Ladies and gentlemen, thank you for standing by, and welcome to the EVO Payments Fourth Quarter and Year-end Earnings Conference Call. [Operator Instructions]. Thank you. I would now like to hand the conference over to your speaker for today, Ed O'Hare, Senior Vice President of Investor Relations. Please go ahead..

Good morning, and welcome to EVO Payments fourth quarter earnings conference call. This call is being webcast today, and a replay will be available through the Investor Relations section of EVO'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 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 filed with the SEC, including our most recent 10-K, which will be 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 the nearest GAAP financial measures can be found in our earnings release available on our Investor Relations website.

Today, we will discuss our fourth quarter and year-end 2019 performance. Joining me on the call is Jim Kelly, Chief Executive Officer; Tom Panther, Chief Financial Officer; Darren Wilson, President, International; and Brendan Tansill, President of the Americas. I will now turn the call over to Jim Kelly..

Thank you, Ed, and good morning, everyone. Welcome to EVO's fourth quarter earnings call. Before I provide my comments on EVO's performance, I'd like to introduce Tom Panther, our new Chief Financial Officer.

Tom joined EVO about 3 months ago and is becoming well acquainted with our organization, having already traveled extensively to many of our global offices. We look forward to working with Tom. On today's call, we will review our results for the quarter, summarize our accomplishments for 2019 and discuss key strategic priorities for 2020.

In the fourth quarter, EVO delivered 7% constant currency adjusted revenue growth, 13% adjusted EBITDA growth and 169 basis points of adjusted EBITDA margin improvement when excluding a onetime benefit that we recognized last year.

These results reflect the strong performance of our Direct and Tech-enabled divisions across both of our segments, coupled with our continuing operating efficiencies and acquisition integration efforts.

In the fourth quarter, EVO's 8% overall adjusted revenue growth in the Direct division was primarily driven by our strong bank referral relationships outside the U.S., most notably, Citibanamex, PKO and the Bank of Ireland. Across our remaining bank alliances, we continue to see solid performance, consistent with previous quarters.

Turning to our Tech-enabled division, in the fourth quarter, EVO once again demonstrated strong adjusted revenue growth across all markets. Overall, Tech-enabled revenue grew at 16%, excluding our domestic e-commerce business. In the U.S., Tech-enabled growth was driven by our ISV and B2B business units, which together grew at 17% in the quarter.

Internationally, our Tech-enabled division is anchored by our ISV and e-commerce businesses, which grew at 15%. Before I turn the call over to Darren and Brendan, who will provide updates on EVO's segment performance, I'd like to highlight some of our many accomplishments for 2019.

Beginning with our acquisitions, we made three tech-enabled investments and announced a new exclusive long-term relationship with Bci in South America. Our tech-enabled acquisitions expanded our distribution in Ireland and the U.K. with Way2Pay, Mexico with SF Systems and the U.S. B2B sector with Delego.

While the immediate impact from these investments was small, they enhance our product offering and provide us early entry into these fast-growing channels. We are leveraging these investments to win new business and enable greater digital capabilities for existing customers through focused cross-selling efforts.

Longer term, we expect the impact of our tech-enabled capabilities to significantly expand our distribution and become a more meaningful portion of the company's earnings.

Additionally, the joint venture we announced with Bci reflects our execution and continued commitment to expand our geographic distribution into new regions as we partner with leading financial institutions. We continue to work through the regulatory process and make progress on our systems and processing readiness.

As we've stated previously, we anticipate this business will demonstrate high revenue growth and accelerate our Direct division in the Americas.

We are very excited to launch our operations in Chile and believe we are well positioned to expand further into South America as leading financial institutions seek to partner with independent acquirers to provide enhanced payment capabilities to their customers.

Across the company, we have been very focused on a range of initiatives that deliver operating efficiencies and continue to expand our margins.

During the year, we continue to leverage our shared service capabilities to deliver market-leading customer service and drive cost synergies as we move third-party processing and back-office functions to our main service centers.

In 2020, we will continue to look to streamline our processes and leverage our existing infrastructure to maximize our operating synergies.

Overall, I am pleased with our full year 2019 performance as we delivered constant currency adjusted revenue growth of 8%, constant currency adjusted EBITDA growth of 11%, normalized margin expansion of 82 basis points and increased cash earnings by over 30%.

Tom will provide details on our fourth quarter performance and 2020 guidance later in the call. We remain very excited about the upcoming year. And I will now turn the call over to Darren to discuss our European business in detail.

Darren?.

Thanks, Jim, and good morning, everyone. In the fourth quarter, European constant currency adjusted revenue grew at 12%.

Within the segment, our Direct division demonstrated 12% constant currency adjusted revenue growth, which reflects the strength of our partnerships with leading financial institutions, coupled with our sales expertise and proprietary product offerings.

Across our European markets, our Tech-enabled divisions also delivered solid constant currency adjusted revenue growth of 14% in the quarter as we continue to leverage our recent tech-enabled acquisitions and our Snap* e-commerce gateway solutions.

I would like to comment on some of the highlights for the quarter, beginning with our Polish market, where we continue to sign national and multinational merchants as well as small and medium-sized merchants through the Cashless initiative.

Since the program began 2 years ago, EVO has been the leading acquirer for merchants in this program by market share. Our success is further evidenced by our sales team winning the award for the top sales performance in 2018 and 2019 from the Cashless Poland Foundation.

We are also continuing to successfully leverage our cross-border capabilities for our Poland-based multinational accounts throughout Central and Eastern Europe and now have over 140 multinational merchants across 5 countries.

We believe that our underlying presence will be beneficial as we seek to develop future bank relationships in these small, fast-growing markets. Complementing our Polish business are our operations in the Czech Republic, where we have exclusive relationships with 2 banks, Moneta and Raiffeisen.

Although our acquiring business there is still relatively small compared to the rest of Europe, we are quickly boarding new merchants to our platform and consistently demonstrating any revenue growth greater than 20%.

In Spain, we remain pleased with the 20% adjusted revenue growth from our Liberbank alliance, as we market EVO's products and services under the bank's brand throughout the country. We have also expanded our direct sales force across Spain to diversify distribution beyond our bank referral channels.

Further, in our Tech-enabled division, Snap*'s integration capabilities continue to deliver new gateway customers as well as their acquiring business through our one-stop shop payments offering.

Turning to Ireland and the U.K., our business continues to demonstrate substantial adjusted revenue growth as a result of our bank referral relationship, our direct sales efforts and our growing ISV network. In the U.K., we remain excited about the success of our expanded Snap* gateway capabilities brought to us by ClearONE.

In the fourth quarter, we continued to expand our Snap* product and launched into the U.K. restaurant sector via Snap*'s pay at table solution. In Ireland, we are also expanding our tech-enabled offering with our Snap* gateway, which we are leveraging to enhance merchant relationships and win new business.

Since we enhanced Snap*'s capabilities to include unique payment options for primary and secondary scores in the market, we've signed over 90% of the acquiring business for new gateway customers.

We will continue to cross-sell EVO's acquiring capabilities to schools and clubs in Ireland in 2020, as we also expand Snap*'s offering to enable card acceptance through SMS for other merchants. In 2019, we remain focused on delivering strong customer service and operational efficiency.

We also worked diligently during the year to implement important regulatory-related infrastructure and processing requirements to support the strong customer authentication, or SCA, rollout as part of PSD2 compliance. These projects required numerous system and product upgrades and extensive communication with regulators, third-parties and merchants.

We are well positioned to continue to deliver improved compliant capabilities to our customers that provide security measures in alignment with the new regulations. I will now turn the call over to Brendan, who will provide updates on EVO's businesses in the Americas.

Brendan?.

Thanks, Darren, and good morning, everyone. The America's constant currency adjusted revenue grew at 4% in the fourth quarter when excluding the traditional division.

Within the segment, our Direct division in Mexico demonstrated 13% in constant currency adjusted revenue growth, which reflects the strength of our Citibanamex relationship complemented by our local direct sales force.

Our Tech-enabled division also delivered solid constant currency adjusted revenue growth in the quarter, driven by ISV and B2B growth in the U.S. of 17% and tech-enabled growth in Mexico of 21%. In our U.S.

B2B business, we have recently integrated the Delego gateway capabilities into our B2B sales offering and are now leveraging its SAP integration to sign newer, larger acquiring customers and ERP referral partners.

Following the acquisition of Delego, we now have full integrations to SAP, Microsoft and Oracle, in addition to a number of smaller ERP solutions. Going forward, we remain focused on expanding our ERP integration capabilities as we continue to leverage the unique technologies and referral networks of each ERP ecosystem to sign new business.

In our ISV business, we continue to work with our dealer network and third-party providers to enhance our product and service offering for merchants using integrated point-of-sale systems in the U.S.

We accelerated this initiative in 2019 and are continuing to execute on this strategy in 2020, as we strengthen our relationships with market-leading payment partners to drive distribution.

Further, we continue to form new relationships with software vendors and dealers as we capitalize on the current industry disruption caused by the large mergers in 2019. Turning to Mexico. We demonstrated strong growth for the full year, driven by our referral relationship with Citibanamex, coupled with our tech-enabled growth in the market.

Our Tech-enabled division grew approximately 20%, as we enabled e-commerce capabilities for many of our large corporate customers. We also enhanced our integrated Snap* offering with our acquisition of the SFS gateway in July and the expansion of our ISV network in Mexico throughout 2019.

The success of our early tech-enabled focus is evidenced by our continued signing of new large merchants for acquiring via our market-leading integrations and new SME restaurants from our in-market exclusive partnership with TouchBistro, a leading restaurant POS provider in the U.S. and Canada.

As an example, leveraging our e-commerce and integration capabilities, we signed one of the largest multinational merchants in the market at the end of 2019.

We anticipate strong tech-enabled growth in Mexico going forward as we continue to build out our payments offering in the market through ISV relationships, the continued rollout of our Snap* e-commerce gateway and related tech-enabling acquisitions. Lastly, we continue to make progress establishing our joint venture in Chile.

We are currently developing our processing solutions and related services in the market and are working with the regulators and the bank to obtain approval to legally establish the joint venture. As a result of this acquisition, we have elected to delay our U.S.

and Mexico platform consolidation in favor of enhancing our Mexico platform and leveraging it to enable processing for Chile. Chile is now EVO's second market in Latin America, and we remain focused on additional expansion opportunities throughout the region.

A key tenet of this expansion strategy is leveraging our existing processing platform and back-office functions in Mexico. Similar to our efforts in Europe, we have worked diligently throughout the year to leverage our existing infrastructure in the Americas to drive a greater customer experience and greater operating efficiencies.

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

Tom?.

Thank you, Brendan, and good morning, everyone. I'm pleased to be here today as part of the EVO team. As Jim mentioned, EVO delivered strong top and bottom line growth this quarter. For the fourth quarter, adjusted revenue grew 7% on a currency-neutral basis.

FX negatively impacted revenue by 60 basis points in the quarter as the euro and the Polish zloty continued to weaken compared to the prior year. On a currency-neutral basis, adjusted EBITDA grew 13% and margin expanded 169 basis points when normalizing for a one-time benefit in the fourth quarter of 2018 related to our Cashless program in Poland.

Including this program, adjusted EBITDA increased 9% to $48 million and margin expanded 52 basis points compared to the prior year quarter. These solid results reflect the core revenue growth of our business, coupled with our continued focus on delivering operating efficiencies and integrating recent acquisitions.

In Europe, segment adjusted revenue in the quarter grew 12% over last year on a currency-neutral basis. Within the segment, we saw fourth quarter Tech-enabled revenue grew 14% versus the prior year, driven by our sales in Ireland, Poland and Spain. The Tech-enabled division now represents 23% of European adjusted revenue.

For the quarter, adjusted segment profit increased 15% and adjusted segment profit margin expanded 113 basis points compared to the prior year.

We're normalizing for an increase in certain transitory expenses in the fourth quarter of 2019 related to the SCA implementation, the continued rollout of the Cashless program and discrete operating costs, primarily in Spain, related to system integration activities.

When including these expenses, fourth quarter adjusted segment profit declined 13% compared to the prior year. Now turning to the Americas. This segment delivered solid core business performance as well. For the quarter, normalized adjusted revenue grew 8% when excluding the impact of our traditional and e-commerce businesses in the U.S.

Adjusted revenue in Mexico grew at 14% in the quarter, which is a result of our strong bank partnerships and direct sales teams in the market, coupled with our growing Tech-enabled division. In addition, our U.S. ISV and B2B adjusted revenue grew on a combined basis at 17% compared to the fourth quarter of last year.

Overall, fourth quarter segment adjusted revenue increased 3% over the prior year on a currency-neutral basis. Adjusted segment profit for the quarter was $37 million, an increase of 17% on a currency-neutral basis.

The Americas adjusted segment profit margin improved 490 basis points to 41% in the quarter, which reflects our revenue growth, conversion synergies and lower state tax rate. Turning to corporate. Adjusted expenses for the quarter were $6 million, which is consistent with our full year adjusted expenses of $24 million.

As we have stated on previous calls, expenses related to our operations as a public company largely began in the second quarter of 2018. We continue to make investments in this area during 2019 in connection with EVO becoming a large accelerated filer. I'm pleased to report that we are now SOX compliant.

Pro forma adjusted net income was $21 million for the quarter, reflecting growth of 40%. Pro forma adjusted net income per share was $0.24, up 33% compared to last year, driven by 9% adjusted EBITDA growth and a 20% decline in net interest expense, which is primarily the result of lower variable interest rates on our debt.

At the end of the quarter, including all share classes and dilutive securities, we had 86.3 million shares outstanding, which is flat compared to the third quarter. In the fourth quarter, we spent $12 million in capital expenditures, of which 44% was for point-of-sale terminals in our international markets.

CapEx increased 24% versus the prior year quarter due to the timing of terminal and software purchases in Europe. However, for the full year, capital expenditures decreased by $12 million or 24% to $37 million versus the prior year.

We ended the year with net leverage of 4.2x the trailing 12 months adjusted EBITDA, which was down 30 basis points compared to 2018 and is inclusive of the 3 acquisitions we completed in 2019. Excluding these acquisitions, net leverage would have declined to 4x.

Free cash flow, defined as adjusted EBITDA, less capital expenditures, less net interest expense, was $26 million, an increase of 16% over the prior year quarter. On a full year basis, free cash flow increased 67%. I'd now like to turn to our outlook.

For 2020, we are providing guidance based on market trends, strategic objectives and growth expectations of our businesses. We expect 2020 full year revenue to range from $516 million to $526 million, growing 7% to 9% on a currency-neutral basis over 2019.

As a reminder, effective January 1, 2019, EVO adopted the new revenue recognition accounting standard, ASC 606, which causes us to now present revenue net of certain network fees we pay to the card brands. During 2019, we reported adjusted revenue, which made 2019 comparable to 2018 prior to the adoption of ASC 606.

Going forward, we will report revenue on a basis that includes the adoption of ASC 606. Adjusted EBITDA is expected to be in the range of $173 million to $179 million, reflecting growth of 10% to 13% over currency-neutral 2019 adjusted EBITDA.

Adjusted EBITDA margin is expected to range from 33.5% to 34%, reflecting currency-neutral expansion of 80 to 130 basis points. Our pretax income on a GAAP basis is expected to be in the range of $17 million to $22 million compared to a pretax loss of $19 million in 2019.

We believe pretax income is a more meaningful financial measure due to the impact our foreign tax earnings have on our effective tax rate. Pro forma adjusted net income per share is expected to range from $0.71 to $0.74 per share, which is an 8% to 12% growth rate over 2019 pro forma adjusted net income per share of $0.66.

These enhanced performance expectations reflect positive operating leverage with revenue growth outpacing expense growth. With that, I will now turn the call back over to Jim..

Thanks, Tom. I will now turn the call over to the operator to begin our question-and-answer session.

Operator?.

[Operator Instructions]. George Mihalos with Cowen. Your line is open..

So I guess first question for Brendan. You talked about pushing out the - or stopping the consolidation of the processing onto the U.S. platform. You're doing that out of Mexico.

Is that a requirement there for Chile? Or is there any sort of rationale around there? Will that now be the hub for processing transactions across Latam?.

Yes. So good question, George. The intent with Mexico for the time being is to enable that platform in the same way that we've been able to the Poland platform as our back office and technology hub for the European markets. So that system is already obviously in Spanish language. That's applicable to nearly all of Central and South America, ex Brazil.

And it has a lot of the capabilities that would be required to quickly stand up a system in Chile. So at one point, we had talked about the possibility of moving the Mexico platform onto the U.S. platform. But when this Chile opportunity came along, the Mexico platform could be enabled for processing in Chile far faster than our U.S. platform.

And we pivoted to Chile given the revenue opportunity that we see there..

Okay, very helpful. And Tom, welcome aboard. Just a question.

If we're looking for comparability purposes, the revenue guidance for 2020 versus 2019, what would that have been on an adjusted revenue basis? So maybe another way to ask it is, we have expected network fees to kind of grow in line with the 7% to 9% that you're looking for in the guidance for 2020..

George, thank you. It's good to be here. And to answer your question, yes, I think you would see network fees and gross revenues move in generally parallel paths. So the guidance that we were giving on a post-606 basis, you can think about as being pretty consistent on a pre-606 basis.

But as I mentioned in my remarks, we're going to move to talking about revenue growth and overall business trends on a post-606 basis. So certainly, encourage you to move to that to stay and sync with how we'll be referring to the business on a go-forward basis..

Ramsey El-Assal with Barclays. Your line is open..

Could you give us an update on EuroBic and Bci in terms of timing? I know it's a difficult question. With those 2, I mean, where are we in the process of moving them forward? And you mentioned already sort of making preparations on Bci.

So how quickly would those get off the ground once you got the green light?.

This is Jim. As it relates to EuroBic, we signed it well over a year ago, I think it was October a year ago. I think as some of you may have followed in the press, the bank has gone through a transformation. And this has been sold to a Spanish bank. There was some entry around one of the owners.

It was a privately held bank up until, I guess, this transaction. And so in terms of our transaction, I think it is, at this stage, a wait and see. We had - in terms of the original agreement with that agreement had expired. We had been extending it month by month.

We didn't want to extend it long-term because we didn't know what was going to happen with the bank. So we will engage with the new owner, and we'll get back to you as to what the future is as to whether we and the new potential owner will continue to move forward with the deal that we had struck with the - with EuroBic.

In terms of Chile, we would be the first acquirer in the market. So we continue to work with the bank and the regulator to clear that process. There is progress. It is slower than probably what we would have expected in the beginning.

But again, being the first in a market where the regulator has not seen a joint venture structure with an independent acquirer, having a majority interest, this is something new for the market. But otherwise, the relationship is progressing well.

We - as Brendan was mentioning relative to the processing component of the relationship, we're continuing to build out capabilities. We're also looking for Visa, Mastercard also entering the market to be enabled during the spring/summertime period. So we're optimistic that we'll have some news to report as an update on the second quarter call..

Great. One more for me. There's sort of a bifurcation in the business between - really, it seems almost like everything versus the North America sort of e-com and traditional channels. Obviously, you're executing really well on ISV. You're executing well on B2B.

Can you talk about the slower growing business lines in the U.S.? Do you see those inflecting at some point? Is there a plan in place to see those inflect at some point? Or should we view those more as kind of like businesses that are sort of slowly bleeding off effectively?.

Okay. So I'll take first the traditional. So EVO, if you went back to when it was formed in '89 through when I joined in, I guess, 2011, '12 time period, before international became part of our vernacular, that was just a traditional sales organization. It was not a processor, used to use Global Payments primarily as its core processing relationship.

And it was feet on the street. It was telesales. It was kind of all that everybody else in the market did for 20 years domestically. That business that we define now as traditional and we discussed on the IPO, that business reflects largely individuals, agents or ISOs that have exited the business or have exited the relationship with EVO.

It's not a core focus of the company as it relates to that group. So that is a runoff. There's not a prospect of that returning to a growth status because those people, in some instances, have retired. Now the flip side is it's a very profitable piece of business. So it's painful for us to watch it atrophy.

But over the last 7 years, we've taken the profits of that business and invested in Mexico or Poland, Ireland, et cetera. And that has been - the strategy is that bleeds off, we've been moving into higher growth markets. B2B is another example that you mentioned, ISVs, where we're seeing very strong organic growth.

So that one is going to continue to move in the direction that it has been moving, which is essentially attrition in the U.S. market. In terms of e-commerce, we've discussed on previous calls. Our e-commerce business was not based around a gateway. We were the acquirer for other gateways. Authorize.Net is one example of that.

And there's been a maturing as well, at least as it relates to that type of a relationship. And we've taken steps to try and develop our own capabilities domestically, but it is still a relatively sizable piece of business in the U.S. We see it as a drag on our overall U.S. growth.

But it is not a business like traditional that we're not putting an effort to see a reversal of the trend. But at this point, we anticipate at least for 2020 it will be a continued drag against the other two primary businesses in the U.S..

Tien-Tsin Huang with JPMorgan. Your line is open..

Just a follow-up on George's question. I wanted to ask on margin. So you had some good expansion here in 2020, maybe the Chile's standup costs are a little bit less, of course, operating leverage.

So any step function changes we need to consider as we walk through the balance of the year on margin, just curious here between platform conversions, investments and then traditional operating leverage?.

Yes, I think a lot of - Tien-Tsin, I think a lot of it is - well, it is around operating leverage of the business. It's trying to maintain the cost structure. As you know, we're essentially all in-sourced processing. So whether it's Europe, Mexico or the U.S., we focus very heavily on processing off our own systems, which is largely a fixed cost.

And then just managing the rest of the cost, whether it's corporate or sales expenses, I think that's the biggest driver. Now at the same time, we've seen the benefit of incentives from schemes, where they ask us to support a new brand or initiative, and we've had conversion benefits as well that benefit the margin line.

As we'd said on the initial IPO, 50 to 75 basis points, I think we've been in that range or above that range since we went public. It continues to be a focus of the company to be as efficient as possible without starving out investments or continuing to grow.

As you know, we've also, last year, made 5 acquisitions, inclusive of the relationship with Bci. In terms of Bci, there's not any significant cost in the P&L for Bci. One of the reasons, as Brendan described, that we're leveraging the Mexico infrastructure. So I guess, there's some.

We took an extra floor in the building in Mexico to be able to set up the infrastructure to support customer service out of that office, at least initially. Longer term, we'll have customer service in the market. But there was not a back book on Bci to buy.

So similar to Ireland, it will be a straight start-up with extremely high-growth for many years, but we'll absorb some losses, and we'll come back to you and describe what those are once we got clearance to go from the brand's connectivity as well as the regulator.

And I think that's going to be a very good story for us, accelerating growth in the Americas, plus it will be the first time into South America. There's other opportunities in adjacent markets that we're also excited about..

Okay. That's good news. It's good news. Jim, maybe just as a bigger picture question for 2020. What do you think will carry the growth in 2020 that's different than 2019 in terms of contribution or maybe some positive surprises? And the same thing on the deal front.

Do you expect it to be a busier deal year in 2020 versus '19?.

I think on the positives, one of the things we've tried to do here is build a business that year-in and year-out is a consistent grower, placing our investments. If you take aside the previous question of traditional and the current e-commerce situation, e-commerce is a very strong business for us in Mexico and across Europe.

The ISV business has been very good for us here domestically. And we've seen great progress now in Ireland, in Spain, in Mexico as well. We've mentioned several times TouchBistro. We just signed a very large customer in the country because of that platform.

So I think you're going to continue to see these smallish appearing tech-enabled type of platform. So it's not software. It's enabling people who are in the software business, but that is going to continue to accelerate growth. And you can see the growth outside those 2 markets that were just described, e-commerce and traditional.

The growth is very healthy across the company. And so I don't know that it's materially different this year versus '19. I think in all instances we're going to continue to invest in stuff that will continue to accelerate growth. I would say on the M&A front - I mean, this is a very a common response. I mean, we feel very good about the prospects.

We've bought a lot of companies since I've been here. I would say, as a public company, it is a positive because people know more about us. We are excited. I'm excited about the pipeline of opportunities. And for us, those opportunities are centralized around financial institutions and more of these tuck-in type tech opportunities.

So yes, I would be disappointed if we don't come back to you this year with some more bank deals..

Chris Kennedy with William Blair. Your line is open..

Just wanted to dive a little bit more into the B2B opportunity and some of the things that you're doing to capture that market..

Microsoft, Oracle and SAP. And I guess, the big one that we'd obviously be missing is NetSuite. NetSuite, owned by Oracle, but a very different technology solution. And why our ERP solution is exciting to us, 2 reasons. The first is no different than through the integrated payments channel.

When we integrate our payment acceptance solutions into ERP solutions, EVO becomes much more difficult to fire. We become - we develop a much stickier customer relationship. We see our attrition go down considerably. But then the second benefit is we can go to these ERP resellers and they become an extension of our distribution.

So scale is difficult when we're calling merchants one by one over the phone and saying, "Can I come see you next Tuesday." But if I have a team of folks that are installing Microsoft, Oracle and SAP and as part of that install they're mentioning that they have a relationship with a company that offers an integrated payment acceptance solution to that ERP, it will shorten the working capital cycles.

It will lower their loss rates for failure to collect and all that kind of good stuff. And we bundle all that with Level 2, Level 3 transaction data, so the cost of acceptance is moderated in some way. Now all of a sudden, the premium to accept card becomes even more tolerable.

And then on top of all that, the channel gives us access to a customer size that we would otherwise - that would otherwise be inaccessible to EVO.

So we have merchants there that are 10 or 15 or 20x the size of what we would board in the direct or ISV channel because these merchants are large B2B merchants, and we also are able to support our merchants that are referred to us by Deutsche Bank through that channel as well because they're all roughly the same size and the customer needs are roughly equivalent.

And then the final piece to that is the B2B opportunity is - I know you directed the question at me here in the U.S. but Delego's merchants, as an example, are absolutely global in nature.

So they have almost as many accounts in Europe as they would have here in the U.S., and we see the opportunity to be global because clearly, Oracle, SAP and Microsoft are targeting a very global audience as well..

Great. Appreciate the color.

And I guess, just on the current revenue base of your B2B, is it mostly software and you hope to grow the payments component going forward?.

No, the opposite. No, it's mostly payments with some software. The software is the wedge that we lead with, but then we sell the acquiring right on top of it. And we're - in the past, these software companies that we've acquired, they've been Switzerland. They've been - they've made their software solutions available to other acquirers in the market.

What we're finding great success in doing is bundling the sale, and we can give you the software a little bit cheaper if you accept acquiring from EVO, and we're seeing a huge closure rate with EVO as the acquirer behind the software solution integrating payment acceptance into the ERP..

Your next question comes from the line of Ashwin Shirvaikar with Citi..

So my question is to try and understand the difference in transaction growth versus the revenue growth, both for North America and Europe. And then I have another question..

Could you just say again, Ashwin? So it was transaction growth in North America versus revenue growth?.

Versus the revenue growth. Yes, I mean, almost 18% transaction growth versus roughly 4% FX....

Ashwin, it's Tom Panther. Yes, so you'll continue to see the mix of our business and the type of volume that we process shift. And so what you have....

Sorry, we hit mute by accident. We'll start that over. Go ahead..

Yes. So you'll continue to see some of the mix of our business shift, where you'll see larger merchants pushing high-volume type transactions. That's particularly true on the European side. In some cases, you see some pricing compression, where the revenue per transaction has come down, and that's what's driving the revenue..

Ashwin, specific to North America, we were fortunate to pick up - I think we had the credit side. I know we had the credit, and we moved to the debit. We picked up the debit side of an existing customer in Mexico. This is a huge customer. It's probably in the top 5 in the country. We picked up all their debit volume.

And that just kind of came flooding in, in the third or fourth - end of the third, beginning of the fourth quarter. So that's one of the reasons you see the kind of disconnect together with what Tom was saying. So when you push the U.S. and Mexico together, it shows a little bit of an anomaly because the U.S.

is growing at a much slower rate, but we have a very high transaction growth rate and it's profitable, but very high transaction growth rate this year until that merchant lapse, which won't be until the third quarter this year in Mexico..

Understood. And then a similar question for Europe. And then I might as well squeeze in - my clarification question was on ASC 606. Just to clarify, if there is any impact on profits or the changes that entirely flow through associated with network fees..

Ashwin, it's Darren Wilson here. Just to add to Tom and Jim's comments. For Europe, we've seen some large corporate evolution in pricing and volume in terms of continuing to sign large customers. But really, the trends through Europe are driven by two major drivers. One is a continued evolution to contactless.

And contactless payments, the tap and go, is obviously lower transaction values. And then secondly, the Cashless initiative - the Cashless Foundation initiative in Poland continues to grow, which is micro merchants, again, seeing lower value transactions. So those are the principal drivers for Europe..

And Ashwin, I think also in your question was around 606. For EVO, that's just a geography matter. Just a matter in terms of classification of those network fees. So no profitability impact or timing of revenue recognition with respect to our business..

Kartik Mehta with Northcoast Research. Your line is open..

Maybe, Darren, a question for you, just on - I realize you don't have a large business in the U.K., but any implications from Brexit on the European business..

Thanks, Kartik. Just thoughts again. So there are mixed trends that you're seeing that are coming from the schemes or just kind of industry reports in terms of the potential Brexit shock.

I think there is uncertainty, and we've seen that for a few quarters now where the Visa reports have shown quarter-on-quarter on the fundamentals kind of stabilizing or a slight debt, nothing significant. Overall, I think it's a watch and see.

I think now that there is certainty in terms of the date and kind of processes in terms of the trade deals to be struck, I think there's still a watching brief on that in July - end of July will be a key milestone as to what the trade deals finally look like. I think the reality is Europe needs the U.K. and vice versa for trade.

So we'll watch this space, but I think it's just - it is a watching brief..

And Jim, I think you answered this question a little bit when Tien-Tsin asked about acquisitions. And I was just wondering, you focused on trying to do some FI alliances.

And is that where the opportunities are? Or is that where EVO's focus is right now because that's where you've had a lot of success?.

I think it's a little of both. My - doing this now, 20 years, I think the key to our success or one of the keys is building great distribution, similar to what Brendan was describing on B2B with ERP relationships. You can employ a lot of people to knock on doors. I mean, that's - definitely passes, I think, for many, many, many years.

But I think we're very good at forming relationships with leading financial institutions and each of the deals that we've put together, and we have something like 14 or 15 financial institution relationships to-date. All of them are doing extremely well. Even with Santander, we continue to move forward constructively. So it's a model that's worked.

It's worked very well for us. It's worked well for many of our competitors. It is our - one of our core focuses together with finding opportunities on the tech-enabled side because one of the things that brings a financial institution to a company like ours is the product set and capabilities that we offer them.

So I think it will be a combination of the 2 as opposed to driving into point-of-sale software. That's not a core focus of ours at this time..

And then just one last question. Tom, maybe you said this, I missed it, I apologize if you did. Just CapEx expectations for 2020..

Yes. For start off, our 2019 point, we were at about $35 million. That's down 25% compared to the prior year. I think where you'd kind of look at 2020 is kind of flattish from there, kind of plus/minus small amounts. I think we'll continue to be opportunistic with respect to investment.

We want to do the right thing with respect to taking advantage of investment opportunities and capital allocation. But I think, looking forward, we'd be kind of flattish off of our 2019 run rate now that we've kind of reset the bar after some increases the last couple of years..

Bryan Keane with Deutsche Bank. Your line is open..

My question was for Darren, I guess, first off. Darren, if I look at the numbers, the quarter, it was 12% constant currency growth, which is up at least 300 basis points, I think, from last quarter. So just trying to pinpoint the driver of the acceleration.

I know tech-enabled has grown well, but was there anywhere in particular that pushed the growth rate higher?.

Bryan, I think you just answered my question there. That's exactly where we're seeing significant growth in multiple markets. As I said, we're seeing U.K., Ireland, Spain, Poland, key markets, where, I think, as Brendan has said, in terms of the stickiness and the margin opportunities is where the success is coming.

So I think you answered the question..

I just would add to that - I'd add to that, Bryan.

Because we're anchored in the ISV business through the Sterling acquisition and then before that when we acquired Snap*, one of the things we did maybe three years ago, four years ago is get the GMs from each of the markets together here in the U.S., actually in our Tampa office, where Sterling was located or is located to explain what ISV looks like.

Because if you come from markets where ISV are still relatively small, it's not something that a financial institution or people coming from financial institutions would otherwise really pay that close attention because most of their distribution comes through branches.

And really, to the credit of Darren and Brendan and the GMs in each of these international markets, they've done an outstanding job finding opportunities with ISVs and finding things like Way2Pay and ClearONE, SFS in Mexico and more to come to be able to make this a bigger component of our business.

And I think as everybody knows, first-mover advantage creates a level of stickiness. So while these are fast-growing international markets anyway because of the shift from paper to plastic, we're also going to get the benefit of the mix shift from traditional point-of-sale with the terminal to an integrated solution.

So we expect that will be a bigger part of the company, and therefore, a faster-growing business over time..

Okay, helpful. And then as a follow-up, Brendan, thinking about Mexico, I know the networks have called out some weakness in Mexico. Just want to get your thoughts on the business there as you see it going forward..

Yes. We haven't seen, I mean, the weakness that you're referencing in our Mexico business. That business is well positioned now. Last quarter, we made one of the technology tuck-in investments that Jim referenced earlier, SF Systems, which has, I think, differentiated our ISV offering.

And then I know in the third quarter, we were quite excited and spoke to you guys a little bit about our new partnership with TouchBistro. So we've kind of shifted the business. I think one of the things that we talk about when we do these bank deals, Jim's mandate, is you buy a business that's entirely predicated on bank referrals.

And then over 3, 4 years, you get it from 100% bank to something more like 50% bank. And so we've aggressively moved our direct sales strategies into the market with telesales. We've enhanced our direct sales effort in the market by enhancing the field sales group and then SF Systems enhancing our ISV strategy.

And then finally, the introduction of EVO's European gateway, IPG or Snap*, that is now enabled for the Mexico market. And so you add all that together, and the answer is that our Mexico business continues to perform at rates that we consider to be quite attractive.

And I'm not seeing same-store sales growth declines or volume declines in any meaningful way..

The other thing I'd mention is the brands as it relates to Mexico have really seen almost exclusively international transactions. So Mexico is still a relatively closed market as it relates to a Mexican issued card to somebody who's from Mexico. That card doesn't go out to Visa, Mastercard currently. Now that, I think, will change over time.

So I think if they were talking about slower transactions, I didn't see that news, but it would be predominantly travel into the country from people outside the country..

Andrew Jeffrey with SunTrust. Your line is open..

I appreciate you squeezing me in here toward the end. Jim, I was hoping to get perhaps an update on Santander and the competitive environment in Poland. It sounds like maybe some of those headwinds - it feels like they're easing a little bit.

And I noticed Santander pushing into Mexico, which is kind of in - for acquiring, which is kind of in contrast maybe to what they're doing in Spain.

So I wondered, just maybe big picture, if you can talk about that and how you think those 2 markets, in particular, are going to inform the performance this year?.

Okay. And we'll try not to squeeze you in the end. The next time we'll get you up earlier..

That's okay. I don't mind hanging on..

We're not taking on. We actually got a bunch of ex-SunTrust people here these days. So we're favorable to SunTrust..

That's right. I'll keep that in mind..

Anyway, as it relates to Santander, as I said earlier, it's not the ideal relationship because it wasn't formed on the basis of them taking us. They bought a bank that we were affiliated with. And I think both parties have tried their best to coexist in a structure that neither of them were originally planning on putting together.

We saw stronger sales referrals last week. One week doesn't make a year, but I know the team in Spain, our group continues to do a really good job working with them. We've aggressively moved our merchants out of the market. We're almost essentially done.

We've got a couple of big merchants that have lots of locations, and they have special needs in terms of processing requirements, but we hope by the first half of this year that we've moved all that stuff off of the centralized system.

And if you recall, as we called it out last year, the consolidation that the bank went through at the branch level is - should lap by the first half of this year. So we would - I don't know that I can say the worst is behind us, but their consolidation efforts are done. It's more about investment and growth. So that aligns with what our interest in.

As we've said several times, we have a growing ISV business there. So that's becoming a bigger piece, bigger share of our new business. So that helps propel growth. And we have a bank relationship with another regional bank in the market that's done extremely well.

So Santander was definitely a headwind in '19, and it's not completely behind us, but we are feeling better. And the second one was in Poland. Poland is - there's several competitors that you would know well upon is in the market has been for a long time. And First Data was in the market first back when they did Polcard.

I think it was like 2006 or 2007. So it's a competitive market. There's a smaller player that has been very aggressive, as you've seen - as we've talked about. Our transaction growth and our revenue growth has not matched because our transactions are in the teens, and our revenues are in the high single to low double digit.

And that has been price compression from competitors in the marketplace. But other than maybe city in Mexico, this is one of our biggest relationships with the bank, which owns 1/3 of the business. It's a great relationship all the way to the top of the house there. And I think we'll weather any competitive threats in the marketplace.

I think we're extremely well positioned as it relates to product, and it is our core processing, as Darren mentioned, is in Poland. So we're quick to react to market needs. We are the leader in the market on the cashless side against our competitors. So we'll see some periodic impact from competitive aggressiveness, but we think we're okay..

Joseph Foresi with Cantor Fitzgerald. Your line is open..

I know the call is fairly long. So I'll hopefully just ask 1. We know about your largest areas from a geographic perspective and you talked a little bit about newer offerings like B2B.

Maybe you could just frame for us the top 2 or 3 things that you're focused on, either from a geographic or offering perspective? And then I wanted to get any sense from you if there's been any change on the competition side, particularly in Latin America, with some of the things that companies like Mercado Libre and stuff we're doing?.

Okay. I mean, if I understand the first question on geographic. So South America is a core focus. And we obviously want to get Chile up and going as fast as possible and as I said working it through with the regulators. I would say also on the geographic side is building out existing markets.

It's much easier for us to form relationships in Europe, let's say, because we have big infrastructure in Europe. We're one of the leaders in Europe. We have all the processing in place, products in place, people in place.

So I think you'll continue to see us build out in existing markets where there are other bank opportunities without crowding out the existing bank relationship as well as going to new countries. There's lots of opportunities across Central and Eastern Europe and even on the Western Europe side.

I think the other piece would be Asia Pacific, putting aside the current prices around the coronavirus, Asia Pacific to us is an opportunity, but we would not go to that market or that region without finding a strong bank partner to be associated with.

On the technology side, I would say, e-commerce is a very big focus in all our markets, including the U.S. We saw - see strong growth across Europe and in Mexico, and we have those capabilities in-house. We acquired a platform about 3 years ago and the team that's running that continues to do very well in bringing the capabilities market by market.

In terms of competition, there's - our competitors have recently consolidated. I don't know that anything has materially changed domestically and internationally. We're up against whomever also offers payment services, but I don't hear a lot of tripping from our sales or GM group about anyone in particular..

We have time for one final question. Mike Del Grosso with Compass Point..

Just one more, I guess, on Poland, a bit of an esoteric question, I suppose. But there's been some rumors of - well, some headlines on bank consolidation there as far as PKO.

Could you briefly comment on your business there, your relationship with PKO? And perhaps what you're seeing as far as an emerging opportunity or other consideration there?.

Sure. I mean, there was some - there was last year, BNP acquired a bank that we had a relationship with, which is Raiffeisen, which is a Central European - Eastern European bank chain of probably 13 different countries. I don't - I haven't heard anything specific.

I can see if Darren has some color on that, but I haven't heard anything specific as it relates to that. Our bank has roughly 24% market share. So it's a leader in this space. I don't know they will discuss those type of plans with us.

I don't know that they wouldn't expand to include another financial institution, but I don't know of anything at this time.

Darren, do you want to add to that?.

Sure. Thanks, Jim. I think there's always rumors in the market about activity. Poland's a hotbed of activity.

Suffice to say, as Jim said, we've got a very strong relationship with PKO, very active in the cashless activities with us, a great distribution team, channel, also supporting our tech-enabled solutions, our omnichannel e-commerce strategy as well. So the relationship could not be stronger.

But sure, on the back of, as Jim said, Raiffeisen changes, there continues to be noise in the market as it does in every market about potential consolidations. But we're very pleased and very active still with PKO..

And just to add to this. When we formed this relationship in 2013, it's our longest for me on record as well, a 20-year joint venture. And I've seen some articles about them buying other banks in the marketplace, but that would - our expectation is that would just roll into our existing joint venture. As I said, it's a great relationship.

We speak to them daily locally, and I do as well with the senior group. And I think it would be great if they bought another bank. That would just be an opportunity for us to have greater distribution and potentially more share..

I would now like to turn the call back over to Jim Kelly for final remarks..

Well, thank you all for joining the call this morning and your continued interest in EVO..

This concludes today's conference call. We thank you for your participation. You may now disconnect..

Thanks, Operator..