Earnings Call Transcript
EURONET WORLDWIDE, INC. (EEFT)
Earnings Call Transcript - EEFT Q2 2025
Operator, Operator
Greetings, and welcome to the Euronet Worldwide Second Quarter 2025 Earnings Conference Call. It is now my pleasure to introduce your host, Mr. Adam Godderz, General Counsel of Euronet Worldwide. Thank you. Mr. Godderz, you may begin.
Adam J. Godderz, General Counsel & Corporate Secretary
Thank you, and good morning, everyone, and welcome to Euronet's Second Quarter 2025 Earnings Conference Call today. On the call, we have Mike Brown, our Chairman and CEO; as well as Rick Weller, our CFO. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the second slide of the PowerPoint presentation we will be making today. Statements made on this call that concern Euronet or its management's intentions, expectations or predictions of further 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 that are listed on that 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 their most comparable GAAP measures. At this time, I'll turn the call over to our CEO, Mike Brown.
Michael J. Brown, CEO
Thank you, Adam, and thank you, everybody, for joining us on our call today. I'll begin my comments on Slide #5. But before I jump into the quarterly results, I'm sure you read our release last night where we announced the acquisition of CoreCard, a leading-edge proven scaled credit card processing platform. This acquisition is exciting in so many ways. First and foremost, it extends our strategy into the digital payments processing space. CoreCard perfectly complements our Ren platform with a modern revolving credit technology that is proven at scale. Moreover, I'll remind you that issuing and processing of cards is not new to us. We already processed tens of millions of cards across Europe and Asia. The addition of this leading credit platform gives us yet more growth opportunities as it enables us to go after the $10 billion-plus revenue Total Addressable Market (TAM) with very attractive operating margins approaching 50% and elevated market rates of growth in large markets where we have strong footholds, Europe and Asia. And finally, it is not just consumer credit; CoreCard also serves as a business lending sector. Let me continue my excitement. As CoreCard was not enough, just this week, we signed a significant Ren deal with one of the three largest U.S. banks. We've been in pursuit of this deal for a couple of years, which makes this announcement that much more exciting. Our Ren technology will be used to drive thousands of ATMs across the country. Clearly, this was a very competitive process across all industry leaders. And so to be selected for this deal really underscores the capability and confidence that banking leaders have in our Ren platform. These two deals further our digital strategy. And while we are excited that these deals will contribute to growth in future quarters, I don't want to overlook the great operating performance of the business this quarter. The second quarter, we delivered constant currency operating income growth year-over-year of 13%. I think this number underscores the strength of our business, and these exciting digital announcements further position us to continue our 20-year track record of double-digit earnings growth. We're a growth business with even more exciting opportunities today than yesterday. Now I will hand it off to Rick to discuss our results in more detail.
Rick L. Weller, CFO
Thank you, Mike. Good morning, and thank you to everyone for joining us today. I will begin my comments on Slide 7. We delivered a record second quarter on all key reported consolidated metrics. We delivered revenue of $1.1 billion, operating income of $159 million and adjusted EBITDA of $206 million; and finally, adjusted EPS of $2.56. The Money Transfer segment led the way by producing constant currency operating income growth of 33% despite significant macro uncertainties that range from immigration reform to global conflict, a great quarter. Our second quarter adjusted EPS grew 14% year-over-year. During the quarter, we repurchased $247 million of our shares. Given the timing of the repurchases, there was only a marginal benefit to the second quarter adjusted EPS. I'll also point out that our consolidated operating margins expanded by more than 112 basis points over the previous year, and we expect to see a continuation of posting expanded margins as we go through the second half of the year. Slide 8 presents a summary of our balance sheet compared to the prior quarter. As you can see, we ended the second quarter with $1.3 billion in unrestricted cash and debt of $2.4 billion. The decrease in cash is largely due to stock repurchases offset by cash generated from operations and working capital fluctuations. Regarding our share repurchases, we anticipated that there was a reasonable likelihood of completing the CoreCard acquisition, and it was important to CoreCard that the deal be a stock-for-stock transaction for tax purposes. Accordingly, we knew a couple of hundred million dollars for share repurchases made sense whether we completed the acquisition or not. In that, we have now signed the purchase agreement and look forward to closing. We essentially have done a cash deal after issuing shares that we just repurchased. Slide 9 shows our results on a reported basis. Year-over-year, the major currencies we operate in strengthened compared to the dollar. To normalize the impact of currency fluctuations, we have presented our results adjusted for currency on the next slide. On Slide 10 now. EFT segment revenue grew 6%. Operating income and adjusted EBITDA were in line with the prior year results. It's worth noting that the second quarter last year, EFT posted exceptionally strong operating income, making it a tough comparison. While the second quarter is a difficult comp to the prior year, we expect to see the strength of EFT earnings grow to restore itself in the third quarter. Epay grew revenue 5%, operating income 17% and EBITDA 15% when compared to the prior year. The main drivers of growth this quarter were attributable to our payment business and continued growth of our digital channel sales in multiple markets, predominantly relating to gaming content. Money Transfer revenue, operating income and adjusted EBITDA grew 6%, 33% and 28%, respectively. The revenue growth was primarily driven by volume via higher principal amount sent per transaction and growth in cross-border transactions, offset by a decrease in intra-U.S. transactions. Direct-to-consumer digital transactions grew by 29%, reflecting continued consumer demand for digital products. Operating income and adjusted EBITDA growth outpaced revenue growth significantly, leveraging margin to the bottom line due to gross margin expansion driven by opportunities developed from foreign currency fluctuations, leverage of scale and effective expense management. Before I close on the quarter, I'd like to point out that we saw roughly $0.05 per share impact due to higher interest expense from carrying the refinance convertible at revolver rates. As you know, we have utilized convertible transactions in our capital structure and would expect to continue with acceptable market conditions and terms. We did not issue any such securities in Q2, but remain interested in doing so, thereby improving interest expense. Further, we had about $0.05 per share for higher income taxes, about half of which related to greater impacts from state taxes on the convertible retirement and the other half due to expense assignment to foreign operations. Looking forward for the balance of the year, we would expect the tax rate to tick up 1% or 2%. In summary, we are pleased to reaffirm the 12% to 16% earnings growth expectation we have for 2025. With this, I'll turn it back over to Mike.
Michael J. Brown, CEO
Okay. Thank you, Rick, and everybody move on to Slide 12. Graph on Slide 12 illustrates over the past 10 years, the strength of our business lies in the diversity of our three segments as well as the diversity within those segments. Now let's move to Slide #13, and we'll discuss the results for the segment, starting with EFT. Slide 13. Our EFT segment, which was founded as a cash ATM business, expanded its digital capabilities through the acquisition of CoreCard, the previously acquired Infinitum, a two-factor authentication provider and continued traction of Ren in the marketplace. Ren, a digital modern end-to-end payments platform that provides banks, fintechs and governments an innovative solution to keep pace with the ever-changing payments landscape. Ren provides acquiring, issuing, processing and access to real-time payment networks. We are receiving accolades around the world for its digital innovation, including the recognition from one of the top three banks in the United States. This leading U.S. bank isn't alone. During the quarter, we signed a deposit network participation agreement with Santander, the third largest bank in Poland and ATM outsourcing agreements with Security Bank in the Philippines, Axis Bank, the third largest bank in India and May Bank in the Philippines. And all of these services will be powered by Ren, further evidence that banks around the globe recognize that Euronet's technology allows them to serve their customers in a more modern and real-time way. A few years ago, we added merchant acquiring, another digital business line, which continues to perform very well. In fact, this quarter, we saw the highest card transaction volume we have processed since we acquired the business. To further the growth, in the second quarter, we successfully completed the integration with Oracle OPI, which significantly strengthens our position within the premium hospitality sector, and we signed more than 9,000 new merchants, including one of Greece's top basketball teams. It's been an exciting few days in the EFT business when combined with our existing strategic growth opportunities, including expanding international and domestic access fees, increasing interchange rates and a recent market expansion. The acquisition of CoreCard and the agreement with this large U.S. bank will continue to fuel EFT growth in the second half of the year and beyond. So now let's go on to Slide #14, and I'll talk about epay. Epay has evolved from a retail-based mobile top-up business to a global partner who provides a broad offering of digital payment solutions for some of the largest consumer brands in the world, including Apple, Google, Sony, Netflix and a number of local players. I commonly get asked, what is epay? Epay allows the consumer to participate in the digital economy in the ways they prefer, whether it is for budgeting, security or convenience. Today, 70% of our epay transactions are 100% digital consumer experiences across e-commerce merchants, digital banks and prominent wallets around the world. Moreover, the majority of the remaining 30% of the transactions use a digital payment method to purchase those services. Notable signings in this quarter were a content distribution signing in Turkey this quarter with Riot Games, publisher of League of Legends. Another signing this quarter was with Etsy gift cards, which had previously only been available for purchase from Etsy directly. And lastly, we signed an agreement to launch Amazon Prime subscription services in India. Now let's move on to Slide 15 and talk about Money Transfer. Okay. Slide 15. This quarter, our Money Transfer segment delivered exceptional results, underscoring the strength and breadth of our globally diversified business model. Operating income grew 33% year-over-year, fueled by disciplined cost management and strong performance across a wide range of channels and geographies. This performance is particularly impressive given the evolving immigration dynamics in North America and the recent announcement of the new remittance tax. To help you understand the impact, the revenue subject to the new 1% remittance tax affects only 27% of the Money Transfer segment or 12% of Euronet's consolidated revenues, limiting our overall exposure. Let me start with research from the Center of Global Development. They found that a 1% increase in fees resulted in a 1.6% decline in remittance volume, which could either be fewer sends or lesser amounts of money sent. This research suggests that while the potential negative impact of 1.6% is only 0.2% of our consolidated revenue. While we would clearly rather not see this tax, the research indicates it will not have a significant impact on our business when it begins next January. We also know that a significant number of our customers have bank accounts. And while they may be more comfortable operating with cash, they may prefer a debit card to avoid this tax further and which further reduces the impact on our revenues. Even with the turbulence in the market, our key performance indicators paint a compelling picture of our ability to continue to deliver growth. Our transaction volume increased 4%, but the principal transferred increased 10%. Digital transactions grew 29%. And our digital payout product, a powerful engine of our ongoing growth is up 20% year-over-year, now composing 55% of total volume. These results highlight the powerful momentum behind our digital transformation and underscore our position as a global leader in money transfer. We leverage the world's premier real-time cross-border payments network, robust omnichannel capabilities and our innovative wholesale strategy with Dandelion. We achieved an important expansion in the Asia Pac region last month through our acquisition of a majority position in Kyodai Remittance, a leading Japanese multichannel operator. This strategic integration not only gives us access to a license in the country's evolving remittance landscape, but Kyodai produces a very rare type 1 funds transfer service provider license, which allows it to deliver high-value inbound bank deposits and important capability for our Dandelion network. Japan is a sizable $6 billion outbound remittance market with an influx of foreign workers. We anticipate outbound growth will considerably outpace overall market trends. Notable enhancements to Money Transfer's digital product were made through Ria's and Xe's partnership with Google and Nickel, a European neobank. Other noteworthy accomplishments included the launch of 20 new partners across 19 countries, extending our global presence that now spans 200 countries and territories. And in Austria, we renewed our partnership with the Austrian Post. Dandelion Wholesale continued to grow its client base, adding Union Bank in the Philippines, the 10th largest bank in the country, Peru's leading wallet, Yape used by 65% of the adult population, Chile's Vita Wallet and U.K.'s BMS and Banco Guayaquil, Ecuador's second largest bank and a Ren customer, a very interesting cross-sell that we got going there. Dandelion's comprehensive solutions, bank-grade compliance, global reach, real-time deposits, account validation and seamless integration through API or SWIFT/BIC are increasingly recognized by leading institutions worldwide. With a 33% year-over-year growth in operating income, a healthy pipeline, and market expansion, our Money Transfer segment is positioned to maintain its strong momentum and deliver continued value for our investors and customers. Slide #16. As I mentioned earlier, Euronet has entered into a definitive agreement yesterday to acquire CoreCard Corporation, a leading U.S.-based provider of credit card processing platforms. This acquisition marks a strategic milestone in our long-term growth plan, reinforcing our commitment to scalable, high-margin digital businesses that align with global payment trends. As outlined in the press release, this is an all-stock transaction valued at approximately $248 million. We expect the transaction to be adjusted EPS accretive in the first full year post close. CoreCard has a proven track record of serving the strong global brands like Apple, Goldman Sachs, American Express and fintech innovators like Cardless and Gemini. In certain analyst reports covering CoreCard, there are concerns expressed over the reports that Goldman Sachs may sell the Apple portfolio. We are obviously aware of such a possibility, and we have factored that into our purchase decision, so there is no real surprise here. The merits of CoreCard go well beyond any single program, and this transaction has been undertaken without any dependency on a positive outcome relating to the Goldman sales process. On the technology front, CoreCard's platform spans debit, prepaid, and revolving credit solutions, not only for consumers but businesses as well. We are really excited about CoreCard's potential beyond the U.S. We plan to extend CoreCard's reach into emerging markets where Euronet has a strong presence and where demand for credit is growing. This transaction will support the continued growth of our EFT segment while expanding our addressable market within our stated strategic pillars. Next slide, please. You may recognize this slide, which is Slide #17 from our year-end and first quarter earnings announcement. As highlighted, issuing is a core strategic growth initiative, illustrating how CoreCard fits perfectly into our long-term digital evolution. This acquisition is not just a tactical win. It is a strategic alignment with our long-term growth thesis. To grow Euronet, we are targeting large addressable markets like the $1.8 quadrillion in global payments and the $320 trillion in foreign exchange and cross-border flows. By providing credit card processing, CoreCard enhances our ability to serve the payment and transaction processing pillar. EFT will now cover prepaid, debit and credit card issuing, along with our other proven abilities in acquiring, real-time payments, switching and ATM management. Please move on to Slide #18. A lot of people ask us where we're going. If we transform our strategic vision into a simple illustration, you can see how our business mix is evolving and why this acquisition is strategically important. Over the past decade, we've executed a deliberate shift away from our legacy cash-based business lines like Euronet-owned ATMs and towards digital offerings. In 2019, Euronet-owned ATMs represented 25% of our revenue mix. By 2024, that number was reduced to 19%, and we're targeting 7% by 2034. CoreCard helps drive this dramatic transformation by offering a high-growth, high-margin, and highly differentiated digital offering. Let's talk more about CoreCard and their offering so you can get a little bit familiar. CoreCard provides a modern revolving credit processing platform built for scale and designed for banks, brands, and fintechs. It currently supports millions of card accounts and processes billions of transactions annually. While the technology is certainly impressive, their list of clients is equally impressive. Goldman Sachs uses CoreCard to process the Apple Card. Cardless uses CoreCard to power its various card programs and has been in the news recently as the chosen partner for the soon-to-be-released Coinbase credit card. This, along with other marquee clients, validates CoreCard's ability to deliver at scale with precision and reliability. Revolving credit remains one of the most profitable and strategically important offerings for banks and fintechs. In the U.S. and globally, this space is dominated by a handful of incumbents. Why? Because building and operating a revolving credit platform at scale is one of the most complex challenges facing solution providers. This isn't just about writing code. This is about mastering the intricacies of revolving credit logic where balances shift due to delayed payments, disputes, returns, and interest recalculations. It's a domain where business logic is king and where even the most seasoned engineers can't just simply code their way through without deep domain knowledge, which CoreCard has. And here's the strategic kicker. While many new competitors focus on debit and prepaid, segments with capped interchange and limited margin, CoreCard is built for where banks and fintechs see real value. In summary, CoreCard is not just a product; it's a proven scalable platform trusted by some of the most innovative names in the financial services industry. It gives us a springboard into the U.S. credit issuing market and beyond, backed by a leadership team with deep roots in the space. The platform supports a range of use cases from stablecoins and global brands to lending, early wage access, healthcare, and commercial credit. Now let's move on to the next slide, and I'll show you our go-to-market strategy for the U.S. Our strategy to expand CoreCard in the U.S. is phased, deliberate, and anchored in high opportunity segments. We will continue to participate in the embedded finance opportunity by partnering with fintechs, digital banks, and program managers across diverse use cases. CoreCard's flexible API-driven architecture and marquee client roster, including Apple, Cardless, and Gemini, give us a strong foundation to scale. Our existing epay relationships also offer a unique cross-sell opportunity. Brand partners currently issuing prepaid credit may be interested in launching credit card programs, creating a natural adjacency for growth. Our next target here is unlocking the commercial credit opportunities with Tier 2 and Tier 3 banks. Commercial credit presents a more immediate opportunity than consumer credit to the B2B digital initiatives. We are seeing more activity in this space as of late, especially with Tier 2 and Tier 3 banks. These are the banks that range from $10 billion to $250 billion in asset size. CoreCard has already signed one such bank, Banc of California. And while commercial credit is our immediate focus, we also see a strategic path to consumer credit. By initially supporting banks with adjunct solutions, we can gradually modernize their consumer credit platforms, helping them differentiate in a market dominated by templated offerings and slow turnaround time. So while the U.S. offers an attractive market, here is where we get excited. We see even more opportunity in the rest of the world. Let's go on to the next slide, and we'll talk. Looking beyond the U.S., our global expansion strategy is anchored in our strong presence and trusted relationships across Asia and Latin America. These regions represent the next frontier for growth for modern credit issuance on the back of rising GDP per capita and an increase in consumption expenditures. In Phase 1, we will focus on cross-selling CoreCard's revolving credit capabilities to our existing base of payment processing clients, such as Grab, which is the Uber of Asia, Standard Chartered, ICICI Bank, Axis Bank, Banco Pichincha, and the Bank of the Philippines Islands, just to name a few. These relationships provide a natural entry point to introduce our credit solution. In India, for example, the number of credit card issuers has doubled in five years, and more than half are already Euronet processing clients for other payment domains. The number of credit cards is expected to double again by 2029, driven by rising GDP and a fierce appetite for more consumer consumption. We also plan to leverage our broader ecosystem of financial institution partners, particularly our epay and Dandelion divisions, which already serve banks and fintechs in high-growth markets. These partnerships offer additional cross-selling opportunities and reinforce our ability to deliver integrated end-to-end solutions across the payment value chain. In Phase 2, we'll target new financial institutions and existing relationships in markets where we have strong brand equity. Many of these institutions are constrained by legacy platforms provided by regional and local players and are actively seeking modern, scalable alternatives. Finally, we also anticipate a structural shift in the regulatory landscape across emerging markets. As credit markets deepen and regulations evolve, we expect a broader wave of fintechs to enter the credit card space, transitioning from prepaid to credit issuance. Today, many are held back by regulatory constraints and limited access to credit infrastructure. As these barriers recede with our established relationships and proven capabilities, we're well-positioned to lead with this transition. Similar to how we grew Ria from a U.S.-centric position, we see an opportunity to use our global footprint to accelerate the growth of CoreCard. Emerging markets are our favorite hunting ground and as demonstrated by our success signing those Ren deals. Slide #22. This acquisition represents an important step in Euronet's long-term strategy to scale our digital payments business and deepen our presence into more resilient technology-driven revenue streams. At its core, the rationale is anchored in the large and growing opportunity in credit issuing, particularly revolving credit, which remains one of the most lucrative revenue pools in payments. CoreCard is one of three platforms in the U.S. proven at scale for revolving credit, and this is a rare opportunity to own such a platform, which is API-first and has already earned the trust of marquee innovative clients like Apple. It brings industrial-grade stability and the flexibility to serve both fintech innovators and traditional banks. This acquisition provides a growth driver to support our digital diversification strategy. CoreCard's marquee clients and proven platform give us immediate momentum to scale across both fintech and the banking segments in the U.S. and globally. The CoreCard world fits seamlessly into our ecosystem, complementing our strength in payments processing, brand partnerships, and global distribution, and enables us to deliver broader, more differentiated value propositions. We are super excited about the opportunity this brings. This acquisition is a catalyst, expanding our payments technology portfolio, accelerating our shift to digital and positioning Euronet as the preferred innovation partner for fintechs and a leading modern card issuing platform for fintechs and banks in the U.S. and globally. Now I'll close out the quarter. Before I close, I'd like to address two emerging opportunities for Euronet. First, artificial intelligence continues to shape the narrative across industries and for good reasons. At our company, we view AI not just as a tool but as a strategic enabler across our enterprise. We've harnessed AI to elevate the customer experience, making interactions more seamless, personalized, and responsive. Behind the scenes, it's driving operational efficiencies in areas such as contract generation, regulatory compliance, and multilingual communication. This is part of our broader commitment to building a smarter, faster and more agile organization. The second area of growing interest is stablecoin and its potential implications for our business. Our proprietary Ren platform is already architected to support stablecoins and has, in fact, processed blockchain-native transactions, positioning us well to pursue further integration. On the operational front, we've initiated discussions with several select partners regarding stablecoins' facilitation. And our treasury team is actively evaluating its utility as part of our capital management strategy. While we're still early in this exploration, we see promise in how digital assets may drive new use cases to deliver speed, transparency, and efficiency. While we do not yet know how to quantify the future impact of AI or stablecoin, we will continue to pursue these opportunities that are beneficial to our business. And hopefully, we have conveyed the strategic shift to the digital business that plays in the $1.8 quadrillion global payments market with endless potential for growth. Supporting our model, we have core assets. We have this newly announced acquisition of CoreCard. We have our Ren technology. We have our Dandelion network. Our global footprint of licensed and regulated entities. We have distribution partners in the form of banks, retailers, company-owned stores, ATMs, and POS terminals, and our people. The best I could ask for with a consistent track record of delivering growth year after year. As I boil it all down, I hope you will take away three important messages. We are moving in a strong strategic digital direction as evidenced with the CoreCard acquisition and the recently announced Ren deals. Epay is not a cash business. It's now nearly all digital payment transactions. And we have consistent double-digit operating results, reflecting the strength of our global asset diversity. We're looking forward to the remainder of 2025. And with a strong second quarter, we are pleased to reaffirm our earnings expectation of 12% to 16% growth for the year. We'll be happy to take questions. Operator, will you assist?
Operator, Operator
Our first question comes from Vasu Govil with KBW.
Vasundhara Govil, Analyst
I guess maybe the first one, just on the CoreCard acquisition, Mike, you gave us quite a bit on sort of how you see the revenue synergies playing out over time. Just on the Apple partnership that you called out and the risk of it potentially going away, given just the revenue concentration there, just hoping you can give us some more color on how the math would work on making the deal accretive if that relationship went away. I mean do you have more visibility into other deals in the pipeline that's giving you confidence there? Just any color there would be helpful.
Michael J. Brown, CEO
We are actively engaged in debit card issuing for numerous banks and fintechs globally, especially in Asia and to some extent in South America. Our clients have expressed interest in credit offerings. With the sophisticated credit platform we are able to provide, developed to meet Apple's high standards for their customers, we have a significant asset for cross-selling. In our analysis, we anticipated that the partnership with Apple might eventually end, but we expect that to take a few years due to the advanced features of their card that no other U.S. credit card offers. If someone does acquire it, they will still need to modify it extensively and will face challenges in transitioning the $20 billion portfolio smoothly. We believe we have a couple of years left with them, and during this time, we plan to leverage our relationship with Apple as a key reference to attract new clients. Additionally, should they sell it and not currently utilize CoreCard, this could create an opportunity for us to offer CoreCard solutions to them for upgrading their systems.
Vasundhara Govil, Analyst
That's very helpful. I have a second question regarding the EFT segment growth. On a constant currency basis, that actually slowed down this quarter, even though the second quarter is usually a stronger one for you. Can you provide some insights on what caused that slowdown? Additionally, how should we view incremental margins for that business moving forward? I understand that costs in the business are structurally higher compared to pre-pandemic levels due to inflation. Is a high teens run rate for incremental margins what we should be modeling in the future, or do you see potential for improvement in that area?
Michael J. Brown, CEO
Last year's strong second quarter sets a high bar for us this year, making this quarter appear like a slowdown. However, we believe this is just a one-time issue related to Q2. We expect to regain momentum in Q3. We're not concerned about the current slowdown as there are plenty of opportunities in the upcoming quarters. The tourist season has extended, resulting in a spread of activity across more months, especially with fewer transactions in May, June, July, and August. We anticipate that our margins will improve as transactions increase. Additionally, new initiatives like our DAF transactions, which are generating the same number of transactions but with higher revenue, will also contribute positively to our margins.
Operator, Operator
Our next question comes from the line of Peter Heckmann with D.A. Davidson.
Peter James Heckmann, Analyst
Congratulations on the top 3 bank. Mike, when do you think we can start to see revenue start there? And when would you expect it to hit the full run rate?
Michael J. Brown, CEO
To tell you the truth, we already have revenue coming from them, and it's only going to accelerate. We had pre-full signature revenue from them as we did some work to provide them with a set of features they've never had before. This should start immediately. I'd say most of it will come in the fourth quarter and beyond. It's a significant achievement with a top 3 bank. Furthermore, every other bank in the country faces the same issue that this bank had. I can't provide specific details right now, but we solved it, and we plan to cross-sell the same solution to other banks with this strong reference customer.
Rick L. Weller, CFO
And Pete, while clearly, we're going to make money on it and stuff like that. I think the importance here is the significance of a bank that's in the top 3 in the United States. We've sold Ren around the world. We've had great success with that and things like that. At some point, we'll put out a press release that actually names the bank and that. But this is a bank recognizing that we have the leading industry technology out there. And I think that, that will be a very strong statement as we continue the momentum of Ren sales. So it certainly will bring in revenue, but I tell you what, having that as a reference customer will be very helpful for building on the Ren reputation. And now you put behind that the CoreCard with arguably one of the most respected cards in the world, the Apple Card and having that technology available. We think that this is just a super combination and a super play.
Peter James Heckmann, Analyst
That's great. That's great. And then so in terms of looking at software, with the acquisition of CoreCard and acknowledging that certainly the Goldman Sachs relationship is going to be around for 3, 4, 5, potentially more years, when do you think the company should be able to hit that maybe $250 million software revenue target? Do you think that can be hit in 2028?
Michael J. Brown, CEO
$250 million seems a bit high for 2028. I believe that's quite ambitious. Our objective with Ren was to achieve $100 million in pretax and operating income. We are a few years away from that target, but these major deals are really catalysts for progress. We'll see how it unfolds. We will try to provide clarity on this. We're also considering an Investor Day in the fall, where we will present more details.
Operator, Operator
Our next question comes from the line of Gus Gala with Monness, Crespi, Hardt.
Gustavo Andre Gala, Analyst
Ren, I believe, had grown to be a sizable chunk, let's call it, 8 digits, right, millions, 80% margins. Is there an opportunity to bring up the CoreCard margin number? I appreciate all the comments on the cross-sell and go-to-market opportunity, but really digging down on the opportunity to maybe replatform, do a little cost removal. The other part of that...
Michael J. Brown, CEO
It's a combination of factors that will allow us to achieve cost synergies between the two companies. We are already publicly aware of this, and we have additional ideas. Increasing volume is the simplest approach. By adding more banks to the platform, we can distribute overhead across a greater revenue base. Therefore, we should see margins increase.
Gustavo Andre Gala, Analyst
Got it. And then on the U.S. deal, congratulations. How should we be thinking about the unit economics of that? I mean, it's clear on the ramp timing, but is there anything we should consider in terms of contribution margin or EBIT margin? I imagine being a top 3 bank, there might be some negotiating leverage on their end. Just thinking about how you balance that out?
Rick L. Weller, CFO
Well, it's obviously a high-margin business because it's a software type of transaction. But in terms of how that flows into the rest of the P&L, I'd characterize it as a, it's an important win. It doesn't directionally change the whole P&L. It's another brick in building the building. So it will benefit it, but it doesn't change next year, next quarter's numbers dramatically just because of that. What will change it is more and more of those Ren sales, which will be more and more possible because of the continued recognition of the quality and contribution of this product. So I think I would view it as more of an indicator of where we can go as opposed to moving the Excel schedule next quarter.
Michael J. Brown, CEO
But it's software, so it's very high margin. We'll take it. Yes, it's going to be wonderful.
Gustavo Andre Gala, Analyst
Got it. Can I ask one more question about Money Transfer? What are you seeing in July for digital and retail? Are you noticing any improvement in either, especially in retail around the start of the month?
Michael J. Brown, CEO
It's interesting you ask that, Gus. I haven't heard anyone mention how well we performed in the money transfer area, which should have been highlighted right from the start. While others are facing challenges, our numbers are impressive as we aim to become the top player globally, and we're making progress every day. Regarding our performance in July, we've seen a significant increase compared to June. We are not experiencing any decline; in fact, the opposite is true. We're optimistic about our digital growth, which has risen approximately 6% compared to June, and we're also seeing growth in retail. Additionally, it's important to note that the U.S. represents only about 40% of Ria's overall performance, possibly even a bit less.
Rick L. Weller, CFO
1/3.
Michael J. Brown, CEO
1/3, yes, 33%. So we're seeing strong growth around the world as well where they don't quite have these immigration challenges like what we're seeing here in the United States. So Money Transfer is doing really well. July is doing better than what we saw last month.
Operator, Operator
Next question comes from the line of Mike Grondahl with Northland Securities.
Michael John Grondahl, Analyst
Just two quick questions. One, any update on epay promotions and how you think they'll fall during the back half of the year? And then two, in regards to money transfer, I don't know, sometimes you've called out the strength from FX. Just any color on how helpful that was. We saw a lot of incremental margin in that business.
Michael J. Brown, CEO
With respect to the promotions, we've got a few scheduled for end of Q3, beginning of Q4. So we'll see when and how those work out for us. With respect...
Rick L. Weller, CFO
But Pete, there's nothing currently in development that would significantly alter the comparisons across different periods. It's essentially business as usual rather than any anticipated major change. Regarding Money Transfer, I did mention previously that we experienced some benefits due to fluctuations in foreign exchange rates during the quarter. We saw a slight increase in the average value per transaction, which can occur during times of currency volatility. Overall, this provided us with some advantage, which may happen again in the future. This certainly contributed to improved margins, supporting a 33% year-over-year growth in operating income.
Michael John Grondahl, Analyst
Yes, on that 6% revenue constant currency. So great. Okay.
Operator, Operator
Next question comes from the line of Chris Kennedy with William Blair.
Cristopher David Kennedy, Analyst
CoreCard has talked about its business could grow like 30% to 40% if you exclude the concentration with Goldman. Is there any way to think about kind of what you're thinking about the sustainable growth is of CoreCard?
Michael J. Brown, CEO
I believe their estimates are likely more precise than ours, but we aim to enhance that by expanding into global markets since they are primarily focused in the U.S. If they deliver on their commitments and we provide access to different regions, we can potentially speed up that growth.
Rick L. Weller, CFO
Yes. And I'd also say, look, they've built a wonderful product, and they've got a team that's been very focused on the quality, the scalability, and delivering a product that's been tested by Apple. So they've put a lot of effort into the quality of that product, which we really respect. On the other hand, they haven't put much effort into sales and marketing. And this is where we see kind of a hand-in-glove kind of fit. We've got operations around the world. We've got relationships with hundreds of banks with brands like Apple and Google and Paytm. I mean, we could just keep going down the list, Nu, which is an online bank in Brazil. I mean we have this tremendous list of relationships that cut across the money transfer business, the epay business, the EFT business. And so here's where we see bringing a great technical product with our distribution around the world. And so yes, we expect to see that we will be able to essentially supercharge that sales process. And now bear in mind that credit transactions, especially if it has anything to do with a conversion process, okay? The sales cycle is not two weeks, but we'll be actively going after it right out of the gate here.
Operator, Operator
Next question comes from the line of Charles Nabhan with Stephens.
Charles Joseph Nabhan, Analyst
Mike, you had referenced the complexities associated with revolving credit issuance. And I was hoping you could double-click on that. I know there's only a handful of players in that market due to some of those complexities. But what is it specifically about that product that has created a moat within that industry?
Michael J. Brown, CEO
Well, Apple has grown from nothing to a $20 billion portfolio in about 4 or 5 years because they offer an excellent set of features and have a strong brand. They provide various services, including cash back and recalculating interest from multiple months back, depending on returns or chargebacks.
Rick L. Weller, CFO
Years.
Michael J. Brown, CEO
Yes, they have created a highly flexible system for Apple, which can be appealing to others who may want similar features. This creates a greater competitive advantage because if it were easy to replicate, there would be many companies offering similar products. It's the unusual cases and unique combinations of circumstances that disrupt interest calculations for many customers. The specialized knowledge that our R&D team possesses has resulted in an outstanding product.
Rick L. Weller, CFO
It's important to consider that with a product like this, there is a lot of discussion around stablecoins. Questions arise about how issues like chargebacks, fraud, and authentication will be managed. These complexities extend beyond the math involved in calculating interest on a chargeback that could be three years old or on a restoration following a chargeback. There are numerous unique challenges in the processing industry. As we envision a platform like this, we can also think about the potential it holds for players with stablecoin products who are looking for on-ramps and off-ramps, authentication, and approvals. It’s clear that many intriguing future applications could emerge from this.
Charles Joseph Nabhan, Analyst
Got it. That's super helpful. And as a follow-up, I wanted to get your thoughts on travel trends within the EFT business as well as the impact of some of the interchange increases you've highlighted over the last year or so. I know you noted the elongation of the travel season, but just kind of curious what you're seeing on an absolute basis for travel trends within '25 relative to your expectations.
Michael J. Brown, CEO
So one interesting point is about Americans traveling to Europe. We appreciate them, but they are using the wrong currency on their cards, which is up 10% compared to last year. This is really exciting. As you may have read, not many Europeans are visiting the U.S. because they feel they haven't been treated well by the current administration. This means they are likely to stay home or choose vacations closer to home. All the numbers look promising, and while we await the final figures for the year, they are definitely better than last year. We've seen strength in the second quarter with EFT, though it seems a bit flat compared to last year because last year's performance was exceptional. However, we anticipate strong numbers in the third quarter and have no concerns regarding travel.
Charles Joseph Nabhan, Analyst
Got it. And that 10% is all the more interesting considering the weakening of the U.S. dollar? So...
Michael J. Brown, CEO
But I think part of this is human nature. I mean all us baby boomers are all going, boy, I better get the year before I die and before another pandemic closes it down. All right. I think we're right at the top of the hour, operator, so we'll end the questions now. I want to thank everybody for joining and spending the time with us. Look forward to talking to you in about 90 days.
Operator, Operator
Ladies and gentlemen, that concludes today's conference call. Thank you all for joining, and you may now disconnect.