Worldline SA (WLN) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the Worldline First Quarter 2022 Revenue Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Gilles Grapinet, CEO of Worldline. Please go ahead, sir.

Thank you, operator. Ladies and gentlemen, good morning. This is Gilles Grapinet speaking. Thank you for attending today's Worldline conf call on our first quarter 2022 revenue. I will start this presentation providing you the key highlights of the quarter and some details on our commercial dynamics regarding our Merchant Services activities. Then Eric will present you, in detail, our Q1 results before I wrap up from myself for the conclusion. Then with Marc-Henri, our Deputy CEO, we will take your questions. Let me start by saying that we are very satisfied with our very strong start of the year. After our solid full year 2021, this Q1 '22 is showing again our strong growth momentum to deliver on our 2022 guidance. And this very good growth performance could be achieved despite some nonanticipated headwinds over the quarter related to the current geopolitical crisis in Ukraine and the immediate enforcement by our company of the international sanction framework on Russia. As you could see, from an organic standpoint, all our divisions did contribute to these Q1 results, with a steady double-digit growth in our Merchant Services activities, up 15.8%, a strong quarter for MeTS and FS starting the year in line with the anticipated full year trajectory for this division. From a more strategic perspective, during the quarter, we have as well closed the acquisitions of Axepta Italy and ANZ commercial acquiring activities in Australia. These 2 operations bring a meaningful contribution to the Merchant Services activities with circa EUR 230 million added revenue from now on, on a full year basis, growing double digit and a strong add-on to our merchant base with circa 110,000 new merchants in the portfolio. Last, the closing of the announced TSS disposal to Apollo is well on track. We have already received the formal opinions from the work council, allowing us to fully confirm our closing road map expected in H2 2022. All these achievements are paving solidly the way to a successful execution of the full year 2022 guidance and our midterm trajectory that we, of course, will both confirm today. Now as committed to do regularly since our full year 2021 release, I want to give you more colors on our commercial dynamics in Merchant Services. Let's start with the commercial wins and upsells and renewals and also the business partnership we have signed during the quarter. Regarding our scope extension with existing customers, we signed, for example, with the large French retail group BUT based on next-gen POS, where we will provide a fast checkout and click-and-collect solution, with strong benefit for the merchant and their consumers following accelerating checkout, improved sales conversion and enriching the customer experience in a more digitized experience in the shops. With Valora, focused on the small-scale retail stores under the k kiosk brand, we have introduced new payment acquiring capabilities such as DCC, Interchange++ model and the full access to some alternative payment methods, leveraging the positioning of Worldline as a single entry point to manage the ever-growing complexity of our payment ecosystem. Now coming to new wins, such as Norse, or Pearson, [indiscernible], or Vinfast and Monoprix on the in-store, I won't comment in detail each and every of them. But I want, nonetheless, to draw your attention on the most recent one, the Monoprix contract won against some of the most well-known global name of our industry. This important win was made possible by our new omnichannel payment acceptance platform part of our target platform environment. Through this contract, Worldline will support all the 700 Monoprix superstores in 250 towns in France, with the Worldline omnichannel target solution combining in-store and mobile payment acceptance really able to respond to new omnichannel consumer behaviors. Regarding the new partnership, Q1 has been also very fruitful in line with the trajectory that we have presented end of February 2022 and which represents another way to bring value to our merchant community through our orchestration strategy. It also highlights, I believe, the attractiveness of Worldline for many ISVs as we can provide a privileged access to circa 15% of the European retail ecosystem. This partnership approach represents one of our new growth accelerators for the medium term. On one hand, we can enrich our own catalog of services with the offers of our partners. On the other hand, we can benefit from their own reach to their own merchants. During the quarter, in terms of partnerships, I would like to highlight the following, amongst others, we signed, for example, with Microsoft based on their Dynamics 365 fraud protection new system. It will enable Worldline enterprise-level customers to deal with increasing challenges caused by online payment fraud through a next-generation hybrid fraud solution that can help increase accuracy and efficiency far beyond that of traditional rules or advanced machine learning alone. Powered by adaptative AI technology, the solution is actually able to learn and adapt to the ever-changing fraud patterns, enabling global merchants to optimize fraud detection and to protect revenue. With Alipay, we have integrated Alipay+ to enhance in-store and e-commerce payments for global merchants, allowing them to accept payment with a wide range of e-wallets and bank apps from across Asia. Last, with Vesca, which is a new growth opportunity as it opens to Worldline the Japanese country, our new partnership unlocks Japanese acceptance landscape both in-store, coupled with online offering, to boost preference for card payments at large scale in a country where only 35% of transactions are expected to be card-based by 2025. As presented during our CMD last year, we will actively pursue the development of these new growth levers in the coming years. To conclude this introduction regarding some business KPIs, let us come back to some of these new data points we released. All our past actions to expand our merchant base have contributed to our remarkable MSV growth during the first quarter of '22. In Q1 '22, indeed, Worldline own acquiring MSV has increased by 36% versus Q1 2021 to reach EUR 66.5 billion, which represents a strong performance in our addressable European acquiring market, as you can see. It illustrates our capacity to continue to gain market share in both in-store and online with the respective MSV growing at circa 37% and circa 32% versus 2021, respectively. For information, our MSV was up 27% versus Q1 2019. Then as you can see on the slide, we continue, as we speak, to see a strong dynamic at the beginning of Q2 2022 with a solid trend in our MSV expansion. Last on the merchant count that we will report more in detail on a semester basis, I would just like to mention the positive ongoing trend. At the end of Q1 '22, our net merchant count, i.e., new merchant minus attrition, was up circa double digit versus Q1 2021, pursuing on the solid 2021 trend presented in February '22 and perfectly in line with our midterm objective to onboard circa 190,000 new merchants since 2021. To conclude this section, I hope you can perceive through these new disclosures of KPIs and information the strong business momentum of our merchant services activity as it enjoys visibly more and more the growth benefit of our combination with Ingenico while continuously improving its market share and competitive positioning. It's my pleasure now to give the floor to Eric to present you our financial performance more in detail.

Thank you, Gilles, and good morning to all of you. Let me start with an overview of our revenue performance in Q1 2022. During the first quarter of 2022, Worldline's revenue reached EUR 939 million, posting a solid 11.6% organic growth fueled by our Merchant Services. In Q1 2022, the main highlight per GBL are the following: first, a steady 15.8% organic growth in Merchant Services weighting now for 67% of Worldline revenue, reflecting the strong growth in payment volume along the quarter on both in-store and online activities and the benefit of our commercial dynamic with new merchants onboarded on our platform. Second, Financial Services showed a 2.5% organic growth as expected with good commercial developments, allowing us to offset the effect of historically large contract renewals, as already mentioned, end of February during our full year 2021 publication. And third, Mobility & e-Transactional services were up 8.4% organically and benefited from a strong project activity with new and existing customers on top of a solid transactional revenue dynamic in the transportation vertical. The strong performance confirms the trend during the fourth quarter and is fully in the trajectory of the 2022 guidance. Let me now detail this number by business line. First, our Merchant Services activity. Revenue reached EUR 627 million, representing a steady 15.8% organic growth despite the effect of the Russian situation as we have stopped our online corridor immediately after sanctions were imposed, costing us circa 1% in our MS division in Q1. Regarding the Commercial Acquiring side, we experienced a strong double-digit growth driven by all customer segments and geographies with notably all-time high reach in the German market in terms of transaction volumes. This performance has been particularly led by our mass market activities as well as by the large retailer and is reflected in our in-store acquiring MSV growth presented by Gilles a few minutes ago. Last, we have started to see a strong rebound in our DCC products related to the start of recovery in the travel vertical. Moving to the Payment Acceptance. Our activity reached a close-to-double-digit rate. The main growth components here are a steady performance of our global sales and vertical go-to-market fueled by new merchant wins and upsell with existing merchants based on the expansion of Worldline offering and solutions as well as the solid performance with our digital customers benefiting from the bounce-back of the travel vertical. To be noted that this dynamic has more than compensated the stop of our Russian activities related to our online corridor in March. Excluding the Russian effect, Payment Acceptance organic growth was solidly double-digit. Last, on the Digital Services, we have experienced a mid-single-digit organic growth with a strong growth in Germany and Belgium driven by all customer segments, while we have suffered, as factored in our guidance, from some anticipated and limited delays in the POS supply that could last a few more quarters. As already communicated by Gilles, the commercial activity over the quarter remained strong, with numerous wins for both Commercial Acquiring and Payment Acceptance in-store and online. Overall, this performance is a solid start of the year and fully in the trajectory we foresee for 2022, which remains unchanged despite the Russian situation. Now moving to Financial Services. Financial Services revenue reached EUR 223 million, representing an organic growth of 2.5%. The activity showed good volumes and commercial developments, allowing the GBL to offset the temporary effects of large historical contract renewals impacting both issuing and acquiring activities as expected. As a reminder, this contract has been successfully extended for several years at the end of 2021. Regarding card-based payment processing and acquiring, we have experienced a stable performance due to the mentioned Equens contract renewals offset during the quarter by improved transaction volumes mainly in Germany and Belgium. Digital Banking remained strong as in 2021, benefiting from high authentication volumes driven by e-com transactions. To end with Account Payments activity, the performance has been steady, with a high level of activity in both volume and projects related to large contracts in Germany while the UniCredit contract ramp-up has now reached its run mode. Regarding the commercial activity, the quarter has been successful with several wins and partnerships based on innovative solutions for our banking partners and clients. Among others, I would like to mention the 2 following: first, a partnership signed with UniCredit on the Open Banking side, the solution will allow to UniCredit customers to connect their accounts in other banks across Europe with one single API. This enables UniCredit to effectively offer Account Information Services and Payment Initiation Services. This removes the complexity and friction of many diverse integrations and allows UniCredit to provide its customers with the ability to get a consolidated view of all their bank accounts held with one or more banks. It also enables them to initiate an online payment at an account from another bank in Europe. Second, we parted with Mainsys to implement an innovative Visa Debit-Bancontact solution. The card benefits from a large acceptance due to the combination of Bancontact and Visa networks. This combination makes it possible to pay for purchases in Belgium and abroad, online and in-store, with or without contact, with a single card while taking advantage of the added value of applications such as P2P payments. Transactions are debited immediately from the account and can be viewed in real time via Mainsys' web and mobile banking apps. The immediate updating of the data gives the bank customers total control over their expenses. The aim of this partnership is to support neobanks, fintechs and other new smaller banking players in order to rapidly launch a turnkey end-to-end accounts and payment card solutions on the market. Last, I would like to mention that our pipeline of new projects remains significant across Europe, with a sales cycle that implies closing the last deal hopefully by year-end. Let me conclude this part with MeTS. Revenue reached EUR 90 million, up 8.4% organically, and represented a strong quarter led by high project activity with existing and new customers coming in parallel with solid transactional revenue from the transportation vertical. Starting with Trusted Digitization, growing double digit during the quarter, the performance has been driven by new projects signed and increased volume on tax collection and digital healthcare. On top, we benefited from the ongoing dynamic as in 2021 of our cash-to-invoice solution related to importation rules from Europe to U.K. in the Brexit context. e-Ticketing activities have steadily performed as well, fueled by increased volume in transportation vertical and a higher level of fare collection in Latin America. Lastly, on the e-Consumer & Mobility, we have experienced a good performance with a solid momentum in our Contact solutions and in Connected Living and Mobility. To end with MeTS, commercial activity over the quarter has been dynamic. We have signed, among others, Département du Nord, a local authority in the north of France, actually, the biggest local authority in France, that has chosen Worldline to use the SaaS solution Worldline Parcours RSA in order to equip their circa 3,000 social agents. It will enable the department to streamline the process of supporting social assistance beneficiaries with hundreds of counterparts involved in order to bring them back quicker to employment. Worldline has also secured a 3-year service contract with a European train operator for its Integrale solution. Integrale will bring cloud-based [indiscernible] control system, providing better IT integration and data flows into the national railways to control trains. Now to end my section, let me just remind you an important message we have already provided regarding our group exposure to Russia. As already communicated on March 18, 2022, we would like to remind you the group limited exposure to the Russian market. As said, the group has immediately enforced all the international sanctions applicable to Russia in compliance with Worldline corporate policies and suspended its Russian online activity so long as applicable. As a reminder, Worldline does not have any payment processing operation based in or operated from Russia. And last, we do not have any significant exposure to Russia software solution or subcontractor impacted by the ongoing sanctions. In a nutshell, our exposure to Russia is rather limited with circa 1.5% of estimated pro forma annual group revenue and circa 3% of Merchant Services revenue. As mentioned earlier in Q1, the situation has costed 1% growth to Merchant Services performance, and we have embedded this impact for the following quarters of 2022 while confirming our guidance, as Gilles will tell you in a minute. Last, we do not have any business exposure in Ukraine. Now let me hand over to Gilles to conclude.

Many thanks, Eric. Now moving to the key takeaways of the first quarter 2022, but say we are pleased. After our year 2021 of very solid execution on all fronts on the group strategy and operations, we actually start 2022 in a very good position. I would like to highlight 3 key takeaways: first, from a pure financial standpoint, a very solid start of the year fully comforting our '22 growth trajectory; second, from a commercial standpoint, ongoing strong mass market merchant base increased, numeral commercial successes with large merchants, materializing with a 36% growth in our acquiring MSV in particular; and last, I want to mention from a more strategic standpoint, thanks to the progress of the TSS sale and the closing of Axepta and ANZ, we are really more than ready to pursue developing our market consolidation strategy as we actually see many new opportunities ahead of us for the coming quarters. All these make 2022 with a full confirmation of our guidance, a very solid cornerstone to project with confidence that will go for the next 3 years. Now to end this presentation, I'm happy to confirm our 2022 guidance, with 8% to 10% revenue organic growth and OMDA margin improvement between 100 basis points and 150 basis points compared to the 2021 estimated pro forma margin of 24.8% and, finally, an OMDA conversion rate into free cash flow of circa 45%. Looking to the guidance more in detail. The bottom range factors, as mentioned during our full year release, localized and temporary potential COVID constraints impacting merchant activities, limited recovery of international travel and some limited delays on POS supply related to the still-ongoing component shortage. As you can see, the bottom range now factors also an additional parameter related to the complete stop of our e-commerce activities with Russian consumers. We are confident that we can still deliver our guidance while absorbing this negative impact of these sanctions on our e-commerce business even if they were to be enforced all along the year 2022. [ Consequently ], as said and despite adding this parameter, we fully confirm our guidance for the year. Now before to open the usual Q&A session, I would like to announce the nomination of Grégory Lambertie as Group Chief Financial Officer following the decision of Eric Heurtaux to leave the company for a new challenge in a few weeks. First, I warmly thank Eric for his instrumental contribution over the past 6 years to the remarkable development of Worldline, and I really very sincerely wish him every success in his future endeavors. I am also delighted to welcome Grégory in this key leadership position in the company. We've been working together for the last 2 years in the Executive Committee of Worldline. His large experience in the payment industry, in-depth financial skills and direct personal involvement over the past 7 years in all transformative acquisitions made both by Ingenico and, more recently, by Worldline will be key assets in supporting from now on Worldline growth trajectory, M&A and integration ambitions and operational efficiency execution. I will give the floor maybe for a few words to Eric and then to Grégory.

Many thanks, Gilles. As you all know, I have spent nearly 6 years leading finance in Worldline, bringing my own contribution to make it today a very successful large listed company. It has been a fantastic ride working closely with Gilles, Marc-Henri and this great management team. As you can guess, it was not an easy decision to leave this company, but life presented to me an exciting new challenge at the right moment in my career. I will join the executive management team of a large tech scale-up company operating in a different sector still privately owned at a different stage of maturity, still smaller today but doomed to become an undisputed leader in its field and most likely one day also, like Worldline, a successful listed company. Having worked with Grégory over the past 2 years and given the strong momentum of Worldline, I am fully convinced he will continue the successful journey of our group in his new position as CFO. It was a pleasure to work with all of you along those years, and maybe our roads will cross again in the future. And in between, I, of course, look forward to our next interaction during the Q1 road shows.

Thank you, Eric, and good morning to you all. I'm delighted and honored of this great opportunity. And after 20 years in the financial industry and a few of those dedicated to actively participating in the payment sector consolidation, I am very much looking forward to shaping the future of our company in this leadership position alongside Gilles, Marc-Henri and the great team at Worldline. I'd like to thank Eric for the fantastic handover we made together until today. And of course, I'll be part in the coming road show alongside Gilles and Eric, and I look forward to meeting you in our future interactions.

Many thanks, [ Greg ] and Eric, and I am now ready with the management team to take your questions, guys.

[Operator Instructions] The first question is from Josh Levin with Autonomous Research.

Eric, best of luck. Two questions. Public market valuations, including Worldline stock price, have come down quite a bit. When you talk to potential M&A targets or sellers of payment assets, to what extent have their valuation expectations also come down and relative to public equity market valuations? And then the second question, historically, you've been reluctant to consider share buybacks. But given where the stock price is and the performance of the company, if you compare that to M&A opportunities available, how do you weigh the value created from a share buyback versus additional M&A? How would you measure that?

Josh, I think I will take these 2 first ones. Well, as a matter of fact, I must say that -- maybe, I will start by background comments. Over my last more than 10 years of tenure in Worldline, I never saw so many European banks, including the largest one, actually engage in strategic reviews of their payment business or initiating concrete processes to find partners, set up alliances, sell sometimes their payment businesses. So it is really, for me, a very interesting moment in the dynamic of the consolidation because even the largest European banks are actually realizing that they need partners if they want to stay really involved and relevant for their own banking consumers in distributing better product services -- better payment services. So this is driving me to a first observation to answer your question. Most of the discussion we are currently undertaking or having with banks primarily meant to help these banks to solve a business issue. The business issue they feel is that the technology is going too fast, they don't have the global or pan-European reach, they lack relevance for omnichannel, and fundamentally, they need technology for our partner. Value is not, at this moment in time, the primary triggering element of most of this discussion. It is really finding a technical and business solution to a business issue they feel is more and more heavy for them. And this is why, for me, at this moment in time, the intensity of discussion we have with banks has no correlation with the evolution of the payment sector valuation. This discussion actually, to a certain extent, could even be eased by the fact that they all feel that the market is actually going through a very strong momentum and that there may be opportunities to strike strategic deals today and expect and maybe serve in the future on the rerating of the payment sector when it will happen because it should happen given the solidity of our results altogether of the sector. So longest answer to your question, we don't believe and we don't observe most importantly at this moment in time that the evolution of the price of the stock in the sector is slowing down, in any form or shape, the intensity of M&A opportunities. Regarding share buybacks, I must say that given what I just said, M&A remains clearly our key focus at this point in time regarding capital allocation on top of CapEx and R&D. And for the time being, our Board still consider M&A offers a better value creation for shareholders than share buyback in the current context and given what we've just said regarding the M&A perspective ahead of this.

The next question is from Hannes Leitner with UBS.

Yes. All the best, Eric, for your next steps. Maybe you can talk a little bit about the merchant service trends. Clearly, it was another strong quarter in growth, so maybe you can drill down a little bit on the dynamics, maybe how much is there, the support from travel. And then also, you referenced a couple of international contract wins, so maybe you can talk also about them. And then just coming back on the M&A, maybe you can give us a little bit of timing, phasing and putting this in context of size. So you mentioned quite a lot of banks are doing strategic reviews. But are those significant deals which could move the needle for Worldline or -- just to get a better feeling for it.

Okay. Hannes, Eric speaking. Thank you for your kind words. I will take your first question. On the MS trend, I think it's a combination, and I think all the signals are growing currently. As we told you, the MSV growth has been quite strong, above 30%. It's true both in line and in-store, as we could say. And it's fueled by the recovery from last year by the good volumes also with the existing merchants and by the number of new merchants. We said a few minutes ago that we enjoyed, versus Q1 2021, a net increase in merchant, which is double digit versus what it was 1 year ago. So it gives you an idea of the robustness of our commercial activity, in particular, for what fuels most of the recovery, which is the small- and medium-sized customer. Last, I think the travel has also been quite good, recovering as expecting. And you know that with travel comes from value-added service and goodies like DCC, that also contributed to the MS growth.

Maybe we can -- I can add to that, that in particular, if you want to give additional color, Germany has been extremely strong. PAYONE is doing really, really well. You may have in mind that in our business, given our particular in-store exposure, the biggest moment in payment is usually Christmas. And in fact, we experienced over the last period the highest peak in payment ever in this business in Germany, meaning that the coming back of the business in Germany, the switch to electronic payments on this market and our commercial wins is really showing a very strong and very solid momentum, giving us good confidence for the future. And indeed, as Eric said, travel and, in particular, airline travels is continuously moving up, not yet full year 2019 level but getting very close to it. And given the momentum, we really see this crossing the lines in the coming months.

Just regarding M&A, Hannes, I believe that, well, this is actually, as always, as we talked to you about the large -- some of the largest European banks, they have their internal governance complexities and many, many layers of potential approval and discussion. So it is hard to really just commit on a given time line for some of these discussions. But I mean given the number of things we see, let me phrase it this way. Most certainly, things will happen for the bank side of this discussion because we have also had M&A opportunities that are not bank-related or smaller magnitude sometimes for technology assets or some value-added services that we could inject in our portfolio. But if I just focus on the banks, I mean I would be disappointed personally by the next summer we would have not been in a position to convert some of these discussions. Some of these are actually starting in processes that are enclosed in tentative time line from the sellers, so that could last between 9, 10 months, let's say. So normally, when it is a competitive process, it has a [Audio Gap] pre-set time line that hopefully can be respected with all the uncertainties of M&A, of course. But we have also some more exclusive discussions that can develop different ways that allow more creativity in the way we can structure transactions. And so for the -- and talking about magnitude, some of these discussions are with the banks that are controlling between, let's say, 20% to 30% of their domestic market. So we talk of some of the largest European countries. So we talk to you about sizable opportunities, of course, in the relative size that our MS division is already quite big. But nonetheless, this could represent, let's say, during the course of our next 3 years, sizable addition in core geographies in Europe where we see an unprecedented momentum to open those 2 discussions that were not taking place previously.

The next question is from Alastair Nolan with Morgan Stanley.

So with volumes running well ahead, I think, of expectations and in plus 30-something percent in the first quarter, can you just comment on what's happening with regard to take rates and kind of what the dynamic is there? Is it mix effect? Or any more detail you could provide would be really helpful. And then just on the travel volumes, can you -- I think the last time you updated us, travel volumes were still running 50% below kind of prepandemic levels. Is there an updated level at which you've exited 1Q? Yes, those would be my 2 questions.

Thank you, Alastair.

I will give you some color -- Eric speaking -- on those questions. On the take rate, I think the trend we observed previously have not changed practically during this first quarter. It's very much continuity. As you understood, we are not so much impacted by the mix because all the type of customer and type of services are growing nicely. There is not one which is overseeing the other, and that's the very good news of this first quarter. So it does not influence so much the take rate, which remain pretty stable. As you know, in our activity, it varies quite significantly from one type of business to the other. That's why we never like to give numbers and average but doesn't mean so much in such an environment. But what is critical is the evolution, and the evolution of the take rate is rather stable. On your second question related to travel volume, I think we probably moved up from the 50% you kept in mind from last year, probably above 2/3. So that's a nice recovery, a nice acceleration. And this is, indeed, very much aligned with our plan, in particular, strong in airlines, as Marc-Henri said, and online business.

It's fair to say that we still miss a significant part of the intercontinental travel. We see coming back some U.S. citizens definitely in Europe, but Chinese travelers are absolutely not there yet, and the part of the Asia and Middle East travelers not fully yet there. So I think there's still an upside down the road of 2022, for sure. If things were to normalize this year, as you know, we kept that as a type of progressive ramp-up on intercontinental travel every year during the next 3 years of the 3-year plan. So if it happens sooner, that would be good news.

Next question is from James Goodman with Barclays.

Encouraging to see the reiterated guidance despite the Russia exposure that you've called out. And Gilles, you made some comments around that in that new parameter at the end of your opening remarks. The question is really for nuance between the guidance ranges. So are you saying that if all of that Russia revenue goes away, you're towards the lower end? Or are you also implying that there are some offsets perhaps when thinking about potential benefit and inflation through the transactional revenues as you head through the rest of this year? I'm also mindful that there might be some further supply chain issues around terminals, so really just looking for you to provide some context as to how you see the guidance range. And then switching over to maybe the last time we speak about it, with the European Payments Initiative, majority of banks have now left that project. I thought it was just worth getting a comment from you on sort of observations around that and what's sort of left there and any remaining opportunity.

Yes, sure. James, so on your first question, I mean let me phrase it to try to answer your question. For the timing, what we say is exactly what we see. We confirm the guidance while absorbing this very unanticipated negative impact of the full stop of the e-com activities with the Russian consumers, which represent an absorption of [Audio Gap] point of the top line growth of the entire group. And as you see between 2% and 3% of the MS activity able today to absorb within the guidance, okay, which means that most probably, should this geopolitical situation have not developed, at the end of H1, we would probably feel quite comfortable to, at minimum, narrow the guidance given the very strong underlying momentum we see on the domestic activities and the development of the group, our commercial wins and so on. So unfortunately, like being what it is, we are not in a position to say today that we can narrow the guidance. We said as you flagged yourself, we have for the bottom of the guidance flagged what could drag us at the low end of the guidance, which are if we face a more severe supply chain impact on the POS delivery or if the international travel does not pick up fully as anticipated or is even lower than that. For the time being, these risks have been controlled in Q1. But in all fairness, the situation is still quite free, and it is probably too soon to be more accurate on where we could land in the guidance as we speak. Today, the good news is we absorb Russia, and we are very confident that we can stay within our guidance. I would give you [indiscernible] a rendezvous later in this year depending on the evolution of these noncontrollable parameters like the supply chain. The health situation development for the time being, we feel quite good. But you know that the stats are still somehow relatively high in Europe. But hopefully, thanks to the vaccination progress, it does not seem to develop into deadly situation in too many countries. But when you look at China, you see a very different picture than this. So sorry for that, there is a bit of uncertainties. My main message is the underlying business is done good, and the competitive positioning of the company post the Ingenico transaction is also super solid. So this is really the main message of today. For the rest, we navigate in front of some uncertainties, to answer more precisely to your question. And regarding EPI, I mean, EPI indeed, I mean, EPI is today the second attempt of a large number of larger banks and some pure players like ourselves and Nexi, Nets to try to create something new on a pan-European basis. So clearly, the project is facing unexpected hurdles. And for the time being, there are discussion of narrowing the scope of EPI more on the digital side of things with actually dropping the card component of the scheme, trying to push potentially a wallet for Internet and mobile-based payment relying primarily on the account-to-account payment and instant payment. Honestly, there are still a lot of discussion to take place. Too soon to say if this revised format can fly or not and how many supporters it can gather. One thing is for sure: there is a real, real strategic ambition of the participants to find a way to bring a new payment solution into the ecosystem. Maybe the second attempt will not be the good one right away, but most probably, there will be discussion ongoing in the coming quarters and semesters to shed something anyway. That is my main takeaway of this 1 year of effort or 1.5 years of effort with so many banks. There is the ambition to do something to bring this missing mic -- this missing stone in the European payment architecture. And I believe that at the point in time, something should happen. And so there also Q2 will be quite intense in terms of discussion between the participants. So let's see where we are at the end of Q2.

The next question is from Alexandre Faure with BNP Paribas Exane.

I have couple of questions. First one is very much a clarification. I'm sorry I was a little late in joining the call. I'm sure you touched on it in the prepared remarks, so apologies for asking you to repeat. Could you please explain to me exactly what the decision is in Russia? Are you just simply stopping activities there? Are you still running them and applying sanctions? And reason I'm asking this, from memory, sanctions don't have much of an impact on your activities with domestic cards in Russia. So that would be my first question. And I think, Eric, you called out a bit of a headwind, perhaps about a point in Q1 in Merchant Services. I want to make sure I got that one right. And my second question, just a follow-up on what you said earlier, Gilles, when commenting on Chinese travelers in Europe, could you give us a sense perhaps on how big Chinese payment methods were for you in revenue terms in MS in 2019, if you have that in mind?

No, I will start by the second one. And definitely, the first one will be a repetition, Alexandre. For you, we're happy to do it. I'll give the floor to Eric. I mean we were, and I think we still probably are, the largest acquirer of UnionPay, Alipay, WeChat Pay, [indiscernible], which we were. Clearly, Marc-Henri confirms. And for the time being, this business is not really there at least for in-store payments in Europe. Of course, we do some e-com acceptance of Alipay, WeChat Pay or UnionPay payments for our gateways. But for the time being, we are still missing the local part of the Chinese spending in Europe and which was quite significant particularly in private-related activities, luxury environment and so on and so. The day it will come back, it will be a very nice upside. Regarding the repetition regarding Russia. I mean, Eric, I give you the floor.

Yes. So I will be short. We issued [indiscernible] communication mid-March, Alex, on this. But to make a long story short, we suspended all our activity as there was sanction. The bulk of our activities were related to our online corridor allowing the Russian consumer to pay on foreign websites. And this, as an order of magnitude, represented in 2021 around 1.5% of our total revenue or 3% of Merchant Services. As we have suspended our activity immediately after the sanction has been imposed on Russia, it means that in Q1, the month of March fully suffered from this impact. And as a matter of fact, indeed, in Q1, we had a headwind corresponding to 1% of Merchant Services.

That will move now to 2.5% to 3% on a run rate period from Q2 onwards. But we did confirm fully our guidance while absorbing this unanticipated negative impact at the time of the budgeting.

The next question is from Sandeep Deshpande with JPMorgan.

I haven't heard all the questions, so I might have repeat something here. But I just want to understand, you've had a very strong quarter in Merchant Services. I mean, clearly, I mean, there is some impact of returning trade. I mean can you talk about it regionally as well, I mean, where the strength is coming from in terms of Merchant Services? I mean you've talked a little bit in the call on travel, and some travel has returned but not all travel. Maybe you can also talk a little bit about the segments in which you're seeing the improvement and whether you can expect that this kind of improvement can continue in Merchant Services through the whole year.

I think we can do it together with Eric. In terms of geographies or in-store activity, which is the biggest part of our Merchant Services is clearly European. And I would say from that point of view, it was good all across Europe and particularly good in Germany, as I said, very, very strong momentum in the German market, in the Swiss market as well. And overall, I would say, on DACH -- what we call the DACH region, very, very strong momentum, with a combination of people being back in business and compared to last year's restrictions and, of course, the good momentum and the commercial wins. So all this was very supportful and will play a role throughout the year as the overall momentum of this activity is strong. And the move from noncash -- cash to electronic money is confirmed, sustained and continue to develop in this region. So it's a very pretty momentum. The online payment developed as well, as Eric said, and double digit. And from that point of view, we don't have a geographical specific set. Our consumers are all across the world, except Russia now. As we explained, it was only that impacting our Russian situation. And here, we see an acceleration to continue in the coming quarter because it is boost by travel. And travel, as it was said during this call, it's not yet at 2019 trends, but we see a very strong and difference between the beginning and the end of Q1. I think this domain is really accelerating and it's -- as you can -- probably all of you witnessed, tourists are starting to come back to European location in significant quantities. So this momentum give us visibility on an acceleration and which should be very -- still very much supporting our business in the coming quarters. Eric, I don't know if you want to...

No, I think you said it all. In terms of geographies, I would add [ 2 tailwinds ] that performed extremely well as well, I think. That's noticeable and including for travel and DCC. But I think I fully concur with everything you said, Marc-Henri, in a way, though. Well, in fact, everywhere.

So we have maybe time for one last question. So -- and we're getting to the end of the tower.

The last question is from Tammy Qiu with Berenberg.

So you indeed delivered very impressive growth for Merchant Services in Q1. Given all the inflation, supply chain challenge and probably that can impact some kind of consumer confidence at some point, can you talk through a little bit of the trend into second half of the year for both Merchant Services and, of course, financial processing as well, please?

Tammy, good to hear you. Well, I will start maybe by 2 comments, which are more on the macro side of things. We've been looking at this past issue. It's true, inflation is a new phenomenon, in general, in the world and, of course, over the last recent years of Worldline development. It has some merits for a merchant acquirer, of course, when street prices are increased, as you know, as we are getting permission that are based on ticket value. Of course, we are naturally hedged, and somehow, this is, of course, a type of mechanical hedging against inflation, both on the margin side, but also it helps the top line somehow, at least on the comparison effect. But more importantly, my comment is that when you look backwards, and we did that at the past, let's say, macro -- big macro changes that have impacted the European economies, whether it was a sovereign debt crisis or whether it was in the past, the things related to subprime or, more recently, to some slowdown we've been facing, it is interesting to observe that never ever the transaction volume on cashless payments nor the dynamics we could observe in terms of growth of domestic consumption plus the accelerated cashless momentum have deviated from the historical growth trajectory that we are measuring, meaning that there is a real deconnection -- or disconnection between the evolution of the GDP, on one hand, and the behaviors of consumers. And it showed that the reason for that when you become a very large-scale acquirer somehow on our platform is that, ultimately, the way consumers are actually spending their money, whether it is on the fuel, on energy, on leisure activities or things like that, are ultimately relatively secondary as long as the overall size of their domestic consumption basket does not really decrease because we are so big that somehow, we capture their payments wherever they take place. And this has been demonstrated over a long series of data point. So it's why we look forward at the current dynamic that we see in the European domestic consumption with a lot of confidence because what we see in our platform is exactly what I just described. We are actually observing a very strong dynamic of the domestic consumption patterns, as Marc-Henri and Eric said, all across the European geographies. And this is why we look at that with actually a lot of confidence for us, the business model of the company and its extremely diverse positioning in the European market.

In terms of what to expect for your modeling of the year, based on what Gilles said, we have not changed our view. We still expect that [ they trend stronger ] thanks to the strong start of Q1 and a favorable effect in Q1. Starting Q2, we expect the situation to normalize with H2 2021, as you remember, having been much less impacted by health restriction. So in MS, you should still expect a double-digit growth; in FS, progressive fadeaway of the negative impact associated with price discount on the historical Equens contract. And on EPS, we should be in the usual mid- to high single digits.

Okay. That's great. And also from perspective, your positioning, you definitely do have a very good position in the European market from recovery perspective and off-line market perspective. Do you see any weakness from e-commerce because of customers moving to things like omnichannel or consolidate their merchant acquirers at all?

Not a weakness per se, but what we can say is in-store is much more dynamic in terms of coming back than e-commerce. So what we observe, it's not -- there is a change of habit that maintained after COVID that people are using electronic money in store. That has changed. They moved really from cash to noncash, and that's not ambiguous, and that's lasting. But we could have thought that some people would have maintained the habit of buying online rather than going in store, and that, we do not observe. We observed that there is a will and the desire for social life, for shopping together, for moving out. So some online business did develop, but coming back to in-store activity is very strong, very robust and proving as something on which we can bet in the long run. So in-store momentum, much stronger than online. It's not that much that online is significantly weakened.

No. And fundamentally, a part of the wins that we did report are also very interesting in the way we actually with our innovation and R&D are developing new ways to do the physical shopping. If you look at some of the announcements we made this quarter, I mentioned BUT, which is quite an interesting one based on Android POS, allowing click and collect in the shops or some that we did not report with Saint-Gobain, for example, allowing to actually order significant pay half of the amount in store. And then once the goods are delivered, you pay the other half through an online payment. We mentioned Carrefour, in which we do a very nice Amazon Go-type of experience in which you do your shopping by yourself basically without having to go to the cashier. I mean we are also reinventing the way we do shopping in store, allowing also to be part of this attractiveness that Marc-Henri mentioned, which is just to make it faster, more convenient, actually omnichannel, if you want, and enjoying the best of both worlds. This is a big focus on our innovation road map, of course, from that standpoint. We should not keep in mind that in-store is a traditional way of shopping. Actually, the -- we also reinvent the way we do in-store shopping to make it faster, more convenient, frictionless as much as we can if it is the choice of the merchants. And it is part, of course, of what ultimately makes this convergence taking place. And I think we are just ideally positioned for that.

Gentlemen, this concludes our Q&A session today. The floor is back to you for any closing remarks.

Thank you very much.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices.