Monday , June 24, 2019

EVO Plans To Pump Up U.S. Growth While Eyeing Further Foreign Expansion

Merchant acquirer EVO Payments Inc. plans to reinvigorate its lagging U.S. e-commerce business while still pursuing expansion opportunities abroad, its chief executive said Wednesday.

Atlanta-based EVO is one of the smaller publicly traded payment processors, and it has a unique business model. Its roots are in the U.S., but today the company generates 70% of its transactions in Europe, and 65% of its revenues come from outside the U.S. The firm has a big presence in Poland, Spain, the United Kingdom, and Ireland, as well as Mexico. European transactions grew 22% year-over-year in the fourth quarter to 575.1 million, while North American transactions rose only 5% to 246.5 million.

In the U.S., volume growth through what EVO calls its “tech-enabled” channels such as  independent software vendors and business-to-business payments is strong, chief executive James G. Kelly said on a conference call with analysts to review fourth-quarter results. It’s not quite so with online commerce.

“We continue to see a robust pipeline of opportunities in current and prospective markets,” says CEO Kelly.

“E-commerce remains a significant component of this division although its performance has lagged behind our other tech-enabled business units,” Kelly said.

The remedy appears to be adding bigger, more profitable online businesses, along with services to attract them. “Historically we have focused on signing small e-commerce merchants. More recently, we have moved upstream to focus on more mid-market e-commerce merchants and expand our domestic product capabilities, which we believe will improve growth in this business unit as we exit 2019,” Kelly said.

EVO also is looking to jump-start its slow-growing domestic direct acquiring operation, which includes the 65% of its U.S. business that hasn’t shifted to ISV channels. In 2018’s second half, EVO brought in a new leadership team for that unit, and the company took full control of Federated Payment Systems LLC, an independent sales organization in which it held a one-third interest at the time of its May 2018 initial public offering.

Meanwhile, the company is looking for further expansion abroad. Acquisitions and bank joint ventures are a key component of EVO’s international strategy. “To date we have successfully completed 14 international bank alliances and partnerships, and we continue to see a robust pipeline of opportunities in current and prospective markets,” Kelly said.

EVO came to Mexico in a big way in 2015 when it struck a merchant-acquiring partnership with Citigroup Inc.’s Citibanamex subsidiary. Now it’s looking “to enter other Latin American markets,” Kelly said, though he didn’t name specific countries. He also said EVO is eyeing countries in the Asia-Pacific region.

EVO’s fourth-quarter revenues increased 9% year-over-year (12% on a currency-neutral basis) to $150.8 million, though the company posted a net loss of $4.04 million. For all of 2018, EVO reported revenues of $564.8 million, up 12% as reported and 11% on a currency-neutral basis from $510.8 million in 2017, and a net loss of $14.7 million.

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