Euronet Worldwide, Inc. (EEFT) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Euronet Worldwide Second Quarter 2026 Earnings Call Conference. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce your host, Ms. Stephanie Taylor, Head of Investor Relations for Euronet Worldwide. Thank you. Ms. Taylor, you may now begin.

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

Thank you, Stephanie. Good morning, everybody, and thank you for joining us. I'll begin my comments on Slide #4. During the second quarter, our results demonstrated the resilience of Euronet's diversified business model and our ability to execute against our long-term growth strategy. Second quarter adjusted EPS increased 10%, marking our fifth consecutive quarter of double-digit earnings growth. Our digital accelerators once again represented our primary growth driver during the quarter, with revenue growing 31% year-over-year for the second quarter and 35% year-to-date. While we experienced some softness in certain parts of the business and made some additional investments into digital, the continued momentum and our accelerators highlights the benefits of our diversified model and digital initiatives. We also continue to see a very positive response to the CoreCard platform, highlighted by the signing of a credit card processing agreement with Unibanca, one of Peru's leading bank processors. Finally, we continue to return capital to shareholders, repurchasing about $50 million worth of Euronet shares during the quarter. Overall, we are pleased with our ability to navigate an evolving macro environment, and remain focused on executing our strategy, managing capital prudently and delivering long-term value for the shareholders. Now we'll move on to Slide #5. On Slide 5, you'll find an update to the digital accelerator framework we introduced at our Investor Day in May. This framework helps illustrate the drivers behind Euronet's long-term growth strategy. Digital accelerators represented 26% of total company revenue year-to-date, reflecting the continued shift in our business towards higher growth, digitally-enabled payment channels. As I mentioned, revenue from these products in this quarter grew 31% in the quarter and 35% year-to-date, well above the 23% growth rate outlined at Investor Day. This performance was driven by strong results across several businesses, led by Ria Digital, issuing and merchant services. Growth in our non-accelerator businesses was somewhat softer than anticipated, primarily due to the impact of U.S. immigration policies and the related pressure on remittance send volumes globally. Moreover, our ATM transactions were a bit softer than we expected earlier in the travel season. Our experience appears to be generally consistent with market sources that indicate that airline bookings from the U.S. to Europe are about 5% to 8% below the peak 2025 booking window and European travelers becoming more selective with discretionary spending. Despite these near-term headwinds, these businesses remain highly profitable, cash-generative and strategically important, providing the foundation that enables us to invest in higher growth opportunities. Looking ahead, our long-term thesis remains unchanged. Leverage Euronet's world-class payment network to provide seamless digital solutions for our customers. We expect the accelerators to remain our fastest growing revenue category and a key driver of earnings growth and shareholder value creation over the coming years. Turning to the next slide, payments infrastructure, formerly known as EFT, we made meaningful progress advancing several of our digital accelerator initiatives during the quarter. In merchant services, we expanded on the previously announced acquisition of CrediaBank's merchant services business in Greece. During the second quarter, we launched a merchant acquiring a referral program that expands our distribution channels and create additional opportunities to reach merchants through partner relationships. This partnership further strengthened our existing sales initiatives, which resulted in the addition of 4,200 new merchants during the quarter. These additions reflect continued demand for our merchant acquiring solutions and reinforce our strong position in Greece. In payment processing, we also continue to see strong momentum for our CoreCard platform. During the quarter, we signed a credit card processing agreement with Upgrade, a U.S.-based digital banking platform. We also signed a multiyear rent agreement with Unibanca, one of Peru's leading financial processors, to modernize credit issuing in Peru through REN's expanded credit architecture powered by CoreCard. Unibanca currently provides processing services to 9 banks in the country, making this an important competitive win, and further demonstrating the flexibility, scalability and competitiveness of our technology. Importantly, CoreCard was the difference maker in winning this business. Prior to the acquisition, we had an issuing platform, but it was not our leading product in our portfolio. We previously participated in the Unibanco RFP, but we were not selected. After we announced the acquisition of CoreCard, it changed the narrative of the sales process. We reengaged with Unibanca, as CoreCard solution not only handles consumer credit at proven scale, but also has a robust commercial credit capability, among others. The CoreCard SaaS solution, together with the breadth of Euronet's broader rent payment product offering, provided Unibanca with a single strategic modernization partner. This ultimately resulted in Unibanca selecting our product, which will displace the incumbent processor. This win really speaks to the combined power of CoreCard and REN. Also related to our accelerators, we signed an online merchant acquiring agreement with NTT Data, a leading merchant acquirer in the Asia Pac region. This relationship highlights the strength of our platform and supports our strategy of partnering with established payment processors -- or providers in attractive growth markets. Finally, we have signed a new sponsorship agreement with a bank in Costa Rica, which will help us grow our IAD network in this cash rich country. Overall, these wins reflect continued execution against our strategy of expanding our customer footprint, deepening client relationships, and delivering scalable infrastructure solutions that help our customers grow. As digital payments adoption continues to increase globally, we believe our digital capabilities position us to deliver greater value to customers and capitalize on this long-term trend. Now let's go to Slide #7. Turning to epay. We continue to expand digital distribution and payment capabilities across our global network. This quarter, we expanded our merchant services business by completing the integration of Visa and MasterCard acquiring across all dm stores. dm is one of the largest health and beauty retailers in Europe, operating more than 4,000 stores in 14 countries across the continent. epay is now the exclusive provider of retail POS processing for Visa and MasterCard across all dm stores in Europe, building on our long-term relationship where we were already providing acquiring to them for Alipay, PayPal, Apple Pay, Google Pay and Girocard. During our Investor Day, we highlighted a new opportunity relating to building direct to publisher relationships as digital channels continue to evolve. Game publishers are seeking greater control over how their products are marketed, sold and distributed. This is creating new capabilities for epay to leverage its global distribution network, issuer capabilities and publisher relationships. Through our direct-to-publisher strategy, we are working directly with game publishers to distribute their content across our expansive network of digital and physical channels, while also supporting publishers that choose to introduce their own branded store value products. As app store billing frameworks continue to evolve, particularly in mobile gaming, we believe demand for these services will increase over time. This quarter, we furthered our direct-to-publisher strategy by signing a distribution agreement with Capcom, a Tier 1 Japanese game publisher with iconic franchises such as Street Fighter and Resident Evil. Capcom sold 59 million units last year, and this agreement allows us to directly distribute Capcom content across Europe with attractive economics. This digital distribution agreement demonstrates our ability to establish direct publisher relationships, and we expect this to continue across both PC and mobile gaming. In Japan, we signed an agreement with Yahoo! and Rakuten to distribute Roblox and Riot products. We launched Google Play, Xbox, Riot and PlayStation products on Stanverse, an Indian gaming platform. These initiatives further strengthen our branded payments and merchant services businesses while expanding the reach of our digital distribution platform. Additionally, after years of anticipation, and I've talked to you about this multiple times, and several delays, Rockstar has officially opened Grand Theft Auto VI pre-orders in late June and confirmed a November 19 release date. We immediately saw a positive response in sales of PlayStation and Xbox gaming credits used to fund those purchases. GTA VI is widely expected to be one of the largest entertainment launches ever, and we believe the opportunity extends well beyond the initial game into months of ongoing digital spending. More specifically, large-scale releases tend to create an extended engagement cycle that begins with preorders, accelerates through the launch and continues through with downloadable content, online gameplay, subscriptions and in-game purchases. While we're not forecasting results tied to a single title, the early demand we are seeing reinforces our confidence in gaming as one of our most attractive growth categories. Finally, as an update to our real money gaming strategy, Marker Trax and Koin continue to make meaningful progress. Marker Trax's omnichannel solution built on Euronet's REN platform is now certified with most U.S. casino management systems. We expect them to achieve certification across all major U.S. slot machine systems as well as their first table management system by year-end. At the same time, one of the world's largest gaming and entertainment technology companies has selected Koin Direct as its white label solution, enabling players to fund slot machines, play directly from their bank accounts using their mobile phones. Together, these milestones reinforce the momentum they are building across both platforms -- across both platforms going into next year and beyond. As we discussed on our Investor Day, epay benefits from a highly scalable global network that connects brands, retailers and consumers across both physical and digital channels. The opportunities we are pursuing today leverage that same infrastructure, creating additional avenues for growth and increasing the value of the platform over time. Now let's move on to Slide 8, and we'll talk about cross-border payments business, formerly known as Money Transfer. Slide 8. The second quarter cross-border payments results were softer than we expected, driven by 2 primary factors. First, U.S. immigration enforcement continue to weigh on cross-border transaction volumes, primarily from the U.S. to Mexico. This was a market-wide dynamic as the broader U.S. outbound remittance market experienced its first annual decline in more than a decade. Supporting that trend, the Brookings Institution reported that net migration was likely close to 0 or negative across the calendar year 2025 for the first time in at least half a century, reducing the pool of new workers and consumers that historically drive outbound remittance growth. Market reports also show encouraging signs, though, of stabilization, with growth in remittance volume to Mexico over the last 4 months. We are executing several initiatives to reinvigorate growth in the retail channel where we felt the pain. And while overall volumes have softened, our geo and channel diversification is enabling us to weather the storm, highlighted by the very strong growth in our digital channel. The second largest driver of the softness was a difficult comp to the prior year second quarter, where we saw an unusually high margins from a nonrecurring fee rebate in Pakistan and certain onetime FX opportunities. Those 2 items together with incremental investment in our cross-border payment accelerators are the key drivers of the softer segment's operating income. I remain confident that the underlying business remains healthy and the long-term growth trajectory remains intact. As I turn to the highlights, Ria Digital continues to lead our growth, with digital transactions increasing 33%, our fourth consecutive quarter of growth exceeding 30%. The business continues to demonstrate its durability, with more than 90% of the transaction volume coming from repeat customers. During the quarter, we continued investing for future growth, increasing digital marketing spend by approximately $3 million to support customer acquisition and long-term expansion. We also made meaningful progress with Dandelion, signing MasterCard Move as a new partner during the quarter. This partnership enables MasterCard Move, one of the world's largest payment ecosystem, to expand its global payout capabilities through the Dandelion network. We expect the service to go live in the fourth quarter with transaction volumes ramping gradually through a phased rollout. In addition to MasterCard, we signed 5 new Dandelion partners, further expanding this key strategic accelerator. In the U.K., we launched an agreement with Uber to integrate real money transfer into Uber's driver app. This digital partnership will allow Uber drivers to send funds to their beneficiary, directly from the app where they receive their earnings, giving them a competitive money transfer offering while saving time and reducing friction. Initiatives like this will continue to expand our reach and create new opportunities to serve both customers -- I'm sorry, consumers and enterprise customers. In addition, we further enhanced our product offering through the launch of Bre-B, enabling instant payments in Colombia. Finally, we expanded our wallet payout capabilities in Nigeria through the addition of 4 new banking partners. In summary, while the quarter's top line print was softer than we wanted to report, the fundamentals of the business are still intact. Our strategic initiatives are contributing to a strong transaction and customer growth. We remain encouraged by the continued momentum in our digital business, the expansion of our global payment networks and the opportunities we see to drive long-term profitable growth across the cross-border payment segment. With that, I will hand it over to Rick.

Thanks, Mike. Good morning, everyone. I will begin my comments on Slide 10. For the quarter, we delivered revenue of $1.1 billion, operating income of $137 million and adjusted EBITDA of $193 million. Our adjusted EPS was $2.82, a 10% increase over the prior year. It is worth noting that our operating income includes $4.7 million of additional noncash purchase price amortization related to the GAAP purchase accounting for the CoreCard acquisition and an additional $1.9 million for noncash share-based compensation. Excluding these 2 noncash items, our operating income would have declined by 9%, which is largely attributable to the lighter cross-border payments volume. Further, we continued to generate strong free cash flows, producing approximately $80 million in the quarter. In addition to investments in our digital initiatives, this free cash flow also allowed us to repurchase approximately 705,000 shares for $50 million. These repurchases occurred later in the quarter, and therefore had minimal impact on our quarterly adjusted EPS, but will benefit adjusted EPS in future quarters. Slide 11 shows our second quarter year-over-year results on an as-reported basis. Most of the currencies, major currencies where we operate in, strengthened compared to the U.S. dollar. To normalize the impact of the currency fluctuations, we have presented our results adjusted for currency on the next slide. Slide 12. The Payments Infrastructure segment delivered good results for the quarter, with revenue growth driven by continued expansion in merchant acquiring, interchange increases in certain markets and the addition of CoreCard, which we acquired in the fourth quarter of 2025. Operating income and adjusted EBITDA increased 2% and 6%, respectively, reflecting incremental earnings from these growth drivers, partially offset by ongoing cost inflation across our global markets. Operating income includes a $4.7 million increase in noncash purchase accounting amortization I previously commented on, related to the CoreCard acquisition. Excluding that impact, operating income would have increased 7%. In epay, revenue grew 4% in operating income and adjusted EBITDA each grew approximately 5%. These results reflect continued growth in higher-value digital content and merchant acquiring. Transactions were down about 11% due to shifting in low-value transactions in Asia Pac. These transactions had nominal impacts on both revenue and profits. The Cross-Border Payments segment results reflect the challenging operating environment Mike just outlined. Revenue declined 5%, reflecting lower U.S. to Mexico remittance volumes as U.S. immigration policies continue to weigh on activity in this quarter. This is partially offset by strong transaction growth at Ria Digital. The second quarter results were also compared to a favorable second quarter 2025, where we benefited from a nonrecurring fee rebate in Pakistan and certain favorable foreign exchange-related opportunities that carried high margins and did not repeat this year. Operating income and adjusted EBITDA declined 35% and 32%, respectively. About 60% of these declines are related to decline in revenue and related gross profit, and approximately 25% is related to incremental investment in sales and marketing to benefit our long-term digital accelerator growth drivers. We believe these investments were beneficial as they contributed to 35% growth in digital revenue. At the consolidated level, we delivered double-digit adjusted EPS growth despite the challenges in cross-border payments. Solid performance in Payments Infrastructure and Epay, combined with continued momentum across our digital channels, helped to offset pressures in Cross-Border Payments. Despite near-term headwinds, we are confident in the underlying fundamentals and long-term thesis of our Cross-Border business. Looking ahead, our outlook remains unchanged. As we discussed during our first quarter call and the Investor Day, our digital accelerators continued to perform well and are becoming a larger part of our business mix. We continue to expect full year adjusted EPS growth in the 10% to 15% range, with quarterly earnings becoming more evenly distributed throughout the year as our digital growth strategy helps balance the quarter mix of our business. As we previously shared, the second and third quarters are expected to represent a smaller share of annual earnings than they have in historical quarters. Now let's turn to Slide 13 for a few comments on the balance sheet. We ended the quarter with $1.2 billion in unrestricted cash and nearly $1 billion in cash deployed in our ATM network. Total debt was $2.7 billion at the end of the quarter. Changes in both cash and debt primarily reflect the seasonal funding required to support peak ATM cash demand, together with share repurchases, partially offset by approximately $80 million in cash generated from operations. Towards the end of May, we settled our $700 million euro bonds. This resulted in increased interest expense of about $1.3 million in the second quarter compared to the prior year. As we look forward, we expect this will increase interest expense by approximately $6 million for the remainder of the year versus the prior year based on current euro borrowing rates. As we discussed in May, share repurchases remain a key component of our capital allocation strategy and are funded primarily through our recurring operating free cash flows. We continue to view buybacks as an attractive use of capital and a reflection of our view regarding the value of our shares relative to long-term opportunities for the business. Going forward, we will remain disciplined in capital allocation. With that, I'll turn it back to Mike for his closing remarks.

Thank you. As we wrap up, my key takeaway is this. Momentum in our digital accelerators continues to strengthen and is increasingly shaping the future of Euronet, with revenue from this category up 35% year-to-date, well ahead of our long-term framework that we communicated to you at Investor Day. In the Cross-Border Payments section, Ria Digital delivered another strong quarter, with revenue and transactions up 35% and 33%, respectively, while Dandelion expanded through MasterCard Move and 5 new partners. In Payments Infrastructure, we saw continued strength in merchant acquiring and growing demand for CoreCard, highlighted by our new agreement with Unibanca. In epay, we are growing our digital content and gaming revenue through new direct publisher relationships, expanded distribution and progress in real money gaming. Importantly, these accelerators are becoming a larger and much more durable part of our revenue mix. While parts of the business faced near-term macroeconomic headwinds this quarter, our core strategy remains intact. Our platforms are scaling and our outlook is unchanged. We remain confident in delivering our long-term growth objectives and creating value for the shareholders. With that, I'd be happy to take questions. Operator, will you please assist?

[Operator Instructions] Our first question comes from the line of Pete Heckmann from D.A. Davidson.

A lot of detail. I wanted to follow up on your comments on the digital accelerators. Revenue related to those businesses is up 35% in the first half, but your 2026 guidance is up 23%. Is that because of the -- lapping the CoreCard acquisition? Or is there another difficult comparison that we should be thinking about? Or is the full year guidance maybe just a little bit conservative?

I would say the lapping is the biggest thing. But -- plus -- I mean, at the Investor Day, we are trying to be thoughtfully conservative. It's been -- I'll tell you right now, it's grown even faster than we thought it would. So we're pretty happy with those growth accelerators.

Great. Great. And then just a follow-up on CoreCard. I didn't hear you mention it, but CoreCard definitely outperformed on the revenue line in the first quarter. But in the second quarter, would you say that it was generally in line with the run rate -- the revenue run rate that we're using on a quarterly basis, something in the $16 million to $18 million of acquired revenue for the quarter?

Yes, Sir Pete. Yes, as we pointed out in the first quarter, we had some onetime revenue that didn't do much in terms of profit because it was basically just pass-through cost that we have to account for under GAAP. So your analysis is right on.

Yes. You remember that a lot of times when people get ready to issue a bunch of cards, they have to buy the plastic in advance. So we provide that to them with little to no markup, and that was -- I can't remember, $10 million or something like that. It was a lot of money, yes.

Our next question comes from the line of Mike Grondahl from Northland.

On the Money Transfer area, any plans for increased marketing or promotion? I guess I'm trying to understand what you guys are doing to kind of return to growth there.

Well, I mean, first of all, we've got a bad kind of macro, but we found that our investments in digital are paying off very handsomely. And we mentioned that we spent about an extra $3 million this last quarter in various marketing, mostly digital. So yes, we are doing that, and we will continue. Now the problem is, if we're spending $3 million this quarter, you really don't see that revenue come in for another quarter or so. So we look forward maybe to the fruits of those labors coming in, in Q3 and Q4. But yes, we are going to do it. But the reality is the market is weak. And so we need to be careful not to put too much money, kind of barking up the wrong tree kind of thing. And -- but with digital, we're doing exceedingly well, and so we will continue to accelerate that.

Got it. And then just secondly, the European ATM footprint, I think I heard you say, Mike, that it -- travel started a little bit soft and European spend was a little bit soft too...

Those are the numbers we get from research, is that U.S. to Mexico is a little weaker. And within Europe, they're very -- it's a little bit weaker too. They're much more careful. I mean the reality is we are in a global economic slowdown, and that just means when people go on vacation, they spend less money.

Got it. And hey, do you see that continuing through the whole year? Or what's kind of your outlook there?

Well, yes, Mike, we saw a little bit of softness in the second quarter. I don't want to be too bullish on stuff, but we saw a little bit of improvement as we go into the third quarter. We've read some other market staff that would indicate that there's maybe a little better expectation as the travel season kind of comes to a head in August. So I would say it would be -- my perspective, it would be certainly consistent to improving, but I wouldn't say that, that improving is rocket improving, but it's a positive.

Our next question comes from the line of Cris Kennedy from William Blair.

I appreciate all the detail. XE and small business payments is a massive opportunity. Can you just talk about some of the initiatives that you have to capture that market?

You're right. It is exactly that. It's a huge opportunity because the value proposition that XE gives to both individuals and small businesses, especially the ability to make cross-border payments much more quickly and less expensively than their bank would, and we're -- we've got a whole plan of investment into XE beginning in the second half of the year. And I think we're sitting on -- honestly, I think we're sitting on an asset that we have not done enough with. And so we'll try -- and because -- one of the reasons that's a little bit frustrating is we've got the best payout of any company of its ilk in the world. And so we should be able to do more with this and that's what we're going to focus on the last half of the year.

Got it. And then the CoreCard win with -- in Peru was very encouraging. Are you seeing that type of setup in other markets where CoreCard is helping you get over the...

Let me tell you this, as I've said in prior calls, we really didn't expect to get a deal closed with CoreCard for like 18 months after sale. And it was in November or December last year when we sold -- when we bought it. And -- but we have been exceedingly -- well, both surprised and happy with the deals that we're signing. I mean we're like 5, 6 deals in and with a lot more in the hopper. So I think CoreCard is going to be one of our very best acquisitions as it continues to build momentum and reference customers because the key when you have -- they're really only 2 platforms kind of on the planet that you could -- that are of scale, maybe 3 -- well, we're the third one. And so you've got to get references in the market. And once you get references, then it's a lot easier to do so. We really like this one at Unibanca because they're actually a processor for multiple banks. So they'll be using CoreCard. And each of the 9 banks they have can set it up however they wish. And it gives us another -- gives us a good reference customer in Lat Am. And that's the key, too, is you've got to be able to have a reference customer in the same language. We -- those 2 deals in Ecuador, excuse me, last year for REN and between that and the Peru deal, I think we see Lat Am as an entire market that's tired of this 40-year-old technology that they've been kind of forced to buy from the United States up to this point.