Q3 2020 EVO Payments Inc Earnings Call

Got it and then.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the evil Demons third quarter 2020 conference call. At this time all participants are they listen only mode. After the speakers presentation. There will be a question and answer session wash B question. During the session you will need to press Star then one on your telephone.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today at O'hare Senior Vice President Investor Relations. Thank you. Please go ahead Sir.

Good morning, and welcome to Eagle payments third quarter earnings Conference call.

This call is being webcast today and a replay will be available through the Investor Relations section of Eagle's website. Shortly after the completion of this call.

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

These forward looking statements are based on currently available information and actual results may differ materially from the views expressed in these statements, particularly due to the impact of COVID-19 on our business.

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.

Please refer to today's press release and the risk factors discussed in our periodic reports filed with the FCC, including our most recent 10-K 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 and reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures for the third quarter can be found in our earnings release available on our Investor Relations website.

We have also posted slides on our website detailing recent volume trends for the company to further assist with today's discussion.

Today, we will discuss our third quarter performance and provide an update on the impact of a 19 is having on our business.

Joining me on the call today is Jim Kelly, Chief Executive Officer, Tom.

Tom Panther, Chief Financial Officer Darren.

Aaron Wilson President of the International segment.

Britain Utensil president of the Americas segment.

I will now turn the call over to Jim.

Thank you Ed and good morning, everyone in the third quarter, we delivered strong financial performance as we continued to actively manage our business through this challenging environment compare.

Compared to last year constant currency revenue declined 4% due to shifting customer mix for larger merchants, coupled with significant declines in cross border activity.

As a result of our continued expense management and after normalizing for certain coveted related charges during the quarter constant currency adjusted EBITDA increased 5% from the prior year and margin expanded 300 basis points to 37%.

Compared to the second quarter constant currency revenue increased 24% and adjusted EBITDA increased 34%, which reflects the strong rebound in volume and our ability to successfully manage our business through this crisis.

With respect to our volume trends total volumes increased 25% sequentially and were flat compared to the prior year.

We demonstrated sequential improvement across both Europe, and the Americas, despite coveted related restrictions, particularly related to cross border activity impacting certain of our industry verticals.

I am steadily improved in July but began selling in August as economic activity was constrained by lingering government restrictions and lower consumer demand.

As you are aware many of our markets have experienced recent spike in co that infection rates.

We are closely monitoring the increases infections and the associated government restrictions in our markets.

Taylor volumes were down slightly from the prior year.

And it is likely that our volumes could continue to exhibit volatility as the effects of dependent might extend into next year.

Despite the ongoing uncertainty regarding this then Dan.

We remain confident in our ability to manage our business through this crisis and positioned the company to capitalize on the accelerated adoption of digital payments.

Turning to our expense management I.

I continue to be pleased with the decisive actions we have taken since the onset of the pandemic to reduce our costs.

These actions have allowed us to realign our expenses, while also continuing to invest in our business and support our customers.

Given our financial positioning we have elected to reinstate salaries for those affected employees beginning in December.

I would like to especially thank them for their sacrifices, which aided the company during this unprecedented period.

Tom will discuss our cost structure and margin improvement in more detail later on the call.

Even though this year has been extremely challenging I believe we are well positioned for growth both organically and through M&A as economies recover from the crisis I will now turn the call over to Darin to discuss our European business Darren.

Thanks, Tim for the quarter European segment revenue declined 2% year over year on a currency neutral basis.

Which reflects the impact of the caveats related restrictions, including cell decreases in cross border activity.

As you can see from the following slides a European payment volumes demonstrated a significant rebound and improvement beginning in June as restrictions were relaxed across our market share.

During the third quarter volumes were approximately 5% higher compared to 2019 and critically Spain, which continues to be the hardest hit by the trouble restrictions volumes grew 17%.

As broadly reported in the media and then left proportionately September in fixing levels across your began increasing.

Governments have responded by Reimposing restrictions on movement, and commerce, which has caused volumes to begin to decline although not to the same degree at the declines in the second quarter.

Playback volumes of 2% below 29 team.

Despite the ongoing challenges from a pandemic, we continued to see positive business trends across our markets.

We remain focused on leveraging our bank referral relationships to find new merchants and securing tech enable partners to meet the evolving consumer demands.

For example in Portland, we have been able to capitalize on recent market trends to include accelerated cast account tailwind.

Increased adoption of tech enabled solution and higher utilization of E Commerce.

We recently extended our relationship with the National grocery store chain to include price thing for additional indications and find a new relationship with the national tax administration to enable tax collections Viacom payment.

Our local sales teams were also able to develop and execute on tuck in April opportunities.

This is enabling and comments solutions for a range of minutes.

And extending our relationship with my pin pad.

Security measures to Southcross offerings, which are downloadable point of sales solutions to mobile phones and tablets.

Lastly, we launched an E commerce campaign unless the cod.

And I would like to move to establish online shops and accept card payments last night.

The promotion and leveraging on new exclusive referral relationships several end market online platform and will drive new E Comm estimates.

Three gateway.

In Germany, we also broadened tech enabled capabilities by enabling a new solution Eva connect for in market insurance businesses Eva.

Eva connect it's an integrated payment solution that recently launched an Irish market and provides merchants with request to pay capabilities text and email to simplify the collection systems and improve cost right.

Turning to island by working with that bank referral partner, we integrate to direct route and National toll Road operates a launch card payment acceptance, including content less that two of the 10 toll passes in the country, which were previously cash annually.

We also integrated snap during market, leading mobile contactless ordering app for both in pubs to enable he won't accept them.

Most opponents savvy, leading gift card program provider based in Dublin to expand our low picks up solutions summit in Ireland and the UK.

Second enables adoption trends also significantly accelerated in our UK business, which contributed to the approximate 30% volume growth for the business this quarter.

For example, we signed two of the largest pharmacy is feeding the market expanded snapped gateway capabilities to sign a new unattended I have to be partner.

Increased <unk> E commerce business through our proprietary solutions and new referral relationships.

Finally in Spain, and we continue to see positive business trends, despite the impact of the pandemic on this market.

Referral channel I relationship would leave the bank has generated over two and a half thousand new merchant adds this year.

Additionally, in our Tech enabled division play one continues to demonstrate success in both gateway and acquiring sales.

In the third quarter, we signed additional problem within the market and outside of Spain, leveraging I player one capabilities, including a relaunch restaurant chain in Portugal, I knew I asked fees in the UK.

Across all of our markets had been able to respond to the increased demand for tech enabled solution Arabic.

Let's see to quickly enhance our existing tech enabled sales strategies will not only continue to enable us to based on the current environment, but will bolster our ability to capture additional growth opportunities once economic activity returns to normal.

I will now turn the call over to Brendan who provide update on our Americas segment Brendan.

Thanks Darren.

For the quarter. The America segment revenue declined 5% on a currency neutral basis, which reflects the steady improvement in our Mexico business, coupled with the flattening of payment volumes in our us business.

Our U.S. revenue continued to be strengthened by the performance of our tech enabled divisions.

Turning to our volume slides for the Americas in the U.S. volumes for the quarter improved within approximately 6% of last year and remained at that level through October we continue to see positive new business trends within both our direct and tech enabled divisions by signing additional referral partners, including ecommerce gate.

Great and I SV partners to capture the accelerating shift towards tech enabled solutions.

For example in August we announced a relationship with on track innovations to process payments for unattended retail merchants as the need for card acceptance in this underpenetrated vertical continues to increase in our b to B business Gateway sales increased as more businesses continue to embrace the accounts receivable automation tools and this will.

Work environment.

We signed a new customers for gateway in acquiring solutions looking to quickly adopt and onboard to all Microsoft integration by way of our pay fabric fee to be gateway disease, and Midmarket merchants have demonstrated the agility to enable card acceptance within relatively short sales cycles further.

Further we continue to see strong sales for Sep integration again, leveraging our pay fabric gateway it had been successful in cross selling requiring services for these customers.

Additionally, in the quarter, we launched express deposit a new solution that enables real time payouts for merchants through the integration of visa direct.

Timely launch of express deposit will provide all merchants with increased flexibility to help them withstand the impact of coated on their cash flows.

We believe the availability of this fast and secure solution will generate increased merchant satisfaction and we are excited to expand this product throughout the us and internationally.

Turning to Mexico, we have continued to see steady improvement in our payment volumes since June when volumes were down 19% year over year for the month of October volumes were up 2% from last year, which demonstrates the resiliency of our merchant portfolio in this market.

Our performance in Mexico was also helped by our Tech enabled division, which demonstrated revenue growth of 13% in the quarter.

Further we signed a new IC partner continued to grow our ecommerce business and sign new bank referral customers such as workplaces remote work business platform has grown as a result of the pandemic.

Lastly, I would like to provide an update on Chile as we approach regulatory approval. Both shareholders have now funded the JV with the requisite amount of regulatory capital and the JV has identified certain members of senior management.

Evols and processing systems in Mexico have now been enabled for operations in Chile, and we recently took a significant step boarding our first life test merchant we.

We expect to finalize our connectivity to visa and Mastercard within the next week at which point. We will have also submitted all required materials to the local regulator in order to be approved for operations based on this progress we anticipate receiving approval before year end.

With that I will turn the call over to Tom who will cover the financials in more detail Tom.

Thanks, Brendan and good morning, everyone.

For the quarter egos constant currency revenue declined 4% compared to the prior year.

FX negatively impacted revenue by 80 basis points as the US dollar strengthens against the peso, but weakened against the euro and Polish zloty compared to the prior year.

On a currency neutral basis, adjusted EBITDA declined 2%, while margin expanded 40 basis points to 34.5%.

However, during the quarter, we recognized certain covered related losses.

Including fully reserving for a potential charge back related to a large margin in Europe.

Normalizing for these charges adjusted EBITDA increased 5% and margin expanded to approximately 37%.

The expansion in margin reflects the impact of our active expense management.

Since the beginning of the pandemic, we have realigned our cost base to drive greater efficiency without jeopardizing customer support or future growth opportunities.

Based on these actions we estimate that we have reduced our cost structure on a go forward basis by approximately 10% of our core SGN expenses, which translates into approximately a 300 basis point improvement in our annual EBITDA margin assuming stable volumes.

These cost management actions improved our margin providing us the confidence to return those affected salaries to pre covered levels.

In addition, the rebound in volumes in the quarter, coupled with our cost realignment gave us the financial capacity to record a compensation reserve that approximates the effect of returning to our historical compensation structure.

With respect to our segment performance in Europe constant currency revenue declined to 2% and adjusted segment profit declined 3%.

Our European segment was impacted by the ongoing effect of the coated related restrictions, including a sharp decline in cross border activity and the previously mentioned charge back reserve.

Excluding these code related headwinds European adjusted segment profit increased 25% compared to last year.

The Tech enabled strategy, Gary described earlier, along with the untapped capacity at certain of our industry verticals and they travel and hospitality provides strong organic growth opportunity as economic activity gradually improves.

In the Americas constant currency revenue declined 5% consistent with the decline in volume.

Adjusted segment profit increased 14% as we were able to maintain most of the cost reductions that we implemented at the beginning of the pandemic.

Across both of our segments. Our performance reflects the active management of our business and the accelerated adoption of digital payments.

We are optimistic that this cash to card tailwind will provide further long term organic growth.

However, as previously mentioned beginning in August our volumes began five Tony and more recently many European governments have re implemented restrictions that are likely to dampen the seasonal growth we have historically experienced in the fourth quarter.

We are well positioned to weather this near term disruption to the economic recovery that was underway and will continue to manage the company to deliver sustainable long term growth.

Adjusted corporate expenses for the quarter were $5 million, which declined approximately $1 million from the prior year. Excluding the previously mentioned compensation reserves recognized during the quarter.

Adjusted net income of $18 million increased 9% compared to last year.

Adjusted net income per share was 19 cents, which declined from 20 cents compared to last year due to the preferred share issuance in April.

At the end of the quarter diluted shares totaled $93 million, an increase of 10 million weighted average shares compared to the prior year.

During the quarter, we actively managed our cash flows by limiting our capex spend to $4 million.

The decrease of 64% versus the prior year.

More than two thirds of our capex spend related to point of sale terminals in our international markets to meet the strong merchant demand, which persisted in the third quarter.

We also generated approximately $30 million in free cash flow this quarter, including a $4 million decline in interest expense.

Further our free cash flow conversion rate was 74%.

An improvement of 25% from the prior year.

During the quarter, we paid down our senior credit facility by $50 million, while continuing to maintain over $150 million in operating cash.

The combination of these actions resulted in a leverage ratio ending the quarter at 2.9 times.

Our strong liquidity and low leverage coupled with $200 million of available cash on our revolver provide us the financial resources to capitalize on M&A opportunities.

Another notable transaction during the quarter related to visa's actions to convert a portion of its series C preferred shares into series a preferred shares as.

As you May recall in 2016 visa Inc. bought visa Europe and ego received series C preferred shares as a member of visa Europe in.

In the third quarter in conjunction with visa partial conversion of these shares we recognized a $16 million gain.

Given the ongoing global economic uncertainty, we will not be providing guidance for the fourth quarter. However, we have provided recent volume and expense management information to help you model our financial performance.

We anticipate resuming our financial guidance once the uncertainty surrounding the economic impact of the two.

Pandemic has abated.

With that I will turn the call back over to Jim.

Thank you Tom.

I am pleased with the progress the company has made during these extremely difficult times, we were able to continue to sign new merchants and roll out new products. Despite the overhang of the current environment.

We remain focused on growing our bank relationships and our tech enabled channel by leveraging our suite of products and solutions and our network of referral partners.

We look forward to launching our business in Chile, with DC and are excited about our growth potential in the market.

We will continue to generate opportunities to expand our distribution through our existing relationships and through M&A.

I will now turn the call over to the operator to begin the question and answer session.

Operator.

My apologies at this time, if you would like to ask a question as a reminder, please press star then the number one on your telephone keypad.

We'll pause for just a moment to compile the <unk> roster.

Your first question comes from the line of Jin Xin Wang from JP Morgan Your line is open.

Hey, good morning, good too good to connect with everybody.

Good morning, I guess.

Good morning, Jim Yes, so the results were.

And so the market is still down now is down at the low low in April may of 80%, it's down half of that so it's down high thirties to 40%.

And I think that's going to continue to be a drag as Tom said.

And his comments, if you X out Spain the business in Europe was doing quite well our IFC business in the UK very strong Ireland extremely strong.

Poland in particular, we're in the mid to high teens and that's without the benefit of what I. Just described that's really the movement to card.

As opposed to cash, Germany, as well, which is predominantly E commerce for us.

Did exceptionally well and then unfortunately decisions were made in the countries. Fortunately I guess for other reasons, but from a business standpoint. Unfortunately dizzy.

Decisions were made to pull back and so we're in that mode I think.

If there is a positive there I think the pullback is not gonna be what we saw in the April may time period, we are seeing a pullback.

Where Poland was in.

Say as an example in the mid teens and now they're in the single digits, but we don't see it going.

It was at one point down 35, 40% itself back in the in the beginning of the year for me time period.

Yeah, so from a from a benchmarking that's all really useful so thinking about benchmarking.

Should we change our thinking at all given what you observed you know looking at the figure tracking pretty close it'd be the credits statistics and the Americas.

Do you expect any I think we are.

Yeah [noise] into hard part and it's the reason why we didn't provide any type of guidance for the fourth quarter. It's hard for me to gas Fo, how long I think Ireland supposed to be locked down for six weeks or do they open back up early or do they continued to extend so that's entirely out of our control I think.

Well, we've done very well is maintain control over expenses to kind of manager way through it. The rabbit is not gonna return, we don't believe to where it had in there in the first wave, but right now I think it's more of a continuing.

Continuation of what you're seeing in the volume trends, that's our expectation for the fourth quarter, we're probably give up something on margin because fourthquarter would've.

Probably seen some benefits of spend because of the holiday et cetera that it may not reappear and then again cross border for Europe in particular, I think a positive.

You can't see it specifically in the numbers, because we don't break it out by country, but.

Mexico, which was the last to experience the impact of of the pandemic back in April following following the U S.

They were down the second quarter say, 13%.

And they're now in the black barely in the black, but there and black so and that seems to be holding so where we are losing it in Europe and in terms of the second way.

It seems that Mexico is showing up pretty strong again same composition bigger retailers et cetera, but but still doing well.

If you don't mind me to ask one more but just in a quick question just tech enabled mixed now what does it Luckily look like and how do you see that changing or the short term. Thanks for taking the time.

Yeah, I would say in the in the you know all the market's I've been incredibly impressed by how strong that business has maintained for example in the UK, which is probably 60, 70% of our new businesses Tech enabled and again, that's a small market, but it never went into the red that grew in the teams through that.

Through the entire.

Time period April on and.

And has continued to perform very well.

Spain as well even with the same thing they are headwinds in that market.

Business is done.

U S business, you know U S. We're a little bit more exposed on the ISP side, because we're hospitality oriented primarily so that has seen more of a retrenchment, but our be debated business has done.

Has done very well so continues to be I think in Brendan's comments. It continues to be a bigger part of our U S business all our businesses. It's of keen focus for us to to partner with leading isc's in each of our markets.

Pangen, Tom and we've seen a solid 300 300 points improvement kind of year over year on tech enabled and as Jim said, it's broad based in terms of where we're seeing that rotation into more tech enabled utilization.

Thinking.

Thank you.

Your next question comes from the line of George Mahalo for My calendar Company. Your line is open.

Hey, good morning, guys and.

And thanks for taking my my question.

I wanted to start off just just give him some of the more I guess, we sometimes that you're seeing in October maybe the supplies a little bit more to.

Europe, and the Americas should we be thinking that again to spread sort of between.

Volume and and yields sort of revenue will continue or should expand a little bit more now going forward as I would think maybe there is a bit more.

Don't into the the non discretionary type merchants.

[noise], Thanks, Joe astern here.

Yeah, I think that's a good observation.

I think the strength of Europe has been the diversified portfolio as much an animal skins already called out thing in and out of the market.

Not only seen a a pivot digital but a strong pivot to contact with as well. So the catch the card's kinda swing has been pretty dramatic, especially in markets that have been more highly cash oriented so.

All of our European markets into [noise].

Excuse me.

Kind of the the call virtual.

[noise] Kohl's that have survived well through covid lockdowns et cetera.

Not only for each transaction values, increasing but.

Also volumes, taking up significantly so I think that's a good observation I think on spread all hand over to tell them to cover the first in specific like some.

Yeah sure. Thanks, Darren I think George from a spread perspective, what we saw was a little bit of compression in the third quarter. I think we would expect that to kind of hold in the fourth quarter. You mentioned one of the reasons, but.

Because we see a larger percentage of the volume coming from those large merchants were spreads are a little bit thinner volumes are higher.

I think that's likely where when government when economies are in a bit of a restricted lockdown mode, you'll see a greater percentage of consumer span going there.

<unk> kind of hunker down and you don't have as much of your volume coming from those higher margins Sme's and as we mentioned cross border I you know, even though it's the holiday season, both in the U S. And then globally in December I think the expectation is that you're going to see less cross border, where D. C C and other things.

Generally yield a little bit higher returns. So so I would be cautious on spreads increasing from here until we see.

Some increased normalization in the economic activity and frankly consumer behavior.

Okay. That's that's very helpful. I appreciate it and just just one one quick one you mentioned M&A. Thank you called out.

Digital within within that commentary at least as it released just curious how does the pipeline look any sort of color you could provider on that and is it going to be more sort of european oriented or or or Americans focused.

To continue to.

Talk about those successfully getting done in the coming quarters.

Makes sense. Thank you yep.

Thanks Rich.

Your next question comes from the line of Robert Napoli from William Blair. Your line is open.

Thank you good morning, as he though to you and nice job.

In tough environment.

Thanks.

See I guess with the cost cuts you have made it lets us.

Dream that the world is back to normal a year from today.

Which I think is reasonable.

Well, we think that the EBITDA margins under their current business makes what are the right margins for this business now.

Now do you think those.

You guys made a I guess a leap forward in our margin expansion from the traditional trend assuming you're back to your your your normal great organic growth type of environment.

So you know that.

I think thats a difficult one to know today, because I don't we don't know that it will be better in the year, but using that thesis.

The model or our industry leverages very well so the bigger we become more profitable generally.

Sizeable piece of that drops to the bottom line. So what we've said.

Remember was 50 to 75 basis points as we Tom and I, both called out on the call. We're seeing roughly a 300 basis points are really multiple years of growth.

As a result of the cost.

Realignment, we did this year.

No I think 50 to 75 basis points is still a good proxy.

Going forward are there is a point of diminishing returns at some point I don't know that that were that close to it yet.

But I wouldn't expect it to be another 300.

Or anything close to that in the future.

Well into the future. So can you just kind of keep pandemic margins added 300 basis points and then put you on your normal trend Thats, a reasonable way to think about it again, yes, I think for I think for now no.

That steps up with an acquisition of size.

You know you've seen some of our competitors in the past, we'll be in the forties and so but they also had a different mix of business. They were in a debit processing business and we're not in a processing business standalone. So we don't have a situation, where we have 90% margins are 95% incremental margins on it on a business.

As we sign merchants for.

For our own account or account with with banks and so along with signing merchants you have sales expenses implementation expenses et cetera. So.

I don't know what the top looks like but I don't I'm not suggesting we're at the top it.

The 37% I think there will be a step up as the volume came back quickly over the last three months from.

April May June into July and then started to level off we saw pretty quick.

Impressive growth in margins, so as volumes get back to where they should be in all our markets I think there's a good opportunity for it to step up again, but at some point, it's got to normalize and it should normalize around what we described at the IPO.

Great and then just quickly Kelly, what Ken that turns on by year end is that.

That get up to run rate quickly has once it's approved.

What is the revenue does that.

I mean in terms of revenue I don't think were there I don't know that we're providing specific guidance on where we expect the numbers to come out, but I think you know as we look.

Towards the balance of the year.

We're sort of in the very very late innings of regulatory approval Weve submitted all of our materials are processing systems are now enabled.

We've identified as I said certain members of senior management that are pretty crucial to growing the business Weve built.

Built a pretty interesting sales pipeline of large merchants the bank that we partner with therapy Sky.

Is extraordinarily engage and they've been very active in including us and the dialogue with their most critical customer. So I think whenever we get off the ground were going to see some chunky wins early.

Our expectation is to hire sales force right away. The nice thing for US is we.

We can run that business out of our Mexico operation that can sort of serve as the hub to our south American and Central American presence the same way that we leverage our.

Well look I guess, we launched Ireland in 2015.

Earlier 2014.

Slide 14, and I think today, we're around 25% market share when it's probably high single digits millions of contribution margin ish.

So I guess.

Can we get to that level the spreads in the market are very very difficult to forecast I mean I think.

Right now there is one incumbent player and visa Mastercard.

Haven't even.

Roland is the hub for all our satellite countries from a processing standpoint.

And the incremental margin that we get under that model is is quite significant. So we're replicating that now in in Latin America. So I think it'll I think it should surprise us on the positive both on the top and bottom line and I don't want to under I mean, I think I said this on the last call I wouldn't underestimate also.

You can see an increase from the normalized level I think what you'll see is buying some of those one time items not repeating.

Ah margin level, that's consistent with in and around that 37% that we referenced.

Very helpful. Thanks, so much.

Your next question comes from the line of Brian came from Deutsche Bank. Your line is open.

Hi, guys good morning.

I wanted to talk about the volumes and obviously see the a little bit of a drop off at October is that all from.

Restrictions being put up by governments and some of the borders clothing I'm just thinking about other factors that are in play here and be interested on your and your thoughts on Steve.

Stimulus plans.

Has there been less stimulus potentially in October and then a little bit on the new business sales versus retention as well is that having any factors.

Thanks I'll have.

Excuse me have.

There and take the first part is it relates to Europe and volumes.

Thanks, Jim Hi, Brian.

Yeah I think.

The volumes have been directly linked to government activity in terms of clothes, there in lockdown restricted activity.

All of our markets.

As you saw as Jim commented volumes bounced back pretty quickly the kind of market restrictions opened up and yes. It has been a tightening through October and most market now in Europe, It's nowhere near as severe as the kind of March April timeline, we saw.

I think businesses small businesses large because we've got used to.

Pelican collect the takeaway solutions et cetera, and work Arounds too and what is the what has been a restricted environment equally the lock bans have not been a severe and that's tight public movement for exercise or otherwise has been or is permitted so.

With.

Pipeful it.

It's on the left and finally, a shorter term so hateful as these the ease up for the holiday season, that's we'll see the volumes recovery.

And then on the on the net new side or the net new business the sales results across across the border or across the board rather have been fantastic I mean, the the net new sales activity is very very strong.

Cut.

Cut back the corn teams from whatever days to three days, so even though you asked us income some cross border.

All right good to hear thanks, so much.

Your next question comes from the line.

Her cheek Mehta from Northcoast Research your line is open.

Hey, Good morning, Hey, Jim you know, we've heard a lot about what the industry might look like after kind of the 19, obviously, there's greater card usage, but I'm just wondering from an industry perspective from a selling perspective use perspective do you think there's going to be much of a change and once we get through the.

Pandemic.

Well I think the biggest changes that you mentioned, which and.

Stronger then the number one on your telephone keypad. Your next question comes from the line of like Bill gradual from Compass point. Your line is open.

Yeah. Good morning actually Mike My question is a follow up from that one and it's.

Kind of related to the deferred raised earlier this year.

I understand and appreciate it was a proactive measure I know in March we were all concerned about what the environment looks like six months on.

Here, we are in it looks like things have somewhat normalized or perhaps stabilizing the better descriptor of that.

Any commentary about.

That.

Current capital composition, and how you view.

That's.

But it was out in the public per view about our as being at four times and the potential that raising because of the trends in the business. So the actions we took or at least initially absolutely defensive to make sure that we were able to weather a storm that none of us none of us had seen previously.

Not just here to you, though but anywhere in the world to make sure that the company was Ah secure through.

We didn't know how long the pandemic would would last but looking at the numbers that we have on the charts. It obviously came back.

[noise] faster to say 19 levels are close to 19 levels.

And we also commented at the time that provided this all kind of normalizes, we're going to use this for offensive measures I buying businesses to continue to expand into you know existing market opportunities, but also new market opportunities.

The challenge on the M&A side is those markets haven't opened up right now I can't get on a plane and go to Europe I can't get on a plane and go to South America I get on a plane and go to L. A and then quarantine or New York in quarantine, but that's about all I can do so M&A, we're gonna have to wait a little bit and so while we have more cash sitting on.

[noise] balance sheet and when he historically have that's not there that's there for acquisition opportunities now and so as those act with the acquisition opportunities become real you'll see us announcing investments in second able to tape capabilities or.

Or a new bank relationships and I said I said on the last call my anticipation is that.

As the dust settles in particular with financial institutions, even if being well capitalized you know there may be some banks that will be looking to raise capital and there are going to continue to be banks that are looking for greater capabilities and the type of capabilities that we have are not ones that they can easily replicate and therefore there'll be looking to partner I think.

You know the the partnership model type model, whether it's a J V or an alliance has proven itself over the last 30 years since it works. It's a it's a good business structure for both companies like us and.

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