Merchant acquirer EVO Payments Inc. disclosed Sunday that it had received a $150 million investment from a private-equity firm to help carry it through the Covid-19, or coronavirus, pandemic, which has decimated consumer spending.
The investment came from funds affiliated with Chicago-based Madison Dearborn Partners LLC, which has been a major investor in EVO Payments since 2012. “MDP’s added resources will strengthen EVO’s financial profile and enable the company to remain focused on future strategic initiatives as it navigates the global Covid-19 pandemic,” Atlanta-based EVO said in a regulatory filing.
EVO generates about 65% of its business outside the U.S., according to a report from Chicago-based investment firm William Blair & Co. Poland and Mexico account for 25% and 20%, respectively.
“In line with other payments companies we follow, payment volume declined sharply beginning in mid-March and is running at a decline of about 25% as countries/states went into lockdown mode,” the report by analyst Robert Napoli says. The report notes that Spain, where volume is down by about 50%, generates not quite 10% of EVO’s business.
EVO’s filing says many of its merchants “operate in markets that are subject to broad governmental restrictions on movement and commerce, resulting in substantial reductions in merchant transaction count and volumes.” In response, EVO says it is taking action to reduce fixed costs up to 20% for the rest of fiscal 2020, and at the same time reduce capital expenditures by up to 75%. “Such reductions will depend on the pace in which economic activity returns,” the filing says. As some other publicly traded payments companies have done recently, EVO withdrew its financial guidance for 2020.
Madison Dearborn’s investment comes in the form of preferred stock convertible into common at a conversion price of $15.80 per share, a 10% premium to EVO’s five-day average share price and a 13.3% premium to EVO’s closing price on March 27. EVO will use part of the funds to pay down revolving debt, and the rest “to fund potential future investment opportunities,” the filing says.
“This capital should give EVO ample liquidity whatever the environment is in front of us and position the company to go on offense as skies clear,” the William Blair report says.
In a separate report issued Monday on its outlook for Visa Inc. and Mastercard Inc., William Blair estimates total purchase volume will fall 25% year-over-year in the quarter ending June 30, 15% in the September quarter, and 10% in the December quarter, “with positive year-over-year growth thereafter.”