EVO Payments, Inc. (EVOP) Q3 2019 Earnings Call Transcript

EVO Payments, Inc. (EVOP)
Q3 2019 Earnings Call
Nov 07, 2019, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the EVO Payments third-quarter 2019 earnings conference call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Ed O'Hare, senior vice president of investor relations for EVO. Please go ahead.

Ed O'Hare -- Senior Vice President of Investor Relations

Good morning and welcome to EVO Payments third-quarter earnings conference call. This call is being webcast today and a replay will be available through our investor relation 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 is 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 third quarter of 2019 performance.

Joining me on the call today is Jim Kelly, chief executive officer; Kevin Hodges, chief financial officer; Darren Wilson, president, international; and Brendan Tansill, president of the Americas. Now I will turn the call over to Jim Kelly.

Jim Kelly -- Chief Executive Officer

Thank you, Ed and good morning, welcome to EVO's third-quarter earnings call where we will review our results for the quarter and provide updates on our business performance and our recent acquisition. In the quarter, normalized constant currency adjusted revenue grew at 9% and constant currency adjusted EBITDA grew at 13%, which are the result of our strong bank relationships in Europe and Mexico and our ISV and B2B businesses in the US. Adjusted EBITDA margins improved 129 basis points in the quarter as a result of our continuing operating efficiencies and acquisition integrations. In addition to our strong bank referral network, growth in the third quarter was primarily driven by our tech enabled divisions across both our North American and European segments.

Since the rollout of our Snap e-commerce Gateway in Europe and in Mexico, earlier this year, we are seeing solid growth in our international businesses as we leverage this proprietary gateway. Additionally, our acquisitions and sales strategies are further driving tech-enabled growth outside the US as clear-one, way-to-pay, and the SFS systems are now integrated into Snap and continue to deliver new merchants beyond our bank referral channels. In the US, we announced the acquisition of Delego, an SAP payment integration company for B2B customers. We believe Delego in addition to our notice and Sterling acquisitions, has positioned our continued success in the under penetrated and fast growing B2B space.

We now offer migrations to the top business software platforms including Microsoft, SAP, and Oracle, enabling us to deliver end-to-end integrated ERP solutions for our merchants. We remain very excited about the long-term growth prospects for this channel as these are estimates the addressable global B2B market opportunity to be 19 trillion. Brendan will discuss Delego and our growing B2B business later this morning. Our recent M&A activity, including our gateway acquisitions, Delego, and the pending joint ventures previously announced demonstrates solid execution against our strategy of expanding into new geographic markets and buying tech-enabled solutions to enhance our global product suite.

Finally, as we announced in our recent press release, I'm pleased to welcome Lauren Miller to our board of directors. Lauren has extensive global experience from our time at First Data and our current position as the global CIO for InterContinental Hotels Group. For payments and technology expertise will be invaluable to EVO as we continue to expand our product suite and distribution around the world. I will now turn the call over to Darren Wilson, who will discuss in detail the performance of our European businesses this quarter.

Darren?

Darren Wilson -- President, International

Thanks, Jim and good morning everyone. For the quarter, European constant currency adjusted revenue grew at 9% led by a bank partnership and our growing tech-enabled division across all market. In Poland, we continue to bring new business together with our bank partner, PKO BP. This quarter we signed a large customers, including several entertainment businesses and healthcare and wellness provider.

We were also the first to implement Visa Direct at the point of sale for the Polish luxury, as Jim mentioned on our last call. Since launching this product, we have installed solution over 900 launches, three point of sale devices throughout the country. This unique opportunity further demonstrates the continued success of our partnership with the bank and our focus on providing innovative solution. Our recently announced partnership with Postbank in Poland continues to see early success.

Last month, we signed the acquiring businesses of sales and independent postal providers which are third-party retail merchants that also provide select postal services. Under the new agreement, EVO will provide the acquiring services for the merchant's postal activity. We'll also look to provide the retail acquiring for these merchants possibly in the future.further leveraging our distribution. Lastly, we continue to sign new merchants or new existing merchants delivered through the cashless program.

Since the program began less than two years ago, we are now purchasing is more than 33,000 small cashless merchants. Our tech enabled divisions performed well in Poland as we saw transactions increased 16% in the quarter, consistent with that of the European market, Snap is the interface for IFE's board merchants to our platform. In our Polish market, our integrated businesses is dominated by larger integrated system in contrast to other market, which are predominantly smaller ISVs. Today, tech-enabled revenue represents 32% of our Polish business with a long runway to growth, the software as a point of sale, further penetrates the middle market.

Our Irish and UK businesses also delivered solid results once again in the third quarter with strong growth from both our direct and tech-enabled division. In addition to record SME referrals from the bank buying this quarter, our direct division signed several large merchants, including a national hardware store chain and a global beverage company. We secured these new customers and others by leveraging our strong direct sales force and broad product offering in the market. In our Irish tech-enabled division, we continue to board the e-commerce and omni-channel merchant on to our Snap e-commerce gateway.

Additionally, we are building out a Snap sales force to leverage our broaden capabilities to support K-12 education and clubs. In the third quarter, we signed 40 schools which are EVOs Merchant Acquiring solution. We expect this growth to continue with the combined Irish and UK market as there are over 100,000 primary and secondary schools inflow. In the UK, we further enhanced the performance of our tech-enabled division by adding new ISV partners during the quarter and continuing the signed merchants from ISP referral.

As an example, our UK sales force successfully launched a pilot of our Snap solution at the Etihad the home of Manchester City Football Club with the UK ISV focus on sport and entertainment venue. Together, our Irish and UK businesses now represent approximately 10% of our European revenue. Turning now to Spain and our bank referral channel, Liberbank partnership is performing well in the market as the bank continues to refer new business. We have recently integrated our automated boarding system directly into the bank branch system which expedite merchant boarding and provides a better experience for merchants and branch personnel.

We continue to cross-sell EVO's enhanced capabilities to our existing Liberbank merchants to provide better products and services. Since the last call, there has been no significant change with respect to our discussions with Santander, but we continue to experience headwinds from our Banco Popular portfolio. We announced the attrition reducing through historic levels. We've completed the migration of all but four national merchants from the Popular portfolio, these remaining merchants will be moved early next year after the holiday season.

In our Spanish tech-enabled division. We continue to deliver new business utilizing our Snap capabilitie,. We are further enhancing our integrated business by signing new ISVs delivering additional distribution. In the third quarter, we bought it over 500 merchants from ISV referral focused on the veterinary, automobile, health and wellness, and hospitality vertical market.

Finally, we continue to build out our e-commerce portfolio in the market by using our Snap e-commerce gateway to attract new merchants. Our tech enabled division, now represents nearly 10% of the revenue in Spain. Now, I'll turn the call over to Brendan Tansill to provide a further update on EVO's businesses in North and South America this quarter, Brendan?

Brendan Tansill -- President, Americas

Thanks, Darren. And good morning everyone. In the third quarter in North America, normalized-adjusted revenue grew at 9%. Beginning with the US, growth continues to be driven by our ISV and B2B business units, which together grew at 21% in the third quarter.

Within our ISV business, we continue to execute our referral partner model forming direct and indirect relationships with software companies and dealers to extend our distribution. In our B2B business, we leveraged our leading ERP payment integrations to attract new customers and increased card usage for existing merchants. Further, we completed the acquisition of The Delego a best-in-class SAP integration company and now have a broad suite of solutions and deliver payment integrations to Microsoft, Oracle, and SAP. As we focus on B2B.

I thought it would be helpful to summarize EVO's positioning within the vast B2B payments landscape. Many commercial customers are increasingly demanding to pay by credit card pressuring more accounts receivable department to enable card acceptance. Our B2B business facilitates electronic payments for invoices via their integrated ERP systems. To optimize the acceptance cost for our B2B customers, we offer a level two and level three processing for commercial cards through our direct ERP integration-stand vendor-applicable through virtual terminal.

We submit to the card networks, level two data which includes customer codes, tax amounts and tax identification information and level 3 data which adds invoice lined item details to level 2 data. In exchange, these commercial card transactions received a reduced interchange fee, thus creating an incentive for broader B2B acceptance. By providing this enhanced data VR -- ERP integrations, businesses in the US can seamlessly reduce their interchange expense by up to 150 basis points and improve the efficiency of the AR process. EVO's B2B customers are primarily large national and multinational companies that generate between 10 and 500 million in annual volume including manufacturers, distributors, and wholesalers.

Our B2B merchants generally produce a higher revenue per transaction than our B2C merchants due to higher average transaction sizes. Further, these customers have lower attrition because of their ERP integrations to our platform. We first entered the B2B space via the Sterling acquisition in 2017, which had a small but fast growing B2B business predominantly oriented toward virtual terminals. We have since expanded our capabilities to include payment integrations to top-tier ERP systems, enabling us to leverage our partner network of over 200 ERP implementers, resellers, and buying groups with our unique solutions.

As a result of our most recent acquisition, Delego will now have access to acquiring solutions, creating a compelling end-to-end solution to merchants running SAP. We remain excited about Delego and will continue to expand our capabilities to increase our distribution as more companies look to adopt B2B card acceptance. Turning to Mexico, we continue to leverage our partnership with Citibanamex to significant new business in both our direct and tech-enabled divisions. These type referrals are diverse mix of small and medium-sized businesses and national and multinational corporations in a variety of vertical markets.

Recently, we signed a national clothing retailer and a Chinese-based global ride hailing service to continued growth in the market. In our Mexican tech-enabled division, both our eCommerce business and our expanding ISP network are demonstrating strong growth as online shopping and software at the point of sale become increasingly popular even in markets with low overall card penetration. This quarter, we signed new merchants from our ISV relationships, including the recently announced TouchBistro partnership. We are also winning the acquiring business from our gateway only customers as we expand our cross-selling capabilities with our recent gateway acquisition.

Our tech-enabled division demonstrated 16% adjusted revenue growth in the quarter and now represents 14% of our Mexico business. Finally, with respect to Chile, our application remains under review with the regulator, we will update you on our next call. With that, I'll turn the call over to Kevin, who will now cover the financials in more detail. Kevin?

Kevin Hodges -- Chief Financial Officer

Thank you Brendan. And good morning everyone. As Jim mentioned, EVO delivered a strong quarter of top and bottom-line growth. For the third quarter, normalized adjusted revenue grew at 9% on a currency-neutral basis.

FX negatively impacted revenue by 270 basis points in the quarter as the euro and Polish zloty, and to a lesser extent the Mexican peso continued to weaken compared to the prior year. On a currency-neutral basis, adjusted EBITDA increased 13% to $42.2 million. Currency-neutral adjusted EBITDA margin increased to 129 basis points to 27.7% compared to the prior-year period, which reflects our North American and European revenue growth and our continuing operating efficiencies and acquisition integrations. In Europe, segment adjusted revenue in the quarter grew 9% over the prior-year period on a currency-neutral basis.

In our largest European market, Poland, transactions grew in the mid-teens and adjusted revenue grew at 7%, which reflects the loss of a large customer at the end of Q1 and market pricing for our larger customers. In Ireland and the UK, adjusted revenue grew at 13% due to a decline in same-store sales, which we believe to be related to ongoing Brexit uncertainties. In the third quarter, our adjusted revenue per transaction in Europe declined 8%, consistent with the trends we've seen this year. Within the segment, we saw third-quarter tech-enabled transactions grew 19% versus the prior year, driven by our sales in Poland, Germany, and Spain.

The tech-enabled division now represents 25% of European adjusted revenue. Adjusted segment profit for the quarter was $20.1 million, an increase of 11% on a currency-neutral basis. For the quarter, adjusted segment profit margin was 29.5%, an increase of 57 basis points compared to the prior year due to the continuing platform and operational consolidation efforts in Spain and Germany. Turning now to North America, we saw strong performance out of this segment as well.

Third-quarter normalized-adjusted revenue increased 9% over the prior-year period on a currency-neutral basis. North American results were normalized for incentives in Mexico in the prior-year period. Excluding these incentives, we saw adjusted revenue in Mexico grew at 11% in the quarter, which is the result of our strong bank partnerships and direct sales teams in the market, coupled with our growing tech-enabled division. On a currency-neutral basis, our adjusted revenue per transaction in North America decreased 6% in the quarter, which reflects the growth of large merchants in Mexico.

Adjusted segment profit for the quarter was $28.5 million, an increase of 15% on a currency-neutral basis. North America adjusted segment profit margin improved 216 basis points to 33.7% in the quarter, which reflects our revenue growth, synergies from our federated acquisition in the US, and other office consolidation effort. Turning to our corporate expenses, adjusted-corporate expenses were $6.3 million for the quarter. As we stated on the last call, expenses related to operations as a public company largely began in Q2, 2018, and the company is continuing to make investments in this area during 2019.

Pro forma adjusted net income was $16.4 million for the quarter, reflecting growth of 16%. Reflecting adjustments described in our press release and our share classes, pro forma adjusted net income per share was $0.19. At the end of the quarter, our diluted share count, which represents the weighted average Class A common stock outstanding and all dilutive securities was 34.6 million shares. The increase in Class A shares was primarily due to the offering we completed in August, including all share classes and dilutive securities.

We had 86.2 million shares outstanding. In the third quarter, we spent $11.3 million in capital expenditures, of which 47% was for point-of-sale terminals in our international market. capex declined 13% versus the prior-year period due to the annualizing of the terminal investments made in the prior year to support the cashless initiative in Poland, offset by terminal uprise in Mexico and software purchases in Europe. We ended the quarter with net leverage of 4.3 times last 12 months, adjusted EBITDA which increased as a result of our Delego acquisition.

In addition, interest expense increased 5% in the quarter compared to the prior-year period as a result of our higher debt balances associated with the recent acquisition. Free cash flow described as adjusted EBITDA less capital expenditures, less net interest expense was $20.7 million, an increase of 35% over the prior-year period. Now I'd like to turn to our full-year 2019 outlook. Based on continued revenue headwinds, primarily related to our Popular portfolio, we are updating our full-year 2019 guidance, we now expect adjusted revenue to range from $596 million to $600 million, reflecting growth of 8% to 9% on a currency-neutral basis.

We are maintaining our adjusted EBITDA range of $159 million to $163 million, which now reflects growth of 10% to 13% on a currency-neutral basis. Lastly, given our lower capital expenditures for the year, which resulted in lower depreciation expense, we are increasing our pro forma adjusted net income per share to be in the range of $0.58 to $0.61, which reflects growth between 12% and 17%. These numbers are calculated based on an updated pro forma share count of 86.2 million shares, which includes our share classes. I will now turn the call back over to Jim.

Jim?

Jim Kelly -- Chief Executive Officer

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

Questions & Answers:

Operator

[Operator instruction] Our first question comes from Bob Napoli of William Blair. Your line is now open.

Bob Napoli -- William Blair -- Analyst

Thank you. Thank you for the question. Appreciate it. The B2B business is, you obviously made several investments and I appreciate the color on the integrations with the ERP systems.

I was hoping you to could give, maybe some thoughts on your color on the size of that business currently and what you think it could be over the next few years. And if there are any other significant pieces that you need to add either organically or inorganically.

Jim Kelly -- Chief Executive Officer

Good morning, Bob.

Bob Napoli -- William Blair -- Analyst

Good morning, Jim.

Jim Kelly -- Chief Executive Officer

So as to the business, I think relative to our other US businesses are is still on the smaller side, we don't break out the specific size, as Brendan said in his comments. This came to us by way of the acquisition of several years ago of Sterling. They did not have the ERP integration. So, we've now acquired two and build one with Oracle.

So, but it's also the fastest growing by far domestically note, some of it's smaller numbers. But the opportunity domestically and the incentives for schemes to couple with the fact that we're heavily now integrated or integrations to these primary systems. We're very excited about the prospects for continued growth, strong growth, and I think this will be a sizable piece of our US business in the not distant future, but I'll if Brendan wants to add something to it.

Brendan Tansill -- President, Americas

Yeah, the only thing I would say in addition to Jim's comments would be the integration to the ERP systems provides an opportunity to enhance our distribution over time. So if you look at the way the business went to market in the past, we sold directly to merchants either over the phone or via an in-person visit. And not just similarly to how the ISV business has traditionally gone to market, leveraging the reseller and dealer communities. Each of these ERP partners has resellers and dealers as well that assist in their distribution.

So we're excited about the opportunity to get scale their leveraging these ERP integrations to get access to a broader distribution network. And these integrations are not overly abundant in the market. They are not widely available. So we feel like we have a compelling technological "mode" around our business.

And as Jim said, we're excited about what lies ahead.

Jim Kelly -- Chief Executive Officer

And for the size -- merchants, as Brendan outlined in 10 million to 500 million in -- these are very large customers that typically an independent like without an affiliation in the US with a financial institution. You don't typically sign those kind of accounts because large institutions can offer other services. So they tend to pick up the acquiring service as well. That's one of the reasons why we did so well in Mexico and Poland and Ireland because of our affiliation with banks but domestically, that's not how EVO got started.

But in this arena where we've historically stayed away from software, software is a differentiator. There are not a lot of companies that have gone to the effort, software companies that have built this integration. So we had an early relationship, small relationship with Delego prior to the acquisition. I think they had gone through a cycle.

A year or two prior looking for and maybe an exit, and we reengage that discussion, having a very positive experience with the notice acquisition. So we are excited and will continue to invest. I think we may just do one or two more investments we'd like to make in the space, but otherwise, I think we have a very powerful tool to go to these shows to solve a lot of people's problems.

Bob Napoli -- William Blair -- Analyst

Thank you. A quick follow-up. And just as we, and I know you're not giving guidance for 2020. But what your view of the health of the economy and your current markets and the trends as we were seem to be pretty, pretty solid, as we look at 2020 is that, should we expect the kind of growth in margin expansion that you've outlined in your medium-term targets?

Jim Kelly -- Chief Executive Officer

Yeah. In our growth -- growth for us comes two ways. One this year for paper plastic we've tried to position the company and either high growth markets where the -- like Mexico, Poland, et cetera, or in vertical markets where it's a mixed shift. The other piece that causes the company to grow is the economy that you're asking.

One of things we've noticed. And I think you've heard on other calls, we have a Brexit person here. I think we're seeing a Brexit, it's impacts both in Ireland in particular and the UK. Our UK business is tiny but our Irish business is becoming a meaningful piece, I think it's roughly 10% of our revenues now in Europe and our finance group, we're showing the, how much it has slowed down its organic -- economy, with how that -- how much of the economy is slowdown from front-store sales year over year.

So that's somewhat of a negative, but I think we're still very well positioned in markets where the shift from paper to plastic should be a bit of a counterweight to that situation and domestically as well, our business in B2B and in the ISV business in particular, I think continues to show very good returns because of the mix shift.

Bob Napoli -- William Blair -- Analyst

All right, thank you. I appreciate it.

Operator

Thank you. And our next question comes from Andrew Jeffrey of SunTrust. Your line is now open.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Thank you. Good morning, appreciate you taking my question. Jim, I know one of the -- the maybe spread into one of the important initiatives for EVO is, is North American e-com, may be US e-com in particular. Can you talk a little bit about the competitive environment and how you think EVO wins in e-com, I know it's a competitive space, where it's tough to differentiate.

So a little bit insight there would be really helpful.

Jim Kelly -- Chief Executive Officer

Yeah, sure. Good morning and thanks for the good questions. So I guess starting in Mexico, we are now introducing our own proprietary gateway that sort of started as an acquisition in Europe, and we've enabled for the capabilities required to be competitive in the Mexico market. So in Mexico, we're enjoying really significant success there -- growth year on year is in the mid to high 30s -- if it for the e-commerce sector and the nice thing, as Jim alluded to about the challenge that we faced in the early days in the US, not having a bank partner in attracting larger corporate clients that would typically have more of an omni-channel presence dealing in both face to face an online world, that's obviously not the case in Mexico.

We do benefit from our partnership with Panamax, and we service many of the top accounts in the market and many, many, many of those businesses deal in both the physical and the online world. So as these merchants focus and invest in their online presence we're naturally getting that business and we're seeing a big uplift. And then we of course have some strong referral relationships with some of the larger multinational gateways that need a local acquiring solution to this point, we really are the only scaled independent acquire in the market. And we've really become the de facto preferred option for acquiring.

So, I mean we'd rather allow merchants there use our gateway, it creates a stickier customer relationship, and there is no intermediary between us and the customer, and we have much greater control over the customer experience. But as it relates to these huge multinationals that have a single gateway servicing them across all the markets globally, in those instances, we will work very willingly partner with third-party gateways and that's been a really attractive source of growth for the company as well. And then in the US, I think we've outlined this on prior calls, we're in still the early days of a shift-in strategy. So the strategy here for a long time, was an indirect model, leveraging third-party technology, we had very large referral relationships with several of the very large third-party gateways, and we did bring our European technology into the market for many years because of the success of those relationships.

And we are revisiting that strategy, and we are bringing the European gateway here now, it's been here since the first part of March. We organized a little bit, and now our reporting, what we call the direction channel, the e-commerce channel into the same leader in Dallas, Lauren Harris. We see the market increasingly adopting the omni-channel solution that I was describing about Mexico earlier. And we think that's a really logical solution, and we're in the process of building out-of-business development team to pursue new relationship.

So, yes, it's competitive. There is no question, yes, there is a lot of gateways that have been here a long time. For me, I think addressing the omni-channel merchant is the area of opportunity. I don't know that anyone does both e-com and card present in a really slick way, and I think many of the most advanced competitors really excel at one or the other.

So it's in the early days of a shift in strategy there, but I think it's the right one, and hopefully we see food store labor in the second half of next year.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Second half. All right. That's really helpful color. And then just a quick one on Santander Popular.

I mean, can we think about that as sort of more bond at this point I noticed Santander made a pretty significant cross border payments investment just a week or so ago. So they seem to be focused at some level on the market or do you think Liber is the key referral partner in Spain?

Jim Kelly -- Chief Executive Officer

Well, relative to size, I'll let Darren. I looked at the press release as well, it didn't seem to be payment. It will look more digital bank transfer of type of services opposed payment. Maybe if you follow center there, which it's obviously we do that they have a -- a shifting strategy over the last several years to be global payments company, they're trying to export some capabilities interestingly out of Brazil, now to Chile and Mexico.

And I think eventually to maybe the US, and Europe, but now having done that here in my prior life that's not that easy. And it's going to take them time, and we have a long-term partnership with them and in Mexico. And we are still the biggest bank in the country, and we've described on a couple of these calls that the acquisition of our bank two years ago, last summer as a result of the consolidation and the rebranding and that consolidation into one organization had an adverse effect. This year more so than we had probably anticipated off coming off the last call.

But as Kevin mentioned, or actually as Darren mentioned in his comments, we are essentially done with the conversion. So our merchants are sitting on our platform out of Poland, which everyone else in Europe is essentially sitting on today. And now the relationship, we'll see how it develops over the the coming year, but I think the experience we've had this year, we're not anticipating it to reoccur next year.

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Really helpful color. Thank you so much.

Jim Kelly -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Tien-Tsin Huang of JP Morgan. Your line is now open.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Hey, thanks so much guys. So I may have missed some of this. I've been bouncing a couple of calls. Just the revision on the guidance, I know you guys step in EPS a little bit then on the revenue side, a little bit lower.

What -- can you summarize or write again the factors behind that.

Jim Kelly -- Chief Executive Officer

Yeah, it's primarily what I was just talking about, it's predominantly Santander. The yes, it is low-rise to that I would say that's probably 80% to 85% of what our expectations were this year on the range that we initially gave on revenue, which I think was 601 to 610.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

601 to 610 is the quarters, right.

Jim Kelly -- Chief Executive Officer

Yes. So the, and the pullback there. I mean, there might be a little FX in that, but the pullback there is predominantly the impact from their consolidation, which I don't think we appreciated the impact it was going to have in terms of the service to customers and the resulting attrition. So that's now complete but, we wanted to update based on what we're seeing now for the end of the year.

And so we think it will be below the low range to about the low range of what we originally expected.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

And then on the earnings?

Jim Kelly -- Chief Executive Officer

On earnings side, we stayed with the same guidance we gave at the beginning of the year, Seeing this coming into the second half of the year, we just deferred some of the investments that we otherwise had anticipated making to counter some of the impact of the Santander actions.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

It's good to see you protect the bottom line. That's helpful for the year. So just as a quick big picture follow-up for you Jim, just, we've heard from other the big acquirers of a deal the merger names that suggest something, I generally think it's been pretty good. Have you seen any change in competitiveness from them either in the field or obviously in potential partnerships in M&A activity, etc.

Jim Kelly -- Chief Executive Officer

Not specifically. I mean my reaction is I don't listen to their calls, and more than, seeing the notes that you all right. It seems like they continue to up their synergies, both on the revenue, which to me sounds like pricing and on -- on the cost side. I can say, I can tell you there's lots of resumes on the street and there's lots of layoffs that have occurred.

So I think that's an opportunity for us. Anytime, somebody is going through an integration this size and sometimes when people leave, and we're going to benefit from that, and I think there are also opportunities domestically on the customer side, those referral partners, et cetera that are now looking for the relationship that used to be in place since left. So we are already focused on trying to fill the gaps where they have occurred because of synergies, but other than that, on the M&A side, not really. I mean, most of our M&A, I know we just Delego is a Canadian-based company, but predominantly the US, our M&A focus has been and continues to largely be outside the US and I haven't seen any change.

So it's not like we see 10 deals a day, but I haven't seen really any change in the profile of the companies that are rumored to be in the deals that we're involved in.

Tien-Tsin Huang -- J.P. Morgan -- Analyst

OK, thanks for the update.

Jim Kelly -- Chief Executive Officer

Thanks, Tien-Tsin.

Operator

Thank you. And our next question comes from George Mihalos of Cowen. Your line is now open.

Unknown speaker

Good morning. This is Allison on for George. Thank you for taking my question. It was great to hear all the progress and success on the ISV front, I'm curious what you seeing in terms of ISV referral fee trends and if there's anything to call out either domestically or internationally.

Jim Kelly -- Chief Executive Officer

Hi. We have the international and domestic guy here. So you want to go first?

Kevin Hodges -- Chief Financial Officer

Got it. If you looked at me, so I guess we're starting domestically. Yeah. And we've talked about this a little bit on prior calls.

What do I see -- I see episodic super aggressive behavior out of some of our competitors, but it doesn't seem to persist for any really longtime period and we've been able to stay rational, and we're not going to get crazy, and we're not going to offer 90/10 split or anything like that. We've sort of held the line and the businesses continues to perform really well, as you guys are seeing in the tech-enabled numbers. I think the AISP business in the quarter were a little bit over 20% and as long as we can grow at that rate, we feel, no need to get a rational. So, and quite honestly in the instances in which we do see a competitor get really aggressive with the specific partner, they generally pull back after some period of time, as I say.

And then the good news in Mexico is, as I said earlier, we're the only true independent of in the market. So for an ISV, there is not really a huge number of alternatives, other than the EVO and we just bought this integrator in the market that we talked a little bit about on the last call SF Systems and that gives us technology that no one else there has as a tool for ISVs to integrate to and so the ISV business there in terms of the competition and pressure on referral fees and all that sort of stuff, you really don't see any of that there, that's one of the additional benefits of working in emerging markets where electronic payments are less developed.

Jim Kelly -- Chief Executive Officer

Darren?

Darren Wilson -- President, International

Thanks, Jim. ISVs in Europe are tech enabled is moving at pace in different market. As I said in my notes earlier, Poland, the tech enabled is about 30% of our revenue. Through our Spain, it's about 10% of our volumes.

UK, Ireland, about 30%. It differs by market and by pace, but it's absolutely core strategic focus for all of our European leaders as the kind of more advanced ISV businesses and strategies from the state from Americas is coming across the pond. So huge opportunity, we've acquired some businesses in Spain with ClearONE and with Way2Pay in Ireland that are giving us niche differential solutions in this space.

Unknown speaker

Great, thanks for the additional color.

Jim Kelly -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Ramsey El-Assal of Barclays. Your line is now open.

Ben Budish -- Barclays -- Analyst

Hey, good morning. This has Ben Budish on for Ramsey. I wanted to ask about the contribution of M&A, in the quarter and to full-year guidance. Is there anything in the year for Delego.

And then I know in the past you've disclosed the M&A contribution at least to North American. I'm wondering if I can get that for this quarter.

Kevin Hodges -- Chief Financial Officer

Yeah. Hey, good morning, Ben. It's Kevin. So, yes, we have factored in Delego, it's timing, it was not a significant deal at all -- on an overall basis, we're still talking just about a couple of points growth related to the acquisitions.

We annualize the larger acquisition the buyout of Federated that was going happen at the end of Q3, last year. So we get into Q4, we're really just talking about some of the smaller deals that we had.

Ben Budish -- Barclays -- Analyst

And can you disclose the M&A contribution to this quarter?

Kevin Hodges -- Chief Financial Officer

Within the quarter itself?

Ben Budish -- Barclays -- Analyst

Yes.

Kevin Hodges -- Chief Financial Officer

Yeah. Yeah, it's about a couple of points.

Ben Budish -- Barclays -- Analyst

OK. And then, just one kind of on a different topic. I'm just wondering, if the ongoing protests in Chile, does that change anything about your thinking on entering the country is it maybe perhaps, less stable than originally thought, or are you still kind of looking at it like full-steam ahead, it's a great opportunity there?

Kevin Hodges -- Chief Financial Officer

I just got a text somebody about something that happened last night in Chile. So I'm -- I mean these events occur all over the world, all the time and may occur in the United States, maybe at not this magnitude but they occur everywhere and so we are a firm believer in payments and what payments represents which is every consumer that would prefer to conduct business without pulling cash out of their wallet. So, we are full speed ahead with Chile, and I'm not anymore concern there, then, I'm sure that the companies that process in Hong Kong are concerned, that this too will pass and cooler heads will prevail. Now having said that, we don't have a physical employee or anything in Chile at this stage.

We haven't been approved by the regulators. So we still have time to see how this unfolds, but my expectation is this country will sort out whatever issues that it's facing in the coming months.

Ben Budish -- Barclays -- Analyst

All right, thanks a lot.

Operator

Thank you. And our next question comes from Kartik Mehta of Northcoast Research. Your line is now open.

Kartik Mehta -- Northcoast Research -- Analyst

Hi, good morning. Maybe, I think this question is probably for you Darren and I know you talked about Brexit and the impact it's having from maybe economy standpoint in Great Britain and Ireland. I'm wondering, is there any change as you need to make to the business because of that, now, because of what's happening in Brexit and since you have other European businesses?

Darren Wilson -- President, International

Thanks, Kartik. Thanks for the question. Yes, it's a topical question in Europe. Just to make to here one way of making across the pond.

Yeah, I mean the uncertainty is still there in terms of what's ultimately going to be happening by way of what is the egg. They are going to be. The election of this now turning that uncertainty. In terms of our business though, we're pretty well insulated in the core of our business is license in Germany, and for possible opinion across the whole of Europe.

So we are in the European community and will stay that and that's not subject to the Brexit issue. So as Jim said, while we got to focus in growth on certainly the tech-enabled lines in the UK, we can or we have filed to the end of 2020 an ability to trade in the UK, and we will then what depending on what happens on the licensing or falling out of Brexit, we will apply for payment institution license to support the UK and Northern Ireland business at that point. And so actual European business fully insulated continue to license in Germany under the buffer. So no domestic impacts we see on licensing or ability to trade and nothing in the short-term being any kind of headwind risk on that.

Kartik Mehta -- Northcoast Research -- Analyst

And then, Jim, I know you comment a little bit on acquisitions as related to all the merger happening at least acquisitions you're seeing. Is there been any change in pricing or expectations because now you have a few companies that are out of the market there seem to be out of the market.

Jim Kelly -- Chief Executive Officer

No, I think my experiences every seller ones as much money as they possibly can get a lot of times, they say, it really doesn't matter. But just need always matters. I haven't, I don't think, the only thing that really informs into some extent is that they see multiples on payments companies where they seeing multiples on payment companies are sold and everybody wants to apply the highest multiple to their business irrespective of whether it looks, anything like that business that had the multiple. No, I would say as the process it most.

And I think I've described this before and during a period of time, where the world is in trouble, kind of the crisis we saw in '08, '09, '10, financial institutions are looking to raise, capital I don't think price is necessarily the driver, even though they are there to raise capital. Today, what we're seeing more in terms of banks, and this is predominantly banks that I'm talking about where we're forming relationships like Chile or others outside the US is they're looking for capabilities that they see continued shift in consumer spending, how they spend, what merchants expectations, what their customers want from a digital perspective, and they know they don't have the expertise or the resources to invest in the bank itself, so they look for partners and those tend to be longer sales cycle because there is not a demand that they have to raise a certain amount of money in a certain quarter it's I need you pick the right partner because this is a long-term relationship, and I've got to think through a business acquiring that we really never thought about in that kind of detail in the past. So that's really the phase that we find ourselves in that we can just call up a banker and say we want to buy a company that's a public company, and then merge the two, we're out looking for relationships and markets that we think will be beneficial. And we're looking for partners that we think we can add value and those take time to performance and, but the pipeline with respect to that, and I think largely because we're -- our reputation over the last eight years doing this and in particular now as a public company.

I think it is a much different conversation than we had when we were starting this in 2012 and '13.

Kartik Mehta -- Northcoast Research -- Analyst

Thanks a lot, Jim. I appreciate it.

Jim Kelly -- Chief Executive Officer

Thanks, Kartik.

Operator

Thank you. And our last question will come from Joseph Foresi of Cantor Fitzgerald. Your line is now open.

Joseph Foresi -- Cantor Fitzgerald -- Analyst

Hi. Two questions. First, wanted to get a sense of how you balance your debt load with the desire to address potential acquisition activity and then my second question I'll just ask it upfront, given where we are on the call. Maybe you can give us an update on your e-commerce efforts? Thanks.

Jim Kelly -- Chief Executive Officer

OK. I'll let -- you want to go?

Kevin Hodges -- Chief Financial Officer

Yeah, so good morning, guys. I'll take the first part of the question on the debt load. I mean that is something that we balance. We obviously want to look at attractive M&A opportunities, and we created a debt structure that allows us to still pursue those deals obviously over the past 12 months.

A lot of what we've pursued or more of these tuck-in deals deals like Delego, Way2Pay, Notice, and even Federated last year. As we've been able to very comfortably fit those into our debt structure and even continue to delever the company, we ticked up leverage just a 10th of a point. This quarter, just as a result of the Delego, but after that, we've been able to show sequential declines in the leverage. So we are still sort of actively looking at deals and to the extent we need to flex the capital structure to accommodate a larger deal.

We certainly have the ability to do that.

Darren Wilson -- President, International

Thanks, Jim. Thanks, Kevin. Thanks for the question, Joseph, on e-com. Yeah, continues to be a core purchases as Jim and Brendan outlined earlier.

We have our in-house gateway. In terms of the business we bought in Europe, a few years ago. So we've rolled out through Europe and now rolling out through all of our international market, as Brendan alluded to in terms of the successes and focus in Mexico, and in the States as well. So if you can, it's still a call or is a very core focus channel, we continue to cross sell directly our e-commerce solutions to our merchants that we're selling card present solutions for.

So the omni-channel solutions that Brendan alluded is a core focus but equally will complement as Brendan said third-party gateways. The largest corporate typically want to gateway providers for redundancy and in Mexico, that's where we're seeing the success of being a complementary supporting acquirer to the larger gateway providers as well. So this is a true omni-channel focus through all sectors, all size of merchants, and our strategy is to be a one-stop shop for in-house e-commerce solutions through all our operating market.

Operator

Thank you. And I would now like to turn the call back over to Jim Kelly for any closing remarks.

Jim Kelly -- Chief Executive Officer

Thank you all for joining this morning and your continued interest in EVO.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Ed O'Hare -- Senior Vice President of Investor Relations

Jim Kelly -- Chief Executive Officer

Darren Wilson -- President, International

Brendan Tansill -- President, Americas

Kevin Hodges -- Chief Financial Officer

Bob Napoli -- William Blair -- Analyst

Andrew Jeffrey -- SunTrust Robinson Humphrey -- Analyst

Tien-Tsin Huang -- J.P. Morgan -- Analyst

Unknown speaker

Ben Budish -- Barclays -- Analyst

Kartik Mehta -- Northcoast Research -- Analyst

Joseph Foresi -- Cantor Fitzgerald -- Analyst

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