Euronet Worldwide Inc

NASDAQ:EEFT

Earnings Call Transcript 2018-Q2

[Operator]

Greetings, and welcome to the Euronet Worldwide Second Quarter Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded. 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.

[Jeffrey Newman, EVP, General Counsel & Secretary]

Thank you, Amani. Good morning, and welcome everyone to Euronet's quarterly results conference call. We will present our results for the second quarter 2018 on this call. We have Mike Brown, our Chairman and CEO; Rick Weller, our CFO; and Kevin Caponecchi, CEO of our epay division on the call.

Before we begin, I need to call your attention to the forward-looking statements disclaimer on the first page of the PowerPoint presentation we'll 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 such forward-looking statements as a result of a number of factors that are listed on the first page of our presentation. Euronet does not intend to update these forward-looking statements and undertakes no duty to any person to provide any such updates under any circumstances.

In addition, I should note that the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures that will use during this call to their most comparable GAAP measures. Now I'll turn the call over to our CFO, Rick Weller.

[Rick Weller, EVP, CAO & CFO]

Thanks, Jeff. And good morning, and thank you to all who are joining us today. I will begin my comments on Slide 5. We finished the second quarter delivering revenue of $622 million, operating income of $90 million and adjusted EBITDA of $121 million. As was the case in the first quarter, our revenue was reduced by approximately $12 million on a constant currency basis from our prospective adoption of the new GAAP ASC 606 revenue recognition standard. Had we not adopted this standard, consolidated revenue on a constant currency basis would have grown yet more than the reported numbers. Second quarter adjusted EPS was $1.32, a 21% increase over the prior year and in line with the guidance we provided in April versus our guidance, adjusted EPS includes approximately $0.02 of headwind from FX rate changes and a $0.01 of share dilution headwind from our convertible bonds. These headwinds were partially offset by $0.01 of tax benefit. So net-net, we came in a couple of cents ahead of guidance.

And for those of you who may likely ask, we continue to believe our third quarter adjusted earnings tax rate will remain in the mid-20s, 20% range. Finally, we purchased approximately 600,000 shares during the quarter, which we had included in the map to reach our $1.32 adjusted EPS guidance.

Next slide please. Slide 6 shows our 3-year transaction trend by segment. EFT transactions grew 18% from expansion of our ATM and POS processing networks in Europe and India. Epay transactions declined 4% -- sorry, 12% with the decline coming principally from the Middle East where we noted in prior quarters, we ceased processing for a large distributor with low-value, low-margin transactions. Total Money Transfer transactions grew 18%. Money Transfers and non-Money Transfers grew at relatively the same rate. Money Transfer growth came from double-digit transaction growth across all segments of our Money Transfer business.

Next slide please. Slide 7 presents our results on an as-reported basis. The year-over-year FX rate changes varied from low single-digit to strong double digit with most currencies appreciating against the U.S. dollar. To normalize the impact of these fluctuations, we have presented our results adjusted for currency on the next slide.

Slide 8 please. Starting with EFT. For the second quarter, EFT grew revenue 18% operating income and adjusted EBITDA grew 19%. This growth was from the continued deployment of ATMs in Europe and India, with India continuing to see more transactions following the cash demonetization, which drove the opening of millions of new bank accounts. On a year-over-year basis, revenue and gross profit per transaction remain consistent with leveraging, helping constant currency operating margins expand by a couple hundred basis points reflecting the success of our strategy to deploy more ATMs and more products on those ATMs. This was an outstanding quarter for EFT with strong growth, better margins and leverage while also investing in more than 1,600 new high-value ATMs.

Epay revenue declined 3%. However, when adjusted for the adoption of the new revenue recognition standard, epay revenue grew 4%. Operating income grew 4% and adjusted EBITDA declined 2%. Revenue and operating income growth were primarily the result of increased nonmobile transactions, partially offset by declines in certain mobile transactions.

Operating income growth benefited from certain intangible assets become fully amortized in late 2017. Revenue and gross profit per transaction for epay were up year-over-year benefiting from nonmobile mix.

Money Transfer had an outstanding quarter delivering revenue, operating income and adjusted EBITDA growth of 17%, 25% and 20%, respectively, driven by a strong 18% transaction expansion. Double-digit operating income and adjusted EBITDA growth also reflects the anniversary of the rate reductions included in the April 2017 renewal and extension of the Walmart agreement. The volume growth came in at similar revenue and gross profits per transaction with the volume growth driving and operating margin expansion of nearly 100 basis points.

In summary, all segments had stable pricing and gross margins contributing to expanded operating profits and margins. Overall, this was an excellent quarter for the business.

Now let's move to Slide 9. On Slide 9, we show you some information with respect to our balance sheet. We continue to strengthen our balance sheet. Cash increased consistent with our free cash flows generated from operations and borrowings to fill our ATMs for the peak season, partially offset by settlement timings in the business and approximately $50 million in share repurchases. Debt increased consistent with our borrowings for ATM cash. I will also point out that our leverage ratio at June 30 was a bit higher. However, on net debt basis, it remains essentially 0, given that borrowings during the quarter are simply sitting in cash at the ATMs. As to capital allocation considerations, we anticipate the use of capital consistent with the way we have used it in the past, primarily acquisitions, share repurchases and operating expansion flexibility. As to acquisitions, and there are plenty around the world, but FinTech valuations have been pretty pricey for some pretty marginal assets. We were able to repurchase shares as we have done from time to time and we also consider the cash needs or our ever-increasing opportunities to install more ATMs around the world. Our preference would be to use capital for additional growth driving acquisitions but they are always hard to sort out.

Finally, over the next few months, we will be taking necessary steps to renew and extend the April 2019 expiration of our current revolving credit agreement, which we believe will be at rate spreads similar to the existing agreement.

In summary, we have delivered strong results for the first half of 2018 while also continuing to make investments that we expect to pay off with record earnings growth as we enter our seasonally stronger third and fourth quarters.

With that, I'll turn it over to Mike.

[Michael Brown, Chairman, President & CEO]

Thank you, Rick, and thank you everyone joining us today. As I reflect on the quarter, I think it's fair to say that virtually all of our operating result indicators are coming in strong. We see revenue growth across all geographies and all product categories except for mobile, which hasn't changed from our expectation. Revenue and gross profit per transaction are consistent to up across all segments. In all segments posted operating income margin improvement.

All in all, I think it's hard to find a weak spot. Our teams across all 3 segments in every part of the world and in every time zone have done an outstanding job. And I am happy to report that the third quarter is stacking up to be even better. With that said, let me now comment on each segment.

I'll begin with EFT on Slide # 13. It's worth mentioning again EFT delivered another exceptional quarter. As I reflect on these excellent results, I'd like to highlight three trends that are driving growth within the segment. First, we continue to see plenty of opportunity to deploy ATMs across our existing markets and in new markets. Over the last year, we have grown are owned ATM base by 14% and we still have thousands of ATMs in the pipeline.

Second, we continue to add new products to our ATM. This quarter we began testing direct access fees or surcharge fees on certain international transactions and in certain new European markets and commenced the integration of INNOVA TAXFREE VAT refund services into our product line up. And finally, as we told you for several years, as global banks were struggling with the financial crisis and the related impact on their capital structure, they turned their attention away from investment in technology, and their ATM in state in discussions about outsourcing with third parties. During this same period, we developed our own industry-leading ATM switching platform and ATM drivers in order to expand our own ATM network and offer customers more convenience, product and functionality at the ATM. This new switch uses industry-leading private cloud technology unmatched in the banking sector. Both ourselves and our bank partners can use these innovations to do more with less expensive infrastructure, fewer personnel and less downtime.

Today, the banks are in a much better financial position but they are still sitting on outdated technology. These banks are now starting to see the value in both our superior ATM driving technology and our expensive network, which has driven a significant increase in interest for our ATM outsourcing services. In the first quarter, we mentioned an outsourcing agreement we won in Poland, and this quarter, we won another outsourcing deal. This one with Piraeus Bank in Romania. We continue to have a significant number of new prospects with 3,000 to 4,000 ATMs already in the outsourcing sales pipeline. We sit here today with several commitments and strong interest from banks in both Europe and Asia, so we feel good about our ability to add outsourcing volume over the next 3 to 18 months. We believe that as more and more banks recognize the advantages of our technology and the expansiveness of our owned ATM networks, outsourcing a network participation agreement will become a larger and larger contributor of our growth. We've really liked these deals because they are typically 5-year agreement and we'd like the recurring nature of the revenue, with very little incremental cost.

Recently, I have seen more promising opportunities in outsourcing than I have seen in the last 7 or 8 years. And I am confident that with our industry-leading ATM and switching technology, we will be successful on expanding this line of our business. I look forward to telling you about our successes in the next third and fourth quarters. With these trends at our feet, we have even more to be excited about in the EFT Segment. That's not just related to ATM deployment.

Now I'll get back to a few of the specific highlights for the quarter. We signed an agreement with Philippines Bank of Communication to deploy a bank branded independent ATM network, which we expect to go live in the third quarter. This small but important step is our first entry into the Philippines market and we are excited to capitalize on this opportunity. As you likely saw in our May press release, we expanded our presence in Ireland with the purchase of 400 easy cash branded ATMs from Ulster Bank. These ATMs are located in primary sale locations and are being migrated over to Euronet's platform. This is a nice extension of our network in Ireland where we already operate both YourCash and Euronet branded ATM.

Finally, as you can see, we are able to renew and extend several ATM agreements across Europe.

Next slide please. Slide # 14. And you can see here that we've added several new products and customers to our ATM and POS networks as well as new products to our card portfolio. In Serbia, we added ATM deposit and other value-added services for Komercijalna Bank. We enabled cash recycling on Raiffeisen, Romania's recycling ATMs. And finally, our software team added a bunch note acceptors at ATMs for Victoria Mutual Building Society in Jamaica.

On our POS network, we added e-commerce installments payments for our bank in Montenegro. DCC for several customers across our markets and expanded our Pure Commerce, Pure Payment product to new hotels in Hong Kong. Finally, we added contact list and credit card issuing for Credit Agricole in Romania and Serbia as well as Piraeus Bank in Romania.

Next slide please. Slide # 15. Before we finish with the EFT quarter, I'd like to give you an update on the status of our DCC regulations in Europe. To remind you, there are 3 parties the EU Commission, the EU Council and the EU Parliament that each formulate a proposal followed by a reconciliation of the 3 proposals and the final adoption of law. The EU Commission proposal was completed in March 2018 and it required that the European Banking Authority or EBA formulate transparency guidelines and set a temporary cap on DCC fees with a 36-month implementation timeframe. The second one, the European Council proposal was completed just in June of 2018, just a few weeks ago. The Council proposed to eliminate the role of the EBA and also eliminate the DCC foreign exchange rate cap and only propose that simple transparency guidelines be implemented over a 12-month implementation timeline.

The next step will be the parliamentary process, which will start in late August. It is unknown whether the parliament will follow the EU Commission proposal closely or adopt provisions like those of the EU Council proposal. Once the parliament has published its version of the proposal, the three versions of the proposed law will be reconciled in what they call a trilog process. The reconciled version is what parliament will vote on for adoption. Based on current information, it is expected that this reconciliation process is to be completed and the final adoption of the law would be in late Q1 or Q2 of 2019, which would be followed then by an implementation period ranging from 12 to 36 months putting the final long-term implementation impact on our P&L somewhere between the first half of 2020 and the first half of 2022 using the dates that have been proposed by the Council and the Commission so far. We will continue to monitor the developments in the European legislative process and we will provide periodic update.

With this summary update, I'd like to provide you with a bit more color on this matter. As of the time of our last update with you in April, only the commission's proposal was published where the commission proposed the temporary rate cap on DCC pending final recommendation of DCC disclosure requirement. Since then, 2 significant organizations have voiced very strong resistance to any kind of the DCC cap. First, digital Europe, a digital technology industry group takes issue with the proposed cap on the basis that it is an intrusive measure that goes against the spirit of our free market and may even produce a negative impact. Second, as I mentioned earlier, the EU Council published its own proposal which strikes out the cap altogether. So we don't know how the final legislation will turn out. But from where I sit, it feels like there is more and more support for allowing a free functioning competitive market dynamic with proper consumer disclosures and no cap at all on DCC. Essentially, allowing consumer choice when given the proper information and fair and transparent disclosures.

With that update on DCC, let's discuss ATM deployments for the quarter. We often get asked whether we will continue to deploy more ATMs given the current legislative process in Europe, and the answer is a resounding yes. Everyone wants to believe that card transactions are displacing cash. But then there is a reality we hear about all the time. Just last week, we received a message from a casual traveler in Europe who said that they were surprised by the amount of cash that they needed because cards weren't as widely accepted, as they are in the U.S. They went further to say that they are afraid to get caught without cash, because in some areas getting access to cash was difficult. That traveler's experience is supported by a recent report from the Bank of Spain where they published that the amount of physical cash withdrawn is growing year-over-year, while the number of bank branches is closing at a rate of 6% a year. So it's true that where POS terminals are available for card transactions, people can choose to use those cards to pay for those purchases. But on most foreign cards, the payment will include a markup and a foreign transaction fee on each transaction. So it's just a matter of who do you want to pay? Your issuing bank or a third-party acquirer like Euronet? As we see it and know from customer experience, certainty and transparency is very important to consumers. And unlike the issuing bank, we provide clarity and certainty at the ATM.

So in short, we will continue to deploy new ATMs in Europe and in India as well as new markets in Asia. There is a big part of the world we have yet to conquer by the way. And we continue to add new products across all of our markets and all of our devices.

Finally, we finished the quarter with 41,205 ATMs, a 10% year-over-year increase. During the quarter, we added more than 1,000 high-value ATMs, which is the net of the addition of nearly 1,600 high-value machines offset by the deinstallation of more than 500 YourCash ATMs which were under performing or lossmaking with these losses being exacerbated by the length rate reduction plan. We also reactivated more than 1,600 seasonal ATMs. And as I mentioned earlier, we purchased and are migrating 400 easy cash ATMs in Ireland. In India, one of our bank partners removed 200 low-margin ATMs, which they expect to relocate during the second half of the year. While the removal of these ATMs impacted our ATM count, they have virtually no impact on our results. So on a year-to-date basis, the 1,561 high-value ATM add is really the net of more than 2,300 value -- high-value ATM additions offset by the deinstallation of nearly 800 lossmaking YourCash machines. So as you can see with more than 2,300 high-value ATMs added plus the addition of the 400 easy cash machines, we are well on our way to our goal of 3,500 ATMs at additions by the end of this full year.

And as I said a couple of slides ago, this has been an outstanding quarter for the EFT segment where we continue to benefit from investment in our network and our product portfolio. We have a lot of opportunity in EFT and we will be excited to tell you more about that in the second half of the year.

Now let's move on to Slide # 18, and we'll talk about epay. On slide 18, you can see a list of the new products that we've launched. The bullets are grouped into 3 categories that I would like to highlight. Solutions, distribution and content. Internally, our epay team has a market-leading technology and strong developers that have made us the leader in digital content distribution. And now we have taken this strength and developed this into solutions that we can provide to external customers. This quarter, we launched our intelligent switching platform with Kroger in the United States. The Intelligent Switching Platform allows Kroger employees to be more productive to provide consumers with better priced products, increase more value for Kroger. It is gratifying for a major retailer to recognize the tremendous benefits that our technology can offer. We also developed and delivered software to Sony North America which allows Sony to deliver digital gift codes to major retailers across the continent. While epay serves more than half of the world's top 20 retailers, both of these deals, Kroger and this one represents epay's first entry into the large retail market in the United States.

We've also made strides in distribution of our nonmobile content adding content into several large retailers in new and existing markets. We launched Amazon cash across 19,000 retail locations in the U.S. We expanded Spotify into Media Markt, Europe's leading electronics consumer store in Austria and Switzerland. And we added Microsoft product into Coop group, a large grocery retailer in Germany. We also added iTunes and Microsoft product distribution at Saudi Telecom locations, which cover more than 10,000 POS terminals. And finally, we continue to add new content to our portfolio. In Germany, Austria and Switzerland, we launched DAZN, a sports streaming service, which offers popular sporting events such as Bundesliga, Premier soccer -- Premier League soccer. And we launched Lottery products through Penny's website, a large grocery retailer in Germany. We are pleased with the progress our epay team continues to make in selling more products across more markets.

Next slide please, Slide # 19. In addition to the epay launches this quarter, you can see that we have several new signed agreements in the pipeline. We have a new exclusive agreement with Amazon to launch a digital gift card mall on Amazon website in Germany. When fully rolled out, epay will be the exclusive provider of digital content for Amazon in Germany. We signed new agreements to distribute Nike and Nordic Game Supply contact through our point-of-sale network across Europe. Finally, we signed an agreement to distribute nonmobile content, including iTunes, Microsoft Office, Xbox and Sony PlayStation through physical stores and digital channels for Etisalat leading mobile operator in the United Arab Emirates.

You might also notice the technology is a key theme here in epay as well. Whether it is our innovative intelligence switching platform for Kroger, our unique digital code server for Sony, multiple deals with PayPal around the world or enhancing the digital presence of our brand partners like Amazon in Germany, epay and Euronet continue to garner more business through superior technology and innovation. Epay's results are performing as expected and we continue to have opportunity to expand our content, expand our footprint and also provide our technology to large retailers in order to save them time while maximizing their profit.

Now let's move on to Slide # 22, and we'll talk about Money Transfer. This was an exceptional quarter for Money Transfer with both our physical and digital businesses hitting on all cylinders. As Rick mentioned, we have now passed the anniversary date of the rate reductions included in the Walmart renewal and you can see the exceptionally strong growth from our underlying business as well. This strong growth is driven by our continued focus on network expansion, technology development and commitment to compliance. Our network has grown more than 8-fold from 42,000 locations when Ria joined our team in 2007 to more than 355,000 locations today, all while meeting the demanding regulatory and banking compliance requirement. We believe we now have the second largest network in the industry, and with the bigger network counts an opportunity for faster growth. Growth from network expansion is a bit of a chicken in egg scenario.

As you can see, as you add more payout locations, you gain market share in your send market because you now have more product for more customers. And once you have excellent payout in certain regions, you can begin to enter new send market. A perfect example is our expansion in India, where we grew our transactions 8-fold over the prior year. India is the world's largest payout quarter, and previously, we did not have the right payout partners, which prevented us from entering certain send market. As we improved our payout to India, we are not only generating growth from our traditional send markets like the U.S. and the EU, but we have been able to sign new partners in other parts of the world like the Gulf countries in Southeast Asia with even more expansion opportunities into new send markets across Asia. The expanded network also fuels our digital transaction growth, which was up 47% year-over-year. The growth in our network over the last 10 years is an important factor and why we have consistently grown our revenue faster than the market and our competitor. This is not 1 exceptional quarter. This is the payoff of continuous long-term investment in our network, both physical and digital and also in technology and compliance. The expansion continued this quarter when we launched 18 new correspondents across 16 countries. We partnered with south [Technical Difficulty] to add more than 5,000 cash collection locations for transactions initiated through riamoneytransfer.com. And with 14 new correspondents signed and not yet implemented across 12 more countries, we have plenty of network growth in the pipeline.

Before I close, I would like to take a minute to expand in our commitment to compliance and its strategic value to this company. As you know, we have always strived and -- strived to and invested heavily in top of the class compliance. We do this for all the right reasons, one of which is very strategic. Over the last few years, there have been a lot of hype around the FinTech industry where companies provide flashy product for consumers and brag about fast transactional growth. Recently, we have seen some of these FinTech companies get hit with large fine for poor compliance. Growing fast is one thing, but going fast in a compliance manner truly is the thing, and that's not easy. So as more of these FinTech players realize this reality, we are starting to develop a pipeline of strategic discussion to consider partnering with some of them on how we can leverage each other's core strength towards mutual growth. Again, this was another exceptional quarter for our Money Transfer Segment. And with plenty of potential, we are excited to deliver results for the second half of this year.

Now let's move to Slide # 23 and wrap up the quarter. Okay. So we achieved second quarter adjusted EPS of $1.32, a 21% year-over-year increase. The double-digit EFT growth reflects continued expansion of our ATM and POS network across Europe and Asia, and we remain on track to meet or exceed 3,500 high-value ATM additions for the full year. And to complement our owned ATMs, we are building an impressive outsourcing pipeline. Epay performed in line with our expectations and continues to expand its offerings with market-leading technology and content portfolio. Money Transfer delivered double-digit growth across all metrics, while still continuing to invest in network and digital expansion. Innovative technology continues to differentiate Euronet from its competitors in all 3 segments.

Our balance sheet continues to strengthen from strong cash flows generated from our operations. And as Rick noted earlier, growth and operating margin expansion across all segments. What a great quarter for the business, which leads me nicely into our expectations for the third quarter where we expect third quarter adjusted EPS to be approximately $2.10, assuming consistent foreign exchange rates and share price.

I'll end on that note and I would be happy to take some questions.

[Operator]

[Operator Instructions]. Our first question comes from Mike Grondahl with Northland Securities.

[Michael Grondahl, Northland Capital Markets]

First, a question on outsourcing. That Piraeus Romanian Bank, how many ATMs did they have that you won? And then, roughly your range in ATMs kind of in your outsourcing pipeline?

[Rick Weller, EVP, CAO & CFO]

Okay. So I don't remember the exact number, but it wasn't a huge number. Piraeus Bank is a rather small bank in Romania. I don't remember that exact number. But the answer to your second question is, in the pipeline, people that we are talking, sales pipeline, it's 2,000 to 4,000 ATMs. It's pretty amazing.

[Michael Grondahl, Northland Capital Markets]

Great. That's really nice. And then could you just describe what specifically you're going for Kroger?

[Michael Brown, Chairman, President & CEO]

Well, some of that's proprietary to them. But what we have done -- and actually maybe even Kevin might be the best guy to do this, because he runs epay and he's the one to deliver that. So we're providing a solution behind there in their money centers. But I'll let Kevin talk.

[Kevin Caponecchi]

Yes, Mike. We work with Kroger to help them drive some efficiency and throughput in their money center. Their money center or their service center is a major focus for Kroger, and they offer a bunch of different services there; bill paid, check cashing et cetera. And they had some inefficiencies in that area. And we provided solutions to address their inefficiencies and to maximize value for the consumer and maximize value for Kroger.

[Rick Weller, EVP, CAO & CFO]

So if you go into the money center in Kroger, right now, and you want to do a bill pay, it will all go through our system.

[Michael Brown, Chairman, President & CEO]

And Mike, the part that -- we'll be a little careful on what we say here, is that, as Kevin said, it allowed for the efficiency, but the real value is the enhanced ability to provide the right product to the customer, to effectively give customer choice on what they may want to do, to allow Kroger to expand its value proposition. And that's the intelligence part of the switching fabric that's been put there. So 1 piece is to get efficiency but the real value is to get the intelligence in it.

[Michael Grondahl, Northland Capital Markets]

Got it. And then real quick, Mike. On the DCC update. Are you basically saying that like 1 of the 3 councils or European parties that get to weigh in on the ultimate decision now wants the DCC cap eliminated?

[Michael Brown, Chairman, President & CEO]

Absolutely. Okay. Yes, there are 3 different parties. And the first party that came out suggested a DCC cap in a 36-month implementation and more better transparency, okay. The second group that came out, they said specifically no cap. They were 100% against the cap. And they just want a more simplified kind of transparency guideline.

[Kevin Caponecchi]

And we're waiting for the view of the third one, the parliament.

[Michael Brown, Chairman, President & CEO]

Yes. And the interesting thing is momentum is growing against the cap. Because the first guys came out with the cap. They kind of -- from what we hear that it wasn't even very well thought out. And again, a lot of blowback from people who say that's not free market. And there are a lot of negative repercussions of having a cap and putting up -- putting any kind of financial strain on those people who are putting out ATMs to offset all those ATMs that are being closed, the branches are being closed. So it's nice politics in our direction.

[Operator]

Our next question comes from Andrew Jeffrey with SunTrust.

[Andrew Jeffrey, SunTrust Robinson Humphrey]

Mike, by all accounts, a really nice clean quarter. And I want to focus, I guess, a little bit on Money Transfer where it seems like you're expanding the network. And you mentioned this marrying the better growth and the receive locations with the send locations and how -- and that's a 2-sided network that you're building. And we hear a ton about. I get a lot of question about competition and what about these new players in Mexico and more capital coming into the space. And yet, and here you are putting up mid-high teens organic revenue growth growing 3x plus market. What's going on? I mean how do we frame up the competitive environment? How do you explain your growth? How do you substantiate the sustainability of it because this -- there seems to be a big disconnect in how the market user business and the numbers you are posting?

[Michael Brown, Chairman, President & CEO]

Well, as I've said before, they're really -- when it comes to public data point, there's only two other guides that you can compare it to, right. And from my perspective, they're both kind of losers. They are just not growing and we are growing and it's because we have a better value proposition. Let's not forget that if you take the top 3 players out there, we account for a whopping 25% of worldwide family remit. That means there's 75% of the world left out there. And so what we're doing is we just continue to take pieces not only from the two big guys but also from that other 75%. So I've got like 3% worldwide market share, I'm not going to be satisfied till I get to get the other 97%. So it's just a big opportunity for us and we have a better value proposition both for the agent and for the customer.

[Rick Weller, EVP, CAO & CFO]

Andrew, may be to go on a couple observations too. As Mike said in his comments, we have continued to be very attentive to compliance requirements. And in today's world, we see an ever-increasing requirement for compliance whether it's coming from the regulator, and it's not just 1 regulator like United States, there's 50. Every country has 1. And it's also coming from the banks, because the banks get a lot of pressure from the OCC. And their respective regulators around the world to deal with money laundering, with terrorism, with fraud et cetera. And so as Mike said, we really paid attention to that. And we, maybe more than anything, we have a team at Ria that is focused and dedicated to compliance. It's not a turn the eye the other way. And that's given us the ability that when these other guys get closed down by regulators or their bank accounts get closed off or things like that, that gives us the opportunity to consistently deliver this high quality, high security, high confidence product that's now available in what we believe is the second largest network in the market out there. So you continue to get the benefit of being attentive to compliance, the investments we've made in that area the -- and the network effects.

[Andrew Jeffrey, SunTrust Robinson Humphrey]

Okay. And as a quick follow up on the EFT business. Recognizing there are lots of moving pieces in DCC and it's frustrating that the time line is extended as it is. You mentioned surcharge, Mike, and starting to experiment with surcharge. If we're two-plus years out maybe even longer from getting clarity or implementation, I guess, on whatever DCC cap, should there be any to come down the line. Is surcharge a potential offset or at least a partial offset?

[Michael Brown, Chairman, President & CEO]

Oh! Yes, for sure. For sure. There's a ton of transactions that we -- that surcharge would be applicable to. Let's not forget that if you're -- if you have a Visa issued card outside the EU, we can't even offer you DCC. So those would be cards that would be applicable perhaps to surcharge. So there's a huge market out there. We just continue to add more and more products alongside DCC. So we've got offsets and growth of other product lines. That just is ATM outsourcing. It's huge. If these -- if some of these things come in, 5-year agreements, the banks always pay on time. It's -- those are great additions -- additional revenues to that segment.

[Rick Weller, EVP, CAO & CFO]

As Mike said, we're kind of experimenting and doing some testing there, because at the end of the day for a bank to put an ATM out there. And while we've got a wonderful and a competitive leading network in Europe of ATM, we're still a fraction of the total ATMs in the market. The banks are the big guys out there with those ATMs. And running an ATM is a costly proposition. Putting cash in front of customers is expensive whether it's for us, the banks or travel acts. And so as we take a look at -- I mean as those banks take a look at what they need to do to effectively run their business, they are beginning to get upset with having rate structures dictated by card organizations. And the only way they are going to ultimately keep ATMs open is if they're going to have the ability to recover a reasonable profit for making that cash available. So we believe that it's important to do some of that testing to see what it is because a surcharge or an access fee is just another alternative to us making money. We can make some money on DCC. We can make money alternatively on access fees or surcharges. So we are watching carefully what's happening in the market and we believe that it was time to start doing a little more testing to see how the consumers react to that, and obviously to test our capabilities.

[Michael Brown, Chairman, President & CEO]

And it does provide market expansion opportunities as well.

[Rick Weller, EVP, CAO & CFO]

Well, because it's not only just in Europe, it's around the world.

[Operator]

And our next question comes from Peter Heckmann with Davidson.

[Peter Heckmann, D.A. Davidson & Co.]

Just a couple follow-ups. Could you give us an update on the Money Transfer side on the digital business? Any notable progress there? Or can you give us an idea of how that business might be going compared to the base?

[Rick Weller, EVP, CAO & CFO]

Well, okay. So we've mentioned here that our digital transactions are growing -- have grown 47%. And so it's growing very nicely. We continue to put more and more emphasis on that. We think we can -- that we're just scratching the surface still in that business. That's where as somebody mentioned before, there's been a lot of investment in competitors may be on the digital side. But these guys really aren't coming up with the transaction that belay the excitement that people have with them. We continue to -- the nice thing is, we've got the second best payout network in the world. And that -- what that means is, that many more customers that you can access. So we will continue to invest. We are not done there at all.

[Peter Heckmann, D.A. Davidson & Co.]

Okay. Great. And then just more of accounting question. But in terms of seasonal cash in ATMs, probably be in the 10-Q. But how do we size that?

[Rick Weller, EVP, CAO & CFO]

We've got nearly $0.75 billion in it -- in there right now. So we got a lot of our cashes in the ATM.

[Peter Heckmann, D.A. Davidson & Co.]

How does range easily? What would be the low of the year for that?

[Rick Weller, EVP, CAO & CFO]

The low? Well, from our credit argument, the low is 0. I mean our own balance sheet cash, the low of the year would probably be about $250 million somewhere in that ballpark.

[Operator]

And our next question comes from Jim Schneider with Goldman Sachs.

[James Schneider, Goldman Sachs Group]

I was wondering if you can maybe address, as you look into 2019 and plan your ATM deployments relative to how many you're planning to deploy this year. How is the DCC legislation impacting those plans, if at all? Do you actually -- are you more optimistic on incremental deployments in Europe than you were 3 months ago? And then, at what point in time do you kind of have to make a call with respect to those investments for deployments in calendar '19? Is it some place at the end of this calendar year or is it before that?

[Rick Weller, EVP, CAO & CFO]

Well, obviously, we like the momentum that's moving away from the March information on caps. So that gives us a little bit more confident. But I'm just telling you, 2019, we're going to put in more ATMs than we're going to put in this year. We continue to grow our site selector group and we'll continue to use more and more interesting algorithms and data sets to find the good location. So next year will be bigger than this year. We've continued to put more products on those ATMs whether that might be direct access fees or other kinds of products. So '19 will continue to grow. And I said this over the last 2 calls, you will see us focus outside of Europe, not just within Europe and underneath the EU guidelines as we expand our network. So hopefully, '19 will be a nice expansion for us outside of Europe.

[James Schneider, Goldman Sachs Group]

That's helpful color. And then maybe Mike, you spent a lot of time talking about the outsourcing opportunity for ATMs. Clearly that's attractive economically. What are the geographies or countries you think they are most promising with respect to that opportunity?

[Michael Brown, Chairman, President & CEO]

We're not going to really go into that. But in general, the geographies are Asia. But you know what, we just -- we are finding that this is a theme around the world. So we're going to start looking in other places other than Asia. But you know the nice thing is, Kevin has been running an Asian operation down in India for a long time. And so we're just kind of connected. We kind of -- we are a lot closer to the smell of money down there, and -- but I'm telling you this idea that banks run their own ATMs is economically, financially dumb. So we can help with these guys and we'll expand.

[Rick Weller, EVP, CAO & CFO]

The other thing I think that is important to understand in our business is the role that outdated technology plays in all of these banks. All of these guys are operating on all the outdated stuff. And we, a few years ago, invested in developing new state-of-the-art technology for both the switching platform and the ATM. So we are not required or dependent upon an ATM box manufacturer to make the machine run the way we want it to run to produce the screens et cetera. And so now as these banks around the world have to deal with the investment decision, they are seeing that the -- there is no one out there that has the same quality of technology we have. Our switch has been ran and producing the volume of transactions on a limited dollar amount of CapEx that goes into it. And we are getting absolutely impressive results, results that make the biggest banks in the world turn their head. And so as we have benefited from this technology in our own business, we now see great opportunity to go outside of our business in outsourcing and so it's opening more and more doors. And it's a lot to like we said with the stuff that's on the competitive street is pretty archaic and does it provide the kind of consumer experiences that are really helpful, whether it's QR code reading, whether it's PIN-less transactions, whether it's non-ATM withdrawal transaction. We have a whole range of products that we put on those ATMs. And it's because of our technology.

[Operator]

And our next question comes from Rayna Kumar with Evercore ISI.

[Rayna Kumar, Evercore ISI]

Mike, previously you mentioned that you were discussing the terms of your debt covenants with your lender sellout for more share repurchase. Do you have an update on that and when you can be more aggressive on shared buyback? And ideally, how much share repurchase would you like to do?

[Michael Brown, Chairman, President & CEO]

I think, Rick pretty much summed it up. We'll take advantage of market dynamics. And if the market doesn't treat us well, then we'll buy back some stock. We got a lot of cash that we're producing. The new agreement that we have, we hope we'll have a little bit wider margins as far as cash repurchasing, but we can't really give you an update on that until we close that deal. But everything's is moving in our direction. I mean if you think about our current agreement, it's almost 5 years old. The financials that this company had 5 years ago are not any different from where they are today. So we are in a very strong position.

[Rick Weller, EVP, CAO & CFO]

And Rayna, I would suspect that will get a little bit more flexibility. Because we've got some absolutely great banks in our credit agreement. We have world-class banks that we've had a long-term relationship with. And so we think that their interest and ours are very aligned. And so we'll see kind of how the process goes.

[Rayna Kumar, Evercore ISI]

That's very helpful. As you continue to add more ATMs throughout the year, can you get back to the 20% plus constant currency topline growth we've seen in the EFT business in the past?

[Michael Brown, Chairman, President & CEO]

Yes, I think so.

[Rick Weller, EVP, CAO & CFO]

I mean, we're only a couple of ticks off of the number, Rayna.

[Michael Brown, Chairman, President & CEO]

This 18% is not good enough I guess. We'll get to work.

[Rayna Kumar, Evercore ISI]

18% is not bad at all. Could we see this as soon as the third quarter?

[Michael Brown, Chairman, President & CEO]

We'll just have to see.

[Rayna Kumar, Evercore ISI]

Okay. And finally, just -- good to get the update on DCC regulation. If only the transparency guidelines go into place, are you going to have to make any investments?

[Michael Brown, Chairman, President & CEO]

No. No, that's the advantage of our switch. And our technology is whatever they want, we can implement it really quickly.

[Operator]

Our final question comes from Jason Deleeuw with Piper Jaffray.

[Jason Deleeuw, Piper Jaffray Companies]

On the Kroger announcement, the platform-as-a-service. Congrats on that. But I guess I'm wondering why is that in the epay segment? Why isn't that in Money Transfer, since it sounds like you'll be doing bill pay and Money Transfer? And could you get an opportunity to expand or create a money -- more robust Money Transfer relationship with Kroger?

[Michael Brown, Chairman, President & CEO]

That, of course, is possible. But the reason that it's in epay, it is because the technology that we use in epay with a lot of our retailers was basically modified to do this for Kroger. So the technology and the kind of the whole approach of multiple products being able to be purchased off of a single screen in all of the kind of good stuff we give them for productivity. And bill payment is really strong across our epay segment. So it actually fits.

[Rick Weller, EVP, CAO & CFO]

And yes, I mean, the other thing I think to observe is that, this is where you see a nice intersection of the capability and strength across our businesses here. We've got the switching knowledge that comes from our EFT business. We got the, like money knowledge is kind of from the Money Transfer business, and clearly we have the large retailer relationships at the epay business that we put a wide variety, wide range of product through those retailers. So it really is kind of leveraging all of our technology and experiences and capabilities to deliver to this group of high and world-class retailers.

[Michael Brown, Chairman, President & CEO]

So we were able actually on this to give you a little more detail. The original technology that the Kroger solution was based upon started in Germany with our epay division there. And then it was expanded and enhanced with our development team here in Kansas City. And it's even being used -- parts of it are being used in EFT. So we have a -- technology is a theme here. That's all I've got to say. A lot of companies talk about sales, a lot talk to you about technology. We've got the best stuff out there and it's starting to gain traction.

[Jason Deleeuw, Piper Jaffray Companies]

And is the revenue model per transaction revenue model or is it some sort of like recurring monthly fee or how does that work?

[Michael Brown, Chairman, President & CEO]

Yes, yes, it's the latter.

[Jason Deleeuw, Piper Jaffray Companies]

And then the -- also the commentary around partnering with startup FinTech company so they can leverage your compliant platform. What businesses would that be? Is that Money Transfer? Is that prepay ATM? I mean just any thoughts there on how big of an opportunity.

[Michael Brown, Chairman, President & CEO]

Well, probably not as much on the ATM side. But every prepaid company now is under a lot of compliance, as of course all the Money Transfer companies.

[Rick Weller, EVP, CAO & CFO]

And it really does cut across segments both in the Money Transfer and the epay because there are a lot of parties out there that receive cash as payment on certain types of transactions. Not indifferent than in epay where when we sell a product at a retailer, we are indifferent as to what the retailer takes this consideration. As I've said before, it's cash, check or check-ins. We don't care what they take. But what's important in this process is really understanding the role of how that cash moves through and the compliance and things like that. So it does have a lot of crossover applicability in our 3 different segments.

[Michael Brown, Chairman, President & CEO]

And thank everyone who joined us today. Operator, I think we can sign off. Thank you very much.

[Operator]

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