Monday , October 15, 2018

Fresh From Its IPO, EVO Payments Looks for Expansion Opportunities Abroad

EVO Payments Inc. is hunting for new international markets as it continues to see growth in its U.S.-based business with independent software vendors, company executives said Wednesday during the merchant processor’s first earnings conference call as a public company.

Founded in 1989 as an independent sales organization, Atlanta-based EVO in recent years has built its own technological systems and gone on an acquisition tear both in the United States and abroad. In May it held an initial public offering and used much of the proceeds to pay down $203.1 million in debt, chief financial officer Kevin Hodges told analysts.

“We’re eager to expand,” says EVO Payments CEO Kelly.

With $667.7 million in long-term debt still on its balance sheet, chief executive James G. Kelly said EVO plans to continue deleveraging. But it also has enough financial clout to further its geographic expansion and do more acquisitions, he indicated. “We continue to be very active on the M&A front,” Kelly said, adding that the company also is pushing organic growth in existing businesses.

A major way EVO has grown is through partnerships with banks in which EVO either buys a bank’s merchant portfolio, or forms a joint venture or related entity that refers the partner’s business clients to it for payment services. Last December, for example, EVO bought the portfolio of Spain’s Liberbank SA, which added 20,000 merchants.

While EVO operates in Canada and has a partnership with Citibanamex in Mexico, the company recently has focused most of its international attention on Europe. There, it has major operations in Ireland, Poland, Spain, the Czech Republic, the United Kingdom, and Germany. Europe generated 69% of EVO’s total of 771.3 million transactions in the second quarter. European transactions grew 24% year-over-year 528.7 million, while the North American transaction count came in at 242.6 million, up 5%.

Now EVO is looking for new business not only in Europe, but also in the high-growth Latin America and the Asia-Pacific regions, according to Kelly. “We’re eager to expand outside the countries that we currently do business in across Europe, and then into new regions,” Kelly said.

Kelly didn’t mention any individual Latin American countries, but said many executives at the Citibanamex partnership have worked in Central and South America and have contacts that could be leveraged for new business. “The shift from paper to plastic is still in very early stages” in Latin America, he said.

Likewise, Kelly didn’t single out any Asian countries for expansion. “It’s a huge market; there’s areas we’re more interested in than others,” he said.

Meanwhile, what Kelly referred to as EVO’s tech-enabled division, which offers payment services to ISVs as well as e-commerce processing and business-to-business services, has become “one of our fastest-growing channels,” Kelly said. The unit now accounts for more than 54% of revenues in North America and 31% in Europe.

EVO reported total revenues of $140.9 million, up 14% from $123.9 million in 2017’s second quarter, though the increase was 11% on a currency-neutral basis. In contrast to transactions, the majority of EVO’s revenues still come from North America. Revenues in that region rose 7% to $79.8 million, while European revenues increased 24% to $61.1 million. Adjusted earnings before interest, taxes, depreciation, and amortization rose 12%, 10% on a currency-neutral basis, to $37 million from $33 million in the prior year.

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