Greetings and welcome to the Euronet Worldwide First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

[Operator Instructions] It's my pleasure to introduce your host Mr. Desmond Acosta, Deputy General Counsel for Euronet Worldwide. Mr. Acosta, you may begin..

Thank you. Good morning, and welcome everyone to Euronet's quarterly results conference call. We'll present our results for the first 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 page two of the PowerPoint presentation we'll be giving 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 from those anticipated in such forward-looking statements as a result of a number of factors that are listed on page two of our presentation. Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any 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?.

Thank you, Desmond, and thank you everybody for joining us today. We hope that you, your families and your friends are safe and well. I'll begin my comments on slide number 5.

Two months ago, Euronet was poised to deliver another year of double-digit revenue and earnings growth to add another 4,500 ATMs in new and existing geographies to its fleet 50,000 to continue to grow its digital presence in both epay and Money Transfer and to continue to grow its brick-and-mortar transfer business two to three times faster than the market.

We were also fielding additional inquiries on our leading-edge technology delivered through our REN platform, and we were well capitalized to accomplish all these initiatives with over $1 billion of cash in the bank or in our ATMs together with $950 million of availability on our revolving credit facility. And then as you know the world changed.

It was hit by the COVID-19 pandemic. Borders were closed. Shelter-in-place orders were issued. Airports restaurants and businesses closed. Stadiums and churches closed. Local events are canceled. And millions of people across the globe were put on unemployment roles. It was almost as if the world changed overnight.

Now, many companies are just trying to survive. A recent study pointed out that more than two-thirds of businesses have been adversely impacted. Euronet being one of them. So while we are one of the many businesses impacted by the virus, we are one of the fortunate ones.

We continue to have a very strong balance sheet with more than $1 billion of cash and no significant debt service obligations for another five years. To put it in perspective, we could cover several years of payroll with the cash that we have. Because we are well capitalized with significant liquidity, we don't have to fight to survive.

We can and are focusing on expanding our market share, product lines, geographical markets and technological superiority. And looking forward, while we will work diligently to make the most out of this year, we are squarely focused on a post-COVID world when we'll come out of the gate swinging.

In reflecting on the future, like Jim Cramer said on CNBC the other day about earnings guidance amid COVID-19, he said that I think that like many people we don't know what the future is and it's amazing that anyone gives you a forecast. So in that vein, Rick and I will focus on three areas that we believe investors most likely want to understand.

First, how are we going to get through this? Second, when is it going to end? And third, what is it going to look like when things are back to normal or maybe a new normal? So, let's start with how we are getting through this. A couple of months ago our first thoughts were ensuring the health and safety of our nearly 8,000 employees.

As a result of our previous investments in our global network, including all the right preparations to ensure cybersecurity and remote access together with exceptional contributions from our employees, we were able to transition virtually all of our employees to remote work-at-home arrangements in about a week, all while ensuring that our service was not interrupted for our customers.

And remember, Euronet started as an international multi-country business. So conference calling, video calls, file sharing and cloud computing are just part of the way that we do business every day. It didn't require us to adopt new forms of operation.

We have also been drawing on our experiences from 2008 financial crisis to use this time to improve our market positioning in all three of our segments. During the 2008 crisis, we focused on expanding geographies, products and distribution channels for each of our three segments.

We introduced new products and solutions and we continue to invest in our technology in fact, our market-leading EFTS ATM management software that gives us such a competitive edge was coated during those times. That's when we made the investment.

We chose to keep our employee workforce today and in fact – I mean back in 2008 and in fact back then we hired 400 to 500 more employees in 2008 and 2009 to attack the market. We had a good balance sheet, which even the rating agencies recognized and they upgraded us back then.

We emerged a stronger more diversified company with expanded market shares and we plan to do much of the same in this crisis. We are financially conservative as you all know. We have a much stronger balance sheet now than we did back then with more than $1.2 billion in cash.

We have had compounded earnings growth of over 20% for six years running and we added to our treasury and we capitalized our business with low cost, long-term fixed rate debt that has no maturities for five years. So we are fortunate that we'll get through this. But as I heard it said a long time ago you make your own luck.

Well we will continue to make our own luck. We are actively working to ensure we are fiscally conservative during these challenging times. We have implemented a cost reduction plan to save $130 million in SG&A and third-party costs, 80% of which has already been identified and has been executed.

And all of these expense reductions are being made without any impact to our future growth potential. For example, we have extended our ATM winterization program to include more than 8500 ATMs, cutting our operating expense considerably.

It is unlikely that we will install the 4500 ATMs we planned in 2020, due to the government-mandated lockdown orders in most countries. You see installation of new ATMs generally isn't considered an essential service but when countries states and cities begin to restart the economy, we will accelerate our deployment plans as quickly as possible.

We'll be ready because we have ATM sites ready to go. And as I said earlier, it is our desire and plan to keep all of our employees. We have not initiated any employee or salary cut to date and we have communicated to all of our employees that it is our intention not to cut salaries or layoff employees.

We believe that this will allow our associates to focus on growing our business while working from home rather than worrying about how to pay their bills. And trust me we are keeping them busy.

Our employees are actively adding new products and solutions including our REN and REV real-time payment product for central banks wanting real-time payment solutions. We will continue to expand geographies and channels as well as further diversify our business into old and new business lines.

For example, the acquisition of U.S.-based ATM outsourcing provider Dolphin to go after the large and attractive U.S. outsourcing opportunities. And finally, we will conserve our balance sheet to ensure that we are here to grow for the long term. Next slide please. Slide number 6. Next you're probably wondering when this crisis will end? Well up to.

We're ready. So while we don't know when it'll end, what we do know is that it will end. Three weeks ago all we read about was country or state or city closings or extensions of closing. Now we are beginning to see promising signs of city and country governments around the world begin to implement plans to reopen their economies.

And we are also hearing more and more news circulating regarding promising treatments emerging and emerging progress on a vaccine. So we believe at some point the world will return to normal or at least a new normal. And what does that mean for our business? Well, let me pose for you a few questions that we asked ourselves.

Do you believe that people will quit taking vacations? Do you believe that immigration will stop? Do you believe that people will stop buying self entertainment? Do you believe that the use of cash will cease? Well, we believe that people will continue to take vacations.

In fact, a survey of 11 countries from the International Air Transport Association -- IATA shows that once restrictions are lifted more than 50% of the respondents either don't plan to wait to travel or only plan to wait for a month or two.

Similarly a recent survey of Americans by the New York Post indicated that nearly half of Americans plan to travel immediately after the restrictions are lifted. We believe that people will continue to immigrate across the globe to seek better opportunities for their families as well.

We believe that people will continue to play games and watch Netflix. And we believe cash will continue to co-exist alongside plastic and digital payment methods for a very long time. So the crisis will end and we believe that each of our three core businesses will still be there when it does end.

As we look across this -- our business, we believe that the epay segment will be the first to achieve full recoveries. The content we sell in epay is largely for self use. We have seen good sales of this content during the pandemic and we believe people will continue to buy gaming products, software and video streaming for everyday use.

We believe the money transfer recovery will lag a little because there are so many people temporarily unemployed around the globe. You may have seen the World Bank report that predicts that money remittances will decline by 20% in 2020 and you may be wondering how that will impact our business.

We believe that it will take some time for us to get through the unemployment, but we have a very strong track record of growing 2 times to 3 times faster than the market and faster than any of our competition and we believe that will continue.

As people regain employment, their first thoughts will be to continue to be with their families and their families' well-being. In fact many of our customers made great sacrifices to support their family in their home country. And we know that some of our larger and many of our smaller competitors are not in a strong financial position as we are.

We think that many of the smaller competitors will struggle to survive and we are well-positioned to pick-up their volume because we have done a good job diversifying by geographical expansion, network expansion expanding in the independent channel and making inroads with large retail agents and expanding our digital offering.

So when customers think about sending money to their loved ones, we're there whether it's at small retail large retail online or even at ATM. And finally, we believe the EFT recovery will take the longest and is the hardest to predict. The recovery will be largely dependent on how quickly travel gains momentum.

We will be ready to take advantage of transactions if they occur throughout this year. But in reality we are operating our business with the assumption that travel and international tourism won't pick up to meaningful levels until 2021. Even then, we believe that it's logical to assume that there will be some negative halo effect of the Coronavirus.

So tourism levels in 2021 will likely not be equal to 2019. Will they be 70%, 80%, 90%? Will there be a pent-up demand from missed business trips and missed vacations this year? Will a vaccine be developed? No one knows for sure, but we would expect it to be somewhere in the 80% to 85% level of 2019 next year.

We're not forecasting here just offering our view of what may be likely to happen, which leads us to what we think the business will look like post COVID. Let's move on to slide number 7. Much like 2008, we are preparing our business to be stronger and more competitive as we emerge from these unprecedented times.

In each of our three segments we believe that the total available market may be temporarily smaller, but thanks to our financial strength we will be able to grab a bigger share of this market, a bigger piece of the pie. In EFT we are continuing to expand our footprint in existing and new geographies.

We are identifying new sites that are being abandoned by our competitors who will not make it through this pandemic. And in the next few months we'll have the operations set up and ready to go in five new markets, so that when we are able to install ATMs and when travel and tourism resumes, we will be ready to go. And we are diversifying our business.

Over the last year or so, we have told you about our increased outsourcing pipeline. This part of our business, which you may remember makes up 50% of our ATM base and has generally been unaffected by this pandemic, as our revenues are less traffic dependent.

In 2019, we added 3,600 outsourcing ATMs through organic expansion and the acquisition of U.S.-based Dolphin Debit. We have been fielding more and more calls for these services, as the banks have felt the pressures of the pandemic. The U.S. is a huge market and only 6% of the bank and credit union-owned ATMs are outsourced.

The acquisition of Dolphin Debit expands Euronet's market-leading technology to the United States and makes available to these banks and credit unions more modern banking options with no investment. Finally in EFT, we continue to see countries invest in their payment infrastructure to keep up with the changing payments landscape.

With our REN and REV technology, we are well positioned to provide these needed solutions for payment modernization. And in fact our phones have been ringing. There's a lot going on out there and I am confident we'll see some success here, even in the midst of the crisis.

In epay, through COVID, we have seen new users of gaming and streaming services and we predict that these users will continue to buy content following the pandemic.

We have seen increased sales of digital codes via digital channels, which we expect to remain and we expect that the content and physical retail will resume as soon as these retailers are back open. We have also heard from our brand partners that many of them have delayed their advertising spend until after COVID.

So we would anticipate that we will likely see some additional promotions from brands when this is over, hopefully later this year. Finally, in epay, much like EFT, we are beginning to see indications that some of our smaller competitors may not be financially strong enough to make it.

So we are making sure that we are positioned to step in and ensure those customers' needs are met. In Money Transfer, the largest piece of our business is cash-based consumers sending money to loved ones in cash-based economy.

So we are confident in the industry, leading up to and accelerating during this pandemic, we have invested into our digital platform and expect to launch our Ria Money Transfer mobile app in 19 new markets in the second quarter.

This will ensure the convenience of self-service transfers to our customers from their living rooms and during the stay-at-home orders, but also to ensure that we are well positioned for the future for customers who prefer digital payment options.

Over the last year, we told you that approximately 70% of the global remittance market is comprised by smaller independent competitors were not addressed.

During these times, many of those smaller competitors without an adequate balance sheet and without industry compliant programs may not make it and we're working to make sure that we're in a position to win their volume. Over the years, we have continued to diversify our business into large retail.

Six years ago, we entered large retail with Walmart and have continued to expand our relationship and product offering within the Walmart stores.

We are pleased to announce that we recently renewed the Walmart2Walmart domestic and the Walmart2World international agreement for another three years and we look forward to working with Walmart to continue to offer these exceptional products to Walmart's customers.

We have furthered our large chain offering by expanding to two new agreements with post offices in Europe. Unlike here in the U.S. where a large portion of remittances are made at grocery stores or pharmacies, in Europe the largest portion of remittances are made through their national post offices.

The post offices have historically been dominated by our larger competitors, but they are beginning to prefer our value proposition, our pricing, our customer service and financial strength for both them and their customers.

Just this month, during the height of COVID and the spread of the lockdowns, we launched our service with bank99 in the Austria post. This follows our February launch of bpost, which is the Belgian post office. And here again, our balance sheet strength is helpful as these large players look to stability for long-term business benefit.

So in summary, we are in all the right places for customers when they want to send money be it the small independent, the large retailer online and in more and more places around the world. Now let's go to slide number eight and I'll give you a little update on our technology.

Our leading-edge technology has really been the driver behind our business continuing to operate as close to normal as possible in our crisis environment here.

We were able to service our customers with no downtime and even delivered new products and services to help customers meet the regulatory demands of them which were required due to the COVID-19 pandemic. And the pandemic has given us time to dedicate significant resources and development time to new opportunities.

During the quarter, we continued to remain on track with our deliverables to install our REN solution for the Bank of Mozambique. We would expect the second quarter to be largely user acceptance testing before we take it live a little bit later in the year.

We also continue to use our REV technology to bridge the gap between physical and digital banking services. As digital banks continue to grow around the world, we have found that in a relatively short period of time, Euronet can provide the bank with a full suite of payment services through API connections to our REV processing platform.

We can then provide the bank with access to Euronet's ATMs for cash withdrawals, content from our epay product portfolio and white labeling of our XE international payment services. We have already signed three of the digital banks and have interest from several others. Let's take a minute now though to talk about our real-time payment capabilities.

This is kind of a new one. Real-time payments combines' funds availability, settlement finality, instant confirmation and integrated information flows all in a payment made in second. This benefits end consumers with instant gratification from the account-based person-to-person transactions.

And this benefits businesses large and small by allowing merchants to request payments directly from customers with instant settlement of funds. The popularity of this trend is putting pressure on governments and regulators around the world to innovate and introduce new real-time payments infrastructure within their country.

This new payments landscape allows both banks and nonbank alike to participate in creating new and exciting payment innovations we've never witnessed before.

Think of it as parallel to the card payment infrastructure that has evolved over the last 40 years, but the big difference is that RTP, Real Time Payments allows more participants and it plugs directly into the bank accounts of consumers and businesses, resulting in lower fees.

Further, customers have the option to anonymize their banking credentials through a proxy or an alias, making the system even more secure, more robust and more appealing to use than standard plastic. Our REN foundation is natively built for real-time payments and settlements between participants in a network.

Additionally, it includes modern design features like adaptive routing two-factor authentication and micro services architecture that I have spoken about previously.

In summary, with the REN foundation, Euronet is uniquely positioned to participate in the modernization of legacy payment infrastructure along with the trend towards real-time payments in virtually every country around the world.

As I conclude, I'd like to reiterate our confidence in our business, while COVID-19 may delay us in delivering the double-digit annual results we have consistently delivered, we will return.

Our strong financial position with plenty of cash, our exceptional employees, careful expense management and balance sheet conservation, as well as our leading-edge technology give us great confidence that we'll get through this.

We are using this time to prepare our business for a post-COVID world and we believe that we have a lot to look forward to across each of our business segments as we move into 2021.

And these continued efforts to advance our business and take market share from our competitors in each segment will leave us better positioned to deliver long-term double-digit growth rates. With that, I'll hand it over to Rick..

Hi. Thank you, Mike, and thank you, everyone who has joined us today. Unlike previous earnings reports, I will begin my comments with the balance sheet on slide 10 rather than the income statement.

As Mike mentioned, the first quarter earnings are not the type of results we are accustomed to reporting, but the strength of our balance sheet will help to see us through this crisis. As you can see here we finished the quarter with $709 million in unrestricted cash on hand.

The decrease in cash from December 31st was a result of cash generated from operations offset by capital expenditures and $240 million in share repurchases, which we curtailed upon seeing the significance of COVID-19 impacts on our business.

While we believe this $709 million cash balance is more than sufficient to sustain the business through the difficult times brought about by the pandemic, the company also has approximately $560 million cash in ATMs at the end of the quarter, which could be redeployed to operations giving the company more than $1.2 billion of cash with no significant debt service obligations for five years.

Our total indebtedness was $1.1 billion as of March 31st, largely unchanged since the end of the year and with the first maturity date of March 2025. Next slide please. On slide 11, for the quarter, we delivered revenue of $584 million, operating income of $31.6 million, and adjusted EBITDA of $68.7 million.

We delivered adjusted EPS of $0.55, a 35% decline versus the prior year as a result of the transaction declines from COVID-19 Mike mentioned during his comments. Next slide please. I’m on slide 12. EFT transactions in the quarter grew 13% driven by strength in Asia Pacific and U.S.

markets in the quarter, partially offset by lower European ATM transactions especially high-margin, cross-border transactions impacted by COVID-19. epay transaction increases were from the growth in Europe and very strong contributions from India, which included a large volume of low margin mobile top-up transactions.

Money Transfer transactions grew 3% from continued strong double-digit growth in international remittances and digital initiated transactions, partially offset by declines in U.S. domestic transactions and transactions initiated in certain brick-and-mortar stores.

So despite the strong start to the year in each of the three segments transactions that drove the year-over-year transaction growth just reviewed.

As border closures and shelter-in-place orders have spanned the globe over the last several weeks, the company has seen transaction declines in the EFT segment's ATM business ranging from minimal declines to as much as 95% with the most significant declines in the cross-border transactions.

In Money Transfer business, the company has seen both increases in certain transactions and declines in others. The increases being more concentrated in the digital channels with decreases approximately 25% in the brick-and-mortar channels.

The epay business as well saw both increases and decreases in transaction categories with very strong transaction increases across the digitally initiated transactions as well as content oriented to self use and declines in transactions traditionally processed out of retail-based merchants.

While the epay segment has been experiencing very strong digitally initiated transactions, the majority of those transactions have been low-margin transactions out of India.

Overall, as the first quarter came to a close and we entered into the second quarter, on average, the EFT segment transactions trends were down approximately 40% over similar weeks of the prior year.

The Money Transfer segment transactions were down approximately 35% over similar weeks of the prior year and epay transactions were up approximately 40% over similar weeks of the prior year, again heavily influenced by low-margin India-based transactions. Next slide please. On slide 13, we present our results on an as-reported basis.

Year-over-year most of the major currencies where we operate declined at low to mid single-digit rate. To normalize the impact of currency fluctuations, we have presented our results adjusted for currency on the next slide.

Here on slide 14, you can see for the first quarter EFT revenue grew 3% driven by growth in Asia Pacific and the United States markets, partially offset by the COVID-19-induced impacts of lower European ATM transactions, especially high-margin cross-border European transactions.

Operating income and adjusted EBITDA declines were the direct result of fewer ATM transactions, especially high-margin cross-border transactions. While measures to reduce certain costs were initiated in the latter part of the quarter, little benefit of those initiatives were realized by quarter end.

Epay revenue grew 1% driven by continued digital media growth. Digital product offerings played a key role in offsetting the decline in retail-based transactions stemming from customer movement restrictions.

Operating income and adjusted EBITDA declines were the result of SG&A investments made throughout 2019 to support future growth, which was unfortunately blunted by the impacts of the virus. Money Transfer revenue growth was driven by strong double-digit contributions from U.S.

originated international remittances and growth in XE stimulated by currency volatility, partially offset by year-over-year decreases in intra U.S. transfer business.

Operating income and adjusted EBITDA were further impacted by additional charges taken to cover anticipated agent receivable defaults as a result of ordered business closures require to manage the pandemic.

In wrapping up, it is needless to say that COVID-19 impact -- pandemic has had a profound impact on our business in the first quarter and we expect the second quarter impact to be even greater.

Like Mike said earlier, we will refrain from giving guidance because none of us know when the COVID-19 crisis will end or how quickly the economies will recover. But due to these unextraordinary circumstances, we believe it is important to give you a couple of data points to frame expectations.

We would expect consolidated second quarter year-over-year revenue including impacts of FX to be in the range of 70% of prior year with EFT revenue in the range of 40% of prior year, epay revenue in the 90% range of prior year and Money Transfer to be in the 80% range of prior year.

From these adjusted revenue levels despite cost reductions and careful expense management actions, we expect the second quarter adjusted EBITDA will be nearly breakeven. And after interest taxes and a two-thirds reduction in capital expenditures, the business will likely consume approximately $25 million of its approximate $1.2 billion cash.

Again, this is not guidance but rather a macro view of how to frame expectations given these rather unpredictable unprecedented times. Mike's comments earlier bear repeating. We are very fortunate to have a strong balance sheet with plenty of cash to see us through this crisis.

We will continue to be fiscally responsible while we take advantage of opportunities made available to us by this crisis. And we will continue to remain -- and we continue to remain confident that our business has very strong long-term growth prospects which we are fostering even during this -- the closures.

With that, I'll turn it back over to Mike for final closing comments..

Thank you, Rick. As I close I want to reflect for a moment on our path. There's a little picture on page -- in Greece on like page 16 that I'd like you to look at. We concluded a year -- last year where we celebrated our 25th anniversary. Many of the management team pictured here have been with us for a majority of those years.

And we have gone through a lot together from recessions to regulatory rate reductions to demonetization you name it, we've seen it. We've drawn on these past experiences to get us through the crisis. Next slide please. We hope that all of these words have given you the same level of confidence in the long-term growth prospects that we believe in.

This picture right here was produced in Greece, one of our important markets looking to recover from the pandemic. Like you, we are looking forward to more normalcy in our daily life and in our business. But until we can all gather again on a beach in Greece, stay safe. With that operator we'll be happy to take questions..

Thank you. [Operator Instructions] Our first question comes from the line of Rayna Kumar with Evercore. Your line is open..

Good morning. Thanks for taking my question. You gave some really good details on recent transaction trends and a framework for revenue.

Could you help us better understand the impact on all three segments on EBITDA for the second quarter?.

Can you restate that Rayna?.

Yes.

Could you help us -- give us a framework on how to think of segment EBITDA for 2Q and beyond?.

Well, I won't go out on the limb on beyond [technical difficulty] but on there I think that you should anticipate that the EBITDA numbers for the EFT business will be negative and they will remain positive for the epay and Money Transfer segments..

Got it. That's very helpful. And could you quantify how many ATMs you expect to winterize in the second quarter and the expected cost savings? And just separately do you view -- do you foresee any problems with your ATM supply chain through Diebold or NCR..

Well, so far -- okay, so we've got about 8500 that are "winterized" that's what we used to call it, but now they're COVID-ized right now. We will continue to bring probably more of those into that into the winterized kind of position here shortly.

We have been a little bit hamstrung because we can't even get people out to visit our ATMs to do the winterization. So in places like airports that are closed there's no reason to keep an ATM there and pay all the additional fees that you need to. So we'll probably do more. We don't have an exact number. Our goal is probably another 1,500 or so more.

But -- so that's kind of what we're looking at. We'll just have to see. The nice thing is and you probably starting to read them there's an article after article coming out over the last say week or so about the consternations of Europe trying to figure out how to open up their tourist trade.

Because in many of these markets, particularly, the Southern Mediterranean markets 25% of those countries' GDP sometimes is all about tourism. So the Europe -- EU understands that for them not to go into a total recession they need to open up the tourism. So we'll just kind of have to wait and see.

With respect to supply chain on the ATMs, we had a number of orders in. I mean everything is going gangbusters until end of February. And so all those orders are kind of in process. We would imagine that there'll be some short interruptions maybe a month or so from Diebold and NCR, but we'll have to wait and see.

But for the time being, we don't really need those ATMs. And we're also making -- doing as we always have done, we're doing a good job of culling the non-performers. So those ATMs end up coming up for redeployment in those same kind of markets. So I don't anticipate them being -- that the supply chain will be well-interrupted.

We're looking for sites though every day because that's just what we do..

I think the other thing Rayna to keep in mind, again the benefit of our technology is we can run any ATM in our network. We don't have to be -- we don't have to rely on one particular brand. So again a real benefit of the flexibility and the value of our technology. So we can make use of -- we could even pick up refurbished ATMs.

We can pick up different brand ATMs. So we don't see that as being a gating factor for our continued growth..

Yes. And because every -- we actually don't use the software that comes with most people's purchase of ATMs. We have our own native ATM software called EFTS that I mentioned before that we coded back in the last recession. That allows us to treat every one of our ATMs as if they're just an IP device hung up our network. So it makes everything easy..

It's really good detail. It's also good to see that you've renewed both your Walmart contracts domestic and the cross border.

What are the terms of the new contract? Did you have to take any new pricing concession?.

They're substantially similar. We didn't do anything on the revenue side, but we will work together with Walmart on some promotional activity but it's substantially similar..

Got it. Thank you. .

Thank you. Our next question comes from the line of Andrew Jeffrey with SunTrust. Your line is open. .

Hey. Mike and Rick, good morning. Thanks for the effusive confidences. As usual Mike, I think, you're absolutely right. Question for you on Money Transfer in particular. Clearly digital commerce of all kinds stands to gain from the pandemic.

And I just wonder if you could, sort of, frame for us how confident you are with Euronet's digital Money Transfer footprint today? I know the business still has a, lot of, sort of cash on the counter remittance.

Are there things you can do to accelerate your digital share? And do you feel like you're far enough ahead of the curve to continue to grow as you said 2 times to 3 times faster than the market as measured by the World Bank in the long run?.

Yes, I think, we do. I mean, the reason we have been -- we've been growing two to three – probably, almost 3 times average faster than the market for freaking in the last 10 years run. So there's no reason that's going to slow down. We have a value proposition that everybody likes.

We have the second biggest payout network in the world, which gives us the ability to do more with people. And then we've got a better value proposition from both the customers and the agents. So yes, we can do that.

But when it comes to digital you might hear that we have -- that we're planning on launching our new app in 18 new markets in this quarter. We've got like five coming out in the next few weeks and then another 13 or something after that.

So one of the biggest challenges to having a large digital presence is being able to send money in local language in lots of different markets and having the licenses to do so. We've got all that now pretty much buttoned up. So, you'll see a bigger focus there.

And finally, of all the Money Transfer companies in the world, we have connections to over three billion bank accounts around the world. Back when we were little, we didn't have because the two big guys had exclusive arrangements we couldn't get cash payouts.

So we went to country after country after country and connected into their – into their bank account schemes, so that we could at least pay out to bank accounts. Because of that we've got the largest bank account payout network in the world with three billion accounts that we have access to.

So, all that again goes back to this digital side, when you go digital-to-digital and digital-to-bank accounts and we're also doing lots of these connections now to wallets payouts and wallets, we announced that last quarter. So we're feeling pretty comfortable that we're going to see very strong growth in the digital side..

Okay. That's helpful color. I appreciate it. And then, if I could just ask one on the REN ecosystem. Especially, as it relates to the REV payments cloud, but maybe just generally I guess.

Do you worry about or think about the health of neo-banks some news this morning about a pretty sharp decline in some UK neo-bank app downloads? And then, sort of broad -- specifically but then broadly, how is the pipeline? Is this a market where you can continue to sell in, or are -- is the selling cycle just kind of frozen its point?.

Well, what this might do is force a lot of those folks to take a hard look at the additional feature functionality that they have versus their competitors. And being able to connect into the REV payment cloud will give them an advantage over their competitors. Yes, we've seen that slow down a little bit, but we've got -- they all need to survive.

And what we can offer them is pretty darn good. So what we want to do is just continue to make them successful. We – yeah, when you look at it, the biggest guys out there are people who are our customers. The biggest -- it was -- it is a neo-bank but Xoom was our very first customer to take advantage of our REV cloud. We then went to Remitly.

We've got several other neo-banks that we're dealing with now. You heard about the neo-bank connections that we had in -- with ING Bank in Spain. We've talked about that where they have three million accounts and they're using our ATMs.

So it's not just on the digital side but on the physical side too, because all those guys need to provide physical access for their customers as well..

And as Mike said in his comments, we've had a lot of discussion with people about real-time payment networks. These are not a neo-bank that's starting up. It's a whole country that's shifting over to a real-time, real settlement kind of a network. So you have to again take a look at the completeness of the REN and REV platforms.

It's not targeted at any one particular thing. The beauty of it is the simplicity of the API connection process, the richness of the product and the features that's within it.

And at a time, when the world is changing and changing to real-time payment, real-time settlement structures whether that's with a neo-bank or a Fed, if you will, a Fed -- Central Bank of any country..

And in fact, let me -- I'll add to that. Kevin Caponecchi runs epay. He also runs Asia Pacific. And he's seen a lot of movement here because these markets in Asia are being in such feeling that they've got to modernize. And so they're really pushing this real-time payments thing.

So, I'll let Kevin describe what we're doing there a little bit, because this is really, really exciting. I really believe that our REV -- REN and REV solutions can almost be -- I won't say another leg of the stool, but could be a significant portion of our business in the years to come..

Yeah. So -- this is Kevin. So, one of the things that's evolving in Asia that's probably the most interesting is the development of all these various wallets. And the biggest challenge that a wallet has is source of funds.

How do I -- if I'm a wallet, how do I connect myself to the source of funds of the consumers? What's so interesting about these real-time payment networks is they basically enable to an API connection, the issuer of the wallet can tap into the RTP or the real-time payment network and basically get access to all the bank accounts in that particular country.

So the RTP network is basically rocket fuel for the development of these wallets.

And these wallets are really interesting to Euronet, because of the full breadth and basket of products and services that we have and we can then offer the wallet not only connections or to the RTP network of our country, but then we can facilitate putting epay content into the wallet.

We can white label the various Money Transfer services to the wallet. So the wallet becomes a perfect ecosystem for Euronet to service..

Appreciated. Thanks..

Thank you. Our next question comes from the line of Andrew Schmidt with Citi. Your line is open..

Hey guys. Thanks for taking my questions. Hope everyone is doing well in this environment. So -- obviously there's not a lot of clarity or visibility right now, but I think it's helpful to provide a framework, particularly heading into the back half.

If we were to see current trends continue, particularly into the third quarter, should we expect to see similar impacts to what you're outlining for the second quarter? Obviously, DCC is a large component but just -- but anything on that front would be helpful? Thank you..

Well as -- again, we're not trying to provide a lot of out guidance, but let's just think about how we kind of constructed the second quarter. And as we said earlier, we've identified a rather substantial amount of cost savings that we're actively working at doing.

But as you can appreciate, you can't get all of those affected as quickly as you would like. And so not all of those kind of savings numbers have been baked into the second quarter number.

So as you articulated in your scenario, if it doesn't change much now through the third quarter, what I would likely expect to see is that we could have some resilience on the cost side, because we'll continue to implement those cost strategies and we'll start seeing a little better cash flow coming out of that, again assuming that the transaction levels would remain relatively constant with now as you set up that question.

If we start on the other hand seeing where countries start opening up, where airports are open, where travel begins to resume and things like that, it will start adding to it. But we didn't try to out guess when that could happen in the second quarter. So hopefully, we see upside from here.

But again we're trying to be careful about how far out on the limb we go..

I mean as just a -- just a data point, we have ATMs and something like 130 airports now. And when they're closed obviously and those are very busy ATM locations. Well they're not busy now..

Yes. Got it. That's super helpful guys. And just on the expense savings front, is it fair to think about that $100 million is the addressable pie, or is there more to do there? And then, it sounds like the majority of the cost savings will start layering in the third quarter.

Just some comments I guess, just magnitude the opportunity and timing would be helpful, if it pertains to cost savings?.

Well we've got already identified and anticipated in our second quarter about half of those numbers, okay? So we would anticipate to continue to gain momentum for more.

And when I say half of it, if you think of that as being a number for the year, you divide that by three and you look at what's in there we got about half of that one-third, if you will in there. And like I say, we would expect to increase that number as we go into the third quarter..

Got it. Thank you for that. And the last question, you guys did a good job of articulating the fact that you've been very opportunistic during these types of cycles. As it relates to the M&A pipeline, obviously it's important to get better visibility before making larger moves.

Could you talk about just the M&A pipeline as it stands today? And then if you were to be opportunistic should we think about targets being more complementary to existing segments, or would you look to add sort of a different flavor in terms of just area to grow into?.

So, as we said on prior calls, our focus usually is try to do more with what we have, where -- either tuck-ins or ways that we could add a new product or a geography where you can kind of get a one plus one equals three, kind of game.

We have also complained on probably the last eight calls, that the price that people think their companies are worth has been kind of crazy. So we haven't done very many acquisitions. Where we were used to doing, two or three acquisitions a year, we've done like one in the last two years.

So, what we're hoping is that this COVID crisis gets, these opportunities that we're looking at to be more reasonably priced. And if so, we're going to take a hard look at them. And if one plus one does give us three then we're going to have to figure out, how we pay for them.

Where in the past we might have done mostly everything with cash, we are all about conserving our balance sheet. And making sure we survive this baby. Because we're going to come out on the other hand and try to crush as many competitors as we can. And we can't do that if we've got a weak balance sheet.

So, we might see more stock-based, equity-based payments for acquisitions than cash payments. So that's kind of where our thinking is always looking. We're also noticing -- I mean, I'm getting freaking cold calls from people I talked to a year ago two years ago, who had outlandish prices.

And now they're calling to make sure I'm healthy with my -- with respect to COVID. Well, that's another way of saying they realized that their price has gone down. And they're burning cash or they're not making much money. So they're looking for an acquirer..

Got it, that's helpful. Thank you, guys..

Thank you. Our next question comes from the line of Mayank Tandon with Needham. Your line is open..

Thank you, guys and good morning. Mike, this may compel consumers to maybe not use cash as much going forward. I'm just wondering on your thought process as you get forward in terms of beyond the crisis.

How does that sort of play into your EFT expectations? Do you think EFT will then operate at a lower growth and profitability level once we come out of this crisis, given the potential shift away from cash by consumers?.

Here's what I've been saying for a long, long time. Consumers are going to use more non-cash than cash payments when you look at the big picture. But like we say, when you're a traveller or you're a vacationer. And you're in a foreign country you're always going to want some cash in your pocket.

You're going to pay for most things with a card, whether that's the hotel or an expensive souvenir or whatever. But you always like to have some cash. Our focus is just give people make it very easy for them to have access to the cash they need, while they're travelling. So, I don't see a lot of impact.

We might get some impact, particularly in the domestic markets, like we've seen the transaction numbers in the U.K. go down just through the crisis. But when we pop out the other end, I don't expect to see a lot..

And I think to add to Mike's comments, as we have seen, there's certain other people that aren't necessarily going to be as survivable through this. So, as some players maybe go off the map.

And as some of the banks as Mike said in his comments are dialling us up having some discussion about whether or not there's an opportunity we could have a bigger role in their ATM processing. So, it might very well be that you could see some contraction in the pie. But we're getting a bigger and bigger slice of the pie.

So more opportunity, there's still many more places out there to deploy ATMs. We've already started picking up some good spots in which the competitors have failed in. And so I think when it's done we'll end up with a bigger piece of the pie..

And I think it's a -- ….

Got it..

We're at 9 O'clock now. So, I think, we're going to have to end this call. But I want to thank everybody for listening. We've got a lot going on. Look forward to talking to you in about one quarter..

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect. Everyone have a wonderful day..