Elavon continued its strong rebound from the pandemic in 2022. Financial accounts deposited at UK Companies House show European payment volume rising 35% to €141bn, well above 2019 levels.
Based in Dublin, Elavon Europe is owned by US Bank Corporation and accounts for roughly 30% of the bank’s global acquiring volume. Winner of Acquirer of the Year at the MPE conference, Elavon is particularly strong in travel, boasting over 100 airline customers worldwide. Virgin Atlantic, which announced it was working with Elavon for acquiring and multi-currency conversion is the latest.
Total revenue was up 23% in 2022 at €379m, again well above pre-pandemic levels. Net merchant processing revenue was particularly strong, up 34% to €332m, of which equipment rental (likely to be mainly POS terminals) accounted for €28m. The overall take rate nudged down 1bp to 0.23%.
The core processing business was bolstered by the acquisition of Sage Pay in 2020 for £232m. Sage Pay was rebranded Opayo and has now been fully integrated into Elavon as its payment acceptance product suite. Elavon works closely with Talech, a small business ePOS software vendor bought by US Bank Corp in 2019 and it also provides terminals from Poynt, now owned by Go Daddy but previously partly financed by Elavon.
In product news, Elavon has partnered with The Digital Line for a voice-activated solution for the hospitality industry. Called Audico, this has been used at Ascot racecourse to order champagne from the corporate boxes. Outside the UK, Elavon won a contract to process contactless payments for the Venice public transport network.
Looking at merchant receivables, Elavon’s business still seems primarily focused on customers in the UK and Ireland although it does have a meaningful presence in Germany, Poland and Norway. Elavon also has branches in Luxembourg and Spain.
Elavon has a small division providing corporate trust services. Performance in this business line wasn’t so positive with sales falling 34% to €41m. Negative real interest rates in the Eurozone weren’t helpful.
Overall, operating income (gross margin) was up 28% at €420m.
Management have kept a firm control on costs. Operating expenses rose just 4% in 2022 to €404m. Staff costs were up 8% to €211m. Although staff staff numbers rose 6% to 2,427, the average cost per employee was up just 2% at €91K. In contrast, the marketing and business development budget rose 32% to €18m which shows confidence in future returns.
With its strong presence in the risky airline sector, Elavon keeps an keen eye on its total chargeback exposure. This rose to €16.5bn at the end of 2022 and aligns with information that the volume of airline tickets sold but not delivered increased 39% to €3.2bn.
It’s unlikely that all Elavon’s airline customers would fail at the same time but this figure shows why some acquirers are uneasy about onboarding customers in the travel sector. It’s helpful for Elavon Europe that its giant US parent provides a financial guarantee.
2022 was a benign year for trading. Total chargeback provisions at Elavon totalled just €0.5m or 3bps of end year exposure and credit losses remained low at just €5m or 1.34% of net processing revenue.
Turning to the bottom line, Elavon recorded a pre-tax profit of €14m, its first since 2019, at a margin of 4%. This remains rather lower than the €44m recorded before the pandemic, at 12% margin, but, with continued recovery in the travel sector backed with product investment, the trajectory looks very positive.
