Q3 2019 Earnings Call

Good morning, and welcome to the evil payments third quarter 2019 earnings conference call.

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I would now like to turn the conference over to idle hair Senior Vice President Investor Relations for Evil. Please go ahead.

Good morning, welcome to you know payments third quarter earnings Conference call.

This call is being webcast today in a replay will be available through our Investor Relations section of your goes website. Shortly after the completion of this call.

Please note that somebody information you will hear during our discussion today will consist of forward looking statements.

These forward looking statements are based on currently available information and actual results may differ materially from the views expressed in these statements.

For additional information on factors that may cause our actual results to differ from the views expressed in any forward looking statements made today. Please refer to our earnings release and the risk factors discussed in our periodic reports.

So with the FCC, including our most recent 10-K, which is available on our website.

In an effort to provide additional information to investors. Today's discussion also includes certain non-GAAP financial measures.

An explanation <unk> reconciliation of these non-GAAP financial measures to the nearest GAAP financial measures can be found our earnings release available on our Investor Relations website.

Today, we will discuss our third quarter 2019 performance.

Joining me on the call today's Jim Kelly, Chief Executive Officer, Kevin Hodges, Chief Financial Officer, Darren Wilson, President International and bread Utensil President the Americas.

Now I'll turn the call over to Jim Kelly.

Thank you Brad and good morning welcome.

Welcome to either third quarter earnings call well, we will review our results for the quarter and provide updates on our business performance in our recent acquisitions.

In the quarter normalized constant currency adjusted revenue grew at 9%.

Constant currency adjusted EBITDA grew at 13%.

Which are the result of our strong bank relationships in Europe , and Mexico, and our IC and B to B businesses in the U.S.

Adjusted EBITDA margins improved 129 basis points in the quarter as a result of our continuing operating efficiencies and acquisition integrations.

In addition to our strong bank referral network growth in the third quarter was primarily driven by our tech enabled divisions across both our north American and European segments.

Since the rollout of our snap ecommerce gateway in Europe and in Mexico.

Earlier this year, we're seeing solid growth in our international businesses as we leverage this proprietary gateway.

Additionally for acquisitions and sales strategies are further driving tech enabled growth outside the U.S. as clear one way to pay and the SFS systems are now integrated into snap and continue to deliver new merchants beyond our bank referral channels.

In the U.S., we announced the acquisition of delay go and S&P payment integration company for B to B customers.

We believe delay go in addition to our notice and Sterling acquisitions has positioned our company for continued success in the underpinned under penetrated and fast growing b to B space.

We now offer payment integrations to the top business software platforms, including Microsoft S&P, and Oracle, enabling us to deliver and an integrated ERP solutions for our merchants.

We remain very excited about the long term growth prospects for this channel as these estimates the addressable global data be market opportunity to be 19 Trillium.

Brendan will discuss the Lego and our growing BT business later this morning.

Our recent M&A activity, including our gateway acquisitions to Lego and depending joint ventures, previously announced demonstrate solid execution against our strategy of expanding into new geographic markets and buying tech enabled solutions.

Enhance our global product suite.

Finally, as we announced in a recent press released I'm pleased to welcome Laura Miller to our board of directors.

He has extensive global experience from her time at first data and our current position as the global CIO for Intercontinental hotels group.

For payments and technology expertise will be invaluable to email as we continue to expand our product suite and distribution around the world.

I will now I'll turn the call over to Daryl Wilson, who will discuss in detail the performance of our European businesses This quarter Darren.

Thanks, Jim and good morning, everyone for the quarter European constant currency adjusted revenue grew at 9% led by buying problems ships and that growing tech enabled division across all market.

In Poland, we continue to win new business together without buying partner PK RVP.

This quarter, we signed large customers, including several entertainment businesses and health <unk> wellness provider.

We will also benefit to implement visa direct other point so for the purpose luxury.

As Jim mentioned on our law school.

Since launching this product we have installed a solution over 900 luxury point of sale devices throughout the country.

This unique opportunity further demonstrates the continued success about partnership with the bank that I'll focus on providing innovative solutions.

I recently announced partnership with price. Thanks, Harlan continues to see early success.

Lastly, we signed the acquiring businesses a thousand independent hosting provider to which a third party retail merchants that also provide select postal services.

Under the new agreement Eva will provide the acquiring services for the matching post selectivity.

We'll also look to provide the retail acquiring for these merchants, possibly in the future further leveraging our distribution.

Lastly, we continue to selling new merchants are new existing matching delivered through the cashless program.

Since the program began less than two years ago, when now persisting for more than 33000 small cashless matching.

Hi Tech enabled division performed well in Poland as we saw transaction increased 16% in the quarter.

Consistent with that or the European market losses, the interface <unk> feast board merchant falafel.

You know Polish market are integrated businesses. It is dominated by legit integrated system, including trust or the market, which are predominantly small I ask Steve.

Today Tech enabled revenue represents 32% of I've heard this business with a long runway for growth the software as a point of sale further penetrate the middle market.

Oh Irish and UK businesses also delivered solid results once again in third quarter with strong growth from both direct and Tech enabled division.

In addition to record a semi referrals for the bank providing this quarter.

Division signed several large merchants, including a national hardware store chain on a global beverage company.

We secure these new customers are those by leveraging a strong direct sale for a broad product offering in the market.

And I'll Irish Tech enabled division, we continue to board like E Commerce on Omni channel merchant on Trust Snow E Commerce Gateway.

Additionally, we are building out a snack sales force to leverage.

Broaden the capabilities just for K 12 education and clubs.

In the third quarter, we signed 40 school, which are using evaluates merchant acquiring solution.

We expect this great to continue as the combined Irish and UK market has over 100000 primary and secondary schools in club.

In the UK, we further enhanced the performance about tech enabled division by adding new ideas to be <unk> during the quarter and continuing to sign matching that is from Atlanta to be referrals.

As an example, a UK sales force and successfully launched a pilot of us not solution. So they actually had the hiring of Manchester City Football club the UK <unk> the focus on sports and entertainment venue.

Together Irish and UK businesses now represent approximately 10% about European revenue.

Turning now to Spain, and a bite referral channel leave a bank problem. The ship is performing well in the market at the bank continues to reflect any business.

We have recently integrated a role to make reporting system directly into the bank branch system, which expedite merchant boarding and provide the best to experience a merchant and branch personnel.

We continue to cross sell ebay then capabilities through our existing LIBOR Bank merchant.

Right.

Products and services.

Since the last cool Theres been no significant change with respect threat because it sounds and the other continued to experience headwinds from at Banco popular portfolio.

Now see attrition reducing through its historic levels.

We've completed the migration of all but four national merchants from the popular portfolio.

These remaining merchants will be moved early next year after the holiday season.

In a Spanish Tech enabled division, we continue to delivering new business utilizing a snap capabilities.

We have further enhancing our integrated business by signing new I see delivering additional distribution.

In the third quarter, we boarded over 500 merchants for my SP referral focused on the veterinary automobile health and wellness and hospitality vertical market.

Finally, we continue to build out our e-commerce portfolio in the market by using a snap e-commerce gateway to attract new merchants.

Hi Tech enabled division now represents nearly 10% of the revenue insane.

Now I'll turn the call a bit to Brendan tons, though to provide a further update on ebay as businesses in north and South America This quarter Brendan.

Thanks, Darren and good morning, everyone.

The third quarter, North American normalized adjusted revenue grew at 9%.

Beginning with the U.S. growth continues to be driven by our I SP and B to B business units, which together grew at 21% in the third quarter within our eyes to be business. We continue to execute our referral partner model, forming direct and indirect relationships with software companies and dealers to extend our distribution in our b to B business, we leveraged.

Our leading ERP payment integrations to attract new customers, an increase card usage for existing merchants.

Further we completed the acquisition of the Lego a best in class Sep integration company and now have a broad suite of solutions and deliver payment integrations to Microsoft Oracle and S&P.

As we focus on database I thought it would be helpful to summarize egos positioning within the vast b to b payments landscape.

Many commercial customers are increasingly demanding to pay by credit card pressuring more accounts receivable departments to enable card acceptance, our PDP business facilitates electronic payments for invoices be other integrated ERP systems to optimize the acceptance costs for our b to b customers, we offer level, two and level three processing for commercial cards.

Through our direct ERP integrations and when the applicable through virtual terminals.

We submit to the card networks level, two data, which includes customer codes tax amounts and tax identification information and level three data, which adds invoice line item details to level two data and exchange. These of course for card transactions received a reduced interchange fee, thus, creating an incentive for broader b to b acceptance by prefer.

Writing this enhanced data VR and ERP integrations businesses in the U.S. can seamlessly reduced their interchange expense by up to 150 basis points and improve the efficiency of the a our process.

He goes b to B customers are primarily large national and multinational companies that generate between 10, and 500 million an annual volume, including manufacturers distributors and wholesalers are b to b merchants generally produce a higher revenue per transaction that our BDC merchants due to higher average transaction sizes.

Further these customers have lower attrition because of their ERP integrations to our platform.

We first entered the B to B space via the Sterling acquisition in 2017, which had a small but fast growing beauty business predominantly oriented towards virtual terminals.

Since expands our capabilities to include payment integrations to top tier ERP systems, enabling us to leverage a partner network of over 200, ERP Implementers resellers and buying groups with our unique solutions.

As a result from our most recent acquisition the leg and will now have access to egos acquiring solutions, creating a compelling end to end solution for merchants running S&P. We remain excited about the Lego and we'll continue to expand our capabilities to increase our distribution as more companies look to adopt b to b card acceptance.

Turning to Mexico, we continue to leverage our partnership with Citi Banamex to when significant new business in both our direct and tech enabled divisions. These type referrals are diverse mix of small and medium sized businesses and national and multinational corporations in a variety of vertical markets.

Recently, we signed a national clothing retailer in a Chinese based global ride hailing service to continue growth in the market.

In our Mexican Tech enabled division, both our ecommerce business in our expanding I asked me network are demonstrating strong growth as online shopping and software at the point of sale become increasingly popular even in markets with low overall card penetration.

This quarter, we signed new merchants from our IC relationships, including the recently announced Touchbistro partnership. We are also winning the acquiring business from our gateway only customers as we expand our cross selling capabilities with our recent gateway acquisition.

Our tech enabled division demonstrated 16% adjusted revenue growth in the quarter and now represents 14% of our Mexico business.

Finally, with respect to Chile, our application remains under review with the regulator, we will update you on our next call with that I'll turn the call over to Kevin who will now cover the financials in more detail Kevin.

Thank you Brenda and good morning, everyone.

As Jim mentioned, Eva delivered a strong quarter of top and bottom line growth.

For the third quarter normalized adjusted revenue grew at 9% on a currency neutral basis.

FX negatively impacted revenue by 270 basis points in the quarter as the euro and Polish zloty and to a lesser extent the Mexican peso continued to weaken compared to the prior year.

On a currency neutral basis, adjusted EBITDA increased 13% to $42.2 million.

Currency neutral adjusted EBITDA margin increased 129 basis points to 27.7% compare to the prior year period, which reflects our north American and European revenue growth and are continuing operating efficiencies and acquisition integrations.

In Europe segment adjusted revenue in the quarter grew 9% over the prior year period on a currency neutral basis.

And our largest European market, Poland transactions grew in the mid teens and adjusted revenue grew at 7%, which reflects the loss of a large customer at the end of Q1 and market pricing for our larger customers.

In Ireland and the UK adjusted revenue grew at 13%.

Due to a decline in same store sales, which we believe to be related to ongoing Brexit uncertainties.

In the third quarter, our adjusted revenue per transaction that Europe declined 8% consistent with the trends we've seen this year.

Within the segment, we saw a third quarter Tech enabled transactions grew 19% versus the prior year driven by our sales in Poland, Germany and Spain.

The Tech enabled division now represents 25% of European adjusted revenue.

Adjusted segment profit for the quarter was $20.1 billion, an increase of 11% on a currency neutral basis.

For the quarter adjusted segment profit margin was 29.5% an increase of 57 basis points compared to the prior year due to the continuing platform and operational consolidation efforts in Spain and Germany.

Turning now to North America, we saw strong performance out of this segment as well.

Third quarter normalized adjusted revenue increased 9% over the prior year period on a currency neutral basis.

North American results when normalized for incentives in Mexico in the prior year period.

Excluding these incentives we saw adjusted revenue in Mexico, ROE at 11% and the quarter, which is the result of our strong bank partnerships and direct sales teams in the market coupled with our growing tech enabled division.

On a currency neutral basis, our adjusted revenue per transaction in North America decreased 6% in the quarter, which reflects the growth of large merchants in Mexico.

Adjusted segment profit for the quarter was $28.5 million, an increase of 15% on a currency neutral basis.

North America adjusted segment profit margin improved 216 basis points to 33.7% in the quarter, which reflects our revenue growth synergies from our Federated acquisition in the U.S. and other office consolidation efforts.

Turning to our corporate expenses adjusted corporate expenses were $6.3 million for the quarter.

As we stated on the last call expenses related to operations as a public company largely began in Q2 2018 and the company is continuing to make investments in this area during 2019.

Pro forma adjusted net income was $16.4 million for the quarter, reflecting growth of 16%.

Reflecting adjustments described in our press release and all share classes.

Pro forma adjusted net income per share was 19 cents.

At the ended the quarter, our diluted share count, which represents the weighted average class a common stock outstanding and all dilutive securities with 34.6 million shares.

The increase in class a shares was primarily due to the offering we completed in August .

Including all share classes and the latest securities we had 86.2 million shares outstanding.

In the third quarter, we spent $11.3 billion and capital expenditures.

Which 47% was four point of sale terminals in our international markets.

Capex declined 13% versus the prior year period.

Due to the Annualizing of the terminal investments made in the prior year to support the cashless initiative in Poland offset by terminal upgrades in Mexico and software purchases and Europe .

We ended the quarter with net leverage up 4.3 times last 12 months adjusted EBITDA, which increased as the result of our delay go acquisition.

In addition interest expense increased 5% and the quarter compared to the prior year period as a result of our higher debt balances associated with recent acquisitions.

Free cash flow described as adjusted EBITDA less capital expenditures less net interest expense was $20.7 million, an increase of 35% over the prior year period.

Now I'd like to turn to our full year 2019 outlook.

Based on continued revenue headwinds primarily related to our popular portfolio, we're updating our full year 2019 guidance.

We now expect adjusted revenue to range from 596 million to $600 million, reflecting growth of 8% to 9% on a currency neutral basis, we're maintaining our adjusted EBITDA range of $159 million to $163 million.

Which now reflects growth of 10% to 13% on a currency neutral basis.

Lastly, given our lower capital expenditures for the year, which resulted in lower depreciation expense.

We are increasing our pro forma adjusted net income per share to be in the range of 58 to 61 cents, which reflects growth between 12 and 17%.

These numbers are calculated based on an updated pro forma share count of 86.2 million shares which includes all share classes.

I'll now turn the call back over to Jim Jim.

Thanks, Kevin I'll now turn the call over to the operator to begin our question and answer session operator.

Thank you as a reminder to ask question you want me to press Star one on your telephone to withdraw your question. Please press the pound Keith please standby well be compiled the county roster.

Our first question comes from Bob Napoli of William Blair. Your line is now open.

Thank you. Thank you for the question appreciate it.

The baby business is you obviously made several investments and I appreciate the color on the integrations with the ERP systems I was hoping you could give maybe some thoughts on or color on the.

The size of that business currently and what you think it could be over the next few years and if there any other significant pieces that you need to add either organically or inorganically.

Good morning, Bob.

Why don't you.

So the business I think relative to other U.S. businesses ours is still on.

Smaller side, we don't break out the specific.

Sizes as Brennan said in his comments this came to us by way of it the acquisition several years ago of.

Sterling they did not have the ERP integration. So we've now acquired two and built one with Oracle.

But it's also the fastest growing by far domestically note some of its smaller numbers, but the opportunity domestically and the incentives for the schemes to.

Cut coupled with the fact that were.

Heavily now integrated or have integrations to these primary systems. We're very excited about the prospects for continued growth strong growth and I think this will be a sizable piece of our youth businesses are not distant future, but ill.

Randy wants to add something to it.

Yeah. The only thing I would say in addition to Jim's comments would be the integration to the ERP system provides an opportunity to enhance our distribution over time. So if you look at the way the business went to market in the past.

We sold directly to merchants either over the phone or be in person business and not just similarly to how the highest fee business has traditionally gone to market leveraging the reseller in dealer communities. Each of these ERP partners has reseller dealers as well that assist in their distribution. So we're in.

Cited about the opportunity to get scaled they're leveraging these ERP integrations to get access to a broader distribution network.

And these integrations are not overly abundant in the market they are not widely available.

So we feel like we have.

Technological quote unquote moat around our business.

And as Jim said, we're excited about what lies ahead and for the size and merchants as.

Brent and outlined and 10 million to 500 million and these are very large customers that typically a an independent like us without an affiliation in the U.S. with the financial institution and you don't typically sign as kind of accounts because large institutions can offer other services.

So they they tend to pick up.

The acquiring services as well that's one of the reasons why we did so well in Mexico and Poland in Ireland, because our affiliation with banks, but domestically that's not how we've all got started but in this in this arena.

Where we have historically stayed away from software suffer is a differentiator they're not a lot of companies that have gone to the effort software companies that have built this integration. So we had a.

Early relationships of all relationships Lego prior to the acquisition I think they had gone through a cycle.

A year or two prior.

Looking for maybe a an exit and we.

Reengaged that discussion, having a very positive experience.

With the notice acquisitions. So yeah. We are excited and will continue to invest I think.

We maybe this one or two more investments, we'd like to make in the space, but otherwise I think we have a very powerful tool to go to these shows too.

Due to solve a lot of people's problems.

Thank you look quick follow up and just as we I know you're not giving guidance for 2020, but what's your view of the health of.

The the economy in the your current market and.

The trends as we were seem to be pretty pretty solid as we look at 2020 is it should we expect the kind of growth and margin expansion that you've outlined in your medium term targets.

Gross growth for US comes two ways one the shift for paper plastic and we've tried to position the company and either high growth markets, where the like Nick Coppola et cetera, or in vertical markets, where it's a mix.

Yes.

The other piece that caused that the company to grow is the economy as you are asking.

Why things, we've noticed and I think you've heard on other calls we have a Brexit person here, Yeah, I think we're seeing a Brexit impact both in Ireland in particular, and the UK, our UK businesses tiny but our.

Rx business is is.

Is becoming a meaningful piece I think it's roughly 10% of our revenues now in Europe , and our finance group was showing the how much it has slowed down its organic.

Our economy with how that how much of the economy's go down slowdown from comp store sales year over year. So that that's somewhat of a negative but I think we're still very well positioned in markets, where the shift from paper to plastic should.

The a bit of a counterweight to.

To that.

Situation and domestically as well, our positioning and b to B and the IC business in particular I think.

Continues to show very good returns because of the mix shift.

Right.

Thank you appreciate it.

Thanks, Yeah, and our next question comes from Andrew Jeffrey of Suntrust. Your line is now open.

Thank you good morning, I appreciate you taking varnish.

Jim I know one of the and maybe spread into one of the.

Important initiatives free though is as North American E Com, maybe you actually gone particular.

Can you talk a little bit about the competitive environment and how you think.

Even though wins in E com I know, what's the competitive space where.

It's tough to differentiate so little bit insight there would be really helpful.

Yes sure. Good morning, Thanks to the thanks for the good question. So I guess starting in Mexico. We are now introducing our own proprietary gateway that sort of started as an acquisition in Europe and we've enabled for the capabilities acquired required to be competitive into Mexico market.

So in Mexico, we're enjoying really significant success they are.

Growth year on year as in the mid to high Thirtys.

It for the ecommerce sector and.

The nice thing as Jim alluded too about the challenge that we faced in the early days in the U.S, not having a bank partner and attracting larger corporate.

Clients that would typically have more of an omnichannel presence dealing in both face to face an online world. That's obviously not the case in Mexico, We do benefit from our partnership with Panamax and we service many of the top accounts in the market in many many many of those businesses.

Well in both the physical and the online world. So.

As as.

As these merchants focus and invest in their online presence, we're naturally getting that business and we're seeing a big uplift and then we of course have been strong referral relationships with some of the larger multinational gateways that need a local acquiring solution to this point, we really are the only scaled independent require in the market and we really become.

Defacto.

Preferred option for acquiring so I mean, we'd rather merchants their use our gateway it creates a stick your customer relationship and there's no intermediary between Austin, the customer and we have much greater control over the customer experience.

But as it relates to these huge multinationals that have a single gateway servicing them across all their markets globally. In those instances, we will work very willingly partner with third party gateways and that's been a really attractive source of growth for the company as well.

And then in the US I think we've outlined this on on prior calls.

We're in still the early days of a shift in strategy. So the strategy here for a long time was an indirect model leveraging third party technology, we had very large referral relationships with several of the very large third party gateways.

And we didn't bring our European technology into the market for many years because of the success of those relationships and were revisiting that strategy and we are bringing the European gateway here now it's been here since the first part of March.

We've reorganized a little bit and now are reporting what we call the direction on the ecommerce channel into the same leader in Dallas Lauren Harris.

We see the market increasingly adopting the omnichannel solution that I was describing about Mexico earlier, and we think thats a really logical solution.

And we're in the process of building out of business development team to pursue new referral relationship. So yes, it's competitive.

Theres No question, yes, Theres a lot of gateways that have been here a long time.

For me I think addressing the Omnichannel merchant is the area of opportunity I don't know that anyone does both E com and card present in a really slick why and I think many of the most advanced competitors really excel at one or the other so it's in the early days of a shift in strategy there, but I think it's the right one and.

Hopefully, we see fruit store labor in the second half of next year.

Second half right that that's really helpful color and then just a quick one on.

I wanted their poppy Lar.

I mean can we think about that is sort of sort of more bonded. Despite I noticed shifted their made a pretty significant.

Cross border payments investment just a week or so ago. So they seem to be focused at some level on the market, where do you think LIBOR is the key referral partner, Spain.

Well.

Relative to size.

I'll, let Darren I looked at the press release as well, but it didn't seem to be payment. It will look more digital.

Thanks transferred type of service as opposed to passive.

Maybe if you follow something there, which is obviously, we do that they have a.

A shifting strategy over the last several years to be a global payments company. They are trying to export capabilities.

Interestingly out of Brazil, now to Chile, and Mexico, and I think eventually to maybe the U.S. in Europe , but now having done that here in my prior life. It that's not that easy it's going to take them time, and we have a long term partnership with them.

In Mexico, I mean, there's still the biggest bank in the country.

We've described on a couple of these calls that the acquisition of our bank two years ago, let's summer.

As a result in a consolidation and rebranding and that consolidation into one organization had an adverse effect.

This year more so than we had probably anticipated off coming off the last call.

But as Kevin mentioned or.

Actually the Darren mentioned in his comments, where essentially done with the conversion. So our merchants are sitting.

On our platform out of Poland, which everyone else in Europe is essentially sitting on today.

And.

As a relationship.

See how it avail develops over the.

The coming year, but I think the experience we've had this year, we're not anticipating into.

Reoccur next year.

Really helpful color. Thanks, so much.

Thank you.

Thank you Yeah. Our next question comes from Hansen long of Jpmorgan. Your line is now open.

Hey, Thanks, so much guys I sorry.

Miss some of this is going down a couple of calls just the revision on the guidance I know you hedged.

As a little bit.

Then on the revenue is that a little bit lower what can you summarize the rank again, that's the factors behind that.

It's primarily what were I was just talking about its predominantly santen there.

Yes, it is localized.

That I would say, that's probably 80, 85% of what our expectations for this year on the range that we initially gave on revenue.

Which I think was six a one does.

I think I want to six stemming from the last quarters right, yes. The.

And that the pullback there I mean, there might be a little FX in that but the pull that back there it's predominantly the impact of.

Of their consolidation, which I don't think we appreciated the impact it was going to have in terms of the service to customers and the resulting attrition.

So.

That's that's now complete but we wanted to update based on what we're seeing now for the end of the year and so we think it will be below the low range to about from a range of what we originally expected.

And then on the earnings going.

I'm learning area.

Turning side, we stayed with the same guidance, we gave at the beginning of the year seeing this coming into the.

Second half of the or we just deferred some of the.

Investments that we otherwise had anticipated making to counter some of the impact of the sense in their actions.

Yes, it would seem to protect the bottom line.

Helpful to here, so just as a quick big picture Paul If you Jim just you know we've heard from all the other big requires all the deal.

The merger names that said you it sounds like generally think it's been pretty good have you have you seen any change in competitive huge from from them either in the field or.

You know obviously in potential partnerships in M&A activity et cetera.

I'm not specifically I mean.

My reaction is.

I don't listen to their calls and I don't more than seen the notes that you all right.

It seems like they continue to up their synergies both on the revenue, which to me sounds like pricing and on there on the cost side.

I can say I can tell you there is lots of resumes on the street, there's lots of layoffs that have occurred so I think thats an opportunity for us anytime somebody is going through an integration that side at this size.

Sometimes the good people, even we're going to benefit from that and I think theres also.

There's also opportunities domestically on the customer side.

Those referral partners et cetera that.

Now lets them for the relationship that used to be in place that's left so.

Focused on trying.

To fill in gaps where they have occurred because of synergies, but other than that on the M&A side.

Not really most of our M&A I know, we just the Lego is that Canadian based company, but predominantly the U.S. Our M&A focus has been and continues to largely be outside the U.S. and I haven't seen.

Any change.

No. It's not like we see 10 deals today, but I haven't seen really any change in the profile of the company's center.

Rumored to be in the deals that were involved in.

Okay.

Okay. Thanks for the uptick.

Thanks.

Thank you and our next question comes from George Mihalos of Cowen. Your line is that open.

Good morning. This is Allison on for George Thank you for taking my question. It was great to hear all the progress and success on the I see front I'm I'm curious why you're seeing in terms of IC referral fee trends and if there's anything to call out either domestically or internationally.

I will we have to where the international and domestic Guy here. So you want to go first.

Got it if you looked at me so I guess, we're starting domestically.

Yeah, and we've talked about this little bit on prior calls what do I see I see.

Episodic super aggressive behavior out of some of our competitors, but it doesn't seem to persist for any really.

Long time period, and we've been able to stay rational and we're not going to get crazy and we're not going to offer.

90, 10 splits or anything like that Weve.

Sort of held the line and the businesses continues to perform really well as you guys are singing the tech enabled numbers I think the IP business in the quarter from a little bit over 20% and as long as we can grow at that rate.

We feel no need to get a rational so and quite honestly in the instances in which we do see a competitor get really aggressive with the specific partner. They generally pullback after some period of time as a side.

And then the good news in Mexico is as I said earlier, we're the only true independent of bar in the market.

So for an eye assai, there's not really is a huge number of alternatives other than evolve and we just bought this integrator in the market that we talked a little bit less than the last call a sub systems and that gives us technology that no. One else there has as a tool for a highest fees.

To integrate too.

And so.

The IC business there in terms of the competition and pressure on referral fees and all that sort of stuff you really don't see any of that there. That's one of the additional benefits of of working in emerging markets, where electronic payments are less developed.

Yeah.

Thanks, Jim.

I see in Europe with Tech enabled a is moving at pace in different markets as I said in my notes earlier, Ireland. The tech enable it's about 30% of a.

Revenues for Spain, it's about 10% of our volumes UK, Ireland about 30 cents it differs by market and by pace, but it's a absolutely core strategic focus.

For all of a European leaders as.

The kind of more advanced RSV businesses and strategies from the states from Americas is coming across the pond. So.

Huge opportunity, we've acquired some businesses and staying with clear won.

With weights pay in Ireland, the are giving us nish differential solution in this space.

Great. Thanks for any additional color.

Thank you.

Thank you and then next question comes from Ramsey El Assal of Barclays. Your line is now open.

Hey, good morning, this has been due to Sean for Ramsey.

I wanted to ask about the contribution of M&A in the quarter into full year guidance is there anything.

The year for delay go and then I know hit by in the past you've disclosed in any contribution at least to North American I'm wondering if you could get that for this quarter.

Yeah, Hey, good morning bands Kevin.

Yes, we have factored in and delay go I mean, it's tiny it was not a significant deal at all.

Overall basis, we're still talking just about a couple of points growth related to the acquisitions, we annualize the larger acquisition. The buyout of Federated that was that happened at the end of Q3 last year. So we get into Q4, we're really just talking about some of the smaller deals that we had.

And can you disclose the M&A contribution to this quarter.

Within the quarter itself.

Yes, yes, yes, there's about a couple points.

Okay.

And then just just one kind of it on a different topic just wondering if the ongoing protests in Chile does that change anything about Europe , you're thinking that entering the country is it maybe perhaps less stable than originally thought or.

So kind of looking at it like full steam ahead to to a great opportunity there.

[laughter].

I just got a text we somebody about.

Nothing happened last night in Chile so.

I'm. These they these events occur all over the world all the time and.

They occur in the United States, maybe not this magnitude, but they occur everywhere. So we were a form firm believer in payments and what payments represents which is every consumer that would prefer to conduct business without pulling cash out of their wallet. So.

We are full speed ahead, with Chile, and now I'm not.

Any more concerned there that I'm sure that companies that process in Hong Kong are concerned that this to pass and and cooler heads will prevail now having said that we don't have a physical.

Employee or or anything in Chile at this stage, we haven't been approved by the regulators, we still have time to see how this unfolds.

My expectation is.

This this country will will sort out whatever issues that its spacing.

In the coming months.

Alright, Thanks, a lot.

Thank you and then next question comes from Pardon Me I Love Northcoast Research. Your line is open.

Hi, Good morning, maybe a quick I think this question is probably for you Darryl and I know you talked about Brexit and impact, it's having from maybe economy standpoint, and no Oh, Great Britain Harlan.

Oh, I'm wondering if that changes you need to make the business because of that no because of what's happening in Brexit performs entry up how the European businesses.

Thanks Scott.

Thanks for the question, yes, the topical question in Europe minutes.

Summit Hyndman, when making across the pond.

Yes, I mean, the uncertainty is still there in terms of what's ultimately tends to be happening by way of what is the exit deal going to be the election uptick now starting by uncertainty and in terms of our business that business is they were pretty well insulated in that the core businesses license.

In Germany.

For passporting across the whole to Europe . So we are in the European community and we'll see that and that's not subject to the break the issue. So as Jim said, whilst we're going to focus.

Gross on certainly the tech enabled lines in the UK.

We can we have filed to the end of 2020 .

On the ability to trade in the UK and we will then what depending what happens on the licensing.

Malls falling out of Brexit, we will apply for payment institution license to support the UK in Northern Ireland business at that point.

So actual European business fully insulated continue to license in Germany.

To the best thing.

So no dramatic impacts, we see on licensing or ability to trade.

Thing in the short term being or any kind of headwind risk.

And then Jim I know you comment a little bit on acquisitions as related to all the merchants are happening at least acquisitions, you're seeing has there been any change in pricing or.

Expectations, because now you have a few companies that are out of the market or seem to be out of the market.

Hi, My experiences every seller once as much money as they possibly can get a lot times. They say it really doesn't matter, but trust me it always matters.

I have it I don't think.

The only thing that really in forms and to some extent is that they see multiples on payments companies are they see multiples when payment companies are sold and.

Everybody wants to apply the highest multiple to their business irrespective of whether it looks anything like that business that had the multiple.

No I would say has a processing most I think I've described as before and during a period of time, where.

The world is in trouble kind of the crisis, we saw.

Eight 910 financial institutions are looking to raise capital I don't think price is necessarily the driver even though they are there to raise capital today, what we're seeing more in terms of banks and this is predominately banks and I'm talking about where we're forming relationships like Chile or.

Others outside the U.S. is they're looking for capabilities that they see continued shift in consumer spending how they spend what merchants expectations with their customers want from a digital perspective, and they know it they don't have the expertise or the resources to invest in the bank itself. So.

They look for partners and those tend to be longer sales cycles, because they they there's not a demanded they have to raise a certain amount of money in us in a certain quarter its I need to pick the right partner because this is a top long term relationship and I've got to think through a business acquiring that we really never thought about and that kind of detail.

In the past so thats really the phase that we find ourselves then we can just.

Call have a banker and say we want to buy a company that the public company and then merged the two we're out.

Looking for relationships in markets that we think will be beneficial and we're looking for partners that we think we can add value and that as those take time to perform and and.

But the pipeline with respect to that and I think.

Largely because we're a reputation over the last year's doing this and in particular now as a public company I think it is a much different conversation than we had when we were starting this in 2012 and 13.

But I appreciate it.

Thanks, Thanks Kartik.

Thank you and her last question will come from Joseph Garcia of Cantor Fitzgerald. Your line is now open.

Hi.

Two questions first wanted to get a sense of.

How you balance your debt load with the desire to you know address potential acquisition activity.

And then my second question I'll, just ask an upfront given where we are on the call maybe give us an update on your ecommerce.

Efforts. Thanks.

Okay.

Oh.

Yes, so drilling does about I'll take the first part of the question on the debt load I mean that is something that we.

Balance, we obviously want to look at attractive M&A opportunities and we created a debt structure that allows us to still pursue those deals obviously over the past 12 months a lot of what we've pursued or more of these tuck in deals.

Deals like delay go way to pay notice even federated last year.

We've been able to very comfortably fit those into our debt structure.

And even continue to Delever the company, we picked up leverage just a 10th of a point this quarter just as a result of the delay go deal, but absent that we've been able to show sequential declines in the leverage. So we are still sort of actively looking at deals then to the extent we need to.

Flex the capital structure to accommodate a larger deal we certainly have the ability to do that.

Well take becomes thanks, Jim Thanks, Kevin.

Thanks for the question Jason E Com.

Yes continues to be a cool focuses.

Jim Brendan outlined earlier.

We have our in house gate right in terms of the business. We brought in Europe , a few years ago. So we've rolled out through Europe will now rolling out through all of our international markets as Brendan alluded to in terms of the successes and focused in Mexico.

And then.

In the states as well so because it's still a cool or is this a very core focus channel. We continue to cross sell directly our E Commerce solutions to our merchants that we're selling called President solution School. So the omni channel solutions, the Brendan alluded to the core focus.

But equally will complement as Brendan said third party gateways, the largest culprits typically want to gateway provide us for redundancy.

Mexico, that's where we're seeing the success of being a complementary supporting acquirer too large a gateway providers as well. So this is a true omni channel focus through all sectors all size merchants and strategy is to be a one stop shop for in.

Health E Commerce solutions through all our operating market.

Thank you and I would now like to turn the call back over to Jim Kelly for any closing remarks.

Thank you all for joining this morning, and your continued interest in Eva.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program and you may all disconnect.