are. This is also a strategic advantage for Euronet, as we're the only player in the market with ATMs across all of Europe. We also launched acceptance of Postcards on our Euronet branded ATM networks in Denmark, Sweden, Switzerland, Romania, and in the UK, and we launched ATM POS and card management outsourcing for ABI bank in Albania. Finally, we ended the quarter with 43,956 active ATMs. This sequential increase includes a reactivation of 3,800 ATMs that were closed at the end of June, to capture the increase in ATM transactions as movement restrictions were lifted, and 444 new ATM deployments across the business. These were offset by the removal of about 1,300 outsourced ATMs and 563 low-margin ATMs which were removed due to the acquisitions by larger banks and their desire to in-source ATM operations. It's important to note that this in-sourcing is due to M&A activity and doesn't diminish the outsourcing pipeline we continue to see within this segment. We also expect a decrease of another 2,000 very low-margin Indian ATMs in the fourth quarter, the income from which to us is marginal. In summary, there is no doubt that COVID has had a profound impact on our EFT segment results, but the resiliency of our ATM transactions as restrictions were lifted, together with our ability to continue to launch new markets, diversify our product portfolio, and sign new agreements underscored the health of our core EFT business and that the post-COVID growth prospects for this segment remain intact. Now we'll move on to Slide number eight and we'll talk about Epay. It's worth repeating that I'm thrilled with Epay's double-digit earnings growth in the quarter driven by continued growth trends in digital media content and expansion of mobile content in certain markets. This growth came from continued strength in our physical retail network, as well as triple-digit transaction growth in the digital channel, which resulted from our ability to deliver both mobile and digital media products to a growing list of mobile wallets and e-commerce sites due to our industry-leading technology. Our transactions through mobile wallets continue to grow at a very strong triple-digit rate. As an example of continued growth in mobile wallets, you may remember a few quarters ago that we told you about our partnership with Amazon Pay in India. As you can see in our transaction count, we continue to see tremendous growth in transactions through Amazon Pay. This quarter, we have furthered this partnership by adding two billers of bottled gas, a key cooking utility in India. We now have all three billers providing bottled gas in India and are processing 30,000 transactions to date through Amazon Pay just in this one category. During the quarter, we also added credit card bill payment services and Google Play recharge codes with the Amazon Pay wallet, and are seeing nice transaction adoption in these other new categories as well. Our technology has allowed us to further expand our mobile distribution in Brazil. This quarter we added mobile distribution services to the Itau Card App, the mobile app of Itau Bank, Brazil's largest private sector bank with over 50 million accounts. Additionally, we further expanded our mobile distribution in the U.S. through the acquisition of the covenant contract with AT&T, allowing Epay to activate and distribute their prepaid mobile airtime. Finally, our technology also allowed us to expand our long-standing distribution agreement with Microsoft. Epay will now manage the monthly recurring billing between Microsoft and select telecommunications retailers for the sale of Xbox Game Pass Ultimate and Xbox All Access subscriptions worldwide. This is Epay's first gaming subscription service and the first gaming bundle distribution agreement with Microsoft. Our Epay segment may provide the most evident example of how powerful our technology suite is in continuing to attract customers from both new and long-time customers. Our pipeline of new launches remains robust, which we expect to drive similar year-over-year growth rates in the fourth quarter, as we saw in the third quarter. Now let's talk about Money Transfer in Slide number 9. I couldn't be more excited to discuss Money Transfer following the recent announcements, including Kroger's expansion of its financial services marketplace, which has chosen Ria as a second provider of money transfer services in around 2,000 Kroger locations across the U.S. You might recall that last year, Epay introduced a new customer service solution for Kroger that significantly streamlined financial transactions for Kroger staff and reduced transaction time for customers. We have aimed to collaborate with Kroger since acquiring Ria in 2007. The success of Epay's SAP solution showcased our technical capabilities, which, combined with Ria's secure and affordable offerings and strong commitment to compliance, influenced Kroger's decision to select Ria through a competitive RFP process. We are thrilled to work with Kroger to deliver the Ria Money Transfer experience to their customers. This service will launch in Kroger stores in the coming weeks and represents a significant enhancement to our U.S. Money Transfer network. This achievement is a testament to the efforts of our Epay and Money Transfer teams. We also formed a partnership with Fiesta Mart, a major Texas grocery chain, to provide Ria's Money Transfer service at their in-store customer service centers across Texas. This agreement extends a decade-long retail partnership Ria has had with Bodega Latina, the parent company of both Fiesta Mart and El Super stores in California. We are eager to assist Bodega Latina in boosting customer traffic, transaction volume, and growth rates at Fiesta Mart, similar to what we have accomplished at El Super over the years. Our efforts to expand our post office receive network continue to be successful. It's important to note that outside the U.S., post offices function similarly to large chain retailers, handling a significant volume of transfers due to their widespread locations. Historically, these post offices have had exclusive agreements with our competitors. Together with the Kroger agreement, these examples show that major retailers and post offices are focusing on growth and responding to customer preferences for better choices and competitive pricing. This quarter, we added spending and payout services for the Post of Serbia, which has over 1,300 locations nationwide. We launched payout services in more than 250 Jordan post branches. Additionally, we signed agreements with both the Indonesian post and Moldova post, which we anticipate launching in the upcoming month. Beyond post offices, we partnered with MMBL in Sri Lanka, which had been exclusively with one of our competitors for nearly 25 years. We have also added Asia Commercial Bank in Vietnam and LuLu Exchange in Kuwait, among others. Furthermore, we launched payout services to M-Peso wallets in Mozambique through Zeepay and to Airtel wallets in Malawi, Rwanda, and Tanzania through our new partnership with Thunes. With these expansions, our mobile wallet network now reaches 160 million users across 17 countries. Another notable development for Ria this quarter is the digital money transfer service partnership with French neo-bank Nickel. In collaboration with our online money transfer platform partner Monisnap, Ria will provide digital capabilities and access to our network for customers of both companies looking to send money abroad. To provide context for our strong growth in money transfer, Ria holds about 5% of the approximately $700 billion international family remittance market. We estimate that about 25% of this market is acquired digitally. From the remaining 75% handled via physical agents, Ria captures nearly 6% of that segment, with agent revenue growth in the mid-20% range compared to last year. We are well-positioned for a substantial increase in market share, which is considerably larger overall. Our brick-and-mortar business is thriving, arguably performing better than any pre-COVID quarter we've seen in years. We are growing about five times faster than the World Bank's projected market growth. This does not even account for our remarkable 126% year-over-year digital growth in the third quarter. And all of this has been achieved without Kroger or BSA. I apologize for any technical difficulties. Operator, can you please confirm if I'm still on the line?

Operator, Operator

And yes, you are connected and we can hear you clearly.

Mike Brown, CEO

Okay, perfect. I apologize, everybody. We're having some telecommunication drops here in Kansas City. So, let's figure out where we were. Okay, yeah. So, like I mentioned, we are growing roughly five times as fast as the World Bank is and that's not including the 126% year-over-year digital growth in the third quarter. And all this is without Kroger or BSA or new post offices. These new agreements will continue to fuel growth in our Money Transfer segment where we saw tremendous growth in remittances during the quarter, except in Malaysia and the U.S. domestic business. These strong growth rates are a testament to the selflessness of our immigrant customers, who prioritize their families back home on payday over the abundant economic uncertainties they face, as well as the strong value proposition that we offer them. We have also benefited from strong execution in the digital channel, the struggles of some smaller competitors, and continued expansion of our network, both our direct-to-account network including banks, wallets, and cards, as well as our physical network of agents and retail stores. With a network that now reaches almost 450,000 physical locations in 159 countries and quickly growing digital and wallet payout networks, we anticipate that for the entire Money Transfer segment we will continue to deliver double-digit international outbound transaction growth in the fourth quarter, assuming no major changes in the global economy and no pervasive lockdown stemming from a second wave of the coronavirus. It was an exceptional quarter for Money Transfer punctuated by our new agreements with Kroger and Fiesta Mart. Now let's move on to Slide number 10. And I'll give you some technology highlights from the quarter. As you likely know by now, our technology is a key factor in our continued success. In this quarter, there are four significant accomplishments that we'd like to highlight. Starting with the Bank of Mozambique that I've talked to you about for the last couple of quarters, I'm pleased to tell you that we are live with our REN Foundation payment solutions. We launched the first bank in late September on time, meeting our original timeline despite the pandemic and travel restrictions that prevented us from working in person with the bank since March. How's that for powerful technology? We expect several more banks to go live in the coming days. I am extremely proud of our REN team. They have worked tirelessly to overcome many pandemic-related obstacles while exceeding our customers' expectations here in Mozambique. We also signed an issuer processing and payment services agreement for GoPay in four key markets; Indonesia, Philippines, Thailand, and Vietnam. GoPay is the largest payment wallet in Indonesia and originates from Gojek, a ride-hailing app, kind of like Uber in the U.S. Like Uber, Gojek has expanded into a multi-service platform covering food delivery, shopping, local delivery, and more while amassing over 100 million active users across Southeast Asia. Gojek launched GoPay as a closed-loop wallet to enable their customers to seamlessly continue payments without carrying cash. For those not familiar with the term, closed-loop implies acceptance only within a network of merchants onboarded by GoPay. To drive broader acceptance, Gojek wants to convert GoPay into an open-loop wallet. Through our partnership, GoPay will connect via our REV payment cloud to Euronet's issuance platform. Euronet will convert the closed-loop wallet balance into a virtually internationally branded prepaid card balance. In this way, a customer can effortlessly use the GoPay wallet at any physical or online merchant that accepts the branded card scheme. This is a great example of one of Asia's fastest-growing Fintech leveraging Euronet technology to strengthen and improve their customer offerings. From our press release last week, you saw we signed an agreement with Connected Processing Services CPS, a U.S. based processor of independently owned ATM networks. CPS will leverage our REN Foundation from a cloud-based installation. This is a perfect example of a customer using our cloud-based technology to modernize their payment infrastructure. This implementation may be the first or one of the first examples of ATM or POS processor using modern scalable and less expensive cloud-based technology to drive their business. Finally, consumer payment patterns have dramatically evolved with the advent of e-commerce and the development of alternative payment options. Payments are no longer confined to regular business hours and traditional payment channels, resulting in new challenges for funds transfer. Traditional payments that involve delayed funds availability, pending settlement between sending and receiving institutions are no longer in line with customer expectations. Real-time payment is a new way to exchange money and purchase services in seconds. These schemes combine immediate funds availability, settlement, finality, instant confirmation, and integrated information flows all within seconds. The interest in real-time payments creates two exciting new opportunities for Euronet. First, in markets with a deployed real-time payment scheme, many financial institutions find it difficult to connect their legacy platforms to the real-time payment clearinghouse, resulting in lower than anticipated adoption rates. The reasons are numerous, but our REN Foundation can be used as a gateway providing simplified interfaces that minimize the impact on a customer's legacy systems and accelerate adoption. We call our solution REN Connect and the interest is high; we've already secured two bank agreements in Asia for this. Second, there are many countries around the world without a real-time payment scheme and they are seeking potential solutions. We have further developed and configured the REN Foundation as a real-time payments clearinghouse. This solution could reside within the national switch, private processor, or central bank and provides the overall real-time payments ecosystem required for payments modernization. We call our solution REN RTP and we are currently involved in bidding for several of these large opportunities. I'm really excited as we travel toward becoming one of the go-to technology providers for real-time payment solutions around the world. In wrapping up, COVID-19 continues to dominate most of the headlines and has negatively impacted many companies in 2020, including Euronet. But with two segments growing at double-digit rates, a strengthening balance sheet, our exceptional employee base, and powerful technology, I'm more than confident that our long-term growth strategy remains fully intact, perhaps even stronger than pre-COVID. With that, I'll turn it over to Rick.

Rick Weller, CFO

Good morning and thank you, Mike. And thank you to all who have joined us today. As we have in the last few quarters, I will begin my comments on the balance sheet on Slide 12, as it continues to provide the best picture of Euronet's financial strength and stability, and underscores our confidence to continue to achieve accomplishments like Mike just mentioned. We finished the quarter with more than $1 billion in unrestricted cash and our ATM cash remained largely consistent. This increase was driven by approximately $50 million of cash generated from operations combined with favorable working capital management. Our total indebtedness was $1.1 billion, unchanged from June. Next slide please. I'm on Slide 13. For the quarter, we reported revenue of $664 million, operating income of $66 million, adjusted operating income of $67.6 million, and adjusted EBITDA of $105 million. As you likely read in our press release, operating income includes a $1.5 million impairment of previously acquired customer relationship intangible assets. This charge has been excluded from adjusted operating income, adjusted EBITDA, and adjusted EPS to facilitate comparisons to the prior year results. We delivered adjusted EPS of $1.12 compared to $2.84 for the prior year, with the decrease being the result of the transaction declines stemming from COVID-19. To the next slide, please. Here on Slide 14, we show you our three-year transaction trends. EFT transactions increased 14%, driven by increased points of sale driving and card processing transactions in Europe, together with payment processing growth for low-value transactions of a customer's bank wallet and e-commerce site, partially offset by fewer transactions in Europe and Asia Pacific related to the COVID-19 pandemic driven by government-imposed border closures and shelter-in-place orders. Epay transactions grew 66% from increases in Europe and Brazil, as well as very strong contributions from India, which included a large volume of low-value in-app mobile pop-up transactions. Money Transfer transactions grew 5% with a very strong 22% growth in U.S. International outbound transfers and 26% growth in internationally initiated cross-border remittances, which were partially offset by a decline in U.S. domestic transfers and transfers initiated in Malaysia. Next slide please. Here on Slide 15, we present our results on an as-reported basis. On one hand, most of the major currencies where we operate increased year-over-year at low- to mid-single digit rates. But on the other hand, a few currencies such as the Indian rupee declined in the low- to mid-single digit range. To normalize the impact of currency fluctuations, we have presented our results on a constant currency basis on the next slide. Now on Slide 16, for the third quarter, EFT revenue declined 55%, operating income declined 96%, and adjusted EBITDA declined 84% driven by the COVID-19 induced impact of lower ATM transactions in Europe and Asia, especially high value cross-border transactions across Europe, partially offset by more than $30 million in cost savings achieved during the quarter as part of the company's cost-saving initiative in 2020. Epay revenue grew 3%, operating income grew 9%, and adjusted EBITDA grew 11% driven by continued strength in sales of digital media content and mobile sales through digital channels in certain markets. While revenues grew year-over-year, the Epay segment too experienced the impacts of customer movement restrictions in certain markets. But other markets were positively impacted, where the company has a higher mix of digital distribution, or a higher concentration of retailers that were deemed essential and remained open during the pandemic. Money Transfer revenue, adjusted operating income and adjusted EBITDA grew 13%, 35% and 30% respectively. This growth was driven by strong double-digit growth in U.S. outbound and internationally originated money transfers, partially offset by declines in the U.S. domestic business. Revenue and gross profit per transaction expanded nicely as a result of a shift in transactions to higher margin countries and a decline in the U.S. domestic business which earns a lower gross profit per transaction. These expanded operating margins in both the Epay and Money Transfer segments underscore the leverage strength of their respective operations. Now, as it relates to all segments, I would like to give you an update on our cost savings initiatives introduced at the onset of COVID-19 to help limit the impact of pressure on earnings. You will recall that we gave you an estimate of approximately $130 million in cost savings. In the second quarter call, we shared with you that we achieved $35 million in the second quarter and expected to see additional savings of approximately $15 million per quarter. Bear in mind that this initiative was to blunt the impacts of COVID-19, which we anticipated would give us a second quarter adjusted EBITDA of nearly breakeven and the consumption of approximately $25 million in cash. Moreover, there was no way to know when things might begin to recover. Since then, as you now know, when reading through our earnings release, we have produced well more than breakeven adjusted EBITDA since then, in fact, at $142 million more than breakeven. With our current expectations for the fourth quarter, that number will increase to somewhere around $210 million. While these results were certainly supported by our aggressive cost-cutting measures, especially in the EFT segment, the real driver has been the growth in the Epay and Money Transfer segments, together with the resilience in travel benefiting transactions in the EFT segment. Due to the resilience of travel, we found the need and motivation to make more cash transactions, reactivate ATMs sooner, and even deploy ATMs in new markets, mind you on a very methodical basis. To that end, we incurred upwards of $5 million of additional cost to support the resilient travel volumes and we can curtail nearly $10 million in costs we had planned for the Money Transfer and Epay segments to support the robust volumes and opportunities we see now that we better understand the COVID-19 impacts on all parts of our business. So, in summary, we have achieved approximately $70 million of the targeted savings through the third quarter, upwards of $5 million of which was rolled back in the EFT business. In the Epay and Money Transfer businesses, we're going to hold off as we did in the third quarter on approximately $10 million in cost savings. It is important to note that we took these actions in light of seeing resilience in travel and year-over-year double-digit growth in Epay and Money Transfer segments. As we look forward, we continue to have approximately $20 million to $25 million per quarter targeted in savings. That's per quarter, not in addition to, included in our expectations which is most of which is in the EFT segment. Furthermore, as we did this quarter, if we see further resilience and opportunities, it may well be we roll back into the business some of these targeted quarterly savings. I hope you can appreciate that our pullback in targeted savings was in light of favorable results and the view toward supporting the momentum we see in all three segments, together with an ever-watchful eye on the future. In wrapping up, it's worth repeating, we're very pleased with the strong double-digit growth rates we were able to deliver across two of our segments while the travel restrictions continued to weigh on our EFT business. However, we are encouraged by the resilience of travel as restrictions were lifted. We will refrain from giving official guidance because the changes to movement restrictions and border openings are ever-changing and the economic recovery from COVID remains uncertain. However, we do believe that it is important to give you a couple of data points to help frame expectations. With that, we would expect fourth quarter consolidated revenues to be approximately 95% or possibly better than the prior year, with EFT, Epay, and Money Transfer to deliver similar to somewhat better growth rates than the third quarter. From these revenue levels with significant cost savings and careful expense management actions, we expect that fourth quarter EBITDA will be $70 million to $80 million. In closing, Mike's earlier comments are worth repeating. We are very pleased to deliver results that exceeded our earlier expectations. This is a testament to our diverse product and geographical revenue mix, powerful technology, and our talented employee base, who make all this possible, all supported by our strengthening balance sheet. These results give us confidence that the long-term growth prospects for the business not only remain intact but are becoming even stronger as we continue to be able to invest in products and technology that are driving the business forward. With that, I will turn it back over to Mike for final comments.

Mike Brown, CEO

Thank you, Rick. As I close, or as we close, I don't want to hide from the impact of COVID-19 on this year's financial results particularly in EFT. However, let's not forget that two of our three segments posted double-digit year-over-year growth this year, which has been very challenging by any business's standards. We saw a near-immediate increase in EFT transactions as travel restrictions were lifted in Europe. We were also able to bring REN live in Mozambique on time. We expanded our money transfer network with Kroger, a leading grocery retailer in the U.S., and our technology allowed us to expand with Microsoft. We also achieved triple-digit expansion in our digital transactions in Epay and Money Transfer. This is quite a list of accomplishments which has proven that our economic model is still valid, and we are making the right investments to grow our business for the long term. Moreover, we see that people are still anxious to travel and will continue to go on vacation as soon as they are able. And maybe most importantly, our balance sheet is strong, which continues to comfort our current customers and impress and attract new customers like Kroger, Fiesta Mart, and Money Transfer as well as Microsoft and Epay. Thank you all for your continued interest and support of Euronet. And now we will be happy to take questions. Operator, will you please assist?

Operator, Operator

Your first question comes from the line of Ken Suchoski from Autonomous Research.

Ken Suchoski, Analyst

Hey, good morning, everyone. I hope you're doing well. I want to ask about the revenue per transaction in the Money Transfer business. You mentioned some mix shifts. But if you control for the mix shift of the business, how has that revenue per transaction trended?

Rick Weller, CFO

How has it consistently trended? I'd say generally stable, as we've said before, you always see competition out there in the market. So, and I would generally say that those have been kind of like pockets of different competition from time to time. But over time, ultimately, you see that the numbers will generally come in. Our counter to that is to continue to expand the mix and to take advantage of opportunities when they're out there. So, I would say generally over time we've seen it reasonably consistent, but in the - generally in the Money Transfer business, you would see it come in and we counter it with mix shifting and actually we've done quite a good job over the last number of years at that.

Ken Suchoski, Analyst

Yeah, that's helpful Rick, thanks a lot for that. And then just quickly on the margin in the Money Transfer segment. I mean, I think when we look back, that was the best margin that you've printed in the company's history. So, can you talk about what drove that outperformance and do you expect that to normalize in the coming quarters?

Rick Weller, CFO

Well, yeah, as I mentioned, that really reflects the leverage ability of our business. While we did not take cost-cutting actions as we pointed out in the call here, we saw the opportunity to continue to support the business. So, it really is a very strong leveraging. I would expect to see it come back into some more normal ranges. We had a great growth quarter, great mix and the team did a good job at managing expenses. But I would expect to see us kind of come back a little more into normal ranges. But again, this is really the benefit of continuing to add more and more volume to the business.

Ken Suchoski, Analyst

Yeah, really helpful. And then if I could just squeeze one last one in. Just the Walmart business, how much is that business down? And I guess how big is that business as a percentage of the Money Transfer segment?

Mike Brown, CEO

Well, it used to be a good 20% of the total Money Transfer segment. It's down in the 40% range from last year. So, and by the way, that has something to do with the last questions you have because the contribution per transaction there is considerably less than one that has an FX benefit. So, as we continue to grow our international remittance at these almost stunning volumes, that brings up our average transaction revenue per transaction.

Ken Suchoski, Analyst

Really helpful. Thanks, Mike. Appreciate it, Rick.

Rick Weller, CFO

Great. Excellent.

Operator, Operator

Your next question comes from line of Andrew Schmidt with Citi.

Andrew Schmidt, Analyst

Hey, Mike. Hey Rick thanks for taking my questions. Just starting off with the EFT segment, why don't we talk a little bit about the expectations embedded in the fourth quarter outlook for performance? And then, if I could ask about FULL YEAR'21, appreciate the comments on the EFT transaction trends. Just talk a little bit about what you saw when things opened up, your confidence and visibility for FULL YEAR'20 results. Some more detail there would be helpful. Thanks.

Mike Brown, CEO

Well, we were trying on the last question, when we try to project out next year, it's kind of hard to know that exactly. But what was just really clear, we try to show that with the graph is that if the countries open the borders, people will show up. And it's kind of like open the gates and the dogs get out. And that's just going to happen. So, next year is going to be throttled by either openings or closings by the government, particularly in Europe. And let's not also forget that, when we said we got up to 50% of last year's transactions in the countries that you could drive to vacation pretty quick, where you didn't need to make very advanced plane reservations and so forth, that 50% was really 50% of 75% because still a quarter of the transactions that we received in 2019 are still from countries like ourselves, like the U.S., North America, and Russia, and so forth, that still aren't even allowed into the market. So we saw resiliency is the best word to describe it. People are going and this is without a COVID vaccine, without any kind of cures. People are ready to go on vacation; I think they're all tired. So it really comes down to the countries on whether they'll open their borders or not and with how much advance notice. When you say on June 15, whether they will open our borders at two weeks, just doesn't give people a whole lot of time to get themselves organized to go on a trip on an airplane, which is why we saw our airplane-focused countries, like Portugal, Spain, and Greece. We saw those down considerably from the countries that you could drive to. At the end of the day, people are flocking to vacation and they're flocking in and when they're on vacation, they're flocking to cash.

Andrew Schmidt, Analyst

Okay, and then the fourth quarter expectations in terms of EFT performance?

Mike Brown, CEO

We're assuming that we're going to have borders opened as they are now. We expect some small closures, maybe for some particular areas within countries. Fourth quarter was not one of our biggest quarters for EFT; remember our two big quarters were Q2 and Q3.

Rick Weller, CFO

And think I'll just add to that, as I mentioned in my comments, that we would expect to see the EFT revenues on a year-over-year basis to be similar. I think I'd be a little optimistic saying they'd probably be a little better than what we would see on the growth rate, as you compare it to the third quarter growth rate.

Mike Brown, CEO

And let's keep our fingers crossed.

Andrew Schmidt, Analyst

Exactly right. Just one last question, I want to make sure I touch on it. The REN ecosystem without payments cloud. Some really interesting updates there. It sounds like you have good pipeline. Could you just talk a little bit about that sort of the sales distribution process? What's in the pipeline from a use case perspective? Just curious, it seems like there's a lot of opportunity to address a variety of different use cases. So, just some comments about the sales process in the pipeline would be helpful.

Kevin Caponecchi, CEO of Epay Division

Yes, this is Kevin. So, as Mike articulated, we kind of view with the WIN ecosystem sort of three big opportunities. One, modernizing banks' legacy structure that has worked if we've all seen it over the life of the company. A little bit more continuing with COVID, because it's more difficult to reach the banks. But we're actively reaching out to banks around the world about modernizing legacy systems with the REN ecosystem. So, that's one opportunity. The opportunity that the two opportunities that Mike referenced in the scripts were related to RTP and the first one being countries where RTP is already deployed. There are about 55 of those countries. That was in that mix of 55. There's varying degrees of a portion of the RTP network. We are targeting those countries that have low participation or low adoption and focusing on helping participants connect to the existing RTP through REN Connect. The way we're doing that is through our local sales teams in these various markets. Then the third opportunity that Mike referenced is for those countries that do not have an RTP network. If only 55 have it, that means there's a whole lot of countries that don't have it. Those countries are at various stages and are looking for RTP solutions. We're actively bidding on a handful of those as we speak. They involve a very long sales cycle, I would say 18 to 24 months. We are actively involved in several of those. In 2021, we envision a handful more becoming available. So, I hope that addresses your question.

Mike Brown, CEO

And we talked about these RTP systems that are currently installed around the world; not one of those was architected in the last 20 years. So, the advantage that we have is we have modern scalable technology, the kind that you would see at Amazon, Google, or one of these high-tech players. That's really even though we're starting after some of the other guys. If people want to have a modern scalable system that's kind of future proof, we're kind of the best game in town.

Andrew Schmidt, Analyst

Got it. Thanks a lot, Kevin. Appreciate the comments Mike and Rick, see you guys at our Fintech conference in November. Appreciate it.

Mike Brown, CEO

Okay. And I'm going to apologize kind of in advance. We talked a little bit longer than usual. In fact, operator will allow one more question because we're already at the top of the hour.

Operator, Operator

And your next question comes from the line of Peter Heckmann from D.A. Davidson.

Peter Heckmann, Analyst

Thank you. Hey, good morning, everyone. Just a lot of information as always, is there any way to quantify the AT&T win and which markets you'll be active with AT&T? Is it primarily the U.S.?

Kevin Caponecchi, CEO of Epay Division

Yeah, so Peter this is Kevin. As you might know, AT&T's prepaid is national all through the U.S. There were only two of these contracts made available, one through one of our competitors and the one that we acquired. What's interesting about this opportunity is it's focused on activations. So, we're just doing a mobile top-up. The focus with this AT&T relationship is around activating new users on AT&T's prepaid network. AT&T and Verizon are relatively new to the prepaid game, and they're aggressively pursuing customers for prepaid. We've got an established network for activations, and we're aggressively growing that activation network. So, we're pretty bullish about the opportunity long run. It'll take some time to get wound up, but it includes a residual payment to us from a mobile operator. So from a margin standpoint, it's a much more lucrative business than what you would associate with a traditional mobile top-up.

Peter Heckmann, Analyst

Got it. That's really helpful. And then, I missed it when you mentioned Mozambique the first time. Were there any success fees related to going live in the third quarter and you expected in the fourth quarter? And can you remind us a little bit of how you expect that revenue to ramp from that relationship?

Mike Brown, CEO

Okay. So this was - remember, this was two things, this was a license and no additional fees in the third quarter. But it also, we cut a deal with them to have basically all their DCC traffic that happens in the country as we connect up all these banks. Obviously, we're not going to get a lot of travelers to any country right now with all these borders closed. But that's going to last for many years from now, so that's all good news still.

Peter Heckmann, Analyst

Got it. All right. Thank you very much.

Mike Brown, CEO

All right. Thank you very much. Bye-bye. And thank you everybody for your time. I think we're going to sign off. Thank you very much.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.