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EVO Payments, inc
(
NASDAQ:EVOP
)
Q2 2021 Earnings Call
Aug 6, 2021
,
8:30 p.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the EVO Payments Second Quarter 2021 Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ed O'Hare. Thank you, sir. You may begin.
Edward OHare
--
Senior Vice President of Investor Relations
Good morning, and welcome to Eagle Payments Second quarter earnings conference call. Our press release and slides detailing the company's recent volume trends are available on the Investor Relations portion of our website. Before we begin, I want to remind all listeners that Eagle payments desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act. Certain statements in this conference call, such as projections regarding future performance may be considered forward-looking statements within the meaning of the act. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press release and filings with the SEC. Please refer to our press release for an explanation of the non-GAAP financial measures discussed in today's call, along with a reconciliation of those measures to the nearest applicable GAAP measures. Today, we'll discuss our second quarter results and our overall business performance. Joining me on the call is Jim Kelly, our Chief Executive Officer; Tom Panther, our Chief Financial Officer; Darren Wilson, President of the International segment; and Brendan Tansill, President of the Americas segment.
I will now turn the call over to Jim.
James G. Kelly
--
Chief Executive Officer & Director
Thank you, Ed. Good morning, everyone, and thank you for joining us today. I'm pleased with our second quarter financial results and business performance despite lingering COVID restrictions in our markets. We are seeing positive trends across our business, including new merchant wins from our bank and tech-enabled referral networks. The build-out of proprietary capabilities in our product and services suite and the continued adoption of digital payments, which began accelerating in 2020. Given our positioning, I'm confident in our ability to capitalize on additional growth opportunities during the second half of the year and into 2022. I'd like to begin by reviewing some of our recent announcements. As many of you are aware, since our last call, we launched our operations in Chile with our bank partner, DCI, acquired a leading e-commerce gateway in the market to complement our JV and most recently, completed the acquisition of a U.K. based omnichannel payment gateway, which expands our integrated payments offering in Europe. We look forward to leveraging these investments to continue expanding our global distribution. Darren and Brendan will provide more detail later on the call. Now I'd like to provide a brief overview of our recent volume trends. As you can see from the slide, the company demonstrated strong growth of 33% year-over-year and 11% compared to 2019. We delivered these results due to our strong sales efforts and superior customer service, coupled with the continued card adoption trends across Europe and the Americas.
As our markets, especially Europe, fully reopen and economic activity returns to pre-pandemic levels, we expect our volumes to continue to increase. Turning to our financial performance compared to the second quarter of 2020, on a constant currency basis, revenue grew 23%. Adjusted EBITDA increased 34%, and margin expanded 300 basis points to 35%. The strong results we demonstrated reflects the easing of COVID related restrictions across our markets and our efforts to realign the company's cost structure over the last 18 months. Tom will cover our second quarter financial performance in more detail later on the call. We look forward to building on our recent accomplishments as we continue to execute on our long-term strategy, solid organic growth, coupled with M&A. Our acquisition strategy remains unchanged, partnering with leading financial institutions in new and existing markets and acquiring tech-enabled assets that enhance our merchant offering and augment our distribution channels. Across the market, we have recently seen an increase in M&A activity, as evidenced by our previously mentioned announcements, and we are well positioned to capitalize on emerging opportunities as we move forward. Finally, as we announced yesterday, I'm pleased to welcome Stacey Panayiotou to our Board of Directors. Stacey has extensive global experience from her time at the Coca-Cola Company and her current position at Graphic Packaging international. Her expertise will be a great addition to EVO as we continue to expand our international footprint.
I'll now turn the call over to Darren to discuss our European business. Darren?
Darren Wilson
--
President of International
Thanks, Jim. To begin, I'd like to discuss two recent updates, acquisition of Anderson Zaks and our partnership with Premier Lotteries Ireland, both of which complement our European tech-enabled strategy. Anderson Zaks is a U.K. based omnichannel payment gateway, which provides us with additional ISV and merchant relationships across the U.K., Ireland, and Continental Europe and will enable us to drive payment acceptance from merchants across a wide range of market verticals, including hospitality, pharmacy, event venues, and ticketing. This acquisition is consistent with our proven international ISV strategy of acquiring in market gateways such as ClearOne in Spain, SS systems in Mexico, and WayPay in Ireland to both enhance our proprietary capabilities and augment our integrated payments distribution. In addition, we have already begun cross-selling our acquiring services to Anderson Zaks Gateway only partners and customers to enhance these relationships with better products and services. In Ireland, I am very pleased about our partnership with Premier Lotteries Ireland, whereby EVO will supply proprietary gateway and acquiring services to process e-commerce payments for the Irish National lottery online platforms. We are excited about this competitive takeaway, which will help us grow our e-commerce business as online payments continue to accelerate in Ireland and across Europe. In our other European markets, we continue to capitalize on the accelerated cash to card tailwinds by signing new merchants partners in both our tech-enabled and bank referral channels.
As economic activity improves and our sales performance surpasses pre-pandemic levels, we anticipate we will continue to grow our referral relationships to meet the increasing consumer demand for digital payments. In other news, in Poland, we recently partnered with Visa to provide our hospitality and restaurant merchants with access codes, which enable live broadcast of the Tokyo Olympic games in an effort to help attract additional customers to those businesses most significantly impacted by the pandemic. Turning to our financial performance for the quarter. European constant currency revenue improved 28% year-over-year. Volumes for the second quarter were approximately 31% higher compared to 2020 and grew 11% versus 2019. In July, European volumes increased 14% compared to 2020 and 23% versus 2019. The since our last call, our markets have steadily reopened as vaccination rates increase across the segment. Recently, the EU rolled out a digital COVIT certificate program, which is accepted in all EU member states and validates an individual vaccination or COVID immunity for our QR codes and the unique digital signature. This initiative is helping to facilitate free movement within the EU, enabling the easing of travel restrictions and the opportunity for business activity to return. I'm pleased with our recent performance and excited about the momentum we have heading into the second half of the year. Our strong revenue and volume growth this quarter reflects the impact of the reopening driven recovery, coupled with increased card adoption across all markets as business activity continues to accelerate, we'll expect cross border activity, including DCC to improve, which will have a positive impact on our revenue as well as our margins. I'm confident in the continued recovery of our European business and our ability to deliver financial results that exceed pre-pandemic levels once markets are fully opened.
I will now turn the call over to Brendan, who will provide an update on our Americas segment. Brendan?
Brendan F. Tansill
--
President of The Americas
Thanks, Darren. As Jim previously mentioned, in June, we announced that our JV with BCI received regulatory approval to commence operations in Chile, and our processing is now live in the market. The Chilean market is well positioned for acquiring growth with approximately 20 million people and only 40% card penetration. In addition, the market has approximately one million merchants that process over $800 billion in annual sales. Of Bci's 60,000 current bank customers, we have established an initial list of over 15,000 merchants to target for acquiring services and have committed to purchase approximately 10,000 terminals to ensure smooth customer onboarding, given the significant demand for differentiated capabilities. We have rolled out local sales, marketing, and product support in Chile and are leveraging our Latin American platform based in Mexico to provide superior products and services for our customers as processing in Chile is dominated by the National bank-owned transbank platform. In June, we completed the acquisition of Pago Facil, a leading in-market e-commerce gateway equipped with acquiring capabilities. This acquisition immediately adds over 3,000 merchants to the JV, including key customers such as Patagonia and Pandora jewelry, and expands our products and services offering with its proprietary integration to Shopify and Wood commerce, among others. Further, Pogo Fitel's customer list spans a variety of high-growth market verticals, such as healthcare, hospitality, ticketing, and travel. As Pagopa has now been integrated into our Snap platform, the gateway will provide additional support for our e-commerce business in Mexico and new markets we seek to enter in the region. Turning to our financial performance. For the quarter, the Americas constant currency revenue improved 20% year-over-year, which reflects the growth from our Mexican market and our U.S. ISV and B2B businesses.
As you can see from the slides, volumes for the second quarter continue to improve. Beginning with the U.S., volumes for the quarter were approximately 26% above the prior year. Our B2B business demonstrated high teens revenue growth, consistent with its historical growth trends, both before and during the pandemic. This quarter, we launched EVO ACH to enable our merchants to send and receive ACH payments directly to inform customers via our Payfabric gateway. As we focus on growing our B2B business, we are making additional investments in our proprietary gateway and pursuing M&A opportunities, including additional ERP integrations. Our ISV business grew 27% in the quarter as this business benefited from the merchant shift to software at the point-of-sale in a significant rebound in volume in certain market verticals, including restaurants and hospitality. We continue to gain sales momentum coming out of the pandemic by finding new partners and rolling out new products and capabilities. Earlier this year, we successfully launched the EVO simple tab payment integration, our proprietary payout table solution, which we will soon expand to include QR based payment functionality for our ISV partners. We will continue to invest in these types of capabilities as well as additional partnerships as we seek to meet changing consumer demands that have remained in effect coming out of the pandemic. Our B2B and ISV businesses together represent approximately 40% of our U.S. revenue, which we expect to increase as we expand our product offering and capitalize on additional sales and M&A opportunities. Turning to Mexico. Our volumes increased 47% this quarter compared to last year and 19% compared to 2019. In July, volumes increased 31% compared to the prior year and 15% compared to 2019. We saw strong growth, both from our bank referral and tech-enabled channels, specifically our e-commerce business throughout the quarter as we leveraged Pago Facil's integration into our Snap platform, we expect to deliver strong merchant wins in increased capabilities that will drive revenue and earnings growth from our Latin American e-commerce business. I am pleased with our recent financial performance and our expanding distribution in Latin America. The results demonstrate our ability to leverage our diverse referral network, including bank partners in an expanding tech-enabled channel and enter new markets to grow our merchant portfolio.
With that, I will turn the call over to Tom, who will cover the financials in more detail. Tom?
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
Thanks, Brendan, and good morning, everyone. For the quarter, on a currency-neutral basis, revenue increased 23%, adjusted EBITDA increased 34% and margin of 35% expanded 300 basis points compared to the prior year. Further, our second quarter revenue was in line with 2019 results, and EBITDA increased 9% as our margin expanded 300 basis points. We generated record volumes in the second quarter, which increased 33% compared to 2020 and 11% compared to 2019. However, revenue spreads remained below pre-pandemic levels due to changes in merchant and transaction mix and lower DCC and cross-border activity. This quarter's solid results demonstrate our ability to capitalize on the favorable consumer trends and the economic recovery that's occurring in our markets as we exit the pandemic. With respect to segment performance. In Europe, our year-over-year constant currency revenue increased 28%, and adjusted segment profit increased 63%. And in the Americas, year-over-year, constant currency revenue increased 20% and adjusted segment profit increased 31%. These solid results reflect the favorable macroeconomic trends as well as the adjustments we made to our cost structure, both of which we expect to have lasting favorable impacts on our results. Our businesses are well positioned to capitalize on the acceleration in card penetration as we make investments that enhance our products and services. Adjusted corporate expenses for the quarter were $9.7 million, which increased 63% from the prior year, primarily due to the impact of salary reductions along with furloughs in the prior period.
Adjusted net income for the quarter increased 105% to $20 million compared to last year, and adjusted net income per share for the quarter was $0.21, which increased $0.10 or 91% compared to a year ago. At the end of the quarter, diluted shares totaled $95 million, an increase of five million weighted average shares compared to the prior year. As a reminder, on May 25, we announced that the Class B common shares were canceled, consistent with the original terms of our UP-C structure at the time of the IPO. However, this change has no impact to our total dilutive shares of $95 million. In the second quarter, capital expenditures were $9.1 million versus $3.5 million in Q2 2020. Of this amount, 68% was for terminals as our markets are reopening and adding new merchants. Also note that comparisons to the prior year are against the lows of the global lockdown. Free cash flow for the second quarter was $28 million, an increase of 44% over the prior year. This is a result of our EBITDA growth and lower interest expense, offset by the increase in capital expenditures. We ended the quarter with leverage at 2.6 times, which is down from 2.8 times at the end of the first quarter. We used the free cash flow generated from the business to purchase Pago Facil and reduce our leverage. Our strong liquidity and low leverage, coupled with $176 million of available cash and $200 million of unused capacity in our credit facilities provide us the financial resources to capitalize on M&P opportunities. Turning to our outlook. Our second quarter results were modestly ahead of our expectations as the vaccine rollout and resulting economic recovery began sooner than expected. We anticipate a modest acceleration in revenue in the second half of the year, although we are monitoring the impact of the emerging COVID variants. Assuming no additional government restrictions are instated, we now expect 2021 revenue to increase 11% to 13%, adjusted EBITDA to grow 18% to 21% and margins to expand 200 to 250 basis points compared to 2020. This guidance reflects the estimated financial impact of our recent acquisitions and launch into Chile.
With that, I will now turn the call back over to Jim. Jim?
James G. Kelly
--
Chief Executive Officer & Director
Thanks, Tom. So what a difference a year makes? As I stated previously, I'm pleased with the company's performance in the second quarter and momentum as we continue to execute on our existing sales strategies and capitalize on emerging M&P opportunities. I will now turn the call over to the operator to begin the question-and-answer session. Operator?
Questions and Answers:
Operator
[Operator Instructions] Your first question is from Andrew Jeffrey with Truist Securities.
Andrew Jeffrey
--
Truist Securities -- Analyst
Hi, good morning everybody. I appreciate you taking a question. I'd like to dig in a little bit on the gateway strategy. Both B2C and B2B, it seems like EVO has taken the approach of acquiring regional gateways that are accelerating Omnium and e-com. Just wondering if you could elaborate a little bit on whether or not that's something you seek to expand in across all your markets and whether there's an opportunity for a more unified gateway, just broadly across geographies, or if they're going to be stand alone? I've got a quick follow-up on B2B.
Darren Wilson
--
President of International
Okay. Good morning, Andrew, if you go back many years before we were public, we acquired a gateway here in the U.S. called IP Commerce, which we now have been referring to as Snap. And the original plan was to, I think, do exactly what you just described, which is to have one gateway solve the issues of the world from a payments standpoint for EVO. The practical side is given geographies and nuances, even though it leads a Mastercard globally, there's lots of nuances to do business in all the different markets. So consistent with the way we have three platforms, one for the U.S., the processing platform, one for Europe, and one for Latin America. What we discovered -- what I discovered is speed to market was better if we had local talent, local infrastructure instead of trying to repurpose a U.S. gateway to do everything that's needed in all the different markets. I think the other component of these are each one of the ones we've acquired, so there's one was in Ireland called Way to pay, Clearone in Spain at the best in Mexico, IPG in Europe. Each one of those companies have been around anywhere from five to 15 years. So, we get the benefit of the experience of the team in market, which are going to have much better line of sight than somebody who is sitting in Denver where Snap is based. It's just not realistic that they would have the same experience level as now we're going to have with Anderson Zaks in the U.K. market, and that has been a very successful growth market for us, in particular, on ISV in the last several years and Anderson Zaks and the team there is going to help accelerate it. They have I think something like 23 ISVs already integrated with 1,000-plus merchants that are not our merchants currently, but have the opportunity to become our merchants. So, I think it's a playbook that works. You should anticipate that you'll see more of these. They're relatively inexpensive and scheme of things versus a merchant portfolio from a bank. But the organic growth that comes out of it and the shift of the company to be more oriented to integrate it in each of the markets that we're in, we think this is a winning strategy.
Andrew Jeffrey
--
Truist Securities -- Analyst
Okay. That's helpful. And on B2B, can you update us on your efforts to convert volume over to your gateway? I assume accentuating or improving yield in that business, in the U.S.?
Darren Wilson
--
President of International
Sure. I think I'll let Brendan take that.
Brendan F. Tansill
--
President of The Americas
Yes. Hey good morning. The strategy on converting the back book, I wouldn't say that, first and foremost, why we bought these businesses. We bought these businesses for the integrations that they provide the company to various ERP solutions and the ability to board net new accounts with both the software and acquiring solution. But in the case of Delego, yes, we have been converting accounts. It's not a huge portfolio of merchants, and we've made some headway. I wouldn't say it's material to the financial performance of the B2B business. In the case of the notice business that we bought that was integrated to Microsoft and Now Oracle. We have done a broader conversion there. There are still customers that just buy the integration solution that we continue to talk to about the acquiring piece. But the opportunity set for us there is to bring those integrations and our acquiring capabilities to net new customers and offer a one-stop-shop that provides the entire value chain of the solution.
Andrew Jeffrey
--
Truist Securities -- Analyst
Thank you, I appreciate that.
Operator
Your next question is from Kartik Mehta, with Northcoast Research.
Kartik Mehta
--
Northcoast Research -- Analyst
Good morning. Jim, just a question on your M&A comments you made. It seems like you have some opportunities. Are those opportunities on the B2B side or more on the traditional firing side?
James G. Kelly
--
Chief Executive Officer & Director
I would say in all categories. If you go back to some comments I made last year around this time, Redsys to M&A, the bank side, the bank channel was much more -- we thought closed down just given what was going on with the pandemic, we're starting to see that improve. And by evidence of the acquisition in Chile, and then the one that was Darren announced in the U.K. Those are the two flavors of what we're looking for, thanks to be able to enter a new market, leverage their brand and their backbook of customers, plus the front book of referrals, and then supportive or technology that will accelerate organic growth and also shift away from being holistically focused on the bank in the market. I think Ireland is a good example where Brian and his team started at 100% of our new business in Ireland owns that began back in, I think it was 13, 14. Now it's probably less than half or significantly less than half because of the acceleration of integrated and e-commerce in the market. I think on the B2B side, as I think we've mentioned -- or I'm sure Brendan has mentioned in the past, the focus there is to build out more capabilities on the receivable side. While we look at payables as a possibility, building more integrations and building is really buying -- we're bought into Delego for SAP, notice for Microsoft, Oracle is the quasi acquisition. But there's plenty of other ERP targets that we'd be interested in to build out the capabilities of the platform that we refer to as PayFabric.
Kartik Mehta
--
Northcoast Research -- Analyst
And then could you just -- Tom, just on the guidance, it looks like you obviously had a very good second quarter, the July trends, which you showed on the slide, it was very good. Curious as to maybe, if you're being conservative around the guidance or if there's other reasons or trends that you're seeing that maybe you didn't increase the guidance a little bit more?
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
Hey Kartik, Good morning. I think we're being smart about the guidance. We are cautious about the second half of the year with the uncertainty around variants and government responses to the COVID variants that are out there. We see the second half of the year being, as we said in our remarks, where we are accelerating. You saw our revenue print of $122 million for the quarter, and it would grow from there to get to that full year guidance number. That's going to be driven, we think, from volume and transactions, not necessarily spread appreciation in the second half of the year. But I would characterize it as our best guess around what we think is appropriate for the second half of the year based on the momentum that we have. We'll continue to be diligent around expenses as we work to achieve the EBITDA number. But I think we've got really good momentum, and it's just continuing that momentum into the second half of the year and hoping that disruption from Coke. It doesn't create a speed bump like it did last year.
Kartik Mehta
--
Northcoast Research -- Analyst
All right. Well, thank you, Tom. I appreciate it.
Operator
Our next question is from Ken Sena, with JPMorgan.
Ken Sena
--
JPMorgan -- Analyst
Thanks so much good morning everyone. Just to build on Kartik's question. Just the change in the guidance here. I just want to make sure I captured it all. Is it primarily the acquisitions as well as your flaring in -- was there any underlying change in the base business to perfo
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
Sure. I think it's both, Ken Sena. We did layer Chile in, both the intro from Bci and then as well as Pago Facil. That's more of a 22 story on both levels, but Pogo Facil was an existing business. And so there's some revenue and EBITDA, day one associated with that business. We see it growing at very strong levels. Bci, we're kind of starting from a base, but that's factored in there, but we also are encouraged by what we're seeing from a recovery perspective in all of our markets, particularly internationally. And we expect the volumes to hold up and maybe even exceed what we were originally anticipated. And that's what happened to a modest degree in the second quarter and keep that momentum, continue to see the tailwinds that we've talked about, the cash to card and all those things that we've talked about, greater adoption of tech able and ISV. All of those things are trending in our favor. So I think that's all factored into that, acknowledge a modest bump in the guidance, but there's also some uncertainties out there that are hard to predict.
Ken Sena
--
JPMorgan -- Analyst
Yes. Very clear and reasonable. Just on the spreads, to your comment, Tom, I think you're still running a little negative. You're not assuming any improvement in the spread between revenue and volume growth in the back half of the year. To see that improve? Is it really just -- we need to see travel and cross-border travel will come back because I'm asking if I'm looking at the treasurer talking here, the spread between volume and revenue in Europe is actually pretty tight. So I'm a little bit surprised by that, but I just wanted to be sure I understood that.
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
You're right. Yes. We have kept our expectations is that spreads may slightly increase, but that is not a driver to overall top line, bottom line. Cross-border is a case, DCC still remains low in Europe, Poland, Spain, in particular. So I think that would be a piece, seeing some of the SME market come back full strength. So even on the merchant main processing, they've been still may be working under some level of restrictions. And I think that those are things that are going to have to move in our favor before we see the spread increase. But I also think we've seen a shift in some merchant mix, some just composition of our business. The larger merchants are making up a greater portion of our business. When you look at our revenue per tran that we published, that includes the growth in our ATM business. So that's also a factor that goes into the overall valuation. So to some degree, it depends on kind of which metrics you're looking at. And -- but I do think we've seen the shift in our merchant base where higher volume, lower spread, but very accretive, very profitable business, just from an overall spread view, it may look a little lighter than what it historically was pre-pandemic.
Ken Sena
--
JPMorgan -- Analyst
I see. No, that makes sense. The travel comes back, and that will be a little kicker for next year. Just last one, if you don't mind, a third question, I'll ask one for Jim since I've learned so much about payments from Jim over years. Just thinking about the buy now pay later, pre-pandemic. The market seems to think there's a lot of growth potential in that category. What are the implications for EVO and to the broader acquiring industry in your mind, Jim? I mean it seems like it is earning some other investive type but would love to hear your thoughts.
James G. Kelly
--
Chief Executive Officer & Director
Yes. It's not -- I know the big announcement the other day. We all thought. And it's not the first time, if you remember, it was built later pickup out years ago? I think they changed the name of that to something that I take was a name. I don't know. I think they're targeting a segment of the world population that otherwise doesn't have access to card yet. If it's a tender type at the point-of-sale is one that doesn't become an acquiring solution, then we're happy to support any tender type. Remember, we're holistically focused on supporting the merchant. So it's something that the merchant wants to offer. And it's noncompetitive, then we're fine with it.
Ken Sena
--
JPMorgan -- Analyst
Perfect. Thank you
James G. Kelly
--
Chief Executive Officer & Director
One other thing as it relates to Europe. Remember, while we see what it looks like here in the United States, I mean, we still have our Irish market. We're not in the office yet. I know that sounds strange because a lot of people are not in the office, but we're potentially in all our offices and have been for some time. So Europe, your comment about cross-border and BCC, that is a big part of the drag on what would have been their historical spread levels. And I think your last comment that, that is an opportunity for the back half of the year. We just don't know exactly when that will be or more likely more into 2022.
Ken Sena
--
JPMorgan -- Analyst
Yep, now agreed. Patiently waiting. Thank you
Operator
Your next question is from Robert Napoli with William Blair.
Robert Napoli
--
William Blair -- Analyst
Thank you and good morning. I guess just on the reopening, as you look at your business today, assuming the world gets back to normal over the next one to two years, whatever that may be, whenever this eventually washes through. How much -- what areas -- how much upside is there, I guess? Or where do you see -- obviously, the cross-border piece, I don't know if you can put some numbers around that on what that means to spread or yield a revenue, but certain markets that haven't opened yet. Is there like -- is it like a 10% upside to revenue? Or is there -- I mean do you look at it? Have you dug into it that way and see what you're still missing I guess.
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
Hey Rob, it's Tom. So sure. We've seen -- we look at it all kinds of way, pre-pandemic, trough of the pandemic, where do we stand today? Do we get all the way back to pre-pandemic levels as an industry? I don't think so. I think there's just going to be some consumer behavioral change. That's just not going to get it all the way back to that level. But I do think that we will see cross-border pickup and with cross-border picking up, you'll see more activity in revenue generated on the DTC price. If you had me to peg a metric around it. We think we could see, call it, $5 million to $10 million revenue lift relative to DTC, the new normal, whatever that new normal is. As I said earlier, when I was responding to Ken's question, that's not a '21. And your guess is good in mind is whether or not that's the summer of '22, let's all hope so. But if you were to just decide the breadbasket, I think it's a $5 million to $10 million number, call it, two basis points potentially in added spread when we get back to what -- we would look into a crystal ball and say the new normal is.
Robert Napoli
--
William Blair -- Analyst
Okay. And it would be very high margin revenue, right, I assume?
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
Yes. There's really no incremental cost-to-cost associated.
James G. Kelly
--
Chief Executive Officer & Director
And then on top of that, you would have cross-border. Our Spanish business continues to suffer from the standpoint of it's oriented to travel, and travel is not resumed to normal levels. So I think there's a ways back. Tom was just speaking to the DCC component. But there's other components of the business that have not fully reopened the SME markets across the world that have been adversely affected where the larger store has been better than the smaller ones. The online obviously did better than the face-to-face. That will eventually sort itself out both on the retail and the restaurant side. So it will be hard for anybody to predict for the future, given what we've just gone through, but we feel good about where our customer base is today and the trajectory for the balance of the year.
Robert Napoli
--
William Blair -- Analyst
Thank you and then maybe a follow-up on the B2B payments business, when you look at that business and you look at some of the other players out there, whether it's Billtrust, so bill.com, acquired invoice2go. I mean, how does your -- or how does your B2B business compare to the others in the market? How different is it? And what is -- I mean, the growth rate, I then some of these like high Radius, I think are showing very high-growth rates, but have somewhat different business models.
Brendan F. Tansill
--
President of The Americas
Sure. Good question. So our B2B business, our focus is on generating or developing or acquiring full-blown ERP integrations. So we want to be integrated to the full ERP offering. And we are focused today exclusively on the receivables side. A lot of the companies that you're mentioning do a lot on the payable side, which is virtual card issuing and interchange becoming revenue. As Jim has alluded to, and I think I've alluded to on prior calls, we've looked a little bit at that business. There are some businesses that are larger in scale that would have a very, very, very fulsome payables offering. And it's not clear to me or us that, that's the right direction for the company. Today, our revenues are entirely on the receivable side. And I think there's a place for us to play on the payable side. But I -- we've addressed the big 3ERP ecosystems today. There are a bunch of ISVs in those ERP ecosystem. So there are ISVs that would operate in the Microsoft ecosystem that would be specific to various industries that Microsoft will be selling its ERPs into. And now that we have the Microsoft integration, there are ISVs that we can further integrate to, to really embed ourselves in that community. And the same is drive of SAP and Oracle, and then there's a long tail of smaller ERPs that we are pursuing, both as a direct integration that we would build out of our PayFabric gateway or again, we would buy an integrator that we would integrate to PayFabric and therefore, have an integration to the ERP. Our interest -- we are, I suppose, in the software business through that integration, but our interest is to make money on spread. Our interest is to make money processing payments. And if this allows for a stickier customer relationship, which it undoubtedly does, then it's, I think, all the better for us.
Robert Napoli
--
William Blair -- Analyst
Great. Thank you. And then one last question, I guess. Now that Jim, as you've been in this business a long time, the industry has changed and there's a lot of innovation. Where do you see, I guess, the future in payments and the innovation, if you would. I mean, binoculator is maybe one aspect or I mean your e-commerce gateway open API for card issuing, a number of different things going on. But as you look at the business today, is it changing faster than what you've seen in the past? And if so, where is EVO investing around that innovation?
James G. Kelly
--
Chief Executive Officer & Director
I don't know just because I've been in the industry that long, but I have the greatest insight to it. I mean, obviously, I've seen a lot around the world over the last 20 odd years. My position is the Visa Mastercard model works extremely well. And what you're talking about in some instances are derivations of these Mastercard ways to make money on and around the core concept. It doesn't specifically have to be those two. Obviously, this is through Union pay. How many trillions it represents and spend globally. I think that's a very solid infrastructure that lots of companies, not just EVO, depend upon. I think where you're seeing changes and put aside by NLP later, where you're seeing changes, and we're participating in that Anderson Zaks and Pago Facil would be two examples of it. The ways that consumers want to do business. I think the phone, the advent of the phone and the iStore and everything that goes around that has caused consumers and consumers being pushing merchants in the direction to make it easier for us to do business, whether it's at our home, doing a pandemic or how we order and buy. So I don't think that's going to change. And I think companies that are going to succeed are going to have to change with the times, and they're going to have to change ever faster and faster and faster. You're seeing the terminal manufacturers have largely gone out of business. The major ones have been consumed by processes because the shift away from a stand-alone terminal is going to continue to accelerate. The other part of it is the B2B piece that you've talked about with me a bunch as well as with Brendan. B2B is a huge market that is in lead in the U.S., really globally, but in the U.S., it's been largely untapped.
And I think what's caused that shift is the same thing we've seen on the consumer side that merchants now want to be able to pay with a card. They want to pay with ACH or a gateway solution and not have to deal with the traditional way of sending texts around. So as long as we're positioned with the right technology, I think we're going to continue to win in the market with lots of big and small companies as well as new entrants. I think that the other side of it, which is the buy now pay later, the company that Square bought in Australia, I think we. That's not really what we do. That's on the consumer side. We're not a consumer-facing company. We're supporting the merchant side of the equation. And because payments are so important and so big of an industry, I think it's going to attract more and more players into the industry. At the same time, we're also seeing a lot of consolidation. But on EVO's Chief the focus on building distribution for banks and technology, I don't think that's going away anytime in my career's lifetime. And we're continuing to see opportunities. Latin America, we set our Board meeting yesterday, and we had a team in from our Mexico and Chille group and the growth opportunities in Latin America are more than significant. This is a largely untapped relative to some of the other markets we do business with in terms of their need to bring technology and capabilities into the market. So I don't get that. I think we're still at early stages on the shift that you're going to see in technology, and we feel really well-positioned to take advantage of it.
Robert Napoli
--
William Blair -- Analyst
Thank you. I appreciate it.
Operator
Your next question is from Ramsey El-Assal with Barclays.
Ramsey El-Assal
--
Barclays -- Analyst
Hi thanks for taking my question. I wanted to ask about the Irish National Lottery relationship. Is that a vertical where you see optionality in other geographies? Is that something you could replicate elsewhere? And I guess, more broadly, is gaming a place where you could move into.
Darren Wilson
--
President of International
Thanks Ramsey. Darren here. So the lottery, we already support lotteries in a number of other markets. It's a vertical through our gateway, but also on an acquiring basis, so there are two elements here in terms of the support to that type of vertical. So yes, it's a good vertical in that it's typically state cantered lotteries. Also, though, with our gateway with IPG Gateway, we have a number of gaming customers already in that portfolio. So yes, it's a vertical where we're used to and expanding into. The Tier one players are really where the focus is because, obviously, there's risks in as you go further down the value chain there. And we'll always look in the markets where it's legal, regulated, et cetera, to support that vertical. But it's a part of the e-commerce vertical, as we've been discussed throughout this call, the switch to Mastercard across multiple and attended software in-app dilution is where we're ensuring there's more single concentration risk in any one vertical. But certainly, we're very pleased to be switching from a key competitive that requires lottery opportunity.
Ramsey El-Assal
--
Barclays -- Analyst
Got it. And just on the Mexico progress on e-commerce in Mexico. I know you guys already have pretty material market share there, but how has the pandemic impacted trends in that market? And do you partner there to sort of drive further adoption?
Brendan F. Tansill
--
President of The Americas
Yes, of course. So we hosted up our European gateway in the payment group, IPG. It's been a big success story for us in Europe, and we've now enabled it for transaction activity in the Mexican market. I think, ultimately, Pago Facil the acquisition that we covered in the script earlier on the call, will serve as our regional platform. But today, e-commerce represents roughly 15% of the Mexico business. It grows 30-ish percent generally and has sort of more or less for the six years that we've been in the market. We have, in the past, relied on third-party gateways, those gateways are in two buckets. So one would be multinational gateways that need domestic support. So those would be the audience of the world, the world pays to the world. And in some instances, we will support multinational companies that require domestic support in the Mexican market.
I would say that is not though the majority of our e-commerce portfolio. The preponderance of our business on the e-comm side has been domestic businesses, either self-sourced by our sales force or referred by Banamex. And many of those businesses came to us prior to standing up the IPG gateway in the market, and we've referred to those to third parties. And in most cases there, that's Mastercard payment gateway services. So I think there will be an opportunity prospectively to move some of that volume off of third-party solutions and see some earnings accretion within the portfolio. But the more interesting story rather than converting the back book onto an internal solution with sensibly no variable cost. The bigger opportunity is to go forward, that we continue to see an enormous amount of present merchants express an interest in establishing the e-commerce presence, and we continue to see net new activity in the market with new entrants, and we've seen no degradation in the volume growth story that, as I say, has been ongoing since 2015 when we entered the market.
Darren Wilson
--
President of International
Yes. I'm just going to add to that. One of the reasons we bought Pago Facil, while we're using our European gateway to support Mexico currently, and this is kind of keeping with the earlier question on I got. Being able to acquire a business that is doing business in Latin America and has many of the feature functionality that we would have to continue to build-out in Europe. We're going to leverage the Pago Facil acquisition across Latin America. So we'll kind of have two available to the market in Mexico and then Pago Facil for the rest of Latin America because I think like everyone, while e-commerce was super important before the pandemic, it is nothing but the bull's eye right now. And if you look at e-commerce across Latin America, if you take Brazil out, maybe the markets that we're mostly focused on Mexico being one of them, penetration in e-commerce is still very low. So I would expect to see over the next several years, very high-growth in e-commerce in this region.
Ramsey El-Assal
--
Barclays -- Analyst
Great. A lot of helpful detail there. Appreciate it. Thank you
Operator
Our next question is from George Mihalos with Cowen.
George Mihalos
--
Cowen -- Analyst
Hey good morning guys thanks for taking my question. I guess to kick things off, Jim, on some of the prior calls, if we're sort of thinking or looking at the business geographically, you sounded more upbeat about opportunities in LatAm on the M&A side, on the partnership side. I'm curious that maybe has changed at all just with Europe opening up? Or do you still kind of see more near-term opportunity out of LatAm maybe to be things versus the European geography?
James G. Kelly
--
Chief Executive Officer & Director
Yes. Kind of like with your kids, you don't kick one side versus the other. I like them both. I think Latin America, actually, for us, because we're in two major markets. Now we're in Chile and we're with the bank partner there with technology that's localized as well as Mexico, we've been in since 2015 and our dominant player in that market with an outstanding team that looks after Latin America for us. I think in terms of opportunity, Latin America, there's a smaller GDP, but the growth opportunity in Latin America is absolutely a high focus of Brendan's responsibility is -- and David Goldman who runs our M&A group to open up more markets. And in opening them up, it's not to just start signing up merchants across the border. It's looking for another bank partner, VCI is an outstanding relationship now with us. As I've said multiple times, they're extremely excited about being able to, for the first time, launch payments into the market. Just to remind you, Chile is a monopoly one provider owned by all the banks that's being broken up largely by the government, and we're the first entrant into the market.
So this is the first time Bci has really been in this aspect of payments and are excited. So we're looking forward to finding other opportunities in Peru, Ecuador, Colombia, Argentina, probably more of the Spanish speaking, but I wouldn't say Brazil was out, but Brazil is pretty crowded these days and lots of players. And then I think for Europe, Darren, once he's allowed to travel freely across the market as he's been sitting in its home office for 18 months. Europe remains a key focus. We have a new General manager for our Spanish business has already made some inroads in Spain and Portugal and even into Italy. So I am looking forward to the awakening of Europe and banks who are not well positioned in payments to listen to us about our opportunities to do business with them. And then lastly, the U.S. is not as though we've abandoned it, in particular, on the B2B side, I think we'll continue to be very acquisitive as well as on the ISV side, not in software, but in enabling capabilities. And then lastly, Asia, to get into that region really like any other new market we go into. We're looking for a bank partner and there would need to be a sizable one, just given the time zone difference, you're essentially setting up an entirely new business halfway around the world. So as the world opens up, we're well positioned financially to be able to take advantage of M&A opportunities. And as we said, we've been able to do too in this quarter.
George Mihalos
--
Cowen -- Analyst
Thanks. I think that's a pretty comprehensive answer there. Just Darren, quickly as a follow-up. I think you commented about kind of post-pandemic Europe achieving higher rates of growth than pre-pandemic. I was hoping maybe you can talk a little bit about that. Is that a mix shift, more of your push on the tech side, what you're seeing with e-comm? Maybe some commentary there.
Darren Wilson
--
President of International
Sure. Thanks, George. Yes. I mean, some is already outlined some of the underlying mix shifts. But actually, the majority trend really is the cash to card conversion and also the tech-enabled and e-comm dilution. And as Jim outlined, I think, in answering Rob's questions about where is the market going? We're seeing a lot of move in app and attended software, e-comm, supported by the underlying cash to card conversion trend. Also, the -- we've seen, obviously, as Tom commented, the big drag on the lack of international travel. So the real opportunities there that will see the growth rates of DCC coming back as well. So there are many drivers, but we've seen various themes we've talked about five years movement in the last 12 months in terms of a move from cash-to-card in terms of our core acquiring business. Amazingly, in some markets where we support ATM customers. There is still ATM with is growing amazingly, especially in the Netherlands, for example. So it's not happening anywhere, but the overriding trend is definitely a cash-to-card conversion at scale.
George Mihalos
--
Cowen -- Analyst
Thank you.
Operator
Your next question is from Bryan Keane with Deutsche Bank.
Bryan Keane
--
Deutsche Bank -- Analyst
Hi good morning guys. I know we're running late. So let me just keep it to one question. Jim, just love to get your thoughts on the concern in the market about the traditional acquirers losing share, the Stripe and Square and the growing syntax. So -- and we've seen that impact multiples in some of the peer groups. So how do you think about share shifts in acquiring? Is that an overblown concern or do you think it's real?
James G. Kelly
--
Chief Executive Officer & Director
You want my honest answer?
Bryan Keane
--
Deutsche Bank -- Analyst
Yes. That's just -- that's why we're kind of -- it's a philosophy of Jim here today on kind of how you see things.
James G. Kelly
--
Chief Executive Officer & Director
Sometimes, my wife, she doesn't think my philosophies are very good about anything. Yes, I think it's massively overblown. I think that's because you buy a company, Australia, it's going to adversely impact three very successful large players in the marketplace. I didn't see that that comparison. I mean I think the success to any industry is to build distribution. And we happen to use financial institutions because that's been the genesis of our industry. But if you look at the United States, we don't support financial institutions really at all. I mean we have two that are sponsors. But otherwise, that's not a motto that we pursue. So I think any business, as long as they can continue to build distribution to leverage or take advantage of the services that they offer, I think you're going to be successful. I don't know why you're not going to be successful.
And banks have been around since the 1400. So I'm not expecting in the next year or two that we're going to see the end of the financial institution model. So look, the market is very fickle, and people are trying to figure out what's positive and negative from the pandemic. But no, I'm a big believer in financial institutions. I think they're a bedrock of any of our economies. And I don't think the new entrants who are trying to find another way, digital bank or otherwise, I don't think that, that's going to change the landscape in the near term. If you're talking 10 or 15 or 20 years out, I'm not that smart to be able to suggest it, but I think those three companies are well positioned. I think they're very strong competitors to ours are massively larger than weight. But I'm not -- I don't think our business model is challenged anyway because somebody bought an existing public company.
Bryan Keane
--
Deutsche Bank -- Analyst
But the shift to digital into omni into more e-commerce, does that in itself have an impact on the traditional acquirers? Or are they able to reap the benefits as well in there?
James G. Kelly
--
Chief Executive Officer & Director
Name one of those companies that doesn't have a digital solution. I mean, Jeff has been buying software companies since they bought Heartland. He has a gateway in Europe called Relax that seems quite acquired. I haven't worked the global for a long time. So I don't know how many assets they have in terms of e-commerce, First data, likewise, I mean they're heavily invested in technology with Clover, among other solutions, just given their size as well and the relationships with banks for distribution and FIS, likewise, I mean FIs may be more of a bank processor than a core acquirer like Lear, they bought Vantiv or Worldpay, whatever the name was at the time it was acquired. So -- and they have a leading e-commerce gateway, obviously, being challenged by Adyen and Strike in frame, but we all have competition. But I think as long as you meet the needs of the market relative to solutions, you're going to be fine. And that's what each of us try to do every day is keep up with the needs of the marketplace.
Bryan Keane
--
Deutsche Bank -- Analyst
Got it. Helpful. Thanks so much.
Operator
Our next question is from Mike Del Grosso, with Compass Point.
Mike Del Grosso
--
Compass Point -- Analyst
Yeah, good morning. I'll keep mind limited to one as well. I think you provided a July volume update in the prepared remarks on kind of the segment level, but wanted to dig a little bit deeper into country level trends in July. Could you just provide an update for Poland? I know it's a big travel destination we intra-Europe and then Mexico as well.
James G. Kelly
--
Chief Executive Officer & Director
Sure. I think Tom's about to start, so I'll let him take this.
Darren Wilson
--
President of International
Yes. As you said, Mike, we did provide overall Europe. Just as a frame of reference, we had Europe up 14% year-over-year and 23% versus 2019, arguably 2019 could be a better comparison. With respect to the Polish market, which makes up a large share of Europe, they're seeing similar numbers, as I just quoted. July, up 25%, 30% compared to 2019. And up low teens compared to 2020. I think the noise compared to 2020 is more about what was going on in 2020 than what's going on in 2021. When you look at things at an absolute level relative sequentially to June, you see some stability and actually a little bit of increase in Poland. And then similarly, on Mexico, similar kind of numbers. Keep in mind, Mexico did not hit the same kind of trough that we saw elsewhere in our markets just because of the nature of the economy down there. Their growth relative to 2019 is also in that mid-teens level. So above our pre-pandemic level and relative to last year, they're up 25%, 30%. They're significant growers relative to either benchmark that you want to look at.
James G. Kelly
--
Chief Executive Officer & Director
Yes. We were -- I was trying to get away from these charts. I know they've become very attractive to the marketplace that we were consolidating, but it sounds like you'd like us to keep them for a little bit longer.
Mike Del Grosso
--
Compass Point -- Analyst
Yes. That -- it would be helpful to remind, but I appreciate the incremental color you're on the call.
Operator
Our last question comes from Ken Suchoski with Autonomous Research.
Ken Suchoski
--
Autonomous Research -- Analyst
Hi good morning everyone thanks for taking my question. I just want to follow-up on that last question. Maybe we could touch on Poland and the growth runway there over the next, call it, two or three years. Just wondering if you could provide some detail on that growth runway. I know it's been growing fairly quickly. But over the next three years, I mean, do you expect that growth to remain in the double digit range? Or does that decelerate to something like high single digits since you've already captured a lot of that benefit from cash shifting to card?
Darren Wilson
--
President of International
Yes. It's Darren again. So yes, we do expect continued strong growth. There's a number of initiatives in Poland called fiscalization, which is really the automation of tax record going through an acquirer or an acquiring device. So that's going to push a lot of grade back economy onto public dilution with storage data, et cetera. So not only have you got -- it's still a -- on a benchmark basis, the penetration of card usage relative to the European market being still low. And equally, we're making some very good traction in the market. John on the team there in terms of the ISV tech-enabled vertical, but it's still kind of embryonic again compared to the U.S. or the U.K., so there's lots of upside growth in terms of the ISP world and the e-commerce well, the digital world. As we've already touched on in terms of INAP software vendors and attended, et cetera. So that with underpenetrated card versus cash and the fiscalization strategy and just underlying inflation trends being above some of the other European markets, there's a lot of tailwind opportunity in Pago Facil.
Ken Suchoski
--
Autonomous Research -- Analyst
Yes. That makes a lot of sense. And then maybe just if I could sneak one more in just on the mark in the quarter, I mean the incremental margins in 2Q versus 1Q were really impressive. I mean, I guess, around 55%. What's the appetite to let incremental margins run at similar or higher levels? Or is that an appetite to reinvest back in the business as volumes recover?
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
Yes. There -- as much as I think the market would like to believe as such, I don't want to necessarily run to a specific margin. We manage the business to the opportunities that we see in front of us either near-term or long-term. During the pandemic, we definitely learned something about ourselves. We were able to run the company more lean than what we had historically done. We've pulled in tight because of the pandemic and the duration was uncertain. And I think that just has allowed us to recalibrate what's needed to be effective in the market now for the company. Now having said that, we do, I think, like a lot of companies right now are experiencing turnover as people who didn't leave their job last year are looking at opportunities for whatever reason. And the market is more challenging to hire. So we have a number of open position. So we'll continue along the guidance expected for this year. I don't see it materially moving down, whether it will continue to move up at that rate. I think that's unlikely without giving more size, at some point, size in our industry matters because it's a fixed cost -- high fixed cost to very about cost model. So we'll need more revenue, more markets to be able to continue to drive that margin up at some point. Operator. I think it's back to you.
Ken Suchoski
--
Autonomous Research -- Analyst
Thanks Tom, I appreciate you [Indecipherable]. thanks for the thought.
Operator
Okay. There are no further questions, at this time. Do you have any closing remarks?
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
Thank you all for your interest, and appreciate your time.
Operator
[Operator Closing Remarks]
Duration: 68 minutes
Call participants:
Edward OHare
--
Senior Vice President of Investor Relations
James G. Kelly
--
Chief Executive Officer & Director
Darren Wilson
--
President of International
Brendan F. Tansill
--
President of The Americas
Thomas E. Panther
--
Executive Vice President & Chief Financial Officer
Andrew Jeffrey
--
Truist Securities -- Analyst
Kartik Mehta
--
Northcoast Research -- Analyst
Ken Sena
--
JPMorgan -- Analyst
Robert Napoli
--
William Blair -- Analyst
Ramsey El-Assal
--
Barclays -- Analyst
George Mihalos
--
Cowen -- Analyst
Bryan Keane
--
Deutsche Bank -- Analyst
Mike Del Grosso
--
Compass Point -- Analyst
Ken Suchoski
--
Autonomous Research -- Analyst
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