EVO Payments, Inc.

Q3 2021 Earnings Conference Call

11/3/2021

spk_0: good morning my name is julie and i will be your conference operator today at this time i will like to welcome everyone should at evo payment third quarter twenty twenty one conference call online second place on mute to prevent any background noise after the speakers remarks that will be a question and answer session if you'd like that's the question during this time press star followed by the number one on your telephone keypad if you like to withdraw your question press that one again thank you mister at o'hare senior vice press that investor relations you may begin your conference
spk_1: good morning and welcome to edo payments third quarter earnings profits school or press release and fried detail on the copies recent vine trends are available on the investor relations portion of our website before we begin i want to remind all listeners that evil payments desire to take advantage of the safe harbor provisions of the private securities litigation reform act certain statements and as conference call such as projections regarding future performance a be considered forward looking statements within the meaning of the act such forward looking statements are subject to risks uncertainties and other factors which could cause actual results to differ materially from those express or implied by such for looking statements for additional information these factors prefer to a press release and filings where the as he say please refer to a press release for an explanation of the non gap financial measures discussed in today's call along with a reconciliation of those measures to the nearest portable gap measures today we will discuss our third quarter results and are over of business performance journeyman the call today is jim kelly or chief executive officer tom panther or chief financial officer darren wilson president of the international segment and brenda tancer president of the america segment i will now trying to call over to jim
spk_2: thank you add the money or the one in thank you for joining us today either delivered thought volume and earning his quarter as economic activity rebounded across or market and accelerated party the late and continued as you can people applied the can be demonstrated volume growth of fifteen percent compared to the word of warning twenty and on a currency neutral basis revenue grew fourteen percent adjusted even that grew twenty five percent and largely expanded three hundred and forty one basis point to thirty eight percent we have expanded our margin by over three hundred basis points for four consecutive quarters the excellent execution of the executive team and our global employees has enabled us to go revenue and an expanding raid my also we cable construction as we actively manage to the pandemic of the last eighteen months we are committed to delivering positive operating leverage and increasing or margins while also investing in long term growth opportunities thamel cover or third quarter financial results in more detail or financial results reflect our ability to execute on are well established bank referral and tech enabled threat sales strategies across both europe and the america we continue to work closely with our international bank partners to facilitate digital payment payments accept them and expand our geographic distribution as we enter new market additionally we are experiencing strong demand for integrated payment solutions throughout each of our markets and we remain focused on growing taken
spk_3: able to the for network to capture the global shift of software at the point of sale
spk_2: further we continue to address unique in market payment solutions were a global tech enabled products we including new integrations and are proprietary gateway solutions including clear one in spain way to pay in ireland as their systems and mexico targeted feel in chile and anderson that in the uk hey by enabling frictionless integration to and he software solution we gain access to the entire integrated payments addressable market enhancing our ability to drive outside market growth requiring and payment processing in the uk we recently integrated are and of them that are michelle gateway and now have access to more than twenty additional active i as a partners is lazy merchant portfolios we're working to convert to either acquiring platform further we're deploying our sales and product expertise to thought additional i a partners and drive sales were or business as we kept right on the exotic adoption of integrated payments which is particularly strong across europe during the joy i'm very encouraged by early success in the market and commanded commencing operation last quarter or strong failed efforts have enabled us to expand on merchant portfolio to more than five thousand customers as we move through the fourth quarter and into twenty twenty two were continuing to grow business together with our bank partner the cia leveraging either direct sales force and tech enabled capabilities er tech enabled channel on chilling include or recently acquired ecommerce gateway in addition to go to a growing i have the network brendan down and will provide more detail on our segment performance later on the call as the impact of the pandemic recedes we will continue to grow business through investment and ourselves distribution new product launches and them and egg we're thing increased and an activity related to birthday partnerships and integrated solution and will continue to pursue opportunities that meet our strategic and financial objective when his better stronger meant and them at the global economic recovery will continue to the fourth quarter and into twenty twenty two when we are confident that will be able to execute er strategies and generates on top line and bottom line growth finally as we announced yesterday i'm very pleased to welcome nikki harlan to board of directors looking currently serves as the chief operating officer of parody blogger there and was recently named to the twenty twenty one list of atlanta top one hundred women of influence
spk_4: or strong leadership skills and merged experience will greatly benefit the board and the company as we continue to grow now from the call over the down to discuss our european business dad
spk_5: thanks jim i'd like to begin by providing some first perspective on how york has successfully emerging from a pandemic lol government restrictions remain in place three much of the second quarter in the third quarter of vaccination rates increase restrictions were greatly reduce an economic activity significantly rebounded i markets are experiencing broad great across most industry vertical of including travel and hospitality which is expected to accelerate and twenty twenty two at the retaking continues and trans continental travel and the to say activity increase
spk_6: these trends are reflected in our recent financial results which now exceed three pandemic levels for the quarter european constant currency revenue increased sixteen percent year over year
spk_5: polio for the quarter was sixteen percent higher compared to twenty twenty angry twenty two percent two nineteen excluding the impact of attempt and edwin which have now lap european volumes and revenue grew approximately thirty percent compared to twenty nineteen
spk_4: as strong financial performance demonstrate the success of our interests of strategy which fact it on under penetrated market coupled with our ability to capitalize on the recent macro economic tell when an accelerated demand for digital payments we continue texture on not prevent a destructive to grow and diversify a match up for failure throughout our european market as we work closely with our bank continent and leverage are rapidly growing tech enabled fail channel
spk_5: across the segment we now have more than two hundred tech enabled for a partner and multiple gateway acquisitions including i pg play one way to pay and understand that integrated into our platform the tech enabled solution together with that continued investment and market leading production capabilities have enabled it to sign merchants running multiple back tickles driving accelerated growth for our european business with with island we continue to work with bank of ireland to go market share and bring in a bucket production capability to the bank customers i've left a demon we have established key in market relationships to expand gift card solution
spk_7: as well have contact with and mobile payment accepted financial
spk_5: the caught that we author enabled the card and storm and for irish economy merchant that we continue to expand or payments offering leveraging matt the cause by now pay later capability additionally we are actively expanding tech enabled referral network
spk_7: evidence by a strong a common sale and the more than twenty in marquis i see if we have time the here
spk_3: enabling it to attract new customers
spk_5: that the live soccer stadium in belfast this quarter we now have integrations to over forty i have faith in island which will continue to drive go for the fitness of merchant continue to adopt software at the point of sale in the uk at great strategy centers on tech a population the capture the accelerating shift to integrate payments given the relative maturity of the payments market
spk_4: it that we completed the integration of and syntax i recently acquired omni channel payment gateway which will augment are integrated payments offering in the uk and ireland and expands at tech enabled referral network
spk_5: we now have over seventy five integrated payments panthers and a merchant portfolio that exceed thirty five thousand customers on a actively signing me with i have the and merchants as we continue to grow the business
spk_4: today i combined irish from uk business represents twenty two percent of our european revenue compared to eight percent in twenty seventeen
spk_5: yeah to date this business has demonstrated strong revenue growth of greater thirty percent with a significant portion driven by a tech enabled channel turning to our central and eastern european business which is anchored by a joint venture with pk or in poland we're generating strong sales rebuilt by working with our bank partners and expanding a tech enabled referral networks as we increase their market share across this and of the penetrated region
spk_4: today we have over a hundred thousand merchants in central eastern europe which represents approximately fifty percent of i european revenue
spk_5: this quarter we continue to expand our relationships with many of about polish match and dining additional the case in poland and the czech republic as well as surrounding countries including hungry and slovakia among others
spk_4: let them straight it accelerated growth from a tech enabled channel by dining more than twenty i see this year which focused on serving merchants of by the physical point of sale and he calmer
spk_5: last month we had it three new eco my partner and loans that integration to a leading pharmacy software provider in portland
spk_4: a tech enabled revenues growing more than twenty percent and now represents approximately forty percent of our business in the region
spk_5: looking into next year or business is well positioned to deliver high teens revenue growth after expand a merchant portfolio through our product capabilities and robust referral networks
spk_4: in germany we have grown at tech enabled network to approximately twenty prefer upon us
spk_5: this quarter we signed an agreement with phil pay to provide gateway and acquiring servitude for their payments platform don't pay connect international customers to retailers across europe by enabling merchants to accept international a wallet payment methods like that the physical point of sale and online
spk_4: lastly sending to spain
spk_5: where think strong business momentum in this market and third quarter volumes are up eighteen percent compared to twenty twenty now that the headwinds some phantom there and the pandemic are largely behind it we remain focused on augmenting attack and able channel which now leverage it more than six the active i have these and the commerce partners connected via only channel to map platform we also continue to leave a bank to expand on merchant portfolio which he delivered that he sales growth even three the fight to the pandemic we believe our ability to execute a stretch it will enable it to return to our historical growth rates
spk_8: i'm very pleased with the economic activity across europe and strop business execution and third quarter as your it continues to reopen and cross border activity including the pc returns we are well positioned to deliver additional revenue growth and margin expansion for the segment
spk_9: i will nail to end the call it is brendan it will provide an update on our america's segment brendan thanks dan
spk_3: for the quarter the americas constant currency revenue increased twelve percent year over year which was driven by fifteen percent boy growth in the quarter these results were largely attributable to growth from mark international bank with channels and are tech enabled businesses across all market beginning in chile has previously discussed ego is now fully operational and delivering leading acquiring of them and payment solutions to the market we have worked with a bang partner easy i to generate strong sales results as we commenced operations in june we continue to cross help acquiring services to the banks initial target customer list
spk_9: of fifteen bow the merchants which will strengthen the banks existing customer relationships
spk_1: in our tech enabled channel we are leveraging are pago for feel acquisition coupled with ourselves expertise to accelerate be palmer's grown for our business as we also identify local i have been with which to establish integration and would hurl relationships consistent with iraq international sales strategy
spk_9: we anticipate or partnership with beatty i and tech enabled capabilities will result in the book that the generates over twenty five million of revenue within three years turning to mexico
spk_3: how boy increased twenty three percent this quarter compared to last year and fifteen percent compared to two thousand and nineteen i continue to be pleased with a solid growth from my bank and tech enabled referral channels as we continue to deliver strong sales and the market including the recent signing of several large merchants across multiple verticals including healthcare and online retail in our tech enabled channel which include i have to the and he
spk_9: commerce revenue was going forty percent this year and now represents approximately twenty percent of mexican business oh total much and portfolio good ten percent over the last year and now exceeds two hundred thou the merchants further demonstrative of the help of the market in our ability to increase marketshare across all of our sales channels
spk_3: in the us volumes for the quarter were approximately seven percent above the prior year which was driven by or be to be and i have the business us to be and i have the together blue and the meeting this quarter into they were present over forty percent of our us revenue
spk_9: specifically can be to be business we signed a significant number of new approach partners to expand or between work and capitalized on the low carb penetration of this past growing market we also continue to cross acquiring services to our proprietary paper gateway customers and expect the success of this conversion strategy to accelerate as the impact of the pandemic moderate we remain focused on growing up be to be business through organic failed expanding our for all networks investing a proprietary products and capitalizing on and many opportunities particularly additional trp integrations in our i have the business winds of continue to improve as merchants migrate to software at the point of sale and consumer demand for hospitality services rebounds
spk_3: we recently established integrations to international i had to be such as impotent peripherals which will expand to diversify or merchant portfolio as we work to meet the changing consumer demand that have remained unaffected the beginning of the pandemic we will continue to invest in our capability and expand on the phone network support the growth of this business i am pleased with a third quarter performance especially on growing tech enabled business which is not only a strong sales channel in the us but latin america as well
spk_10: you are continuing to invest in a mexican platform and strengthen our infrastructure to support growth in this market in addition to chile as we expand our present the latin america we will also look to grow or merchant portfolio by entering new markets with strong growth opportunities leveraging or tech enabled with whole network and international bank
spk_5: partners
spk_9: with that i will turn to call over to tom who would cover the financial in more detail
spk_10: tom
spk_1: thanks brandon and good morning everyone for the quarter on a currency neutral basis revenue increased fourteen percent and adjusted ebitda increased twenty five percent and margin of thirty eight percent expanded three hundred and forty one basis point compared to the prior year further compared to twenty nine g r third quarter revenue grew ten percent and adjusted ebitda increased twenty two percent as our margin expanded three hundred and fifty one basis point a strong results are despite that significant strengthening of the us dollar during the quarter which adversely impacted revenue by approximately two million dollars
spk_11: we again generated record volumes this quarter which increased sixty percent compared to about twenty twenty and twenty nineteen
spk_5: sequential revenue spreads increased this quarter dude a merchant max and a seasonal increase and cross border activity dtc revenue increased twenty four percent compared to twenty twenty or remains approximately forty percent below twenty nineteen levels
spk_1: we do both spread improvement and dp see revenue as opportunities for additional revenue growth of over twenty million dollars and twenty twenty two this quarter's solid results demonstrate the company's ability to generate strong top and bottom line growth as economic activity gradually realizes across our market
spk_5: we remain optimistic that these trains will continue as we leverage our capabilities to capitalize on the continued cast a card tailwind that have persisted coming out of the pandemic
spk_11: with respect to segment performance and europe or year over year constant currency revenue increased sixty percent and adjusted segment profit increased eighteen percent in the americas he over year constant currency revenue increased twelve percent and adjusted segment profit increased twenty percent
spk_5: adjusted corporate expensive for the quarter were ten million dollars which decreased five percent from the prior year primarily due to the timing of various cruel last year adjusted net income for the quarter increased forty four percent to twenty six million dollars compared to last year and adjusted net income per share for the quarter was twenty seven cents which increased eight cents or forty two percent compared to a year ago
spk_1: at the end of the quarter dilutive shares total of ninety five million an increase of one point seven million weighted average shares compared to the prior year
spk_11: and the third quarter catholic spend jurors were six million dollars versus four million dollars and que three twenty twenty of this amount seventy eight percent with for terminals as our markets continue to reopen and board additional merchants
spk_1: free cash flow for the third quarter increased thirty three percent to forty million dollars compared to the prior year
spk_3: resulting in a free cash flow conversion ratio of seventy seven percent
spk_12: this was driven by the company's record earnings and lower interest expense we ended a quarter leverage at two point two times which is down from two point six times at the end of the second quarter we also just completed the refinancing of our term lung be and revolving credit facility which reset your in two twenty twenty three by entering into an all bank term loan and renewing or two hundred million dollars revolver which now mature and twenty twenty six
spk_3: the new credit facilities lower our interest cost a full percentage point and enable us to retain the same flexibility to access additional capital to support him in a opportunities for the next five years
spk_2: you got our winters they pull you revenue growth has been devoting person twenty to twenty two percent he but i'll grab onto hundred to two hundred point of modern these results with like a strong third quarter of the performance of the other rate remained consistent with her corner and straw consumer drones in you know martin
spk_11: with that out on call back over the gym
spk_2: jim thank you tom i'm pleased with the company's performance this here as we've successfully executed our business strategies
spk_0: revenue and a our growth rates have increased or margins have improved over three hundred basis points
spk_13: and our balance sheet is extremely strong as such we remain focused on delivering consistent growth and expanding our geographic footprint and tech enabled illnesses we have solid momentum heading into twenty twenty two and are well positioned to continue deliver strong financial results to organic sales and capitalize on additional emanate opportunities
spk_10: oh now trying to call over the operator to begin to question and answer session operator
spk_11: thank you at this time i've liked him on every one another test the question press time than a number one on your cell phone keypad and your first question on some charge me out some cohen's please go ahead
spk_10: greg morning guys and or congrats on the solid results nice to see the of the moment
spk_9: i just think you're like my first person on top who talked about the ttc opportunity that that still sort of the head of you potentially another twenty million dollars if it if it gets back to ninety levels are off for work for twenty two it can you give us a sense of the distribution kind of by countries do that sensitivity meaning you know how much of the
spk_11: it really poland vs know a geography like like spain and the like just has been sort of clarity around that novel
spk_13: sure i mourn george don't the majority that you expect is poland on your big given that it's a significant portion of our european business
spk_11: we do expect to see increase it cross border activity our domestic card activity in poland was about and still ninety percent domestic so there's still an opportunity for more international and european cross border activity that that we see going forward but yeah you'd heard in a and com
spk_13: hence we see a lot of opportunity in spain we have the santander matter that we've lapped and know we think there's some really good growth opportunity with in spain that alonso add additional dcc momentum now one just thing to clarify the twenty million that i referenced was a combination of both improvement in dc see as well as
spk_14: as where we expect to see spread
spk_3: continue to migrate up into twenty twenty two based on transaction makes and and merger makes it's want to clarify that you didn't attribute all of that to just dc see there is a component and that it is spread improvement
spk_11: really appreciate that color hominin an art gym i know on on the last call we we were seeking out your are your expertise on a lot of things happening now real or perceived in the yeah
spk_15: in the payments base and i'm i'm i'm i'm just curious given your experience given you guys have a up a big european business i'm i'm curious what you're seeing with alternative payments specific to you know things like account to account base payments which i guess with open banking might be a little bit more prevalent their relative to the us is that is that encroaching
spk_11: on the business at all other opportunities for you guys to participate in things like that and then maybe it's up as a as a quick follow up on obviously the balance you get in good shape anything in sale now i'm in a in the the out valuations are conjured for some of the assets that you're interested in thanks again and i apologize for the long winded question
spk_14: now george your question or much appreciated so darn for the first time in what eighteen months is actually sitting in the room that we've been doing this by pointing to each other over the screen previously gonna let him take part of it i think is you guys see these headlines whether last time it was by now pay later or here back to a transfer even made these are true
spk_11: and that are appearing in the marketplace but the entrenched business as the core visa mastercard and the other cards your our job is to support the real estate and for the point of sale so it really it doesn't really matter to us at the end
spk_14: what the merchant once too
spk_11: trends act as long as it's running across or rails in in some way or fashion so we have we've seen probably more in your eastern europe than in western europe a an interest in data bank transfers
spk_14: which to us mean i guess the equivalent to the us would be kind of and a ch type of a transactional that i think this is more real time than and a ch which is delayed
spk_5: the it's super early days so i would not and i would not be overly concerned it's gonna have some material impact in the near term and the other cases we've seen visa mastercard the mastercard made an acquisition in the space and europe so my expectation is that a you'll see those big brands
spk_16: find a way it is need to be relevant in that space and lows of the primary relationships that that we support ballot
spk_14: dare to amplify something are there are come back to emanate there they're short yep i'm james covered it ultimately yes in eastern europe with being kind of great traction through the online channel say ecommerce where there's kind of a button say adopt an account to account type payment ah it's not getting any traction in the card presents space
spk_5: as you'd probably imagine cause if canada the the friction to try and do that and they can it muscle memory of paying by card or any wallet tight from the action there think some intro into a come it's not material that said we see the trend with them working on ensuring we play in that cap space and ensure with to stay in economics of a cancer camp at were at we see that growth opportunity so it's not it's not think the volumes yet but we'll we'll have a footprint to capture those transactions in future is just to drop somewhat of a parallel on data they transfer but there's a domestic scheme in poland that was getting launch of the time we entered parliament twenty thirty the under twenty thirteen it's called black i am blake's then single digits since twenty thirteen i ain't seen an uptick with ecommerce since the pandemic so i don't know if it's out a single digits yet but a it has been a long run way mean almost eight nine years before it's become now beginning to be relevant in the marketplace
spk_11: i think data banks probably got some time to and another this game called the be them in spain as well as that's got ah
spk_14: or over ten million registered as in consumers but similarly volume small at the moment but exclusively on line as well and we also plan that space and time the constraint capturing the them transactions says a similar to block open banking know across the rest of your really is an account information service or the payment information service at this stage
spk_11: we're not seeing any real traction in the uk and ireland or other with the market
spk_14: and what we have to remember the benefits of visa mastercard charge back rights all the rest
spk_11: early days of credit and that it's still a incredibly compelling solution for consumers are the end of the day it's not our decision or somebody elses decision it's the consumers decision as to how they want to transmit transact business and down still extremely bullish on the major brands continue to be incredibly strong a very long period of time and then on your second question is tom said and were very very pleased at where we are on on leverage i actually think georgia was one of your notes pretend damage that highlighted that we were north of for
spk_14: so to see us down almost below to inward to one to two i think is a testament to the management team and the efforts there we did bring an additional money before the pandemic
spk_13: not knowing how long and how deep it was going to be but there's a lot of effort that was taken across the company to tighten tighten the belt dory
spk_17: covered and and coming out a covert in this was my your expectation is that would be well positioned to take advantage of them and a i also mentioned by guess some time last year this time about is difficult to do them and a when people are traveling but as we see domestically and internationally people are starting to
spk_0: a travel again and we're definitely have a a lot more conversations
spk_18: on the emanate from you alley closed deal in chile for a gateway last quarter and my expectation going into the bouncer this year and definitely into next year that will be coming to market with more emanate announcement really appreciate the color and congrats again on the corner nice nice results thanks george
spk_11: and your next question come some can send one hundred eighty martin please go ahead hey i have to echo which was second good results here it's good to see summer and queen numbers just under on the by inside a just want to make sure given what we've heard from your peers just bummer
spk_3: to pry standpoint month to month into a corner any
spk_11: change or anything concerning anything to say around october everything looks pretty consistent just just want to make sure there's been a surprise and from a macro standpoint
spk_18: good morning to engine thank you know no surprises honestly we were trying to win the market off of us publishing hyams every single month elite i really did that in the beginning because when we first had covered we did the raise or i don't think the market appreciated house the or it was him because we are heavily international sixty five plus present international no the the european market with say i think it faster than clearly mexico and the us so that was being that was the catalyst to start producing the the slides we didn't put october on october with sequentially stronger then september by couple of percent so actually subbed october was a very good month when the reasons we feel good about the quarter of in effect is obviously out of our control
spk_11: you're all the news that were saying about supply chain issues and how they issues out there they're still it a potential headwind in the in the world relative to that but your where were sitting today we we will look the fourth quarter and going into next year feels good
spk_14: sorry to hear grid here my quick bottle of just on margins i'll i'll ask you you been
spk_11: just like you said on leverage fun you can an amazing job getting costs down and and and producing chong march you hear any change in philosophy is you going to twenty two you feel the need to invest more
spk_14: aggressively or or can we assume that a lower court cause baseline years shirts that thank you
spk_11: got a i remember for the last twenty years and in question on margins
spk_14: yep margins and i feel like we operate the company as we try to operate companies efficiently as possible we out we obviously playing over the last eighteen months not just on the payroll side which we've already announced but on the nonpareil side we found ways to be more efficient reduce expenses root root reduce rely
spk_11: hands on third parties that were we are either part of legacy either were part of some the companies that we acquired
spk_3: and so largely what you're saying is permanent we've we've reduced the expenses and as the company continues to get bigger
spk_9: as we make more acquisitions yeah i don't see the margin goes up indefinitely definitely but i don't see pressure on the march and line and i think the other important feature is it's not like we're starving off the will we like everybody else is somewhat challenge and filling open positions and it's one of the things i guess
spk_3: feedback from the the and the gm to run the business day to day but in a worse competitors weekend the i'm on
spk_11: on salaries and attracting talent in
spk_16: so maybe we'll see some incremental cost increases we add more positions but the company is not starved for employees and as you see on the capital side were continuing to spend money
spk_0: to by terminals because the business is coming back pretty aggressively i a the other benefit we and every one is benefiting from is that there's more spend on card
spk_19: as a result of the pandemic so we're just a bigger company nine it's way more merchants in the aggregate be just a bigger company because consumers are spending more and spending more on a card just drives the a greater march and for us so your relative to your first comment on super of it
spk_9: impressed by how the company has performed on the march on line i remember going public and during the early days the ip oh that was a question we got wires are margin so low were margin so low relative to the bigger guys and i would say and are bigger guys
spk_19: but yeah we're within spitting different distance of the companies that are multiples of our size so i think we're running a really efficient place right now good stuff thanks thanks thanks
spk_3: on and your next question comes from and she just centrist seen fun
spk_5: i a good morning pretty taking the question
spk_15: the gym yeah i think a sort of falling on a contingency question we're we're clearly seeing a lot of noise in the market just around at the differentiation have some of the more legacy players and and one of the things that consistently jumps out and i was you talk about your business is the focus on
spk_16: tech enabled and specifically the gateway strategy and i want to be to spend a couple minutes talking about how you think
spk_11: you've always position in the market especially in in in the us and in north america and how maybe some of your tech enabled issue is absent owning vertical marked software for example distinguishes the company and and improves your competitive position perhaps relative to peers okay and they do this in tandem with others brendan since he has the americas
spk_2: yeah i think it relative to our peers in the us or are pure the us are massively bigger that way and very successful companies the i personally think their reaction in the market has been a massive overreaction these are very
spk_11: a oh well entrenched strong
spk_3: companies with lots of technology lot capabilities so difficult to compete against
spk_11: we have physicians the us around tech enables you said out through an acquisition or a series of acquisitions the piece a business that we are our the two pieces of it with that were most focused on his our i have to the business which was based out of tampa which is through the sterling acquisition that has grown multiples of where it was as when we first acquired it and and the one that's even more impressive is our beat to the business which is based in denver in anaheim
spk_20: and focuses on the receiver or side and it we send as many times before i think
spk_15: that has been in is going to continue to be our primary area of focus for our us business because that's what consumers are looking for in particular on the beat of the space we've made a series of acquisitions and i think we're going to continue to we we have a differentiating product done on the microsoft plugin on as
spk_9: a p on oracle are these are sticker stickier and larger customers customers the size of levi's as a p as a customer
spk_11: fuji films as a customer and i think that's that's how we at at our size without bank relationships in the us was we have outside the u s i think let our you're going to see us continue to grow in a meaningful way domestically as the the other gateways we've we mentioned in the script
spk_1: what we have learned
spk_21: over time where we originally started with the us snap gateway for i have these it with supplement that by buying into smaller ones anderson's acts are really good example there and matches speech know this is something we chased for a number of years it's got over a thousand i customer
spk_11: as already connected to it over twenty i as these connected to it i think it in total were like forty or fifty i cities in the uk market that has been an incredible bright spot for us in terms of it's growth rate of actually the uk market is almost as big it or not are bigger than our irish market and it does not have a bang
spk_9: partner the he are you a get uk business think of the old mercury business in the us on the ice the side were essentially just taking that playbook and each of these international market and taking the learning from the us from our i as he did he was at a tampa and using that as a way to
spk_5: to hear teach our gm internationally what were new opportunities are besides just relying on financial institutions and of i covered all that the bread enough you wanted to add something to that
spk_22: maybe you know i mean i think i think jim
spk_14: hit the had the question had on a minute what we're trying to do not just limited to the us a globally as bill distribution and you know our our our entre to the market your to to the distilled a strategy me and make it very simple we go into a market with a partnership through a bank the bank provides a brand we don't call ourselves eva eva we brown
spk_9: ourselves under the bank the bank you know it's corporate bankers and retail footprint constitute our initial distribution and then we immediately followed that up by introducing are other cells capabilities and products that and moon we try and buy a gateway in the market because that gateway excel
spk_11: low rates are integrations to i have these that have a significant presence domestically whatever market we're talking about and those i have these and vars and resellers become an extension of our distribution i'm and we think that you know in many of these international markets were not competing against you know the great companies domestically year that the gym referenced earlier were competing against financial institutions that are otherwise super focused on innovative point of sale solutions so that you know that the list that the gym referenced earlier anderson zack's clear one in spain as of us and mexico to lego and notice here domestically pago for sale in chile they they are all a replication of the exact same strategy and we talk about it all day everyday hear how do we build distribution in a scale of a way that doesn't just constitute hiring warheads because this allows us to you know attract a lot of them are a lot of merchants grow the top line grow volume and not grow
spk_14: our headcount which creates the ebitda margin that we all enjoy
spk_2: just when i had one other component to this as heat and brennan just described going into a market again will use and through tax or we could use sfs fast and mexico
spk_14: the going into those market we have two options go in with her own software for
spk_11: flash by somebody in the market and now we're competing in a channel that's not court to our company or go into a market and try to partner with everyone and or maybe we have to give up ten or fifteen percent of our revenue or we're not getting up ninety nine percent of revenue which you would see and okay fact model with somebody like a toaster or somebody of these other companies that have been enabled over the years to to basically harvest the value of processing the payments and piece of it as opposed to making money on software so we're partner with software companies where we keep the majority of our revenue and just like a sales coming
spk_13: ocean
spk_0: we knew we pay them a self commission for referring there's this to us and that model has been replicated country after country after country and i again i think would be naive to think that i can develop a software in the united states it's going to be ubiquitous across the world their software everywhere everywhere we've gone to the point of sale infrastructure that is that it's already
spk_23: in place so that's the model internationally domestically a we do the same model on the ice the tide and and very heavy focus on
spk_24: on the to be where we do differentiate by buying software developing software as plugins to earpiece systems and that what we're seeing the evident and from that strategy as we said in the script is that the growth rates of those businesses far exceed the total growth rate of the company which overtime
spk_23: time will pull the growth rate the company up him beyond where we are currently long winded answer been ugly that answers your question yeah it does to prepare a thank you and your next question and some thought natalie some logan black go ahead that you could morning
spk_11: every once had i hope maybe along the same lines ah but how do you know about the growth outlook for ego today he been public for years ago yeah that not be a model that that you would put out there you know the market is kind of saying that since been a lot of new technology and that
spk_3: it had that some companies that you know the thought when you stop he's kind of flat on for years ago that you're not be able to compete against that new technology it's gonna take market share but added how do you feel about he does market position versus the
spk_11: in other that the new companies that are out there and your growth opportunities and the growth model versus one so you went public for years ago yeah i like my model and the i i can't speak the while the valuations that i see in the marketplace for companies that lose the amount of money that they do and have valuations that have a lot of heroes bind them but know our strategy is is i think well documented as we've just the
spk_14: scribed here i think this is a superior strategy on all levels and thanks yeah i think we have a lot of investors who are us down the south where maybe banks have become less relevant to the payment market but sixty five percent and growing and of our businesses outside the united states where banks are still very relevant who are branches
spk_11: are still relevant relevant businesses dunaway differently than say it's done here in the united states and the tech enabled piece that we just described is very vibrant is growing is very low penetrated outside the united states couldn't so inside the united states were not competing again some of the businesses i think that you're are you referring to relative to recent valuations we're focused very narrowly on of the to be space which has twenty four try and as they say of opportunity which will vote a lot of boats and and and i as a business that again is is not based on owning software because i might variances been software in and of itself is not making any money they're making money on the payment side and i think them hate mistake that some people have made as an able these software companies to make all their money on the economics of the of us
spk_10: rockstar on the cost that companies like us have to bear to run our businesses but we're not competing a law against a lot of the companies that you're referencing or you're not referencing but your i think referring to because word domiciled in chile and mexico and countries across europe where we're not seeing the
spk_23: the phenomenon that maybe is more prevalent here in the united states but i also think there's a test of time let let's see how these businesses do over the long haul do they morph into something else
spk_25: were because it's at some point they do have to make money
spk_23: if they can choose aggro for the sake of growth they have to be able to provide a return to shareholders and wanted to see that you know some the feedback that i got when we went public was about not just growth but margins and leverage and all the rest and those other ingredients of the company have been more than address and your so
spk_13: they are growth continue to accelerate and that's going to continue because what either started with was a small sales organization based in new york that was a traditional i the model that all us companies that are payments face have some remnants of and it's still not
spk_10: and immaterial piece of our company is still a resident in the us but outside the u s as you saw in the numbers now some of this is a bounce back from covered but i'm all or numbers are pointing in the right direction and i feel very good about competing against any other companies
spk_11: domestically or internationally i don't see any concerns
spk_26: thank you dennis the follow up has is tom of out you want to give any color on growth rate and twenty twenty two many seen pretty pop and it you know assuming you're kind of a stable recovery from coded
spk_7: to the would you expect
spk_11: the growth rate to accelerate from here
spk_5: and he just any color to give someone seems like a very competent are margins and so maybe know steady in a gradual margin increase by just any thoughts around the revenue growth and twenty twenty two be harmful
spk_4: sure yeah will force comment on the macro economic environment i think we expect there to be a strong macro economic environment and twenty twenty two and mm peers be a baiting vaccination rates are increasing
spk_11: you governments and consumers are getting a strong footing underneath them i think the macro economic environment think is encouraging are we set a couple of times that the cast a card tailwind seems to continue to be at our back we would expect that to be sticky on i mentioned earlier in terms of the level of cross border active neither we expect to
spk_14: see an improvement on as i said domestic ah volume was around ninety percent in our european market i historically it would have been year we would have seen a a higher level of international or and cross border activities i think gcc will be a benefit us so
spk_3: we think a lot of macroeconomic as well energy industry specific opportunities and in front of us and i think that bodes well for the growth potential of the organization
spk_11: i think you have the this year where at that thirteen fourteen fifteen percent growth rate will be all coming off about top topper comparable obviously twenty twenty one but if historically we were you know eight to nine i think going forward
spk_23: with those when you could see as above this historical level on a on a go forward basis hard to predict where we sit here today but that would certainly be our expectation that the that you'd see a rotation up from that those historical
spk_27: top one growth rates that that would be rated before you just that that one of the as i just mentioned has that his gonna help dagger overall growth rate is been a legacy either others we referred to as traditional but our eyes the and be to be in particular be to be has grown
spk_0: meyer five times the size six times the size probably more than when we first acquired it from sterling an added some acquisitions for those businesses are now over forty percent of our us business and as soon as they continue to get bigger and i think be to be is probably the one where we have bigger opportunities are better
spk_28: opportunities for emanate
spk_20: and that becomes a bigger part and their it plays a bigger role in iowa
spk_11: payment commerce in the us then you're going to continue you will see the us business accelerate european and latin america is already where we like it today it's really the u s that we've been working on trying to move it up the chain thank you really appreciated
spk_3: yeah they've been
spk_11: yeah next question and some ramsey alice how some barclays please go ahead
spk_10: pajama thanks for us because human hair i i wanted to ask about the american segment and how much revenue generated in the corner from from bc i am that part of a hill game understand it going to a sense of the underlying us mexico performance versus article this incremental or new this year
spk_5: yeah i think you would see in the quarter the revenue from bc i and pago for sale was relatively material from and i think you know we really only started book boarding merchants in earnest in the second half of september through the j arm and then october you know i will say we are
spk_29: are the beneficiary of a very very engaged big partner there and so we prescreened in i think in the script with a thirty eight hundred accounts on you know we have very lofty ambitions in terms of the number merchants we think we can board between now and year and and they have a very significant foothold in the corporate banking segment so some of these merchants could be considerably chow
spk_11: thinking in terms of volume and profitability
spk_28: but in terms of contribution within the quarter you know from from from the jb relatively a material and and the pago for sale gateway while profitable an attractive is also relatively small the stage as well yeah the granted tom i think the story around your bc i in chile is really a twenty two stories as brendan santa mean you're talking single digits you know
spk_14: low single digits on the revenue contribution measured and millions from from the business i was just getting you started down there but we do
spk_3: a have expectations of from a revenue perspective you you you'll see that exhilarate significantly and twenty twenty two and and beyond and then and brendan script even commented on you know how that business we think and can grow significantly over the next three to five years and and you
spk_5: to generate outsize done revenue growth for us print to a strong organic drivers this quarter rather than a nothing short of near incremental or inorganic driving the be i appreciate that one fall of question for gym is or maybe not as term for general every for whoever chewed answer and you mentioned enabling mastercard installments in ireland and i was just wondering if you can talk a little more about that implementation maybe opportunity rule that product out more broadly a cross your footprint and if you might also just commenting on your updated view on by now pay later in general how it's evolving how you see it as an opportunity you are potential challenge for the business specifically
spk_30: well there it is here is not irish is english fun
spk_5: oh there are a lot with i'll let him answer the master card and i can i guess we can both talk about the by now pay later
spk_31: shopping seven
spk_11: at same a scottish government's is purely the in i must card ensuring that they can support their your bank with installment solutions or by now pay later haryana label it but really more an installment product of ensuring that sir
spk_3: they play in the market and we wanted to be front and center with them and sanders you're in the integration that we've got that functionality and capability clearly it's the at the minute the fashionable
spk_11: time in terms of can see him is seeking installments war a myriad of products rich and as some of it is questionable i think in terms of taking your grocers on three months his own success or think that there's a lot of for in the market at but i think in terms of having a stable secure legacy bad future products in terms of enabling merchants is important to partner with master card on a robust and dormant solution doctor it's a by now pay later is is not limited to the u s a movie the i was talking to poland recently and their story to see the the shoots of people talking about by now pay later her again for our industry my experience has then in discover would be a good example of this amex another is that merchants like a single statement a single deposit it makes life easier to manage their business
spk_3: so the have a by now pay later company coming in with a separate deposit as opposed to ruddy everything through the acquire who again has the the the real estate
spk_5: id in the long term that that's not a good outcome so i see if it as by now pay later it to me it does continue to to be a part of the options for consumers then that either yeah it is gonna be at the point of sale it's gonna run through the same acquiring structure infrastructure that's
spk_32: calm and across all the markets and as some of our larger competitors have said and i think we have a small by now pay later company that we process and transactions for and they need someone to get to these a master car least for debit transactions though they're gonna ride the rails of the company that made the investment otherwise
spk_33: they have to spend a fair amount of money to stand that up for themselves so i think on both ends whether it's processing for them or it at the point of sale
spk_34: i don't i just say is another tender type i don't see it as a as a threat to the industry
spk_35: and just one more clarification will to have enabled it an island for ecommerce transactions we can take it across the european markets
spk_36: the a jam the uk spain access or say where it's an important engagement with mastercard that i think continues gym says embedding as with
spk_37: the games to support this transaction time
spk_38: at a very helpful thanks so much
spk_39: and your next question on some as fan service some citigroup please go ahead
spk_40: one
spk_39: none good corner in doesn't
spk_11: as a nursing home you go i'm the bank respect and is my looking at ten minutes in the propensity to continue doing
spk_3: continue doing bank partnerships and the pipeline from the bank perspective what his teens the moment the last
spk_15: during the day
spk_11: appreciate your bad now bringing him or his neighbours parlour the how did that plane was he has sense within the pipeline look like
spk_16: okay
spk_11: edmonton his prior but i think they do this for two reasons do this meaningful relationship with a third party it's not uncommon internationally for banks to have partnerships with a variety of different companies that have specialization in anything from payments to insurance
spk_41: and i think they do it for two reasons one in the case of a bank that needs to threes raise capital there is a process to look across the bank as the ways to raise capital versus just selling stock and know in the early days of either international expansion we capitalized on that coming out
spk_3: two thousand and ten crisis and in particular in europe and i think even in in latin america to some extent the last several years pre pandemic and i think we're seeing it again now it has more to do if they don't need to raise capital is capabilities so it got a lot of money to build companies like either our global or f i s et cetera and
spk_14: the the ability to replicated not impossible but for a financial institution is it would be a very big undertaking i think they would have to buy somebody for that to to to the able to get to market and any reasonable period of time and the model works a it's been working since first date acquainted back in the late nineties and into the two thousands mild company global payments has been extremely successful continues to be successful with it
spk_25: the antlers when it was doing it and now is started see it was some european players so it because it works and has worked in canada the us asia pacific in europe latin america then i think the stigma of our and have a partner who's going to touch my accounts just like i touch the same customers i think that gone and
spk_39: at a reputation that our company has we've got on oct fifteen sixteen of these relationships spanning several different continents
spk_29: that gives somebody
spk_11: yeah
spk_10: a level of comfort that they're dealing with an organization that knows how to properly dealt a business together because it's not all about us as brendan said who are model is their leverage a variety of things one of which is the bank's name and that's an important distinction and our approach is going into a new market where nobody knows who
spk_11: either with we go into ireland and weren't or the bank of ireland payment acceptance or we go into europe the czech republic where were aligned with right husband bank and were called repo are for real for reified than an evil for our name and i see that as i said earlier i see that starting to accelerate there's still lots of banks in the world it
spk_10: it need to be relevant in the digital world and that's something that we and people like us have the ability to do where someone who is like a square or
spk_42: others who are competing for banking services they're not going to be interested in partnering with somebody who otherwise want to offer a service that the bank is otherwise
spk_43: i used to doing so we are very clear with financial institutions that we stay within our lane we do what we do and the you know they continue to do the other thirty or so banking products
spk_0: the
spk_9: the second question they could you do mine me
spk_14: credit was his debit by year in your pin is getting a few questions on net
spk_11: yeah hey ash minutes and tom so you'd expect in europe it's heavy debit market is probably over eight percent debit market within within europe within the us it's kind of the first but not quite the same level seventy percent credit we've actually seen the credit market card type actually move up recently that
spk_44: atlanta think that doesn't influence our view around spreads and then within mexico it
spk_11: your credit market is already fifty percent of the of the business with a bit more balanced in know in mexico and credit and debit and then known as i mentioned earlier europe is is heavily debit card relate based think again and go they that run
spk_3: yeah next question comes on protect met up with some marked cause we teams go ahead
spk_9: he could morning a gym i know you've answered a lot on acquisition i'm wondering if you're seeing any change in who you competing with acquisitions were especially since through the valuations that we found the public's eye are coming down and i'm wondering if that's changing our meeting people
spk_16: oh who might want to compete for some the actors and one sir i don't think about these garlic i have the answer that question somebody else have something similar so i
spk_11: it's a fair proxy but i is where we trade in the marketplace tend to to some extent drive what banks think there is this is might be worth that there's other dynamics in play and yes as the industry's trended up over last many years i think it has driven up the prices for or
spk_9: he the requiring a business in an alliance structure or it in a joint venture
spk_22: structure
spk_11: but the going in price relative to the things that both brendan and deron have described with mickey other acquisitions in the marketplace integrating to our it fixed infrastructure of back and systems are back in and front end systems the it still provides a tremendous amount of leverage
spk_1: but i i think for for now i don't know that the prices because the on the the impact as to our stock prices in our in our sector of the industry
spk_9: that has moved down a pretty significant recently i don't know that that's translated into
spk_33: what what the price for the next bank a relationships gonna look like i think it will have a bearing ah
spk_45: on it but yeah these relationships take a very it's like a marriage as i've said many times it takes a long time to put together you date for a while before you're in a room talking about contracts and the like but yeah they take they take a variety things into consideration and clearly public public multiples are part of that analysis
spk_11: it and then to followed by the know tom or brendan you talked about the to a business and i know a thing time he said really twenty twenty two years you should start seeing some acceleration murray from margins the and point is that business a similar to kind of the margins you see in the americas where the different
spk_29: yeah
spk_11: and thanks for the question karthik so
spk_29: you know we won the the company and a hub and spoke model you know we have kind of to be hobbes internationally we have
spk_10: the off of the european business and in mexico city for the latin american business and what that allows us to do is populate are in market businesses with sales initially so basically exclusively sales
spk_11: and then you know overtime or move customer support in market as the business skills
spk_5: we are going to be processing the market or we are processing the market are mexican platform which know sensibly has no variable cost per transaction are very very little variable cost per transaction
spk_14: so you know that and we may lose a tiny bit of money for the first couple months we would expect to get to break even super quickly we would expect there to be you know
spk_11: positivity but top for the first year we would expect the margin to scale and normalized to what you would see and are other you know spoke model car spoke markets around the world so we will look very similar when our irish business or spanish business or german business might look like so are you know
spk_46: and that would be way north of fifty percent contribution margins
spk_45: perfect thank you very much appreciated
spk_0: yup
spk_47: yeah next question on some brain keen on some that's a bank please go ahead hi guys good morning i know we're gone long aerosol just keep it the a quick one question when i just like high level you know you see the massive improvement in volume on a two year in europe
spk_11: but on a two year the the americas drop their think from twelve percent and nine percent so just thinking you know it's particularly in the americas given that the cause for the the drop on a two year and in that possible rebound on the to your gone forward
spk_16: jerk hi brian saw the uri as we said the us business doesn't grow as fast as or international business so it's somewhat dilutive to that overall blended americans
spk_3: growth number when you look at mac when you break it apart mexico's grow in north of twenty percent
spk_47: and the us is is years we've said before it it's gonna be in that mid single digit kind of grower until the tech enabled peace new continues to grow we do see double digit mid teens growth in the eyes the be to be business not just on know top line but also on the volume such as a function of those other businesses continue to kind of dilute we look forward to when those good businesses get smaller and and you aren't you informed and some of the some of the blended numbers but you just seen a bland of of those other businesses near continued to affect the overall but new internationally and whether it's europe more or mexico the the volume numbers are very strong and powdered add that while the be to be businesses done are incredibly well through the pandemic in relative to other business channels that we have our i as he business the you as our growing outside of hospitality business required years ago was predominantly hospitality so the other that segment saw some closures and that segment as rebounded and and retrenched and rebounded or retrenched to the sad service issues and you're getting servers and
spk_11: thatcher so i think that fan
spk_5: not really a a headwind but relative to volumes and and maybe what the bounce back would have otherwise looked at the like i think that is played into it a little bit too
spk_11: gotta help of okcupid their thanks guess
spk_48: thanks
spk_49: yeah next question some jason cuts about some bank of america please go ahead
spk_0: hey guys cathy on a home i didn't wanna follow up on the
spk_11: october time that you mention would cost them into their relative to september that's about the america than the european segment and are you assuming these the a holding pattern from the upper levels in order to hit your twenty twenty one and thing so yeah i think it's time to amplify five but i think we're pretty consistent in relative to where we were coming out of the quarter and we would expect they will continue in we have a holiday season that we're approaching and to markets in particular have probably more exposure to big box type of activity that would be a mexico and are polish market as opposed to and most of our others that the more stable type of activity so there may be some improvement in
spk_5: ember just as or a relative to rather months just because of of the holiday i think that's helpful and ah and ninety all up a follow up on bargain than a that i be a night owl that is over
spk_11: point that migraine didn't on the yeah yeah like next to the kind of be thinking about it back you to seventy five point of of annually fans yet another example that are coming back
spk_21: but he kind of like watching my games with me a little bit of a deceleration he held out had said could the phone call quarter thank you
spk_9: hey kathy i'm eat your zipper my comment that they want to that an answer and bobs question terms of how do we think about twenty two i was focused on on revenue growth and talking about how we think go to be a bit outsized relative to the long term historical run rate it would feel the same way on margins as well so
spk_21: for pre pandemic we were gonna fifty to seventy five annually i think that rotates up this regard to one hundred
spk_11: will continue to invest in the company long term adding our resources predominately people customer facing of people whether that's customer support or sales so that we can continue to feed the distribution engine but we will you be done your very focused on are operating leverage a we've demonstrated you strong execution or through and coming out of the pandemic and i think operating mode will continue to be something that you will see as generate with your causes margins to continue to expand yeah obviously the the with the three hundred basis points is a complete you know pandemic reset but we're from here we see margins and growing at a higher rate than historically
spk_22: i think guy
spk_3: or good
spk_14: he next question comes on can such as keep some autonomy h please go ahead
spk_3: good morning everyone thinks the thanks for taking the question yeah i saw a follow up on on chile opportunity
spk_50: you mention it with the a twenty five million grab an opportunity within three years when he talk about how you expected revenue for ramp over the coming years is it that linear call eight sixteen twenty five
spk_1: over three years and i get any other detail and how you came up with that as imagine if there's a pledge that number
spk_46: your head and care if tom and brendan i can contact him this arm so know we would we would see it as the accelerated is as brennan said twenty twenty one is is our start up been part of the see okay with an established business five thousand and merchants and and growing ah
spk_3: but the bc i worse we're starting from scratch in and partnering with the the bc i very well to get that that movie we would see your part the reason why i feel good about twenty twenty two alex's out in one of my early remarks and was answered bugs question garlic chili is also a significant tailwind financially for us in and twenty two year when we see that in kind of call it the just use round numbers ten million ish kind of revenue number for for twenty two and and we can see it the you know doubling from there is that business continues to accelerate strong margins the margins will increase over time as we gain scale on the cover more those fixed costs that we put in the market
spk_11: by given the hub and spoke structure that we have those fixed costs are customer facing sales generation type resources that that will more than than paper themselves so it'll accelerate to that twenty five million dollar number but we see significant contribution in twenty two coming from from chile and new one
spk_51: yeah i mean i is you think about the opportunity said
spk_26: the banks address of audience in terms of their customer base they have mid seventies thousand corporate customers seventy five eighty thousand and corporate customers and the goal is to service those as many as we possibly can
spk_11: yeah i think the ceo of the day
spk_52: yeah as set a target for ten thousand merchants this year i think that's likely ambitious i hope he's not listening to the we're going to give it our best shot
spk_0: but dumb you know i do think does gateway has been a huge addition to us in terms of capabilities and we are seeing a lot of demand mean that business boarded fifteen hundred customers in the third quarter alone which is a real remarkable growth and i think validate the the strategy that we had it in buying it
spk_14: so we feel really well positioned again you know that the competition there is relatively skinny we are competing against an incumbent that has been operating as a monopoly for you know since the origin of the payments market there and the only other company that sort of doing something along similar lines of sent on there but they are you know running it themselves not in partnership with a
spk_0: for like an evil though i think the positioning of god i think our partner as good as i said in an earlier question they are super super engaged
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