EURONET WORLDWIDE, INC. Q1 2026 earnings call

Thank you. Good morning, and welcome to Euronet's First Quarter 2026 Earnings Conference Call. On the call, we have Mike Brown, our Chairman and CEO, and Rick Weller, our CFO. Before we begin, I need to call your attention to the forward-looking statements disclaimer on the second slide of the PowerPoint presentation we will be making today. Statements made on this call that concern Euronet's or its management's intentions, expectations, or predictions of future performance are forward-looking statements. Euronet's actual results may vary materially from those anticipated in these forward-looking statements as a result of a number of factors that are listed on the second slide of our presentation. In addition, the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures we'll be using during the call to their most comparable GAAP measures. I will turn the call over to our Chairman and CEO, Mike Brown.

Thank you, Stephanie. Good morning, and thank you, everyone, for joining. I'll begin my comments on slide number four. The first quarter here in 2026 represented a solid start to the year as we navigated what continues to be a fluid operating environment. Importantly, we continued to make meaningful progress on our growth initiatives that we believe will position Euronet as a long-term winner in the payments and cross-border space. We are pleased by the broad-based strength across our business, which drove 19% growth in adjusted EPS alongside accelerating momentum in several of our key digital efforts.

Highlights include 35% growth in Ria digital transactions and a 42% growth in new digital customers, the addition of approximately 2,300 new merchants in our merchant acquiring business, Dandelion delivering its strongest quarter-to-date, and three EFT payment infrastructure deals signed and continued the expansion of our CoreCard client base. During the quarter, we continued to face headwinds from immigration policy and ongoing economic pressures. The conflict in the Middle East introduced additional volatility across parts of our business. These impacts were most pronounced within the money transfer segment. We believe the softness associated with these factors is transitory, and we remain focused on what we can control, continuing to operate the business efficiently, executing our long-term growth initiatives across all three segments, and maintaining financial discipline.

We remain confident with our full-year outlook, supported by our strong balance sheet and our historically disciplined, balanced approach to capital allocation. We believe that we are well-positioned to execute against our strategic priorities and deliver adjusted EPS growth in the 10%-15% range for the full-year. Next slide, please. Slide number five. During the first quarter, the EFT team continued to expand our banking and payments infrastructure business with a particular focus on growing the Ren platform, our ATM-as-a-service offerings, and our merchant acquiring networks. As a reminder, these are key offerings within EFT that we believe will play a significant role in accelerating growth at Euronet for years to come. Starting in Europe, in Austria, we implemented an ATM-as-a-service banking infrastructure agreement with bank99.

Under this long-term agreement, Euronet will provide full outsourcing services for bank99's ATM fleet across the country, reinforcing our role as a long-term infrastructure partner to leading banks. In Poland, we signed an agreement with UniCredit Bank to deploy cash recyclers across its branch network. This deployment also allows UniCredit's customers to access Euronet's market-leading depository network. In Latin America, the Ren team signed its first banking infrastructure agreement in the region with Banco Itaú in Paraguay. This agreement enables the bank to take full ownership and management of its ATM network, allowing it to exit the country's centralized ATM monopoly and then transition to a modern independent processing model with direct scheme connectivity. I want to highlight the strategic importance of these banking infrastructure agreements.

Across several European markets and even at an EU level, regulators are developing standards and, in some cases, formal regulation that require banks to maintain ATM networks to ensure customer access to cash. By leveraging Euronet's Ren technology and scale, banks can meet these requirements while delivering a better customer service at a significantly lower cost. For Euronet, these agreements generate long-term recurring revenue and deepen our position as a critical infrastructure provider. In addition to these core platform wins, we continue to expand our product footprint with existing relationships. In Ecuador, we extended our partnership with Banco Guayaquil through a 3D Secure agreement. This is notable for two reasons. First, it demonstrates our ability to cross-sell incremental Ren products to existing clients.

Second, it represents the first deployment of this product in Latin America, highlighting the cross-geography synergies resulting from our 2024 Infinitium acquisition in Malaysia. We also saw continued momentum in merchant acquiring, adding approximately 2,300 new merchants to our existing portfolio. During the quarter, we further strengthened our position in Spain through the announced acquisition of PaynoPain. This transaction enhances our ability to offer digital merchants a comprehensive and flexible suite of omni-channel payment solutions tailored to a wide range of customer needs and industries. Overall, I am pleased with the EFT group's solid start to the year. Their continued focus on expanding banking and payments infrastructure continues to provide long-term recurring revenue while also providing state-of-the-art technology for banks, merchants, and fintech around the world. With that, let's turn to slide number six and we'll discuss Epay.

During the quarter, Epay continued to make steady progress expanding its digital content distribution capabilities across both established and developing markets. We extended our digital content distribution relationship with Revolut into Brazil and Mexico for a total of 22 countries. Revolut is a banking super app and one of the most successful fintech companies in the world with over 65 million global users. This expansion reflects continued demand from global partners to leverage our distribution infrastructure across global markets. We signed and launched a B2B agreement with Apple for distribution through corporate benefits, a leading European employee benefits and rewards platform across six countries.

In Japan, we signed a content distribution agreement with Roblox, adding another global brand to our network. This agreement represents continued progress in expanding Epay's presence in key digital entertainment markets. We also advanced our alternative payment initiatives during the quarter. We launched Amazon PayCode in partnership with Italy-based LIS PAY, increasing consumer access to alternative digital payment solutions through additional payment channels. In India, we launched Google Play and Apple Gift Card codes on Zepto, a leading quick commerce platform.

This launch expands our distribution of key digital content and supports our strategy of partnering with digital platforms to capture the evolving consumer purchasing trends. Excuse me. Overall, Epay continued to execute on its growth strategy during the quarter with incremental expansion across geographies, partners, and product offerings. We expect this trajectory to continue as we seek to leverage existing infrastructure into high-growth adjacencies, which we will discuss in greater detail at our upcoming Investor Day. The team remains focused on building its global distribution network to support long-term value creation. Now let's go on to slide seven and we'll talk about money transfer.

In the first quarter, we continued to make progress in our money transfer segment, but a few external factors masked these positive developments. Pressure on transactions initiated in the U.S. retail business to countries south of the border remained persistent, largely due to the continued effects of U.S. immigration policy, where the industry has continued to experience a one-two punch of lost customers from deportation and a virtual freeze in replacement immigration. To a lesser extent, we also saw some impact from the geopolitical developments in the Middle East. While these factors affected our reported results for the quarter, we do not view them as indicative of underlying weakness across our global business or long-term in nature. While we face challenges in the physical retail channel, we receive benefits in the digital channel.

The U.S. immigration policy, combined with the 1% remittance excise tax and our targeted investments in new customer acquisition, resulted in accelerated digital transaction growth of 35%, new customer growth of 42%, and digital revenue growth of 42% year-over-year. The average send per transaction increased approximately 6% and gross profit per transaction improved year-over-year. Dandelion also posted its best quarter on record. While external pressures remained, we stayed focused on execution, expanding our digital cross-border payments capabilities, including the launch of real-time payment services in nine new markets and continuing to scale the Dandelion network.

I want to emphasize an important differentiator in our money transfer business, the strength and the scale of our global cross-border payments network. Today, that network reaches more than 4 billion bank accounts, 3.7 billion wallet accounts, and more than 4 billion debit card accounts, as well as over 600 payout cash locations. The unparalleled reach, speed, and product differentiation powers Ria, Dandelion, and XE with real-time consumer and corporate payments at lower costs than competitor networks. While cash pickup remains a critical service for a large portion of our remittance consumer base, we continue to see Ria, Dandelion, and XE customers gravitate towards the convenience of digital payout. Our account deposit transactions grew 12% this quarter and now represent 44% of the money transfers transactions and 58% of the principal transfers.

Thanks, Mike. Good morning, everyone, and thank you for joining us today. I'll start my remarks on slide nine. We delivered revenue of $1 billion, operating income of $72 million, adjusted EBITDA of $126 million, and adjusted EPS of $1.58. Adjusted earnings per share increased 40% from $1.13 in the prior year. Excluding a one-time tax charge of $0.20 per share in the prior year, adjusted earnings per share increased 19% from $1.33. You can see we are on track to meet the guidance range we shared with you earlier in February. Further, this quarter, we continued our track record of producing strong free cash flows. Because we didn't have any large pending acquisitions or other capital requirements, we repurchased $100 million of our shares.

Given the timing of the repurchases, there was only a marginal benefit of about $0.02 per share in the first quarter adjusted EPS. We know this repurchase will continue to support per share earnings in the future. I'll point out that our operating income of $72 million includes $5 million of additional non-cash purchase price amortization reflected in the GAAP purchase accounting for the CoreCard acquisition and an additional $3.5 million for non-cash share-based comp. Excluding these two non-cash items, our operating income would have grown 7%. Slide 10 shows our first quarter year-over-year results on an as-reported basis. Most of the major currencies we operate in strengthened compared to the dollar. To normalize the impact of the currency fluctuations, we have presented our results adjusted for currency on the next slide. I'm on Slide 11 now.

The EFT segment delivered strong revenue growth in the first quarter of 2026, with constant currency revenues increasing 19%, driven by a combination of double-digit growth in Ren and merchant acquiring, certain interchange rate increases, and the full quarter inclusion of the CoreCard acquisition completed in the fourth quarter of 2025. Morocco, Egypt, and Philippines led the way for the geographical expansion of our ATM footprint, together with deepening our banking outsourcing partnerships. ATM expansion was modest, with installed ATMs and active ATMs up 1% after de-installing approximately 1,400 non-performing ATMs. In Poland, interchange increased during the first quarter, with certain schemes implementing new interchange rates that include both fixed and variable components. These rate increases reflect a similar theme where we have seen rate improvements across Europe.

Looking ahead, we expect to continue to see improvements in interchange rates and direct access fees, or DAF, as regulatory requirements evolve across Europe, where approximately 15 countries have implemented formal ATM cash access frameworks. These changes are designed to preserve customer access to cash while supporting the long-term sustainability of ATM networks. As additional bank branches decline, independently owned ATM networks are increasingly filling the gap, enabling banks to lower cost while still meeting regulatory requirements for access to cash. As these trends evolve, we expect pricing structures to adjust to support accessible ATM networks. Adjusted EBITDA increased 12%. Operating income remained relatively flat, largely due to the approximately five-million-dollar increase in non-cash purchase price amortization related to the CoreCard acquisition. Absent this five-million-dollar increase, operating income for the segment would have grown 21%.

These double-digit operating results reflect the earnings leverage of revenue growth while exercising disciplined expense management. Operating margins were consistent year-over-year after adjusting for the inclusion of the five-million-dollar non-cash purchase price amortization. In Epay, the segment delivered solid results for the first quarter of 2026, with revenue increasing 2% on a constant currency basis. Operating income rose 13%, and adjusted EBITDA increased 12% on a constant currency basis. Results benefited from the absence of a four and a half million-dollar one-time operating tax impact in the prior year first quarter. Epay revenue and gross profits per transactions were consistent to improving. In the money transfer segment, revenue declined 4% on a constant currency basis. Operating income was $38.9 million and adjusted EBITDA $45 million, both down year-over-year.

Total transactions decreased 2% to 43.9 million, while digital transactions grew 35%. New digital customers increased 42%, and the network locations expanded 4%. The decline in constant currency revenue was primarily driven by immigration-related pressures impacting transfers between the U.S. and Mexico, the implementation of a 1% remittance excise tax paid on cash transactions in the first quarter, and reduced volumes in the Middle East. These headwinds were partially offset by growth in markets outside the U.S., continued strength in consumer-to-consumer digital transactions, and the expansion of our Dandelion cross-border payment network. While constant currency revenue per transaction came in a bit, gross profit per transaction improved, driven by a favorable mix toward account-based payouts, improved payout rates, and more efficient network routing, highlighting the strength of our cross-border payments network.

Operating profit benefited from expanded gross margins, which were reinvested in digital marketing to support long-term growth, resulting in lower operating profit year-over-year. At the consolidated level, despite a more challenging macro environment, we delivered solid earnings growth, supported by strong performance in EFT and continued momentum in our digital channels. While money transfer faced near-term pressure, the underlying fundamentals of the businesses remain intact. Turning to the full-year guidance, I'd note that as we continue to see the benefits of our key digital growth initiatives, we are seeing a corresponding evolution in our seasonal earnings profile. In prior year, earnings were more heavily weighted toward ATM tourist activity. As we continue to diversify the business and expand our digital products, we expect the second and third quarters to represent a lighter portion of full-year earnings than in the past.

As Mike mentioned earlier, our current operating momentum and pipeline of growth initiatives give us confidence in our ability to deliver adjusted earnings per share growth of 10%-15% in 2026. Let's now turn to slide 12 for a few brief comments on the balance sheet. As you can see, we ended the first quarter with $2.1 billion in unrestricted and unrestricted cash and ATM cash. Total debt was $2.6 billion at the end of the quarter. The increase in cash and debt was due to an increase in cash in ATMs in preparation for our tourist season in Europe, as well as cash generated from operations, partially offset by share repurchases and working capital fluctuations. During the first quarter, we repurchased $100 million of our shares.

Share repurchases remain a core component of our capital allocation strategy, funded primarily through our strong recurring operating cash flows. We believe share repurchases have been an effective use of capital and underscore our confidence in the long-term value of the business. Over the past four years, we have returned on average approximately 85% of our annual earnings to shareholders through share repurchases, reflecting a strong return of capital to shareholders. Our broader capital allocation framework continues to prioritize maintaining an investment-grade balance sheet, investing in organic growth, pursuing disciplined and strategic M&A opportunities, and returning excess capital to shareholders. With this, I will turn it over to Mike to wrap up the quarter.

Thanks, Rick, and thank you everybody again. To close, we are pleased with the solid start to this year. We continue to benefit from product and geographic diversity, which allow us to deliver good results despite a complex and uneven macro environment. Our digital initiatives are clearly delivering results. We're seeing accelerating adoption across the business, driving meaningful mix shift and operating leverage. That progress reinforces our confidence in our strategic direction and the investments that we have made to develop an industry-leading global payments network and expand digital access for customers and partners. At the same time, our core platforms continue to scale globally. Long-term infrastructure agreements, expanding networks, and continued partner wins across the portfolio are strengthening the durability and reach of the business. We also remain disciplined on how we allocate capital.

We are balancing organic growth and innovation with selective M&A opportunities while continuing to return capital to shareholders in a way that supports long-term value creation. Our balance sheet and cash generation remain strong, providing us with the flexibility to execute and give us confidence in our full-year outlook while continuing to build long-term value for our shareholders. Thank you for your time today, and we look forward to seeing you at our Investor Day on May 20th. With that, we will open the floor for questions. Operator, will you please assist?