EVOP (2021 - Q1)

Good day, and thank you for standing by. Welcome to the EVO Payments First Quarter 2021 Conference Call. I would now like to hand the conference over to your speaker today, Ed O'Hare, Senior Vice President of Investor Relations. Thank you, please go ahead. Ed O'Har

Good morning and welcome to EVO Payments first 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.

Thank you, Ed. Good morning everyone, and thank you for joining us today. It’s hard to believe that it’s been over a year since the COVID-19 pandemic first swept across the globe. While today many of our international markets remain under lockdown, we continue to be encouraged by recent volume trends across the company as vaccination programs gain momentum and markets reopen. For the first quarter, volumes were down 2% compared to 2020, which reflects the lapping of the initial impact of the pandemic beginning in March. This slight decline in year-over-year volume demonstrates an improvement from the fourth quarter when our volumes were down 4% year-over-year. As you can see from the slides compared to 2020, March volumes were up 17% and April volumes were up 48%. Compared to 2019, March and April volumes were up mid to high single digits. These positive growth trends not only capture the lapping of the initial COVID impact, but also demonstrate growth relative to prepandemic levels despite the ongoing restrictions. These results give us confidence that both consumers and merchants are embracing card payments, a trend that we believe will continue well beyond the pandemic. Later on the call, Darren and Brendan will discuss the reopening trajectory of each of our markets to provide a better understanding of our current operating environment, and more importantly, the developments we anticipate as the vaccine rollouts continue.

Thanks, Jim. For the quarter, European constant currency revenue declined 17% year-over-year, which demonstrates the continued impact of the hard lockdowns across many of our markets. These results also reflect the strong financial performance we delivered in January and February of the prior year before COVID began to significantly impact our operations. Despite the quarterly decline in revenue, I’m encouraged by the growth opportunity of our European segment once markets reopen and consumer spending returns. I am confident that our revenue will return to the growth rates that exceeded pre-pandemic levels as we benefit from pent-up demand and higher card utilization. During the first quarter, volumes were approximately 6% lower compared to 2020. As you can see from the slides, volumes are down from January and February, 2020, however, beginning in March, volumes improved to well above 2020 levels when we lapped the initial impact of the pandemic.

Thanks, Darren. For the quarter, the Americas constant currency revenue was flat, which reflects the solid performance of our Mexican business coupled with modest declines in our U.S. direct and traditional divisions. Volumes for the quarter demonstrated improvement as restrictions continued to be lifted and economic activity increased. In the U.S., volumes for the quarter were approximately 1% above the prior year. By April, volumes were 48% above the prior year and 12% above 2019. We are seeing a steady recovery in this market with SMEs, which comprise a significant portion of our U.S. portfolio continuing to reopen. B2B continued to grow in the mid-teens, a trend this business maintained throughout the pandemic due to the adoption of business automation tools and increased card acceptance. B2B now represents approximately 20% of our U.S. revenue, which we expect to increase as we capitalize on additional sales opportunities. We are confident this business will realize long-term benefits from the pandemics impact on accounts receivables as companies continue to automate back office processes. Our ISD business, which is largely concentrated in hospitality, grew mid-single digits in the quarter despite the challenging operating environment. We are gaining sales momentum coming out of the pandemic by signing new partners and rolling out new products and capabilities.

Thanks, Brendan, and good morning, everyone. On a currency neutral basis, revenue for the quarter declined 6%. However, adjusted EBITDA increased 6%, and margin of 32% expanded 360 basis points compared to the prior year. These solid results demonstrate our effective cost management and ability to grow EBITDA and margin, despite quarterly volumes being down 2% compared to last year, and the continued shift in merchant mix. We remain confident that as the pandemic abates and economic activity increases, volumes will strongly rebound and spread will return to historical levels, resulting in an acceleration in revenue growth and margin expansion. With respect to segment performance, in Europe, our year-over-year constant currency revenue declined 17% and adjusted segment profit declined 37%. In the Americas, year-over-year constant currency revenue was flat and, adjusted segment profit increased 22%. As reflected in our volumes.

Thank you, Tom. As we continue to manage our business through this crisis, I’d like to, again, thank our employees, partners, customers, and shareholders for their continued support. Our significant margin expansion and strong liquidity will further aid us through the remainder of the pandemic and position us to capitalize on the business opportunities we expect in the second half of the year and beyond. We continue to focus on expanding our distribution, leveraging the efficiencies we have put into place to deliver strong results as economies recover. I will now turn the call over to the operator to begin the question and answer session. Operator?

Your first question comes from the line of Robert Napoli with William Blair.

Nice trends. I like the April charts, and the comparisons to 2019 are really helpful. Still the outlook, maintaining the outlook, you still have a lot of work to do to get to that EBITDA range. And the margins there are especially low in Europe. And just maybe some commentary on the confidence that you have in this substantial acceleration in earnings growth as we move through the year.

Thanks, Bob. I think the best way to look at it is, if you look at the second quarter coming out of the second quarter of last year, how strong these markets, Europe in particular, even Mexico, which is doing well, but still is in the throes of the pandemic, does not have the same benefit to widespread vaccination as we do here in the United States. Even Europe is, other than maybe the UK, has lagged the availability of the vaccine. But if you look at summer months last year, and how quickly all of our markets came back, as soon as the lockdowns were released, that’s really the evidence that we point to, beyond in Tom’s comments, he was talking about economic outlook from a variety of experts as to the second half of the year. But we can see in our business that the business is a bigger business, because greater utilization of card, and that’s with less merchants than we had last year, either because merchants failed or they’re still dormant. They haven’t been able to open up because of the lockdowns. So yes. It’s not a layup to arrive at those numbers. But given what I just described, our expectation is that it will all flow together. The cost reductions that we put into place to manage through the pandemic in 2020, those have largely stayed in place. We haven’t seen an appreciable increase in head count in the company. Now some of that is driven by, there’s a lot of dislocation that’s going on right now, a lot of turnover, because if you look at employees for the last 12 months, they really haven’t changed jobs. So you’ve got a pent up demand of people looking for different opportunities in their careers. So we’re going to face that. That’s something that all companies are going to face going into this next year. A lot of articles that are out on it. But assuming the lockdowns release – and Darren is our bellwether to European lockdowns. So he’s already been allowed out of his house, finally. I’ve been watching him on Google for the last year, sitting in his garage. He’s got a loft upstairs in his garage, and I know he’s sick and tired of sitting there, but Ireland will be soon to follow. Poland as well. So they need the business as much as we do. From an economy standpoint the government can’t continue to provide stimulus forever without some economic activity. So right now our best view is, provided those lockdowns release, this is a big recovery opportunity for us in Europe, in particular. And by the end of the year, our margins are significantly bigger than they are today, given that the first quarter still is facing lots of lockdowns. I’ll see if Tom wants to add anything.

No, Jim. Good thorough response. I think the only thing I would add, Bob, is that we also expect a lift from continued improvement in spreads. We expect some level of cross-border activity to resume, maybe not to the same level that we saw in 2019, pre-pandemic, but we do think that there’ll be green shoots of activity from cross-border. And then I think the U.S. Q1 serves as a good bellwether for, economically, the just general economic conditions that we expect in our other markets. The 6% GDP, the strong consumer spending, etc, I think foreshadows well what’s going to happen in our other markets. So we’re just going to get some general lift from the economies being strong.

Just to pile on as well, I think New York is opening, isn’t that right, Brendan?

Yes.

May 19th, I believe. Yes. So they haven’t been open yet for full service restaurant.

That’ll take your EBITDA above 2019 on that guidance. So it’s good to see. Just a follow-up question. A lot to ask, but I’ll just ask one more. The B2B business, 20% of the U.S. growing still mid-teens, what are your plans for that business or your goals? From an investment perspective, is your technology where it needs to be? Can you accelerate the growth? I mean it’s obviously a massive tan, and is that an area where you’re looking specifically to add through acquisition?

Yes. The short answer is absolutely, for the U.S. business. I mean this is an e-commerce business. It’s just business to business e-commerce, predominantly, but I’m going to let Brendan take you through more of the specifics.

Thanks for the question. So on B2B, and I think I actually referenced this maybe on the last call, but I think the rough numbers are 25 trillion of spend in the U.S. and I think only one trillion of it is on card. So you’re talking 4% penetration today and obviously with a lot of room to go. Our last two acquisitions here in the U.S. have been specific to B2B. Notice in California, Delego in Kitchener, Ontario later this month, we’re actually standing up our own proprietary ACH platform. We’ve got a couple of merchants in beta now that we’re excited about, and that allows us to in-source the service that our merchants have otherwise clamored for, for some time. Where do we see ourselves investing prospectively? I think there are obviously more ERP solutions that we’d like to get integrated to. So integrators to ERP today. We focus on SAP, Oracle, and Microsoft, and then the other piece would be we talked about in the last call a little bit, Bob, the payables side. So I continue to think that merchants are going to want one throat to choke. Today we focused our efforts on the receivable side, and I do think that there are opportunities to have a stickier customer relationship by addressing some pretty basic needs on the payable side as well. So yes, and then the final piece would be building a distribution network of resellers and ERPs is similar to what we have out of our Tampa ISV business, so that we are increasingly less reliant on direct merchant sales and more signing partner relationships. Because as Jim will often say to me, distribution is the name of the game. And in the U.S., partner referral relationships constitute our most vibrant referral source. So that’s where we’re headed. And we think it is just an enormous opportunity. We spend, collectively, quite a bit of time trying to make sure that we maximize that opportunity for EVO.

Your next question comes from Tien-Tsin Huang with JPMorgan.

Jim, I guess I have to go to your opening comments around bank conversations picking up. I know some of your peers have secured some JVs and whatnot. So can you elaborate a little bit more how things are thawing out? Is it pretty broad-based? What regions? I know you can’t give away all the secrets here, but would love to learn a little bit more.

I’d be happy to give you all my secrets, but I’d get in trouble. I don’t think there’s been a ton of them that have been out there. I mean we’ve looked at the ones that have been announced as well. Yes, I would say it’s beginning to thaw. I think it’s still early, in terms of Europe, as we just described is still a very much in a lockdown. So I think the banks have to, as a point of distribution for us, but have to assess the impact of COVID on their balance sheet, on their business. And I think it’s one of two things. One, it’s going to be an interest in capital. This wouldn’t necessarily be the only business that probably would be part of a race. And then the second is capabilities that they just lived through the worst pandemic in a hundred years. And how did they fare in terms of capabilities meeting the needs of their customers from a payment standpoint, merchants. And yes, yes, it is beginning to thaw. As I said last year, it’s difficult to form these long-term agreements and ours tend to be 10 years in nature without getting a chance to meet in person. And Europe has just beginning to open up in terms of travel. Now you wish still very much focused on South America as well. And unfortunately, they’re still not what – they’re heading into the winter season and their play on the pandemic has not gone as well as expected. So I think that in terms of additional markets in South America may be a longer – but then what we’ll see in Europe.

Yes. That makes sense. My quick follow up, if you don’t mind, just on the meet for Tom, just thinking about the second quarter revenue number here puts you on the spot. I think consensus is like 5% down from the 2019 level. It sounds like the U.S. is running a little ahead. Is that we use the moan in your mind. Lots of puts and takes. So I figured I’d ask here.

Yes, no, you’re right. Attention, there are lots of puts and takes, and I think the pace of recovery in Europe will have a big impact on where that comes out right now. I think the second quarter consensus top line number looks certainly in line with the broader guidance that we’ve provided. I think margins accelerate in the second half, because by then our expectations that you’ve got Europe on all cylinders, not just on 2. And so I would say that as we look at our guidance and look at it on a quarterly basis, we see margins accelerating versus flat-lining over the next three quarters.

Your next question comes from George Mihalos with Cowen.

This is Allison on for George. Thank you for taking my question. I was hoping you can provide more color on what you’re seeing quarter today in Europe, in particular, what geographies are accelerating the most? And how disparate are the growth rates between the different countries?

Yes. Tom and Darren, certainly feel free to weigh in as well. They’re boots on the ground. You can, as we’ve talked a couple times now, we’ve seen the lockdowns persist in Europe that obviously has an impact on us. I would say UK and Ireland are the ones that seem to be, especially UK seem to be the ones that have progressed the fastest. Poland has been a bit episodic. They had a strong March. I know that’s still inside the Q1, but then did see some retraction in April when their restrictions were pretty severe, but then started to come back. So I would say it’s good momentum, but certainly not functioning at the same level that we would say the U.S. has. And then Spain continues to be the private slowest of our markets, but we do expect just based on what we can see with travel bookings and the signals that the government is giving that we do expect Spain to still be able to salvage a vacation season come the third quarter.

Echos is coming from me. UK as well, vaccinated with all the headlines, excuse me. Getting on for high 90% of adult population over 50, having at least the first shot, but over 60% of the total population. European countries’ kind of averaging about 30% having had vaccinations, the road map is the UK fully opens with no restrictions in June, but essentially everything open from mid-May. Poland end of May, Germany in June evening. And as I said, in my comments at the start, the hotel bookings in Spain for the second half of the year through our customers are recovering extremely well, and showing good forms. So it plays to the very first question I think Bob asked in terms of the trends and the outlook. So with also the tech-enabled growth, where more merchants are taking e-commerce or some tech-enabled solution, is showing well. And of course those smaller merchants bringing in the higher margins trend well, too. But the real indicator has been the UK with volumes ticking up significantly with the lockdowns easing.

Yes. And one other point I’ll make that I didn’t think of when I was first commenting is that merchant portfolio looks very healthy. The active merchant count still remains a very high almost at prepandemic levels. We’ve seen some net growth year-over-year on the merchant portfolio. So you – I think we’re well positioned that when the business comes back, there are merchants there to receive it that we’re processing for. And that’s why we’re optimistic.

Got it. That makes sense. And then just as a quick follow-up I heard the liquidity update, Tom, that you gave. I’m curious if you can provide an update on your priorities for additional M&A as the world starts to reopen.

I’ll take that Jim. So it isn’t as though we took our eye off of M&A, I think we’re pretty disciplined as to what we’re interested in that aligns well with the company’s overall strategy was as Brendan mentioned, NSI, I say often, which is building distribution. And we build that through bank distribution in markets where banks are still very germane to a merchants decision to select an acquirer. And then in other markets, we were looking for distribution through tech-enabled and tech-enabled in our vernaculars is B2B and the ISV channels. So you should anticipate as the thought engine says, the thought begins in Europe and in other markets that you’ll see more animal M&A activity out of us in those two areas.

Your next question comes from Kartik Mehta from Northcoast Research.

I wanted to ask you about maybe margins for the company moving forward. You’ve obviously been able to take a lot of costs out and I’m wondering as we move forward, do you think the company’s in a different spot? Would you expect overall margins to maybe be different going forward than you already originally anticipated before a kind of COVID hit.

Yes, it’s Sunny. I was, I had a conversation similar to this just yesterday. And when – just before COVID hit, I mean, we just had a budget approved. We had already sized our expenses going into 2020. And within two weeks we ended up producing 600 positions, which I don’t know if that reflects well on us or not, that we had that ability within the organization. But I think it speaks to the rest of the organization, to the employees who are here, who picked up the slack. Now some of that was covered by the fact that our business as everybody else was much slower than it had been expected going into 2020. Coming out of 2020, we probably have another couple of hundred employees that are in the queue to hire as the market stall. And we start reinvesting to capture sales and support on customer service. I think on IT and product we’ve continued through the pandemic well. But if you go back to your question on margins, I’m not anticipating those additions are going to have a material impact to our expectations for margins. As I’ve said, a couple of times, this is going to become a bigger company, even without additional acquisitions, just because of the amount of spends on card that we will benefit from. And also we’re going to start seeing DCC probably improved by a 100% it’s down significantly from where it was historically. So those things conspired together as Darren was saying, markets opening up that we’re on anticipating Tom and I are anticipating that the back half of the year, we’re going to see margins that are sustainable and are significantly better than what we’ve delivered prepandemic.

And then just one last question. Did Darren, you talked about Europe and maybe the impact of ISB or having has dependently changed how you’re selling in Europe. And you think that if it has changed as the change become permanent, as we come out of the pandemic?

Thanks, Kartik. Has the change in selling into the markets to ISBs or generally in the market, you’re meaning, to merge?

Just overall, just if you’ve seen it.

Yes. Not really seen the mix shift from kind of traditional channels. Clearly banks have been distracted with other activities, but in terms of the partners we’ve got, we’re still seeing a maintained healthy re referral chain from them. But yes, IFCs are getting traction in all markets. So bolstering upon the channels to sign up ISVs for sustainable distribution that way on a referral model basis, typically again, is definitely a growth agenda. Tech-enabled as usual kind of stuff in the States, and then follows Western Europe, going east. To all of our markets are active in the ISV space. But as Tom alluded too, we’re seeing that merchant solid strong net merchant growth across Europe, which is being driven by all channels. That said, inevitably banks are pivoting to more of an online proposition now from the face-to-face with many branch closures happening. So what – we’ve had experienced on in terms of online marketing with them, it’s just rarely pivoting that activity. But no, we’re seeing good sustainable value.

Your next question comes from Ramsey El-Assal with Barclays.

This is Ben. I’m for Ramsey. Also follow up on Bob’s question from earlier and ask about the guidance range on the revenue side. I seem like Q1 came in ahead of your expectations. And then there was kind of a lot of optimism and talked about around the fall. And it seems like there’s a few kind of external factors like Europe is going to start allowing some tourists to come in and kind of late into the year. So I just wanted to ask the – what are the puts and takes on the decision to leave the guidance range for revenues unchanged. Kind of what’s going maybe better than expected and what’s worse. And to what degree does this expect kind of unknowns about volatility versus?

Yes, I think Tom and I’ll do this together. I think the first is when we normally provide guidance like any company does, it’s based on our performance, what we’ve done historically. And we generally have a much better feel. Right now, we’re banking on these markets opening up. In Ireland, As an example, I know the team from Ireland is listening. But Ireland, for example, has surprised us as to how aggressive the lockdowns have been there in Ireland. Ireland’s a big growth market for us at Germany was opened, they just kind of closed a couple of weeks ago. In Spain our team in Madrid can travel outside of Madrid, but other Europeans can’t travel into Spain. So we’re providing guidance based on the expectation that these things are going to change as Darren described. But we don’t have a crystal ball. So I think it – at this stage, I’m not sure it does us or anyone any good to get ahead of the expectations of a variety of governments that we can’t necessarily predict. The expectation is yes, everything good is moving in the right direction. I was in a restaurant here in Atlanta, Monday night for the board dinner. I walked in, none of the restaurant staff had masks on any longer because they dropped the mask mandate here and in Georgia. So if that’s what we start to see across the globe, because of the vaccination program has been successful. Then we should be well into the range that we provided you. But if there are some bumps then, we’re being conservative to prevent – protect the downside. But Tom can add to that.

I think the other thing I would add, Ben, is that, we appreciate the fact that we had a beat in the quarter. It was a slight beat and well within the range that we referenced over a full year basis. So it really wasn’t something that would cause you to say based on one quarter in the bag that we’ve seen enough to increase guidance. And then I’d say when we were offering that guidance, well, two months ago at the end of February, that we had optimism then. We probably had fewer data points because the U.S. wasn’t as far along, we weren’t sure what the vaccine program was going to be in Europe. So we’ve seen more traction that validates the view that we had at the end of February. And so I think that’s why we’re confident to reiterate, but don’t feel like it’s something that we would want to adjust at this point.

Okay. That’s really helpful color. And if I can just ask one housekeeping question, you mentioned B2B is now 20% of the U.S., do you have a sense of what that would be excluding COVID? I remember just a couple of years ago, I think it was just 5% and it obviously has been growing very nicely, but had the rest of the business then growing normally, where would B2B be today? And how does that compare to your other technical guide channels in the U.S. that the ISP and the e-com?

Yes. Ben, it’s Brendan again. I don’t know that COVID has distorted per se, the percent of B2B that B2B represents versus the balance of the business. B2B, it hasn’t been negatively impacted the way that some of our other businesses have. I mean I actually, in some instances we’ve probably seen some uplift, e-commerce, as an example, we’ve seen some shifts there. But I don’t think that the numbers that you’re seeing today are going to go down in any way. In fact, I would expect them to continue to elevate as the businesses is clearly the fastest growing business within our U.S. portfolio. Relative to ISV specifically, I do think that, that business’ overall contribution to the U.S. business has been negatively impacted in a material way because of this exposure to hospitality. So our ISV business is heavily exposed to restaurants, and we have just seen restaurant activities slow in many, many geographic areas. I mean Jim said earlier, New York’s opening on May 19th. And we talked about in the board meeting, that there tends to be a bit of a smile across America. So if you drew a line or a circle across the Southern half of the U.S. and then up a little bit on either coast, you see some pockets of activity, but then as you get further north or toward the middle of the country, and our geographic exposure is we’re not concentrated anywhere. So I think if things reopen, you’ll see more impact on the ISV side, that business will come back faster, I think, than the balance of the U.S. business. And that will start to contribute more to the overall profitability of the region.

Your next question comes from Bryan Keane with Deutsche Bank.

Tom, just wanted to make sure I understood this, the first quarter beat above expectations, which parts were exactly came in above where you guys had budgeted?

Again, Bryan, it’s a fairly modest beat, but the Americas, no surprise there. I think we saw activity in the U.S. in particular ramp quickly, that’s a function of the chain effect of vaccines rolling out, businesses reopening and the pent up demand and stimulus checks and all of those types of things. 6% GDP number in the U.S. I don’t think was necessarily something that people were anticipating. Mexico has stayed resilient, so there, that continues to be a good outcome because we’re always concerned given that they’ve been slower with the vaccine rollout, and their infection rates tend to run high, although it has been declining recently. But they have continued to remain resilient. I think that has a lot to do with the diversification of our merchant mix and heavyweight toward grocery and consumer goods.

Got it, got it. And then thinking about spreads as we hopefully turn the corner here into more positive numbers, how much faster can revenue grow above volume as we get through the pandemic here? I know you mentioned cross border, I’m sure SMBs, the impact there hurt spreads previously, but all those reverse. I’m just trying to think the magnitude that revenue could run above volume, maybe you can give some thoughts there.

Yes, I think we do expect some upward lift in spreads over the remainder of the year, particularly second half for the two reasons you just alluded to. So both the SMEs coming back and being a larger percentage of our volume and some level of cross border activity. That said, I think last year, we ended with spreads at 33 basis points, maybe 33.5. Something like that. We’re not expecting spreads in 2021 to get all the way back to those levels. I think you’re going to continue to see some level of dilution from just the merchant mix in a good way. Some of the large merchants that we now have on the platform that are producing at high levels, and we expect that to continue. So I think we’ll continue to see some uplift, but I don’t think it’s going to get to the same level that we had say pre-pandemic in 2019, where we were approaching 34 pips.

Your final question comes from Michael Del Grosso with Compass Point.

Jim, I’m interested in your comments on competition particularly in the U.S. and certain ISV channel. 2020 and 2021 has seen fairly large influx of capital markets activity with smaller players coming public. We’re getting a look at profitability or in some cases, lack thereof of some of these smaller guys. They’ve been doing this for a while, I guess, could you comment on what you’re seeing today on the competitive dynamic, have things changed at all with some of these new entrants or would just love to hear your overall commentary?

Okay. Well, and you’re speaking specifically to the U.S. market, or just more generally all markets?

Particularly in the U.S. but yes, I mean, would be interested for U.S. as well.

Yes, I think if I broke it between our tech-enabled direct business on tech-enabled focused more on the B2B and the ISV channel, as Brendan said, it’s a very big market. They’re still early days, very early days relative to the retail side, traditional retail, restaurant type of business. So I don’t think in any of the markets and the U.S. is a very mature market, lots of very strong competitors. And I don’t think anybody has free reign in terms of competition. I do think it has a lot to do with the distribution that you build, whether that’s a old model of feed on the street, or that’s more of the model that we tend to pursue. So I would say on the B2B side, although there’s a lot of talk around it, I’m not sure that we’re seeing any dramatic increase in competition. And one of the things that we like is some of the earlier investments we’ve made the last several years, as Brendan mentioned them by name notice, which is a Microsoft integration and Delego, which is an SAP integration. We have some unique case character capabilities that not everybody will necessarily have. It’s not easy to build, and there’s not a lot of competitors to go out and buy. So I think on the B2B side with respect to those two plus Oracle, we have some advantage, first mover advantage because we have made those investments, as I said. I think on the ISV side, when we bought the Sterling business in 2017, it gave us access to a great dealer network that continues to be a very big part of our hospitality play. I think the competition though in ISC has definitely changed, more of our competitors have opted to buy software companies. The big guys and smaller guys have made a bet as well as private equity that they buy a software company and they get to convert the merchants over. And now they’ve got expertise in some specific software, whether it’s retail or restaurant. It’s not a model that we’ve pursued. It has created some level of headwind to the extent that we previously had a relationship with that ISV, and then it’s acquired. But if you go back and you look at software plays, software is only as good as the investments you make in it. It’s constantly changing, there’s new entrants coming into the marketplace. And our strategy both here in the U.S. and our international markets is to support all third-party software companies that are in the payment space. And I think with respect to that, we continue to do quite well. I’m not sure that I see a headwind as it relates to that. It has more to do with this software companies. And typically, the ones that are selling are the ones that have hit a wall. And so they’re selling because they need to sell, they’re not selling because they’re business is vibrant, they’re selling because they either haven’t made investments, or there are bigger competitors that are taking share from them. So we prefer to stay in our lane and support that market as opposed to compete against it. I would say the last piece would be the direct face-to-face business, and that is what it is. It had a long run for a very long period of time in the U.S., it’s still very vibrant outside the U.S. We give a lot of attention to the tech-enabled space, but if you’re in Latin America, if you’re in Mexico, if you’re in Poland or Europe, direct sales through bank referrals are still a very vibrant part of our business. It’s one of the reasons why we’re the leader in Poland and in Mexico, because we have two very strong financial institutions that continue to refer us thousands of merchants, new merchants a month. So the direct business outside of the U.S. remains very, very strong. I would say inside the U.S., it is a very mature business. So there, it’s more of a cash cow to us. And that those proceeds, we continue to invest in acquisitions like the Delego notice and Sterling. And we’ll do more of that here in the U.S. and internationally.

That concludes the questions. I would now like to turn the call over to Jim Kelly.

Thank you, operator. And I’d like to thank all of you for joining our call today and your continued interest in EVO.

This concludes the conference call. Thank you for participating. You may now disconnect.