Jeff Newman - EVP and General Counsel Mike Brown - CEO Rick Weller - CFO Kevin Caponecchi - EVP and CEO of epay

Chris Shutler - William Blair Mike Grondahl - Northland Capital Markets Rayna Kumar - Evercore ISI Peter Heckmann - Avondale Partners Josh Elving - Feltl and Company Jason Deleeuw - Piper Jaffray Alex Veytsman - Monness, Crespi & Hardt Matt O'Neill - Autonomous Research

Greetings, and welcome to the Euronet Worldwide Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] It is now my pleasure to introduce your host Mr. Jeff Newman, Executive Vice President and General Counsel for Euronet Worldwide. Thank you Mr. Newman, you may begin.

Thank you, Chelsea. Good morning and welcome everyone to Euronet's quarterly results conference call. We’ll present our results for the third quarter 2016 on this call. We have Mike Brown, our Chief Executive Officer; Rick Weller, our Chief Financial Officer, and Kevin Caponecchi, Executive Vice President and CEO of our epay division on the call. Before we begin, I need to make our forward-looking statements disclaimer. Statements made on this call that concern Euronet's or its management's intentions, expectations or predictions of future performance are forward-looking statements. Euronet's actual results may vary materially from those anticipated in such forward-looking statements as a result of a number of factors, including technological developments affecting the market for the Company's products and services; technological issues associated with the operation of our complex processing systems including security breaches, changes in ATM and other transaction fees and changes in laws and regulations affecting the Company's business, including immigration laws and anti-money laundering regulations. These risks and other risks are described in the Company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Copies of these filings may be obtained via the SEC's EDGAR website or by contacting the Company or the SEC. 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. The Company regularly posts important information to the Investor Relations section of its website. Now, I'll turn the call over to our Chief Financial Officer, Rick Weller.

Thanks Jeff and good morning and thank you all for joining us today. I will begin my comments on slide 5. This was another outstanding quarter for Euronet. We delivered strong results including revenue of $524 million, operating income of $90 million and adjusted EBITDA of $114 million. Our adjusted EPS was $1.35, a 30% year-over-year increase and $0.01 ahead of our guidance. This $1.35 had the benefit of about $0.005 of favorable impact from currency exchange rates since we gave our guidance in July, but offset by about $0.01 of impact from convertible bond share delusion as the stock price has appreciated nicely over the last few months. So, net-net, our operations beat our expectations by about $0.015 primarily from the strong results of the EFT segment. You may have noticed in our press release that we have changed the title of our non-GAAP earnings per share to adjusted earnings per share. This is simply a naming change to align our terminology to the more - to that more consistently use throughout the market. It is important to understand that we did not make any changes to the calculation or the items included in the calculation of the adjusted EPS, simply the dropping of the word cash. Next slide please. Slide 6 shows our three-year transaction trends by segment. EFT transactions grew 22% with growth in India and Europe partially offset by declines in China. Consistent with past several quarters, this 22% growth includes a substantial number of transactions from the low margin ATMs that we have on-boarded in India as well as the loss of a number of transactions from the termination of an unprofitable contract in China. Net of the China and India items, transactions would have grown 13%. epay transactions declined 7%; notable in the 7% decline was a shift of higher volume low margin mobile transactions to lower volume higher margin non-mobile transactions in India. The shift in India represents a large volume of transactions, but resulted in a slightly favorable impact on gross profit. Excluding the India shift, epay transactions would have declined 2%. The money transfer transactions grew 12%. This growth was the result of 13% increase in transfers and a 1% increase in non-money transfers - transactions. Money transfer growth was driven by a double-digit increase in Ria’s organic business including double-digit growth across all regions. Next slide please, slide 7. Represents our results on an as reported basis. Year-over-year currencies were largely consistent with the notable exception being the decline in the British pound of 15% as well as improvements in the Australian and New Zealand dollars of 5% and 11% respectively. To normalize the impact of these currency fluctuations we have presented our results adjusted for currency on the next slide. Slide 8 now, EFT delivered another exceptional quarter. Constant currency revenue grew 29%, operating income grew 47% and adjusted EBITDA grew 44%. These strong double-digit growth rates are the results of a 12% increase in ATMs and 13% increase in transactions adjusted for India and China. Operating income and adjusted EBITDA grew at a faster pace than revenue due to a higher percentage of high-value transactions which occur during the seasonally strong third quarter. Revenue and gross profit per transaction expanded slightly with the growth in the higher value seasonal transactions. And our quarterly leading operating margins expanded from approximately 34% 3Q last year to almost 39% this quarter, simply outstanding results. epay performance was largely in line with our expectations. Revenue declined 3% from mobile declines in certain markets largely offset by continued sales of non-mobile content. Operating income and adjusted EBITDA remained constant on a year-over-year basis as a result of a higher margin products and effective expense management. Revenue and gross profit for transaction were consistent on a year-over-year basis as were operating margins. Constant currency revenue for Ria’s remittance business grew at a rate of 11% benefiting from double-digit growth rate from all geographic regions; Asia-Pacific, Europe and the United States including the Walmart-to-Walmart product. Tempering the Ria double-digit growth was a lower single-digit growth from high FX business, which when weighed against the Ria growth netted to a 9% money transfer segment growth. The high FX businesses has experienced the effect of a sustained devaluation of the British pound as a result of the Brexit decision, which has caused customers to take a cautious approach to discretionary transfers such as ex-pat earnings or simply delayed payments in anticipation of currency rate recovery. As we pointed out in previous comments, customers do not seize making payment but rather they will postpone payment. To that end, we are quite pleased to see in the first weeks of October a nice increase in high FX trading volume. The growth and the unevenness can be more readily seen when we look high FXs nine months to-date annual growth rate of 11%. With the robust October start, we remain confident we will see nice double-digit annual growth rate as we close out the year. We are confident with the fundamentals of this business and are even more excited for 2017 as we transition XE to our platform. Also, our money transfer segment constant currency op income and EBITDA results grew at 4% year-over-year. The prior year results included an unusual FX benefit of approximately $2 million and if you make a pro-forma adjustment to exclude this benefit, the op income and EBITDA growth would have been approximately 13% and 11% respectively. And operating margins would have improved by about 50 basis points. It is also important to point out that in this quarter we made approximately $1.5 million of incremental SG&A investment in the money transfer business to accommodate the November transition of the XE customers from a competitor platform to the HiFX processing platform together with more resources added in the recently acquired Asia-Pacific market where we are producing strong double-digit growth and see substantial expansion opportunities. While in 4Q, we will see a partial quarter’s benefit of the XE transition, we will enjoy a full quarter’s benefit in the first quarter. I would also point out that we have seen consistent year-over-year revenues and gross margins per transaction in the Ria business. Net-net, our core remittance business continues to grow at double-digit rates, our HiFX volumes are temporarily lighter due to the currency devaluations and we've invested in areas we believe will pay substantial future dividend. In a period of strength, we are making important investments for the continuation of double-digit growth. As it relates to all segments, we had no notable one-time items this quarter, just a good solid quarter. Now let's go to the next slide to hit a few balance sheet highlights. Here on slide 9 we present highlights of our September 30 balance sheet compared to our balance sheet three months ago. Here you can see that cash decreased by about 20 million and debt decreased by about 85 million. This is essentially the function of two things, reduction in cash levels necessary to support the seasonally high ATM transaction driven volumes in the EFT segment and the production of free cash flows. From $114 million EBITDA after paying interest, taxes and CapEx, we are able to produce approximately $75 million in free cash flows this quarter. So this quarter's results helped further strengthen our balance sheet and as you can see our leverage ratios continued to be attractively low. As it relates to the use of our we paid in early October for the YourCash deal and we continue to see nice opportunities, acquisition opportunities across all three segments as we always say there is no certainty on acquisition deal timing, but we’ve got nice opportunity. Also as we've done in the past, if buying opportunities develop to repurchase our shares, we would likely do so again. Overall, this was an outstanding quarter for Euronet where we delivered 30% adjusted EPS growth, our 15th consecutive quarter of double-digit adjusted EPS growth. With that I’ll turn it over to Mike.

Thanks Rick and thank you to everyone joining us today. While I’m not sure what more I can say about 30% adjusted EPS growth for the third quarter, our teams continue to work hard to deliver absolutely stunning results. There are quite a few developments that we’re excited to share with you, so I’ll move straight on into the EFT highlights on page number 13. We continue to expand our automated deposit terminal network in Poland, we signed an ADT network participation agreement with BPH Bank, the rollout of these new ADPs, ADP by the way is automatic deposit terminal, is complete and they are performing to our expectations. In India, we migrated approximately 2,700 of UCO Bank’s ATMs to our platform. UCO is another public sector bank where we earned lower margins than the ATMs across the rest of our business. However, you may remember that we told you that these ATMs just like the prior ones are immediately accretive to our earnings and provide us with the opportunity to sell other products to these banks who have a large customer base. As an example, since we signed our first public sector bank a couple of quarters ago, we have already sold that bank additional services including MasterCard gateway services and a connection to the Indian National bill payment platform. We continue to have dialog about other products that may serve their needs. Net-net, while lower is the mathematical averages of profits per ATM, we were making more money and you can see that in our third-quarter operating margins of almost 39%. I'm also reminded of sharing with you the immediately past fourth and first quarters, the investments we made in these quarters to drive stronger growth and profit. So suffice it to say this roughly 39% operating margin demonstrates the payback value of those investments. In Pakistan, we signed an ATM and card outsourcing agreement with Faysal Bank, Faysal Bank has more than 300 branches in 90 cities and is among the most significant players in Pakistan’s banking industry. When fully rolled out, Euronet’s systems will serve as the banking hub for all of Faysal’s payments covering 120,000 credit cards, 2 million debit cards and 300 ATMs. Now please move onto slide number 14. In addition to successful ATM deployment, we signed several new value-added services agreement during the quarter. In Europe, we signed an ATM advertising agreement with Union Pay International, our first pan-European advertising agreement. We also signed value-added service agreement with Punjab National Bank and South Indian Bank in India and the Bank of Ceylon in Sri Lanka. During the quarter, we added 3,463 ATMs across Europe and India, of which 2,740 were those UCO Bank ATMs I previously mentioned. We also winterized almost 100 ATMs during the quarter bringing our total calc to 29,276 ATMs. Net of the outsourcing ATM terminations earlier this year, we have added about 1,800 ATMs this year, well within our reach of our 2000 plus goal. As you know in early October we acquired UK-based ATM operator YourCash. Accordingly, we will start off the fourth quarter with the addition of approximately 5,000 YourCash ATMs across the UK, Netherlands, Ireland and Belgium. And the addition of Belgium brings our total IAD markets to 21. The YourCash ATMs currently produce a little less than half of the annual operating margin of our European ATMs but we see the opportunity to expand those margins through the addition of our value-added products to their machines bringing some outsourced services in house and finding cost efficiencies as we integrate the two businesses. We are pleased to have the YourCash team on board and look forward to further expansion of this business. Overall this was another outstanding quarter where we continue to benefit from our focus of adding more ATMs and more products to those devices. And the great momentum in EFT will further be strengthened by the acquisition of YourCash, which will give us substantial and profitable ATM additions in four countries. Now let's move onto slide number 16, I mean sorry, excuse me 17 to talk about epay. Our epay team continues to focus on expanding its non-mobile content presence. As we told you last quarter, our gaming partners are focused on rolling out more gaming content across our retail partner base. During the quarter, we experienced a 65% year-over-year growth in gross profit in the gaming category and we have excellent momentum as we enter the fourth quarter where we will see seasonally stronger sales of the non-mobile products. We have also maintained our focus on expanding our digital content distribution, in the US we launched Apple music sales through PayPal and eBay. The new Apple music codes are sold as a subscription base gift cards similar to that of the Netflix digital codes that we launched last year. We also signed agreements to distribute digital gift codes for Blizzard, the publisher of games such as World of Warcraft and StarCraft across Europe. And we expanded our relationship with Netflix for digital code distribution across the US and more of Europe. In India, we signed an agreement with Google to digitally distribute Google Play codes, this is Google's first digital distribution agreement in India and we are pleased to add this to product portfolio. In Germany, we signed an agreement with REWE, a leading grocery store chain to double the capacity of our gift card mall in their stores as well as an agreement with MediaSaturn, the Best Buy of Germany for hardware and music bundling. Overall, the epay business performed largely in line with our expectations in the quarter and the team continues to work hard to add more content to all of our channels. Now let's move onto slide number 20 and we’ll talk a little bit about money transfer. Our money transfer network now reaches 314,000 locations in 144 countries, 9% year-over-year increase. During the quarter, we launched 12 new correspondents in 11 countries. We continue to expand our presence in India, one of the most important receive markets in the world. This quarter we launched payout service at more than 960 mini financier locations in India. And in Pakistan, we added more than 300 Bankislami Pakistan locations. These increases offset about 1,500 closings we had during the quarter, about half these closings were from non-productive agents and the other half were from regulatory concerns in two small countries. Despite the small sequential reduction in locations in the third quarter, our remittance transactions continued to grow at double-digit rate across most all geographies and we have a healthy pipeline of new corresponding locations. During the quarter, we signed 17 new correspondent agreements spanning 14 countries. As you probably saw in last month’s press release, the XE mobile app has now surpassed 50 million downloads, XE continues to be the world's most trusted currency source and we are excited to migrate XE to our HiFX platform in November. Our money transfer segment continues to deliver strong earnings contributions which we expect to continue as we move and add more payout locations across our remittance business and of course bring XE to live on our platform. Overall, our money transfer segment continues to benefit from the strong sector growth together with robust sales and marketing efforts across all segments of the money transfer. While our volumes were a bit lighter this quarter than we would have liked to see, when we looked to the future, we are confident that through the incremental investments and continued detention to sales and marketing, our volumes will be more substantial as we have already seen in the early weeks of October with a HiFX trade. So net-net, as I travel the world, I remain confident in our great products, great teams and they will deliver great results. Let's move on to slide number 21. And we will kind of summary and outlook. We achieved adjusted EPS of $1.35, a whopping 30% year-over-year improvement and the 15th consecutive quarter that we have achieved double-digit adjusted EPS growth. EFT delivered another exceptional quarter of double-digit earnings in ATMs network expansion. epay continued to benefit from continued sales of non-mobile content which largely offset our mobile decline. Money transfer results reflect double-digit growth from Ria’s remittance business and continued investment in Asia and in our digital platforms ahead of the XE migration to our HiFX platform in early November. We balanced our investments in bringing XE and HiFX live with a spectacular result of the EFT segment this quarter. It certainly is nice to have three strong segments working together to help us deliver a 30% year-over-year profit growth this quarter. Our balance sheet remains strong with improving leverage as we remove ATM cash from our network after the peak travel season and we generated approximately $75 million in free cash flow. Finally, we expect our Q4 adjusted earnings per share to be approximately $1.07 assuming consistent foreign currency exchange rates. With that we’ll be happy to answer any questions, operator would you please assist.

[Operating Instructions] And our first question comes from the line of Chris Shutler with William Blair. Your line is open.

I'm going to focus on money transfers. You are probably not surprised. In Q3, when did you guys see the volumes beginning to slip? And I ask just because at the time of the call the pound had already made a substantial move and I just kind of sat around the $1.30 range. So, can you walk us through the cadence over the course of the quarter? And then, did you take any actions elsewhere in the business like in the ATM business to try to offset that impact on the earnings line?

I think the answer to that question is clearly yes when we exceeded overall our expectations on earnings by about a $0.015. So, yeah, we were - we obviously benefited from really good results across that EFT segment. But in terms of the cadence on HiFX, it was more towards the end of July, there was a lot of trading activity as you may recall from the second quarter that when the pound dropped following the Brexit vote decisions, there was a let’s just call it a nervousness that set in, a lot of trades that happen those remained reasonably strong for few weeks, but then after that they kind of settled down and our sense is that customers were anticipating a recovery in the pound. And it really kind of felt flat and as you know a few weeks ago we started seeing a little bit more pressure on the pound and consequently as Mike and I said, we've seen some real nice upticks in volumes again out of that business. So, customers haven't - their trades haven't gone away, it was just delayed, we’ve seen some of those happen and we’ll see how we continue out throughout the rest of period but it was more towards the end of July that that started slowing down.

And one of the things that Rick said and I can’t stress it too much but these payments that people make, they've got to make them, but they will try to play with timing. And so, when you watch the pound plummet, you’re going to just hang back and see if we get any kind of recovery before you make the payment. And then when they saw that the recovery wasn't happening by the beginning of this month, they basically just jumped in. So we had a very strong first three weeks of October. So, over the year it doesn't really make much difference but quarter to quarter you can get some quarter timing especially because you remember in Q2, we had blisteringly good end of Q2 because of some - because of the currency fluctuations.

Yes, makes sense. And maybe, Mike, just to put a finer point on that, could you - and I don't mean to dwell on this too much. But could you quantify how much the HiFX volumes have been up so far this quarter and just confirm that you said that in Q3 that the revenue from HiFX was growth in the low-single digits?

Growth was in the low-single digits for Q3 and we wouldn’t trot a number here, but I would tell you it's a nice strong double-digit number at the beginning of the quarter here.

And for the Q4 guidance overall, is that what you're expecting that the activities on the first three weeks to be what continues?

We won’t expect it probably to be a strong as what we've seen in the first few weeks of October, but we do expect it to be stronger than what we had in the third quarter.

And then on the core Ria business, it sounds like still good double-digit transaction grow there, did the transaction growth decelerate much from the second quarter, just give us how that played out?

No not really, and you know we've had look ahead good results in the international markets really good results there, IME continues to play very well for us really, really well. And so, I mean we're pretty happy, I mean HiFX was a little bit of lag but looks like it's coming back. So we're really not worried about it.

And then lastly on the XE acquisition, Q4 you get a partial benefit of moving over to your platform, but just give us a sense of what the - or you're expecting in terms of the revenue bump quarter over quarter in Q4 and then what the full bump will be as you get into Q1 of next year?

Q4 will really only be about 1 million in revenue bump and then as we said in the past there is about 1 million a month in incremental but that would be 1 million at the Canadian level. So, 750 at the revenue line per month would be about what we expect to see there, Chris.

And I would like to add too that that's really our couple of aces up the sleeve, the whole XE conversion. That's going to go live at the end - basically the beginning of November. And so, how well we can improve upon the current conversion rate could affect very positively our results. We haven't put those improvements in our forecast because we really don't know yet, but it's going to be really exciting to get that live and to have a heck of a lot better user experience than they have today.

That makes sense. Thanks guys.

Thank you. And our next question comes from the line of Mike Grondahl with Northland Capital Markets. Your line is now open.

Good morning, guys and thanks for that color on HiFX. That really helps. Hey, I wanted to ask a little bit about the YourCash ATMs. It sounds like the margin on those 5,000 are currently slightly less than half your existing ATM margins. Where can that eventually go and what's the timing of getting the value-added services on those?

Well, I think they've got some value-added services, they can have more and then we've got some economies of scale because they outsource some of their switching and et cetera that we can now do internally. We've got to exit those contracts and I would see over the next year or so that we will start to see that. And maybe.

Yes. The other -

Hello.

Somebody accidentally hit the mute button, sorry.

Yeah. I can hear you now.

Yeah. As you pointed out, the margins are about half of what we see across our other EFT business there. And as we enhanced the value-added services, as we optimized those services and as we take advantage of some internal processing that we can do, we would expect to see that that number moves up to be in probably the 75% to 80% of what our historical EFT margins would be. We don't see that they will get quite to the level of our historical EFT margins, but we do think that they will be in that 75% to 80% range.

Got it, got it. And then secondly, any other drivers or detail to kind of call out with the strengths in the ATM business? I mean, 44% year-over-year EBITDA growth is pretty robust. What else is happening there? Was it all DCC this summer?

Well, no, it's not just DCC, but the fact is we’re putting in a lot of ATMs, we've got 1800 more net new ATMs than we had when we started the year. So we are well on our way to beating the 2000 number and it's really just elbow grease, finding good sites that are very profitable. It's all about great locations, picking them one at a time, and we want to continue to grow that estate and accelerate our growth in that estate.

Well, and as Mike pointed out two in the EFT numbers there, just like with these low value ATMs we brought on in India, we said, well, we did that because we saw opportunity there, and while it didn't make the number this quarter, it certainly helped the number to continue to add more products and services to those. So it's not one item that makes the number, it's a series of things that ranges from, we picked up more outsourcing ATMs, we installed more ATMs, we got more value against the existing contracts we had. We've seen more card transactions across our European business. We've increased the volume and signed some nice customers as pointed out on the POS DCC business. So it’s just a lot of pieces that are moving in a very nice positive fashion across our whole EFT segment there.

Got it, great. Thank you guys.

Thank you. And our next question comes from the line of Rayna Kumar with Evercore ISI. Your line is now open.

Good morning. Putting aside the whole HiFX issue, what are you seeing for overall money transfer industry growth? And did you see any shift towards more ACH-based money transfers in the third quarter?

No, absolutely not. There may be, see, I will tell you where that comes from. If there is ever any ACH growth, that's really money out of the pockets that the banks are doing personal money transfers, like wire transfer. But as far as our business, which is the bulk of which is cash-based transfers, we don't see it.

Great, that's very helpful. What is the sustainability of the high 20% topline gains in EFT going forward? Do you expect that growth to continue throughout 2017?

Honestly, I think we've got a splendid team in EFT, both in Asia and in Europe and those people just are crushing it and the reality is, I think we haven't even really scratched the surface. I mean, there may be room for another 40,000 ATMs in Europe alone and you know we’re putting in 2000 plus a year. So we've still got a lot of - the reality is, the market is under penetrated even today because they don't, we don't have high interchange rates and we don't have surcharge. If either of those things change, then it's kind of like all bets are off and the numbers could double, triple or quadruple after that. But it is hard work, because there aren’t chains of stores that are profitable, like in the US or the UK where you can sign a big old chain contract, you've got to go find these things one at a time. Hard work.

Great. Do you expect the implementation of PSC 2 to impact your ATM business in the UK and continental Europe?

No, not at all.

Okay, and if I can sneak one last one in there, if you can just update us on your talks with Walmart for a potential cross-border contract?

Well, first of all, we are in substantial talks with them on the continuation of our current service, which has been absolutely successful and probably better than our expectations or their expectations with our Walmart to Walmart domestic product. As you know, as you go international, the price differentials are considerably less than it was in the domestic market before we started 2.5 years ago. So we have, what we would expect is that Walmart will probably end up with an international partner for many countries and we’d love to be a partner for that. We’re waiting to see if that RFP gets issued and we will certainly be on it if it does. The nice thing is we’ve got a great relationship with them. We certainly have exceeded our expectations, gotten awards, et cetera. So that’s where the real money is, the real money is sending additional transfers out to our 144 countries that we currently do service to. So it's a big market out there. We hope we can get a piece of that, but we will let Walmart do what Walmart wants to do because they are pretty smart about their customer base and where their needs are.

It sounds like you are saying you are expecting Walmart to have several international --?

Well, all we know for sure, Rayna, is that they have got a lot of opportunities and with the new contract they’ve signed with our competitor, they have absolutely free range to do it anywhere they want. So I think we will just have to kind of see what they decide.

Thank you.

Thank you. And our next question comes from the Peter Heckmann with Avondale Partners. Your line is now open.

Good morning, gentlemen. Hey, Rick, can you just comment on the anticipated tax rate for fourth quarter? I know you had a tax - much lower than expected tax rate last year and that creates a little bit of a difficult comp. Are you looking for something in that 25% to 27% range for the quarter?

Well, probably a little inside of that, as I said last quarter, we're probably looking at kind of mid to little bit inside of mid-20s there for the fourth quarter.

Okay, that's great. And then as regards the Netflix prepaid partnership, can you talk about the role out there? That seems like something that could be pretty interesting. Is that a country-by-country rollout? And will you be rolling it out at all of your retail locations?

Yes, Pete. This is Kevin. In the United States, as we know, most people have paid for their Netflix subscription with a credit card. With the lack of credit cards in other parts of the world, anybody with a subscription service needs to come up with a way to do a prepaid solution. So we've partnered with Netflix to roll out a prepaid subscription across Europe. We are going market by market, Pete, and we just did Germany and there is a rollout of several other European countries that will occur over the next six months.

Great. All right, that's helpful. And then just last question - on the issue of the potential for surcharges on ATM transactions, I guess opportunity and risk in that it would dramatically increase the potential value of your existing networks. But wouldn't that draw additional competitors into the market, and potentially create more competition for good locations?

Oh, yes, absolutely, but you've got to understand that if you have surcharge, that number of profitable locations that you can put an ATM in probably goes up 4 to 5 fold, so you can have competition and still there is plenty of room and the nice thing is, we've got on the ground personnel in 21 European countries plus in India. So in 22 countries, we are out there putting in ATMs right now. If that did change, we would be really in the catbird seat for expanding our very aggressive rollout plan.

And as Mike said, there could be room for more competition, but let's not overlook the fact that we have competition today, it's not as if we are out there in the market and we are the only guy there. So each day, we compete for this stuff and if there are other economic influences that make it more attractive to be in there, our teams are well fitted to be tough competitors.

Got it. That's helpful. Thanks.

Thank you. And our next question comes from the line of Josh Elving with Feltl and Company. Your line is now open.

Hey, good morning. Most of my questions have been answered. I guess I did have one question, in epay. Just trying to get a sense for where you are with regard to the mix of mobile versus non-mobile content. And as that mix continues to shift towards non-mobile, what is it going to take to return to growth in that segment?

Well, we’re just a little over the 50-50 mark as we said last quarter here on non-mobile. And so then, as we look forward in terms of seeing that, we’d like to see a more of a troughing effect on the mobile side of the business. And if we would start seeing that, there has been a couple of, let's call it, false signals in the last year, so that we thought we were kind of seeing the bottom of it and it didn't quite get there. So I think that's really what we’re keeping our eye on and we’re also just, we’re not just waiting to see what will happen there as we've disclosed and done over the last number of quarters is that we've continue to add more and more of this non-mobile product and you can see that it's not only one helpful on replacing that, but it brings in, on average, little better margins too. So I think that's really what the tell-tale sign will be for us before we start seeing a little more robustness on the growth side there is a little flattening out on that mobile side.

And we are looking forward to Q4, because Q4 tends to be a pretty strong non-mobile quarter for epay.

Sure, right. Okay. With regards to the money transfer, I know that there have been a handful of questions on the topic. I was just wondering, with so many opportunities - some of the growth that you are showing has been, obviously, there is strong and stronger than what a lot of industry data points would suggest. With regards to, let's say, like IME in Southeast Asia, do you see impacts from, say, weakness in the Middle Eastern oil markets? Do you see that impacting volumes back to some of the Southeast Asian countries?

We haven't seen that, but it may be because we’re not really deep in to the oil market transfers. There are certain markets that have very strong oil volumes and the IME business was not in those markets. So it’s not had any kind of impact on us. I mean, one of the markets that we were in is, for example, Malaysia. Malaysia continues to have nice growth, if not an oil producing market out there. So it's more of a - it has a little bit more of like agricultural type of influences and things like that. And so we've not seen that, we've seen just nice growth across those Asian markets we’re in.

Okay, great. Last question, you have a pretty good balance sheet right now. You've made what appears to be an attractive acquisition with YourCash. You said you have opportunities kind of across all segments. Is there one that stands out as a place you'd like to do more? Or are you seeing more opportunities?

No, I mean the reality is, we would look at many, many acquisitions in a year and we probably do due diligence on 3, 4 times as many as we ever bring to market, heavy due diligence. It's just hard to find the kind of acquisitions that are good tuck-ins and also have potential good strong growth afterwards. So we’re picky. I mean, that's where it comes down to and that's why we don't and we don't feel like we need to do an acquisition to keep bumping our earnings. I mean, we have a 30% growth in earnings and it’s all organic. So we’ll buy a company if it all looks right, and if we can't find one for a while, we won’t. But we do see them across all three, and we just have to sort through [indiscernible].

Sure. Thank you.

Thank you. And your next question comes from the line of Jason Deleeuw with Piper Jaffray. Your line is now open.

Thanks and good morning. On the ATM business, the margins are very strong. And I'm just wondering, before we start to think about YourCash and the impact there, but is this quarter - is this indicative of kind of what the new margin level is for the business and we just kind of think about it quarter to quarter? There is obviously going to be seasonality. But is this kind of the new step up in the expected margins for EFT?

Well, let's not forget that Q3 is our big - high margin quarter because it's during that quarter that you get lots of tourist traffic. As I mentioned before many, many times, the domestic interchange fee, which we make of local transaction ranges from about $0.28 to $0.52 or something like that across our European countries, it’s only $0.18 in India. So during most of the year, you have mostly locals, but during the summer months, you get a chunk of international people and if you just do an international transaction, that's even same currency to same currency, you make a euro. So euro is going to be 3 to 4 times the domestic interchange fee. So we really love the tourist season, it's always going to bump our margins and it's going to be that way kind of forever and ever. Q3 will be our biggest EFT quarter for quite some time.

Yes. And again, as Mike said, that's our biggest quarter, just like last year, Q3 was our biggest quarter and so by the time we finished the year, we will have a nice little bump in our overall operating margin of that business. And as we said earlier, there is just a whole handful of products, of markets, of devices that have contributed to that. And so we see that there is excellent opportunity, but I wouldn't be fixed on the 39 or nearly 39 for this quarter as being the average for the full year.

No. That isn’t going to happen.

But it is our seasonally strongest quarter.

Yes, and I do understand it. But I was just thinking like year-over-year, it seems like if we are going to expect for any quarter to be a lot of margin surprise, it would probably be the heavy tourist period. So that would be second or third quarter, and then maybe like the first and fourth quarter probably not as much potential surprise on the margins. But could we still expect margins are going to probably kind of expand or they have at least reached a new higher level for this business?

Yes. I think so, as an average across a year and remember, as we add more and more ATMs if they can continue to deliver the profit per ATM that our current ones do, it's going to average ours up.

I mean, this is a recurring revenue business model, so we would expect that to continue and absent the math of just bringing in the YourCash deal, we ought to continue to grow those.

Just don’t abandon ship when Q1 comes around and there is not a tourist to be found.

Yes, got it. And then on the ATM surcharge opportunities, could you give us an update on where that stands? I think Spain and Austria are the key markets. But can you just provide us an update there?

There is still a lot of noise about execution on how to do that within the markets. The regulators are kind of trying to figure that out. So we don't see it as a substantial change in the way we do business or our profits this year, but by our next quarter, we may be able to give you a little bit more color, as we know, more color because I think they've got to settle these things down kind of by the end of the year. So we will see, it's up to the governments and regulators and politicians, et cetera.

And then on money transfer with the XE app and integrating Ria with that to enable easy money transfers from the app or the online website for a digital money transfer strategy, can you just update us on where that stands and your expectations as we head into next year for that strategy?

Well, I mean our app will, we've got several versions of the app coming out and actually several versions of our XE, HiFX and Ria kind of combinations, too. What's different right out of the blocks is originally, XE would give leads to our competitors, but it would only be used in the business services end, basically high end money transfers where the business is paying off a bill or something like that, big amounts, $5,000, $10,000, $20,000, $30,000, at a pop, okay. But what we are going to have too is the ability if somebody is, particularly transfers more retail, like individuals, we’ll be able to send those to the riamoneytransfer.com site, so we will be able, just right out of the blocks to do, have more potential transactions than even we were doing now, but that would be smaller ones if you go to the retail side. And then, with respect to the app itself, the app is going to, out of the blocks, it’s going to allow you to register, so that you can - we can get more people registered in to do these HiFX transactions and further versions will add more functionality. So we've got a whole product timeline, the most important thing is the cut over that happens in I think 10 days, so that's kind of where we are.

Okay, thank you very much.

Thank you. And our next question comes from the line of Alex Veytsman with Monness, Crespi & Hardt. Your line is now open.

Good morning, guys. I just wanted to ask more about epay. Obviously, there was some impact from tough comps from prior year for this business in 3Q. And as we are looking out at the next two quarters, I mean as we model this, what does the comp set up looking like for epay? And what, really, we should be expecting in terms of accelerating revenue growth from the 3% decline we saw this quarter?

I think we should expect stable. Q4 is a stronger quarter for us, but -

On a year-over-year basis, it's a stable quarter.

Got it, got it. It's just that there's such fluctuations between the fourth and the first quarter, so as far as the ops.

Seasonality there, yes.

Okay, it was more of a 3Q phenomenon that we saw.

And that's what you saw here in the third quarter, our op income in that EBITDA numbers. While there is a little bit more movement on the revenue side of it, given the mix of the gross margin of the non-mobile product coming in there, we were able to maintain a stable position on a year-over-year basis. We would expect that to be the case in the fourth quarter.

Got it, got it. And I know that you can't provide guidance, but as far as the setup for ‘17, are you looking to accelerate it to around a low to mid single-digit growth? Is this really where you are positioning it for the next 12 months or so?

Like you said, we don't give guidance on that and it really kind of comes back to as we continue to watch the non-mobile product, I mean the mobile product there, in terms of the trajectory that it takes, so I would like to think that as we start seeing hopefully we see a little bit of a troughing effect that then with the strength of our non-mobile product that we would be able to see some mid-single digit numbers there, but I don't want to get too far out on the limb. I am confident that our team continues to sign up more and more non-mobile products just like we talked about here in the third quarter. We know that we've got other non-mobile products on the drawing board. We've got the distribution into more countries on the drawing board and we've got more digital products that's going out every day. So we've got all the right fundamentals and all the right drivers going in the non-mobile product. I just like to see a little bit of a tempering on that mobile side, if we see that, then we will start seeing a little pop on that revenue growth.

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

Thank you. And our next question comes from the line of Matt O'Neill with Autonomous Research. Your line is now open. Matt O'Neill: Good morning, everybody. Thanks for taking my question. [Technical Difficulty] the queue a little bit late. So if my questions are answered, again, I apologize. The first one from me is on YourCash. And I was just curious if you could discuss the revenue growth trajectory, understanding that there's a margin opportunity in the business long term as it comes on to your platform. Are we starting at a point of double-digit revenue growth, say, in that business? Or has it matured more?

Well, that business has had a little bit more of a double-digit growth on the bottom line than on the top line, it's been more in the single digit range, but I would also say it’s fair to represent that the former sellers being entrepreneurs did not have the same level of access to capital that we do and so their deployment of ATMs was not nearly as robust as what it could be under our leadership. So we would expect to see that the combination of a good team that we acquired and some great markets, together with our processing platforms, our knowledge of the markets and our capital that we will be able to see double-digit growth come out of that business. Matt O'Neill: Got it. That makes a lot of sense. And then just switching to money transfer quickly, and I know this has been discussed in different ways already, but regarding the slowdown in actual transactions, that's more where my curiosity is. I understand the revenue dynamics with currency. But if there's any color there, that would be helpful.

Your phone was breaking up a bit, I didn't quite hear the first part of that question. Could you repeat it? Matt O'Neill: Yes. Sorry, Mike. Hopefully, this is better. I was just curious about the transaction slowdown in money transfer versus the understanding around the revenue which makes sense with currency.

It was the - transaction was in the same kind of relationship. So granted in that business, we have a smaller number of bigger transactions, but the relationship of their volume slowdown was consistent. Also, we did see a little bit lighter in terms of send volume per transaction, which again is consistent with a customer’s orientation to maybe delay payments, if they have to make a certain amount of payment, they may make the smaller side of it, but the transaction numbers and revenue numbers were reasonably consistent with the spreads that we were able to obtain, we’re again reasonably consistent with what we've had. So it was really just more of that, let's say, customer cautious tone on sending while that pound was down.

Because you’ve got to understand the psychology, let's say you’re a British wine merchant and you’re importing Bordeaux from France, okay. So your invoice is going to be in euros and it comes over, you shipped in this big thing, you owe some wine producer EUR50,000 and you see that pound plummet while you do well, maybe it will come back a little because when I convert my pounds to euros to pay off this bill, I’d rather wait till the pound comes back, but then you wait around for two or three or four weeks and you see the pound drop a little bit more, and you go, oh, oh, I better go send something now, I better go pay this invoice now. So you do always, you will pay it, it's just, some people when they're right after a currency fluctuation tend to think that they can time it better. Matt O'Neill: Yeah. That makes a lot of sense. Thanks guys.

I think we are over time now. Operator, so I am going to cease the call. So I want to thank everybody for taking their time with us today and we look forward to talking to you after the fourth quarter. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.