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Euronet Worldwide Inc (NASDAQ:EEFT)
Q4 2019 Earnings Call
Feb 11, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Euronet Worldwide Fourth Quarter and Full Year 2019 Earnings Conference Call. [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.

Jeffrey B. Newman -- Executive Vice President and General Counsel

Thank you, Chris. Good morning and welcome everyone to Euronet's quarterly results conference call. We'll present our results for the fourth quarter and full year 2019 on this call. We have Mike Brown, our Chairman and CEO; Rick Weller, our CFO; and Kevin Caponecchi, the CEO of our epay division on the call.

Before we begin, I need to call your attention to the forward-looking statements disclaimer on 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 update under any circumstances.

In addition, the PowerPoint presentation includes a reconciliation of the non-GAAP financial measures we'll be using during the call to their most comparable GAAP measures.

Now, I'll turn the call over to our CFO, Rick Weller. Rick?

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Thank you, Jeff, and thank you to everyone who is joining us here today. I will begin my comments on Slide 5. We delivered fourth quarter revenue of $694 million, adjusted operating income of $107 million and adjusted EBITDA of $142 million. Our adjusted EPS for the fourth quarter was $1.63, a 19% year-over-year increase and the seventh consecutive quarter we have delivered double-digit adjusted EPS growth. This strong growth was driven by double-digit operating income contributions from our EFT and epay segments and continued strength in our international remittance business, as well as a couple cents of income tax benefits.

Next slide please. Slide 6 shows our three-year transaction trends by segment. EFT transactions grew 14%, driven by expansion of our ATM and point of sale networks in Europe and Asia, including growth in our local and international withdrawals and deposit transactions, as well as value-added transactions on ATMs and point of sale terminals, including dynamic currency conversion, domestic and international surcharge, and foreign currency dispensing.

Epay transactions grew 27% with continued digital media expansion and significant contributions from wallet-driven mobile top-up transactions in India, which earn a small amount of revenue per transaction compared to our more traditional commission-based revenue transactions. Money transfers grew 4%. This growth was the result of double-digit expansion out of our US outbound and international originated sends, partially offset by continued softness in our intra-US money transfer business.

Next slide please. Slide 7 presents our results on an as reported basis. Year-over-year, most of the major currencies where we operate declined at low-to-mid single-digit rates. To normalize the impact of currency fluctuations, we have presented our results as adjusted for currency on the next slide.

Next slide please. I am on Slide 8 now. Here you can see that for the fourth quarter, EFT revenue grew 23%, adjusted operating income grew 85% and adjusted EBITDA grew 58%. These very strong double-digit growth rates were the result of a 14% increase in ATMs and transactions, new outsourcing agreements and our ability to offer DCC on all cards worldwide. Adjusted operating income and adjusted EBITDA also included a one-time VAT benefit of approximately $8 million. Even without the VAT benefit, we still produced a staggering 50% increase in profit expansion and a year-over-year expansion in operating margin.

Epay fourth quarter revenue grew 4%, adjusted operating income grew 17% and adjusted EBITDA grew 18%. These strong growth rates were the result of continued expansion of our digital media products and SaaS solutions. Revenue and gross profit per transaction came in a bit as we continued to see a stronger mix of wallet-driven mobile top-up transactions in India. However, operating margins expanded nicely; in fact, a new high watermark for the epay quarterly operating margins. Overall, this was an excellent fourth quarter for epay. The fourth quarter was the fifth consecutive quarter and 2019 the second consecutive year where epay has delivered double-digit operating income growth.

Money Transfer grew 4%, and adjusted operating income and adjusted EBITDA declined 7% and 5% respectively. We continued to see strong double-digit growth from our US outbound and international originated remittances, which were offset by constrained growth from our xe business, stemming from continued economic, Brexit uncertainties in the UK and softness in the intra-US transfer business. Keep in mind that the vast majority of our remittance business is international, which continues to grow at nice double-digit rates. This strong growth combined with several exciting developments in the pipeline give us confidence that the Money Transfer segment will post improving results as we move through the year 2020.

Next, Slide 10 to discuss a few comments on the full year results. Here on Slide 10, you can see our 2019 results compared to 2018. Since we have previously provided you all of the quarterly details, I will not restate them again here. However, I would like to point out that all of our consolidated constant currency results grew at strong double-digit year-over-year rates. Full year adjusted EPS was $7.01, a 27% year-over-year increase. This was the seventh consecutive year we have posted double-digit growth in adjusted EPS, which included contributions from each of our three segments.

Now, let's go to Slide 14 and talk about the balance sheet. Skipping over to 14 here. On a year-over-year basis, our balance sheet continued to strengthen. As we noted in our press release, we have revised the presentation of our balance sheet to include three new balance sheet captions entitled ATM cash, settlement assets and settlement liabilities -- obligations, including the related cash components of ATM and settlement cash. We made this change to better align settlement assets with settlement obligations. We have updated the prior year amounts to conform to the current year presentation.

Unrestricted cash increased as a result of cash generated from operations, partially offset by share repurchases and capital expenditures, including ATM purchases. The debt increased year-over-year as a result of the new convertible bonds and Eurobonds issued earlier in 2019. The combination of cash available on our balance sheet and approximately $1 billion of availability on our revolver give us capital flexibility to drive future growth. The strength of our balance sheet continues to allow us to be successful in the competitive environment in which we operate.

As I close, I think it bears repeating that this was another exceptional year for Euronet where we delivered on our strategy to add more products, both physical and digital, to more markets around the world. With that, I'll turn it over to Mike.

Michael J. Brown -- Chairman, Chief Executive Officer and President

Thank you, Rick, and thank you, everybody, for joining us today. I'll begin my comments on Slide number 16. First, I'll start by repeating what Rick said. This was another exceptional year for Euronet, the seventh consecutive year that we've delivered double-digit growth in adjusted EPS. There are not many companies out there that can say that they've had such consistently strong growth. This is a testament to our exceptional teams around the world and their focus to continue to improve our product portfolio, our global reach and the technology that enables our payment networks.

Let me begin my specific comments regarding the Slide 16 by giving you several examples of our technology-driven successes this quarter. You'll notice that these are wins from all three segments of our business as a result of our cross-segment technology platform that spans our entire business.

As it relates to the REV category on this slide, you may have read in our press release from a few weeks ago regarding our rebrand of the Digital Integrated Payments Cloud and why we did it. The Digital Integrated Payments Cloud was quite a mouthful. I know I've talked to a number of you about this and kind of laughed at ourselves. And although descriptive, it didn't fully capture the significance of the solution. We chose the name REN for our new switch because it represents a new way of doing things, a renaissance, if you will, for payment switching.

In a similar thought process to that, the REV payments cloud allows us to create revolutionary products and drives revenue for us and our partners. So the base of our technology is a great switch, and the cloud surrounding it really drives our revenue growth and makes money for all of our partners. The underlying technology remains the same, as does its purpose of providing developers with API access to Euronet's software technology platforms, services, products, network of ATMs, POS terminals and Ria Money Transfer locations and payouts.

In Asia, I will start with our first one, we signed a global ATM DCC agreement with a very nice bank, Standard Chartered Bank, to provide pass-through ATM DCC across 14 countries in Asia and Africa through a single connection to a proprietary intra-bank inter-country network developed by Euronet specifically for Standard Chartered Bank, made possible by our REV Payments Cloud.

We also announced last week our partnership with Amazon Pay in India, where we are providing integration and content aggregation services for mobile recharges, bill payments, gift cards and other offerings to Amazon India. Through our REV Payment Cloud, Amazon can now have access to our portfolio of payments vendors through a single API connection. They are already live with their first biller under this agreement and expect to launch several more billers in the coming months.

And as I'm asked from time to time, how does this technology come into play in the cash-based part of Euronet's business? Well, interestingly enough, a recent Wall Street Journal article, I think it was last week, perfectly described the current payments environment in which cash and digital payment methods coexist in almost all global markets. They're both growing. This supports our thesis that our powerful technology and expansive network of assets place us in a perfect position to expand our digital presence to enable other fintech companies, while being right here at the nexus between the digital and physical payments experience, both of which are growing.

To that end, here is an example of two agreements we launched in the quarter that highlight this unique market position. First, we continue to expand our merchant deposit agreement, launching a cash deposit network participation agreement with cardless payments -- cardless payouts for DHL courier services. We now have agreements with several banks and hundreds of merchants that allow customers to make an online purchase and pay for it with cash when the item is delivered to their door. The courier can then deposit the cash at Euronet ATMs as they go through their route to reduce the risk of carrying cash all day long. I'd like to highlight that these cash deposits aren't good [Phonetic] to sound like for this presentation, but that last year, we processed more than $4 billion worth of deposits in just one market last year.

We also implemented a real-time payments agreement with Federal Bank in India that allows for real-time deposit of cash-based remittances to any bank account holder in India through UPI, India's real-time payment system. Both of these agreements highlight our ability to use our powerful technology to provide digital options in cash preferred economy. These are just a few examples of our technology achievements, and I will highlight more as we move through the segment discussion.

And finally, as an update on REN, our deployment of REN in Mozambique is on track, and this quarter, we expanded that same agreement to include prepaid functionality. We continue to receive strong interest after our November technology conference in Bangkok and hope to provide additional updates in the coming quarters.

So well, now, let's move on to Slide number 20, and we'll talk about EFT for a few minutes. Slide 20, our EFT team delivered another exceptional year. During the fourth quarter, we launched an ATM network participation agreement and value-added service agreement with ATTICA Bank in Greece whereby ATTICA customers can use Euronet's ATMs under similar terms to their own bank. We enabled ATM cash recycling and cardless direct deposits for Commercial Bank of Ceylon in Sri Lanka.

In addition to these launches, we signed a POS switching agreement with COSMOTE Deutsche Telekom Group in Greece and a DCC agreement with Yes Bank, one of India's largest private sector banks. We also renewed several agreements during the quarter, including our ATM network participation agreement with BNP Paribas Group in Ukraine, an ATM driving and switching agreement with Oriental Bank of Commerce, and a UPI, India's real-time payment system, gateway service agreement for Indian Overseas Bank.

Next Slide please. Slide 21: during the quarter, we signed several new agreements in Asia. We signed an issuer processing agreement with PT Bank Artos in Indonesia and a cloud-based multi-factor authorization agreement with Cargills Bank in Sri Lanka. In Indonesia, we signed an agreement with Bank Central Asia, the country's largest private bank, to offer DCC on their network of more than 17,000 ATMs. We also signed an agreement with EbixCash in India to provide multi-currency and forex prepaid cards. Euronet, through REV, will be hosting these cards on our card management system, authorizing transactions against the balances on the card, switching transactions to Visa and Mastercard, as well as handling reconciliation and settlement for these transactions.

Finally, we finished the quarter with 46,000 active ATMs, a 14% year-over-year increase. During the quarter, we added more than 900 high-value ATMs, while we deinstalled 170 at YourCash and seasonally deactivated 3,640 ATMs. We acquired a small ATM outsourcing network with about 1,800 ATMs, which will not be dilutive to our earnings in 2020. For the full year, we deployed more than 4,200 ATMs ahead of our 3,500 to 4,000 goal for 2019. You also recall that about 12 to 18 months ago, we were beginning to see more ATM outsourcing opportunity, and during the year, we added almost 1,800 outsourced ATMs, and in addition to that, acquired another 1,800 consistent with our strategy.

Our total ATM count now is more than 50,000. And between the deployed and outsourced ATMs we added in 2019, as well as the 1,800 ATMs we acquired, we will enter 2020 with more than 7,000 additional high-value ATMs than we started the year in 2019. Given our proven ability to deploy ATMs and the expansive opportunities that we continue to see both inside and outside of Europe, we expect that we can add more than 4,000 ATMs again in 2020.

With strong double-digit growth across all metrics, it was another outstanding year for the EFT team.

Now, let's move to Slide number 25 and we will talk about epay. Slide 25: I'm extremely proud of epay's success and the continued transformation of their business into a leading global digital media content and SaaS solutions provider. Their success is reflected in the result and their fifth consecutive quarter and second consecutive year where they have delivered double-digit operating income growth. This transformation has resulted in gross profit from digital media, which made up 76% of epay's gross profit in the quarter and 72% for the entire year versus 69% in the prior year 2018.

During the quarter, we launched AppleCare+ as a monthly recurring payment subscription service. This agreement gives customers a more affordable option for AppleCare and drives attachment to Apple hardware through Target's point-of-sale terminal. In New Zealand, we bought Prezzy -- we brought Prezzy card in-house, rather than getting it from a third party. Prezzy card is New Zealand's leading open loop prepaid card, and this will allow us to offer more products to more merchants. And then in Brazil, we added a catalog of digital media content through pin-on-receipt across an independent network of 56,000 merchants across the country. And we expanded additional content like Blizzard gaming and Nintendo eShop to new countries.

Next slide please, Slide 26. In addition to these launches, we signed several agreements that will launch in the coming quarters. These include an agreement with Safe2Pay, an alternative payments company in Australia, where we signed an agreement to -- and we also signed an agreement to distribute EA gaming products through Amazon. We also signed an agreement to distribute Microsoft Office through Eptimum, a leading online retailer of software to individuals and businesses in France. And as you can see, there's a lot of exciting things happening in the epay segment. And it bears repeating that this was a great fourth quarter and a strong finish to a transformative year for our epay segment.

Now, let's move on to Slide 30 and we'll talk about the epay segment -- I mean, the Ria segment -- Money Transfer. Our Money Transfer network now reaches almost 400,000 locations across 160 countries. During the quarter, we launched 22 new correspondents in 20 countries, including new mobile wallet services in Kenya, Uganda, Burundi, Zimbabwe, Croatia and the Democratic Republic of Congo.

I think it is important here to pause and to explain the significance of these new mobile wallet services. Over the last several years, we have placed a significant focus on building a great physical network, which we have now grown to over 400,000 locations, and it's the second largest in the world. And it remains true that about 90% of remittances are still collected in cash, so we will not take our eye off the physical ball. However, other forms of remittance delivery are increasing in popularity, including bank and mobile wallet deposits. And similar to growing our physical network, we have also been focusing on these digital delivery methods to build a network for the next 20 years. We have now grown our reach to more than 3.2 billion bank accounts globally with the ability to deliver cash to more than 30 mobile wallets, which we believe may very well be the largest digital money transfer payout network in the world.

Moreover, over 20% of Ria's international outbound volume is deposited into an account, and this is Ria's fastest growing payment method. In fact, including the xe business, cross-border volumes initiated or terminated on a digital device [Phonetic] or into an account represented 59% of our total Money Transfer segment volume. And our success is a result of building a better payout network, both physical and digital, that is really fueling our growth.

In addition to these launches, we signed an agreement with 21 other new correspondents across 18 countries, which we will launch in the coming quarter. As you may have seen in the recent press release, Walmart has selected Ria as a second provider of Walmart2World to offer US outbound international money transfer services at Walmart locations in the US and Puerto Rico. We are pleased to have the third expansion of our relationship with Walmart, including payout for US domestic and international inbound remittances, which we signed last year. We are excited to have Walmart2World powered by Ria available at all locations across the US as of last Friday, in fact, and look forward to working with Walmart to provide their customers with excellent FX rates, product assortment and outstanding service.

During the quarter, we also signed three important new agent agreements, all of which were competitive wins. In Belgium, we signed the Belgian postal service, or Bpost, to offer Ria's money transfer services on an exclusive basis across its more than 600 post offices and partner locations. And in Austria, you will see a press release shortly announcing that Ria has signed Bank99, Austrian Post's new banking and financial entity, to provide its customers with Ria's domestic and international money transfer services to its network of over 750 bank branches and partner locations. In both of these countries, the post offices have long been the preferred destinations by customers for money transfer services, and Ria is pleased to be able to provide its outstanding product to their important customer bases.

We also signed an agreement with Travelex North America to offer money transfer and bill payment services at approximately 200 retail locations at airport and other high-traffic locations across the US. As I mentioned, these -- all three of these were competitive wins and demonstrate that Ria is making important traction, unlocking the large-surface retail and post office channel, which has largely been dominated by two other providers for decades.

Finally, we've reached a four-year partnership with the Atletico de Madrid football team, the 10-time Spanish La Liga champion, becoming the club's new back-of-shirt sponsor. The Spanish Football League, La Liga, is a renowned associate football league with a rich history, and we expect this partnership to provide exceptional brand awareness for Ria around the world. La Liga attracts annual viewership of approximately 3 billion people to its football matches, and Atletico has nearly 300 million fan followers around the world. Most importantly, Atletico has a diverse and renowned roster of players from markets that align with our customer base, and activation of our sponsorship activities should provide Ria with tremendous exposure and a closer relationship with our customers as we put more focus on building Ria's brand awareness.

We have experienced a few transitory challenges in the Money Transfer segment in 2019. However, our strong double-digit international remittance growth underscores the strength of our Money Transfer business, which we believe will return to stronger growth patterns as we move through 2020. And let's not forget that Ria owns roughly 5% of the planet's international remittance market share, growing at strong double-digit rates. If we could just own 10% of this huge market, we would double that business. That is very exciting.

Now, let's move on to Slide number 31 and we'll wrap up the quarter. We finished the year strong with fourth quarter adjusted EPS of $1.63 and a 19% year-over-year increase. We continue to develop and launch leading SaaS solutions to solve problems for our business partners and bridge the gap between digital payments and cash preferred customers -- consumers. EFT continued to deliver exceptional double-digit growth rates, while continuing to invest in ATM network expansion around the world. epay's double-digit earnings growth resulted from continued digital media growth and leading-edge SaaS solutions. And Money Transfer continued to deliver strong double-digit growth in international remittances. The generation of free cash flow continues to strengthen our balance sheet.

And as we wrap up, I'd like to brag again on our full year results. We achieved full year adjusted EPS of $7.01, a 27% year-over-year increase and the seventh consecutive year we have achieved double-digit earnings growth. This is a significant accomplishment made possible by our powerful technology of REN and REV that allows that to add more products and more devices around the world, but also powers products and payments for some of the biggest fintech and retail players in the world.

As you can see from all of the technology highlights, we are just getting started. And we expect the first quarter adjusted EPS to be approximately $0.95, assuming consistent foreign exchange rates and share price. And finally, beyond the first quarter of 2020, we expect each of the three segments to grow op income for the full year 2020 at the lower end of the double-digit range, reflecting continued expansion and leverage of the business.

Our EFT division benefited nicely in 2019 as we were able to expand DCC into international transactions across the globe. As a result, EFT benefited from a significant onetime step-up in operating income. Looking forward, we expect growth that is more in line with the deployment of ATMs, especially as we take into account further investments in geographical expansion. And as you know, we are looking for a couple of wild card REN and outsourcing deals that are difficult to predict their timing and contribution to the bottom line. But talking to potential customers, these wild cards are real.

Our epay business posted double-digit op income growth now for two consecutive years, and together with the continued addition of more digital media around the world, we expect 2020 to be our third sequential year of double-digit operating income growth.

As for Money Transfer, we're pleased to see strong double-digit growth in our international remittances, which provides some shelter from the intra-US transaction softness, and to a lesser extent, the malice stemming from Brexit uncertainty. Nonetheless, we are focusing on leveraging the international remittance strength, as well as implementing recent large surface retail wins. These should prove to be a game changer for us over the next several years. But net-net, we expect all three segments to grow at lower double-digit rates, contributing to our eighth consecutive year of double-digit adjusted EPS growth.

With that, we would be happy to take questions. Operator, will you please assist?

Questions and Answers:

Operator

Certainly. [Operator Instructions] And our first question comes from the line of Andrew Jeffrey with SunTrust. Your line is now open.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Hi, good morning, guys. Appreciate taking the question.

Michael J. Brown -- Chairman, Chief Executive Officer and President

No Problem, Andrew.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Mike, when you look at Money Transfer, there are obviously some call out interim headwinds. I wonder if you could talk a little bit about how much sort of you think you control your own destiny. In other words, you've had some pretty good agent growth, nice wins, expansion of the network, and then there's the sort of global migration patterns. How much do you think is sort of growth in Euronet-specific drivers versus the market as a whole at this point?

Michael J. Brown -- Chairman, Chief Executive Officer and President

Well, certainly, when you look at international remittances, you can take the World Bank numbers, and they grow between 3% and 4% a year. And we've got good double-digit kind of low-teens growth at least for the last dozen years. So that's the reason our market share continues to grow. And what's exciting to me is that we're growing, what, four times faster than the market. That means our market share will continue to increase. We only have 5% of it now. So I look at it as there is 95% to go. And if we can continue to grow at these rates with international volumes, we could get to that 10% market share.

And another boost that we're going to get here is, starting last Friday, we have 100% of the Walmart locations now doing international remittance with us using their Walmart2World product that's powered by Ria. So -- and then you add the two post offices and the Travelex and all these other things that we'll be implementing throughout the year, I think we're going to continue to see a nice strong growth. And this is -- I don't know what you call it, not self-inflicted, but we are the ones who caused this to happen. We closed these deals. We won competitively. We took these deals away from our competitors, and our market share is going to grow on account of that.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Okay. I appreciate it. And then, also notable commentary around the focus on digital and account-based remittances. What gives you an advantage do you think versus some of the disruptive players in the market, sort of cloud-native solutions? Are they predominantly taking share from banks? Or what gives you confidence...

Michael J. Brown -- Chairman, Chief Executive Officer and President

Yeah, I think predominantly from banks. Our technology gives us that difference. That's why a number of these techie kind of new fintech players have used us for their payout, because there's no way they're going to be able to connect up to 3.2 billion bank accounts, to all these wallets and everything as far as payout goes, but we can provide that to them and to ourselves.

And we also have the cash component. Even if you happen to be a little bit more well-heeled immigrant into a country, you've got a bank account, you can use a mobile wallet or one of these fintech players to send your money or maybe use riamoneytransfer.com or xe to do this, at the end of the day, a lot of times you need to terminate that money transfer into cash. And that's the one thing, we can hit it both ways. We are truly at that nexus of both digital and physical payments, and we're the only guy in town really who has that.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Got it. Appreciate it. Thank you.

Operator

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

Rayna Kumar -- Evercore ISI -- Analyst

Hi, good morning.

Michael J. Brown -- Chairman, Chief Executive Officer and President

Good morning, Rayna.

Rayna Kumar -- Evercore ISI -- Analyst

Now that you've lapped the Walmart ID requirements, do you expect the Money Transfer top line growth to return back to the low-double digit growth that you've done historically?

Michael J. Brown -- Chairman, Chief Executive Officer and President

Yeah. So, Rayna, we haven't quite lapped it. What really happened was, they started those ID requirements in the last half of 2018, but they really didn't have a significant impact. If you might remember, in our January quarter of 2019, we had -- we saw just a tiny bit, and din't even mention it in the fourth quarter of '18. In '19 January, I think we mentioned we thought maybe a 3% kind of headwind or something like that. But by the time I got to the second quarter, we could really see it. So I would say our full lapping will probably come after the second quarter of this year.

So what happened was, I think, as more and more people went into try to make those money transfers, they -- we just got more kind of word of mouth and it slowed things down. So that -- and that's just on the intra-US piece of the business, not on our international money transfer.

Rayna Kumar -- Evercore ISI -- Analyst

Got it. I think so.

Michael J. Brown -- Chairman, Chief Executive Officer and President

So kind of look at full lapping probably pretty close by the end of the second quarter.

Rayna Kumar -- Evercore ISI -- Analyst

And once you pass the second quarter, do you get back to the low double-digit growth after that?

Michael J. Brown -- Chairman, Chief Executive Officer and President

We hope so, certainly.

Rayna Kumar -- Evercore ISI -- Analyst

Okay. And then, just moving on to the EFT business, you acquired 1,795 ATMs. I think in your press release, you're saying it's not going to be dilutive for the full year. But for the first quarter, are there any upfront costs that would make it dilutive and then ramp up throughout the year?

Michael J. Brown -- Chairman, Chief Executive Officer and President

No, no. We're good.

Rayna Kumar -- Evercore ISI -- Analyst

Okay. And just finally on epay, you grew 4% top line growth in the fourth quarter, slower than what you did in the second and the third quarter, which is 7%. Can you just talk about the drivers of that slowdown? And how should we -- what should we think of as a sustainable type top line growth rate for epay throughout 2020?

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Yeah. Hey, Rayna. In the third quarter, we had a little bit more revenue that was, what we would say, recognized on a gross revenue basis. There is a few products that you know or may recall in our business that we recognize at revenue rather that on a commission basis. And so, that came into our third quarter. But if you take a look at our gross profit, and this will come out in our Q, but our gross profit, which is after you kind of sort out the noise of the gross versus net, if you will, grew nicely on a double-digit basis, which again reflects the continuation of the deployment of digital media product that's out there. This high volume of, we'd say, low-value transactions out of India happens to be one that's on the other side of the coin that the revenue equals roughly the gross margin. And so the 4% number that you saw in the fourth quarter is really more of an anomaly of gross versus net on some of that recognition. But if you look at the gross profit, you will see that it improved double-digit year-over-year, which contributed to that double-digit year-over-year operating profit growth.

Rayna Kumar -- Evercore ISI -- Analyst

Got it. That's very helpful. I'm just going to sneak in one last question in there. For the fourth quarter, your adjusted EBITDA margin, it expanded a strong 360 basis points. Is that -- could that continue into 2020? And what were the drivers to that expansion?

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Well, I don't think you're going to see that similar kind of expansion that will continue because we really benefited from -- and let me just make sure when you reference that number there, are you talking about epay's specifically?

Rayna Kumar -- Evercore ISI -- Analyst

I'm talking about your consolidated adjusted EBITDA.

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Yeah. That's what I thought there because I didn't think we have that on epay but just better check my number there with you. But on the consolidated, remember, we had the real benefit, as Mike said, the onetime lift from DCC around the world that really came into that number quite nicely. So, that lifted the number. I don't expect to see those similar kinds of expansions on a year-over-year basis, but we should be able to continue forward on a run rate, if you will.

Rayna Kumar -- Evercore ISI -- Analyst

Great, thank you.

Operator

Thank you. And our next question comes from the line of Mike Grondahl with Northland Capital -- I'm sorry, Northland Securities. Your line is now open.

Mike Grondahl -- Northland Capital Markets -- Analyst

Yeah. Thanks and good morning, guys.

Michael J. Brown -- Chairman, Chief Executive Officer and President

Good morning.

Mike Grondahl -- Northland Capital Markets -- Analyst

On the 1,795 ATMs that you acquired, can you tell us roughly where those are? And do the metrics on those compare to your core ATMs?

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Well Mike, we're being a little guarded on saying where they are. What we kind of find is, as when we plant to flag around the world, we see other little competitor flags pop up around them. And so, we've -- until we kind of really get our feet on -- underneath us on this one here and start unfolding the rest of our strategy, we'll be a little careful on saying where that is. I think it's fair to say it's other than in Europe and it's consistent with what we've been talking about in the past about going more globally with the ATMs.

I would tell you that they are consistent with the high-value ATMs that we operate today [Phonetic], and we expect that as we integrate the business and bring it in line with our technology and things like that, then we'll be able to improve that so that it is accretive to our bottom line there. As Mike said, it's not going to be dilutive to us. They are higher-value ATMs. They position is quite nicely to go after another important market. And so kind of stay tuned. But we are excited about these other 1,800 we brought into the fold.

Mike Grondahl -- Northland Capital Markets -- Analyst

Great. And then, on the Money Transfer business, it seems like xe, because the Brexit, was a little bit slower and clearly US, the intra market, because of ID at a [Phonetic] dollar. So what percent is xe and the US intra business of the whole? Just trying to get a feel for what percent of that is kind of dragging you down.

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Kind in grenade [Phonetic] math, a third, when you add the two together.

Mike Grondahl -- Northland Capital Markets -- Analyst

Got it. Okay, thanks a lot guys.

Operator

Thank you. And our next question comes from the line of Darrin Peller with Wolfe Research. Your line is now open.

Darrin Peller -- Wolfe Research -- Analyst

All right, thanks guys. Look, when I look at the EFT segment, you have a couple of things happening this year. You're going to anniversary the DCC fees going into effect for Visa, and then you're also going to have to be required to show more disclosures. First of all, on the anniversary, can you give us a sense of what you would expect top line growth profile in that segment to be after you anniversary DCC? And then, have you prepared just to answer the question on the disclosures? Do you feel comfortable that you're prepared properly and the impact will be pretty limited?

Michael J. Brown -- Chairman, Chief Executive Officer and President

Yeah I think so. It's basically 1st of April that you have the full anniversary. We have tested a number of scenarios with respect to the new disclosures that are required. We're optimistic that we think we won't see significant impact to -- or see a slight impact to our business. The nice thing is that most of our business now is in Europe, and the banks themselves keep charging their own customers higher and higher fees to not do DCC. So, all the banks are trying to figure out how to take more money out of the pockets of their customers. So we're cautiously optimistic that we won't see anything significant. And then what you'll see is kind of what Rick said. We're planning on still throwing out a lot more ATMs this year, 4,000 plus, and you'll probably see our profit go commensurate with that.

Darrin Peller -- Wolfe Research -- Analyst

Okay. And then, I guess, when I think about the epay segment's growth rate, again, we look at it more on a stack basis than what I think some -- one of the other questions was alluding to. But on the stack basis, it was over 10% growth. It looked like it actually accelerated. So I think some of it was just compares. But look, we think it's a very tough segment to model, given the lumpiness and the types of revenue coming in. If you can give us any more direction on how the top line should trend there through the year? And then, really factoring in, where do we think about -- you guys have signed and announced a lot of really big brands, whether it's Amazon or Apple or others, incremental deals. How do we think about those flowing through the numbers? Thanks again, guys.

Michael J. Brown -- Chairman, Chief Executive Officer and President

Well, first of all, we've got to implement them. So when we announced -- as an example, in Money Transfer, we had a couple of -- the two post offices, for example, and we just started -- we just let up all the Walmarts for international here last Friday. So it takes a while for all that stuff to happen. But you're right, in epay, every -- I don't think we have a magic bullet, single thing. Epay is superior technology that lets us do lots and lots of smaller deals that add up to something pretty potent, so lots of BBs kind of like a shotgun as opposed to a rifle shot, to continue to improve our business. And we really don't look at our business, again, in terms of revenue because revenue -- you get -- certainly, you get all messed up when you try to consolidate that all together. As Rick mentioned, with respect to epay, it depends on if it's a gross or a net deal on typical distribution of cards and so forth. We only keep 20% of the gross revenue before we even have $1 of expense. So we kind of look at it as let's just keep bringing in more op profit. Every one of our executives are focused on that.

And then, Darrin, back to your original question about the EFT segment, let's not forget that the world is a lot bigger than Europe. And now that we've got this DCC change, it allows us to go after many, many more markets. And you're going to see a lot of that starting to happen this year. We had one market last year that we added to outside of Europe, but I hope to have several more this year. And that's really exciting because the markets for DCC outside of Europe may be twice the size of Europe's. So we still have a lot of growth potential in Europe. And then to think that there might be twice that much more out there that had it's totally virgin turf, that's exciting.

Darrin Peller -- Wolfe Research -- Analyst

All right. Thanks guys.

Operator

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

Andrew Schmidt -- Citigroup -- Analyst

Hey, guys. Thanks for taking my questions. First question on the EFT segment. Just wanted to clarify the onetime benefit there. Was that -- I just wanted to just confirm that that is in your adjusted results of EBITDA and EPS and then whether that was included in the initial outlook.

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Yes to both. There's a little bit of it that, I would say, it was fair to say that was not included in the original outlook. But we obviously knew what was going on with that particular part of our business. But it was included in the numbers, as we reported them.

Andrew Schmidt -- Citigroup -- Analyst

Got it. Thank you for that. And then, just the first quarter EPS outlook, just looks like there's a little delta relative to Street expectations. I wonder if you can just comment on some of the drivers there, whether there is incremental investment, maybe lower assumptions [Phonetic] around Money Transfer? Just a little bit more in depth about the assumptions in the first quarter guide would be helpful, I think.

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Yeah. Well, it's probably always hard to really compare what we have as an outlook compared to the -- some of the models of the Street here. But from a, let's say, relatively macro kind of point of view, I think you point on one, is that, certainly, some of the investment as we continue to add ATMs into the business. Those are expense-driven ATMs until they really are productive in the tourist kind of season. And then, I think as Mike had mentioned there when we were talking about the Money Transfer, we have seen that intra-US domestic stuff, the decline had stepped up a little bit, and so clearly we think that that will have a continuation or a carry-forward effect into the first quarter. So those are really probably the two items in there, is the continued additions of ATMs in that [Phonetic] first quarter, as we've said before, becomes more and more pronounced in terms of its seasonal impacts, and then some of the carryover effects on the intra-US and the Brexit as we go through the quarter.

Michael J. Brown -- Chairman, Chief Executive Officer and President

And because don't forget, Andrew, that you -- we've winterized almost 4,000 ATMs. Now, all that means is we're not delivering cash to them, but most all of their other expenses are still ongoing. So as you put more and more of these ATMs into these very seasonal kinds of areas, particularly where you've got to winterize them, you're just going to have a bigger drag on that first quarter every single year. And let's not forget too, epay just crushed it in the fourth quarter, but that's because lots of gift cards are sold, a lot of their products are sold with the Christmas time rush and so forth. Well, then you get the natural seasonality drop-off in the first quarter. And I think people keep forgetting that we have a very seasonal business, particularly in the EFT and epay segment. So it's like nothing is going wrong in particular. It's just kind of life in the January quarter.

Andrew Schmidt -- Citigroup -- Analyst

Yeah, that makes sense, seasonally low quarter. Got it. And I think just last question on capital allocation. I appreciate the incremental disclosure on the balance sheet in terms of just the available cash. Have your priorities for use of cash changed at all? Just with the favorable [Indecipherable] cash position has come up, just how you're thinking about priorities? And then, what the M&A pipeline might look like?

Michael J. Brown -- Chairman, Chief Executive Officer and President

Well, really nothing has changed since maybe the last time we talked to you. We are always looking at acquisitions. We did pick up those 1,800 ATMs, so that was a nice little one. We're always looking. And if you look over the last five years, the only two places we spent our cash is to buy back stock if the market tends to dislocate and -- or acquisition. So those are the two places that we will spend our money. And we continue to get a bigger and bigger war chest. So I guess that means we can do a bigger or more transformational deal kind of every quarter, but we still haven't found one that meets our criteria and has the return on investment that we'd like.

Andrew Schmidt -- Citigroup -- Analyst

And that you guys are actively looking for something. Any...

Michael J. Brown -- Chairman, Chief Executive Officer and President

Always. Why not? We've got all this cash in the bank. We've got over $1 billion worth of potential. So we're always looking at where -- acquisitions that -- where we could get -- their one, plus our one gives us three.

Rick L. Weller -- Executive Vice President and Chief Financial Officer

And it's the -- as you may know or see in the market is, sometimes the price for some of the quality of assets is beyond what we think is reasonable and practical. So it's just having the discipline to sort through what they are, the alignment with our strategy and something that will give shareholders a good return on investment. We could always complete acquisitions that made no sense, but we hopefully do a little better on our discipline.

Andrew Schmidt -- Citigroup -- Analyst

Understood. And just to refine that a little bit further, I probably can't go into specificity, but any broad areas that you're looking at or that you would look at for a just transformative type acquisition?

Michael J. Brown -- Chairman, Chief Executive Officer and President

Well, no. But you know what, I think the theme of this call was the cross-divisional solutions that we have and that continued to push our growth. So anything that can strengthen our position as being really the best company out there at the nexus of digital plus cash or cash to digital, those would be places that we look.

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Yeah, where we could really kind of leverage the other parts of our assets. We've had many transactions that we've talked about where we really bring to a partner -- a business partner a lot of different assets out there, even if it's as simple as the Amazon announcement where we can make this array of additional products and services available to them, they can use some easy API integrations to come into our business and start offering more. So to the extent that we would see an acquisition, again, that fits in line with our strategy that can leverage the scope of assets, then that seems to where one and one is greater than two.

Andrew Schmidt -- Citigroup -- Analyst

Understood. That's helpful. Thank you, guys.

Operator

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

Peter Heckmann -- D.A. Davidson & Co. -- Analyst

Hey, good morning, everyone. One as a follow-up. It looks like this Sprint-T-Mobile deal may be finally approved. What do you think, any impacts there on the epay side if they sunset some of their prepaid bands? I know the US isn't a huge market for you, but I think Sprint historically have been a decent size customer. Can you handicap that yet?

Kevin J. Caponecchi -- Executive Vice President and Chief Executive Officer, epay, Software and EFT Asia Pacific Division

Yeah, this is Kevin. So remember, there's two parts to that. There is the T-Mobile-Sprint acquisition has to close, and then the divestiture of Boost to DISH. And DISH was a customer of ours prior to the announcement. There are -- we're very close to them in terms of providing solutions and doing things with them. And we're frankly quite excited about the opportunity to expand our relationship. Because they're not in the mobile business as of yet, I think there's a -- there will be a dependency on partners to help them with the business, and our early discussions with them are exciting. So, to summarize, I'm excited about what it potentially means for epay North America because you're getting a highly motivated buyer who has lots of ideas about what they want to do with the business going forward, and that could only be good for us.

Peter Heckmann -- D.A. Davidson & Co. -- Analyst

Okay, great. Thanks Kevin. And then, Rick, maybe just following up on Walmart2World, just remind us about how you're thinking about the ramp there and how you differentiate in that situation against the other branded player.

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Well, the differentiation, I think, comes on several fronts as we've got a -- as Mike said earlier, we've got a wonderful payout network. We have that start [Phonetic] with -- whether it's physical payout or digital payout, we have provided a wonderful Walmart-to-Walmart US domestic product, so customers are very familiar with that type of flat-rate product and great customer convenience. And so we'll continue -- and as Walmart does with its product positioning, its everyday low pricing, so we think that we'll fall right in line there. And so, it's every day giving customers choice, and we back that up with a great service with great FX rates.

In terms of the ramp, I would anticipate that it will be a steady ramp as we go through the process here. The first part was to get it deployed at the stores. The next part is to make sure that the proper signage and branding and stuff like that is available in the stores. And so I would expect that it will be a moderate ramp as we go throughout the year, and we expose that product to the customers and they vote with choice.

Peter Heckmann -- D.A. Davidson & Co. -- Analyst

Got it. Thanks so much.

Michael J. Brown -- Chairman, Chief Executive Officer and President

All right. I think that will be our last question for the day. I want to thank everyone for joining us, and I look forward to talking to you in about 90 days. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 60 minutes

Call participants:

Jeffrey B. Newman -- Executive Vice President and General Counsel

Rick L. Weller -- Executive Vice President and Chief Financial Officer

Michael J. Brown -- Chairman, Chief Executive Officer and President

Kevin J. Caponecchi -- Executive Vice President and Chief Executive Officer, epay, Software and EFT Asia Pacific Division

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Rayna Kumar -- Evercore ISI -- Analyst

Mike Grondahl -- Northland Capital Markets -- Analyst

Darrin Peller -- Wolfe Research -- Analyst

Andrew Schmidt -- Citigroup -- Analyst

Peter Heckmann -- D.A. Davidson & Co. -- Analyst

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