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Good day, and welcome to the Worldline First Quarter 2018 Revenue Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Gilles Grapinet, Chief Executive Officer. Please go ahead, sir.
Thank you, Amy. Ladies and gentlemen, good evening. This is Gilles Grapinet speaking. Thank you for attending the Worldline conference call today on this first quarter 2018 revenue. I'm going to share this presentation as usual with Marc-Henri Desportes, General Manager; and Eric Heurtaux, our group CFO.I will start by commenting the highlights of the quarter, then Eric will develop in detail the revenue performance for Q1. After Eric, Marc-Henri will take the floor to present the first quarter commercial developments and will also share with you our focus on some of our latest innovation that went to market during this Q1. And finally, I will come back to conclude before starting our Q&A session.Let me first share with you all that we had a very good start of the year with revenue standing at EUR 394.1 million, which is an organic growth of 5.8% at constant scope and exchange rates. Our business momentum has been particularly solid during this Q1 2018, and I would like to highlight 3 main points in particular: first, we had an overall robust operational performance with good transaction volumes growth in our Financial Services division and double-digit volume growth in Merchant Services activities in India and in Central Europe. Also, as Marc-Henri will develop further, we had successful go-to-market of some of our latest innovations industry business lines. And lastly, and maybe more importantly for this quarter, the group has continued to develop the very strong commercial momentum created during last year, particularly in H2. And notably, we have been seeing significant progresses in many of the payment outsourcing opportunities that we pursue in our first 2 quarters for various European banks in many European countries. With this very good start of the year, we are in a position, of course, to fully confirm all our objective for 2018, in line with our 2019 ambition. The group expect to achieve, as you know, an organic growth of its revenue at constant scope and exchange rate of between 5% to 7%, with H2 accelerating over H1. The group targets an OMDA margin between 22% and 23%, and the group has the ambition to generate a free cash flow of between EUR 200 million and EUR 210 million, including circa EUR 20 million of synergy implementation costs linked to the synergy plan within Equens Worldline. Thank you very much for this time. And now, Eric, the floor is now yours to comment further on the revenue of this quarter.
Thank you, Gilles, and good evening to all of you. Before I start commenting on Q1 2018 revenue, just a word on the figure I will use in my presentation. As you know, for the analysis of the group performance, revenue for Q1 2018 is compared with Q1 2017 at constant scope and exchange rate. You can see on the screen the main reconciliation item between the Q1 '17 reported revenue and the Q1 '17 revenue at constant scope, including exchange rates.First, the application of the IFRS 15 accounting standard revenue from contracts with customer had an impact on Q1 2017 revenue of minus 2.3%. Then, internal transfers correspond to transfer and refocus of some contracts between Merchant Services and Mobility & e-Transactional Services. The scope effects correspond to the addition of Q1 2017 revenue in Merchant Services of MRL Posnet and Digital River World Payments and the deduction of Q1 2017 revenue from PaySquare Belgium. In Financial Services, the addition of Q1 2017 revenue of First Data Baltics and Diamis and the reduction of Q1 2017 revenue from Cheque Service. Last, exchange rate effects correspond mainly to the depreciation of the Argentinian peso and of Asian currencies, mostly the Indian rupee versus the euro. So on a comparable basis, the revenue for Q1 '17 is at EUR 372.7 million.Let's now move to a review of the operational performance. The table on this slide shows the organic growth for the group and for each global business Line. Revenue was EUR 394.1 million, representing an organic growth of 5.8% at constant scope and exchange rate compared to the first quarter of 2017. All 3 global business lines contributed to the revenue growth as I will detail on the following slide. Just a note on the figure that Atos will present tomorrow. Worldline contribution to Atos revenue will appear there for an amount of EUR 384 million in Q1 2018. The difference of circa EUR 10 million is linked to consolidation elimination as we have, as you know, a part of our revenue that is invoiced to our end clients to Atos.In terms of group profile, Financial Services represent 45% of the revenue of the group; Merchant Services, 35%; and Mobility & e-Transactional Services, 20%.Let's now move to a review of the operational performance per GBL in more detail. Merchant Services revenue for the quarter reached EUR 138.1 million, an improvement of EUR 8.1 million or 6.3% organically compared to Q1 last year, both divisions contributing to an increased revenue. Growth in Merchant Payment Services was primarily fueled by Commercial Acquiring services, thanks notably to a strong revenue growth in Continental Europe triggered by higher volumes of international card transaction in Belgium, double-digit growth in the number of transaction at PaySquare and KB SmartPay market as well as the success of Worldline tiered-priced packaged offers, which combine acquiring and, in most cases, terminal services, and which grew by more than 30% compared to Q1 last year. The growth of this division is also due to a solid double-digit growth in India, fueled by an increase of more than 20% in the number of Payment Terminals managed. As anticipated, on the other hand, Payment Terminal Services slowed down, affected by the current renewal of the product range. The other division, Merchant Digital Services, grew as well, thanks to Private Label Cards & Loyalty Services in Spain in consumer credit services, in the United Kingdom in digital ticketing kiosks for the transport industry, and in France with new customers. Moving to Financial Services. First quarter revenues stood at to EUR 178.4 million, an organic increase of EUR 9.6 million or 5.7% compared to last year. All 4 business divisions contributed to this growth. Acquiring Processing grew to high project activities and to strong authorization volumes, notably in France and in Germany. Wordline Baltics also contributed to growth. Account payments benefited from good SEPA payment transaction volumes, strong volume growth on transaction on the Dutch iDeal scheme as well as new project ramp-ups on Instant Payments. Growth in Digital Banking was fueled by new project in France in e-Brokerage. Last, Issuing Processing enjoyed a satisfactory level of card transactions in Europe and a continuous increase in e-payment Strong Authentication services. Increased payment software license and maintenance revenue was also recorded in Asia Pacific. What matters in Financial Services currently is to win new large projects and big outsourcing deals, and it is what we are focusing on because these new clients will bring new volumes and reinforce the operating leverage.Mobility & e-Transactional Services revenue reached EUR 77.6 million or an organic improvement of EUR 3.8 million, which represents 5.1% increase compared to last year. With the contrasted evolution between business lines, Trusted Digitization grew double digit, benefiting from a strong momentum with French government agencies following the good order recorded in 2017. In addition, business was also strong in Latin America, both in healthcare transactional services and in tax collection services. Growth in Mobility and e-Consumer was fueled notably by Connected Living activities in Germany and in Iberia. Last, despite good business growth in Latin America, revenue in e-Ticketing decreased, impacting by lower project revenue in the United Kingdom compared with Q1 2017.Thank you for your attention. And I leave the floor now to Marc-Henri for his comments on the commercial and operational performance of the quarter.
Thank you, Eric, and good evening to you all. Let me start by commenting a few KPIs sustaining our robust volume growth during the first quarter. We had a plus 6% growth in the number of traditional issuing transactions and also a strong increase of plus 24% of ACS transaction, a service that is used for authorization processes of online card transactions.Account-based transactions were up plus 5%. And in particular, we managed 12% more SEPA mandates. And the number of e-payment processed from the iDeal platform grew by plus 40% compared with Q1 last year. Lastly, regarding Worldline India. As Eric mentioned, even though it is over a year since the Demonetization Act triggered a particular and positive impact on our results, we are experiencing, as anticipated, a continuous and very satisfactory growth momentum in our acquiring business due to the strong merchant needs for electronic money acceptance and acquiring services.I will now present some of the key wins of the quarter and mention, in the interest of time, the main deals on this slide. For Merchant Services, the success of Worldline Commercial Acquiring packaged offers was confirmed in Belgium and Luxembourg during the past quarter, and close to 11,000 merchants have now subscribed for this all-inclusive tier pricing Commercial Acquiring contracts. The wallet momentum continue to be strong. We have a merchant wallet solution that was sold to a major French appliance retailer. And in the same area, Total, in collaboration with Worldline, has now officially launched Total eWallet, a 100% digital and connected solution for customers to fill up and pay for purchases through their mobile phones in just a few clicks.For financial services, market interest for Worldline Issuing in 1-Click solution targeting banks managing small to midsize payment card portfolios have been confirmed, with 3 new contracts signed during the period. Regarding PSD2-related innovative offers, the PSD2 compliant digital banking platforms and the access to account platform sold to a major European financial institution, as we already said, are now fully operational. Seven North European banks decided to implement the equensWorldline access to account solution to let them meet the compliance deadline for access to account, leveraging Worldline Digital Banking Platforms, which, by the way, received the PayFORUM Award 2018 in the category API. Last but not least, for Financial Services, De Volksbank has chosen equensWorldline to process its instant payment transactions. For Mobility & e-Transactional Services, several new Trusted Digitization programs were signed during the past quarter. And in particular, with the ANCV, Agence Nationale des Cheques Vacances, which is holiday vouchers, and with whom Worldline will implement a secured digital platform to transition from paper vouchers, integrating technologies developed for Merchant Services and Financial Services.Let me now zoom on the recent successfully market launch innovations. First, a major announcement was made in e-Ticketing. Worldline, in cooperation with Visa, Keolis and local partners, launched a new innovation in the field of Open Payment for public transport division in Dijon, where, for the first time in France, the transport network in a large city has equipped its trains with contactless verification terminals, enabling passengers to pay for their journey directly on board using their usual contactless bank debit card. You can see on the screen the cinematic of a typical transaction from the start of the journey, the tap-in to the tap-out, where controls are performed such as the card verification, encryption of the personal card account number or the creation of the token, et cetera. And during the journey, the core account engine, which manages authorization, estimates the fare and computes the final price for the customer. Our ability to master both payments processing and ticket processing technology position us naturally on the resolution end market. I think it is a fantastic example of the combination of all 3 business lines. With the acceptance solution, including our new VALINA payment terminal coming from Merchant Services, with the tokenization system that result from our Financial Services business line and the account engine and the transportation know-how coming from Mobility & e-Transactional Services. The success of this very complex delivery attracts a strong attention, and we observe a very nice development of our price in this area.Now coming to a bit of Blockchain. Worldline and Bureau Veritas announced the launch of Origin, a joint developed traceability solution based on Blockchain technology and offering a smart and practical way for consumers to access information on each stage of the product's journey. For the first time in the world, the traceability level will give consumers the complete end-to-end proof of a product's journey, from farm to fork, by scanning the barcode of Origin-certified products. The use of Blockchain by Worldline makes Bureau Veritas Origin technology innovative and resolves key challenges that have made full food traceability elusive until now. It is a first solution of this kind to deliver that technology, and projects are underway with a number of Bureau Veritas customers. And the technology is now ready to be launched to the wider market. On a broader basis concerning Blockchain, across Worldline, we now have more than 20 Blockchain opportunities being actively pursued in various industries.I will now give the floor back to Gilles for the conclusion.
Thank you, Marc-Henri. It is indeed now the time to conclude this presentation. And I would like here to briefly sum up the key takeaways for me of this quarter.It is, as a matter of fact, a very good Q1, and we have a very satisfactory start of the year. As you can see, with this 5% to 8% organic revenue growth, well-distributed between our 3 business lines, and the confirmation, of course, of all our full year 2018 objectives. The satisfaction for this Q1 is also coming from the pursued development of our commercial activities. In Q1, we grew again our pipeline, and we also saw the progresses on some of the largest outsourcing opportunities that we are now pursuing over a few quarters since 2017 that we already mentioned in our full year results.So I think we are really witnessing here the power of the equensWorldline combination starting to gain a real traction in the market of financial processing in Europe. And it is also the positive trend that we have in MS and in MTS, which are also supporting this commercial successful development so far. We are also, as you see, pursuing investing to continue to be a forward-looking innovator, trying to find a new use cases for payment technologies, as Marc-Henri just highlighted. And last, regarding M&A. I can only confirm that during this Q1, the group stayed particularly active on various M&A opportunities all related to our major strategic priority to be the leading European payment industry consolidator to better serve banks and merchants.Thank you for your attention. And I am now ready, of course, with the team, to take your questions.
[Operator Instructions] And we'll take our first question from Stephane Houri of Natixis.
Yes, I have 2 questions if I may. In the press release, you've been talking about the outsourcing opportunities you are talking with. Can you just tell us how many outsourcing opportunities you see and how large they could be and if they could arrive in the short term? And also about India, you've been growing double digit during the quarter. Do you think that this growth can last in the course of the year?
Thank you for your -- those questions. I guess Marc-Henri will take the one on India. I can give some comments indeed and some colors regarding the commercial development. So as a matter of fact, we have a very active pipe with opportunities of all sizes, as you can guess. But what was noticeable and already communicated during the full year results is that despite that, there are also very unusually large payment outsourcing opportunities. So when we say unusually large, we are talking here of potentially above EUR 100 million TCV, total contract value, on, of course, the entire lifespan of the contracts. And these activities are -- these opportunities are primarily coming from the Financial Services division, but not only for some of them. Focusing on what has been really supporting the commercial development so far is really all that we've been talking about since we IPO-ed this company. So cap processing-related opportunities, secured processing-related opportunities, more particularly coming with the Equens capability, PPA, mass payments and instant payments implementations. And in some other business divisions like MeTS, also regulatory implementation projects. So we have actually a variety of opportunities. Coming to the timeline issue, we want to stay on the relatively conservative side. You know that we expect some of these deals to be signed soon enough to contribute to our H2 and, of course, to 2019. So that can be always on these large opportunities relatively complex finalization processes because we are talking of very significant engagements, particularly for the banks. But we are confident that our plan for '18 with the contribution in H2, and of course, for the acceleration further in '19 will be delivered, thanks to relatively now soon signing some of these opportunities, hopefully. But of course, as soon as we will be in a position to communicate, we will do.
Regarding India, you're absolutely right. It's a solid double-digit growth. I think we said it, it was what we anticipated. I mean, what we have said constantly is that the equipment in India is producing for us a continued growth momentum and not a one-off momentum. And this is for the moment, we see no sign of slowdown. On the contrary, we are very satisfied with the MRL Posnet integration. The product is really great and is helping us to be more efficient. The market position is great as well, so it's doing very well. And in this moment, there are even new signs of shortage of cash in India, if you read the press. And the country seems to be dedicated to go even faster in equipping the merchants with new digital ways of accepting payments. And these -- we are positioned not only on these selling electronic equipment, meaning payment terminals, but also simpler ways with QR codes related then integrated into transaction platforms. So for all these factors and elements, we see a strong continuity as far as we can foresee in the growth of India.
Okay. So what you're saying is that India may be moving also to QR code instead of payment terminal? Is it looking like China? Or...
Not exactly like China, but it is a move that has been engaged, and indeed for 1 year. We are in this situation of equipping the merchants, both with terminals and with QR codes depending on their size and profile. And both of them is contributing to revenues.
[Operator Instructions] And we'll take our next question from Emmanuel Matot of ODDO.
Emmanuel Matot speaking from ODDO. First, on M&A, do you want to remain mainly services-orientated in your business model, meaning adding limited exposure to any hardware business? That's my first question. Second, you start the year close to the midrange of your full year guidance regarding organic growth. In case of an acceleration in the coming quarters, can it come from all business lines? Is it mainly related to Financial Services with the opportunities you mentioned from outsourcing for European banks? And my last question is about Belgium. I saw in your annual report that the business was flat last year. Do you think you can come back to growth in that country? Or that scenario is too optimistic, knowing your very high level of market share in Merchant Services? I ask you that question because your comments seems fairly positive for Q1 in that country.
Thanks for the question. I will take the first one regarding M&A, which was nicely shaped, I must recognize. You know that we have no conceptual problem with hardware. We are actually having our line of payment terminal, as you know, and so we know how to manage, of course, that type of activity. That being said, we have been absolutely always consistent. Our first priority is linked with financial processing services consolidation and merchant acquiring consolidation. So really, the tagline of our M&A strategy is crystal clear. Priority is to consolidate and to help banks, in Europe particularly, not only banks but particularly bank communities, to find the satisfactory solution for engaging into this new era of pan-European scale and helping to transition this business as successfully as we are demonstrating with the equensWorldline transaction. So the priority of the company has not changed. Regarding the second question, it was regarding the full year profile. I don't know, Eric, if you want to give some comment, but clearly...
Yes. Basically, we expect all our divisions to continue to grow. And therefore, the acceleration we have has no reason to be centered exclusively on FS. It's true that FS might be supporting it. You understood the large number of outsourcing deal we have. But it will not only come from Financial Services. We have also a solid pipe on MeTS. And Merchant Services has been also very successful in Q1. No reason to believe this trend should not last for the rest of the year.
Marc-Henri on Belgium, if you comment maybe?
Yes, on Belgium, we are clearly a company who is looking for growth and accelerating growth. So even if in Belgium, given a starting point is difficult, we increased the market share. What we can do is find -- and what we are actively doing is finding gross revenues in evolving our business model. So introducing the next generation of payment terminals, moving to PAC for the merchants with a different pricing model, adding some additional value-added services. And so this strategy is actively pursued. And I mean, we are not giving guidance country-by-country, but I think it's very clear that we intend to have Belgium supporting the overall growth momentum of the company even if we will expect more growth from the new markets. And mathematically, as we are growing much faster, payment of time will contribute to an acceleration of the growth profile of the Merchant Services.
We'll next hear from Mohammed Moawalla of Goldman Sachs.
Just a couple of questions from my side. Firstly, Gilles, do I sort of detect any sort of subtle change? I know you're emphasizing the outsourcing opportunities. Has anything changed in perhaps some of the M&A opportunities you're pursuing? And should we expect kind of one to sort of maybe come through ahead of the other? And if you can just sort of give us an update on sort of the some of the consolidation opportunities in Europe, that would be helpful. Secondly, in terms of some of these outsourcing contracts, I know you have a midterm objective of 6% to 8%. I assume that these would be accretive to that and you're not necessarily dependent on them to drive that sort of midterm acceleration.
Thanks for the questions. I mean, maybe I was not subtle. I will rephrase. We are absolutely extremely active for the organic growth on these large outsourcing opportunities, which, I would say, more organic developments because it is really about winning the contracts, not buying a business, like it's really banks shifting from insourcing to outsourcing. And so there, we talk about something that we covered many times together since we IPO-ed the company, which is really happening in Europe now over the last 12, 18 months, which is good change of sourcing strategy within some large banking organizations due to the evolutions of the economics of the payment business. There's a need for scale due to the scarcity of a priority and allocation of CapEx or other digital transformation priorities in these big organizations. So this is strongly structural factors supporting really the new momentum in payment outsourcing at large, on top of the need, in any case, to reinvest on this platform due to the regulation, particularly instant payment, for example, of PSD2, as you know. And we are also extremely active on M&A, and particularly over the last month. And we don't oppose one to the other. Or there is no -- if it was the sense of your question or the meaning of your question, we've been also pretty active this quarter pursuing, growing, developing our pipeline of M&A opportunities. This time, we are not talking about indeed acquisitions where we value business, onboard new teams and, of course, make synergies and create value for our shareholders. So really, those have kept us particularly busy during this Q1, which is fundamentally good news. It just demonstrates that the project of this company since it was IPO-ed by Atos in '14 is just developing as per its overarching medium and long-term plan. Regarding the second question, I think you want to do some comment, Eric, on it?
Yes. Basically, we have been in the medium term based on our view of the market, which includes last deal. So it does not mean that if we do not materialize the last deal, we'll change our guidance. But definitely, it will support the improvement of our guidance, which used to be 5% to 7% to 6% to 8%. It is not full last year because it takes a little bit more time to materialize. We have various levers to still deliver and be comfortable, but we will reach anyway this guidance.
Yes. And maybe to add to what Eric is saying, our guidance is not based on scoring all the [indiscernible] that are in the pipe. So it's, of course, a statistical view. And we have sufficient control with the pipe, which is sufficiently strong to help us to provide some visibility on that indeed.
Now, we have a number of opportunities, which is allowing us to believe that we are in statistical growth. And so it is really -- I think the good news of the development, since particularly the merger with Equens because now it is really showing the power of the industrial combination in action. So that's really great to see that happening.
Great. And can I just follow up? In terms of where these deals are in terms of late stage, are you now in sort of more exclusive negotiations and it's just the question of getting the contracts signed? Or are these still at a kind of competitive bid phase, just to understand where we are?
Well, actually, there is variety of situation. Sorry, we cannot be more specific. But indeed for some, we are in signing phase or in exclusive negotiation indeed now.
And from Citi, we do have Josh Levin.
I want to ask about the GDPR. How has your experience been in terms of getting ready to comply with the GDPR? And going forward, do you expect to incur materially higher expenses from complying with the GDPR?
Marc-Henri will take it. We have a full-blown program there.
Yes. So indeed, GDPR is an important regulation and coming with very strict requirements and -- so requiring a high level of attention. You may remember that we mentioned it in the previous call, think that we feel very comfortable on this topic because it is our business to be secured, it is our business to endorse a customer that are in a compliant way with data privacy rules. We are European-based, so it was always in our DNA to do things the right way. That being said, of course, we spend time reviewing all our contracts, all the situation and making sure that things are properly done, so we are in the process of finalizing that. But without major impact on our costs. We have not derived from that. Something that is a change in the way of operating that would create significant additional costs. In some cases, it can trigger additional discussion with customers that were a bit too restrictive in the way we should handle a specific transaction and a specific contract. And in this case, we tell them, "Okay, you wanted it this way, but now you need to adapt to it because GDPR is asking a bit for more." And in some cases, we see that as an opportunity for additional business. And more transactionally, we have in our portfolio a lot of solution, and that can add companies to handle GDPR. Typically, tokenization is a way to anonymize data in your own systems. All of our customer engagement solution and communication solution can add to contact us in case of issues. And even the APIs for the PSD2 to handle in a very structured and organized manner. The access to the data can, in some cases, be adapted and applied to some GDPR needs. So we are very unmanaged in this consent management that is required, in some cases, by GDPR. So being born in a collection of countries that have various interest but most of the time, very high interest in data privacy situation, we're well-prepared. All the work being done is confirming that we are well-prepared. And we are not seeing additional costs coming from it. We are more seeing additional potentialities of revenues.
Okay. And one more question. The GDPR is going to require that companies get affirmative consent from people before you collect and use their data. Do you think that's going to negatively impact the growth in ancillary services that merchant acquirers want to provide merchants in Europe?
No. The biggest challenge will be for the development of loyalty services and using the merchant data to derive additional business permit, which, in all fairness, is still relatively low on the market, and some are -- probably need more hopes than others. But it was not a very strong driver of our plan. So we recognize that we really need -- you will need to secure a very strong customer consent to handle this data. But once again, not a big game-changer on the market from our point of view.
[Operator Instructions] We'll take our next question from Hannes Leitner from UBS.
I have questions, if I may. Regarding the guidance, you mentioned at the full year results that the growth comes broadly evenly across the divisions. So was it an upside surprise at Merchant Services? Or was it rather more that the mobility division was lagging? And will this reverse throughout the year? Secondly, regarding the pipeline and the backlog, and backlog remained unchanged for the last 4 quarters, do you see there some change within the backlog? And how soon will it come through the pipeline and translate into the backlog? And thirdly, in terms of M&A, do you see -- how many competitors do you see in the final stage? Or is it really now an exclusive negotiation about the final pricing?
Eric, maybe you take the 2 first ones?
Yes. So I will take the first one. We have not been surprised by the good performance of our 3 divisions. This time, MeTS is the third one in terms of growth rate. We have always said this is volatile, so it might very well happen. But this one is significantly above the 2 [ others ] at a different quarter. What's important for this division is that really contributes to reach the growth pattern of -- the average cost pattern of Worldline. On FS, it was a little bit lower than the rest of the previous quarters. But you remember, we had lots of project activity there. We still have a lot, by the way, and posted a good growth this quarter again. So we are satisfied, and it's again according to our expectation. And last, MS, we are not surprised that this is the first in terms of growth in the contribution to Worldline growth due to the fact that in the long term, we always said that Merchant Services should be the growth driver for Worldline. So it might happen that things are different from one quarter to the other. But this is completely according to our expectations so far.
So you had a question on the backlog. I just -- of course, you should see the backlog actually recording the impact of the some of the larger deals that we will hopefully sign now, let's say, in the coming period, to -- not to be more precise. The fact that the backlog is stable while the company is actually growing at circa 6% is also showing that we are renewing it constantly and significantly in itself. It is, of course, a good sign of the dynamism of the refresh constantly of this backlog because actually, the company has accelerated, as you know, over the years to get to where it stands today in the circa 6% trend. And of course, you should see in the coming period that an improvement of the backlog because everything being equal in the trajectory we have set for the company for 2018, the material impact of one or hopefully some potential significant deal could be, at that point in time, fully reflected in the backlog, of course. So it is a matter of a period. M&A, so I'm not going to be, of course, in any shape or form explicit. As you understood from my comment, we are active on the various M&A opportunities again, so value sizes in Europe primarily. And the -- so we are at different stages of the competition, well-advanced, I guess, in some, but still in competitive mode. And for some other opportunities, it is more, at this point in time, as far as we know, more the type of bilateral discussion. But of course, still way too soon to tell more about it. The normal M&A process with its ups and downs and sometimes slow down. Well, the life as it is. But there are also, I think, an interesting traction. And certainly more to come if I showed only a more general comment. We feel, Marc-Henri, myself, the team all across Europe a clear understanding that something is happening and that the big game is actually starting with probably numerous impact of the transaction that could take place in 2018 that would have like the type of domino effect on the acceleration of the decision-making process of other bank on platform, in particular. It is really our anticipation, as of today, that 2018 will be a type of triggering year for an accelerated consolidation in the next 2 years. So it is really what we feel, what we are discussing. And we see that fundamentally, even the most conservative countries start to sing differently than what they were doing previously.
And from Barclays, we'll hear from Gerardus Vos.
Just a couple of questions for me. Just firstly on the kind of revenues, it looks like you started a little bit kind of stronger in kind of Q1. Could you just highlight perhaps where that was coming from? And also make a comment what you've seen on pricing in particularly in Merchant Service and the Financial Service kind of division? And then secondly, just coming back on the outsourcing opportunity. This has been on the agenda for a long time, I think, since the IPO. It has been a bit slower. And now you seem to become more kind of optimistic around it. What has been driving that? And obviously, we've also seen the deal with Wirecard and Credit Agricole. Has that perhaps been a kind of catalyst for banks in Europe and particularly in France to look at those alternative instead of the vertical integration we've seen in the past?
Thanks for all your questions. Eric, maybe you can take the first one? Marc-Henri will discuss a bit more about the outsourcing trends we see and the rationale for this to have a chance, as a matter of fact, over last year.
Indeed, we are satisfied with the Q1 as you could hear us on the call. Not really surprised, though. It's really in line with our guidance, but good research. You're right to underline it. And as I commented when I did the details per business division, actually, there is not a lot of business division that did not contribute to this performance. And that, for us, is a very satisfactory point. There is not one driving the growth, and the rest, lagging. We underline the 2 areas where we have room for improvement. Our terminals, you know the history. And also the businesses in U.K., where we had less project this time. The rest has been really performing very well. We're very strong in Commercial Acquiring, in particular, and this has been a very good quarter. Very good also for the Financial Services division. The Acquiring and Processing has been strong indeed. But MeTS has been doing very well also, so no real one-off explanation to justify this Q1.
On pricing, I don't have much to say for this Q1. I mean, there is no specific change in trend. We are seeing a situation that is more a continuation of before. The market in Financial Services is competitive but not -- we saw stickiness. As we know also, it's not -- there's much under pressure, and we enjoy, I would say, a satisfactory situation from that point of view. On acquiring, I will say it's more a continuation of what we've done before. So no further pressure on [indiscernible] to be a price maker on small merchants or smaller merchants. To your point of what's behind the potential change of trend, I think we had the opportunity to discuss about the factors before. We see them materializing more and more. We mentioned the fact that there is this pressure on banks on regulation. There is this pressure of banks on the need for scale. I mean, all these, and then there are P&L payments being difficult, such as technology requirements. All these is there. All these is pushing on them. They see that more and more, for sure. Maybe there is an additional driver that has also come close to the flow, which is, they see this happening. They see the scale being built. And this is multiples being paid. And these multiples in some shape are also influencing the decision because they realize that this multiples are paid. It's also because people have the synergies. They would derive the scale. And they would be also on the market competing and providing these services in front of them, in front of their internal IT was no change to follow on this. So I think the deal flow, the news also has created awareness, and they are slow on [indiscernible]. So some deals happening 1, 2 years ago, even in some -- to some extent, Equens has created an awareness that puts them into motion, and more [indiscernible] have continued to do so. I still do not really buy the fact that the way [ have come ] the deal with Credit Agricole was also part of the momentum. I will say, to some extent, yes, but less because it's not such a deep [indiscernible] content. It's more illustrative of what things could do. It has not triggered, in itself, a move. It's more illustrative of the move that was created. As we said before, due to the overall deal flow, due to these various drivers I mentioned that are only growing and never decreasing.
Yes. Maybe it may look immodest for a second, but I think that the since we IPO-ed the company, we are clearly stronger with Equens on board and probably also clearly better in our commercial engagement capabilities. And so -- I mean, the pipe is, of course, the result of the meeting between the need of the customer and the value proposition from an outsourcer, in our case, talking about payments here. But I think clearly, we can make the meeting of these 2 fundamental elements to get a deal ready, I think, much more efficient than it was in the past, both for the pricing power standpoint on our site and also, I think, on the portfolio capability standpoint. And last, but it is not secondary, a real better commercial team and the ability to channel all these capabilities and value proposition to the customers. So I think it has helped, in all fairness, too.
We'll next hear from Matthew Yates with Credit Suisse.
2 very quick ones for me. It's sort of revisiting a previous plan. Just on the kind of strong performance at the Merchant Services, can you perhaps just guide us to what might have been a standout driver this quarter, if there is one? And secondly, obviously, with the various M&A transactions in the pipeline, I understand they are each at different stages of the process. But if you could perhaps let us know, are we fair to assume that financial processing deals are within that mix? Or is it too early to say?
Yes, we think your first question regarding Merchant Services, I mean, in this quarter, we had a good volumes and good activity of acquiring in Continental Europe. And in particular, a good mix of international cards and also the online acquiring was good. The Indian momentum was supportive to the overall situation. And those are the main elements. We were a bit down on Payment Terminals but nothing really significant. And so that's why from a time point of view this -- good aspect of this is even if the quarter was good and maybe a bit early for expectation, it is based on the sustainable trends that we think have a very strong view to materialize going forward. And on the terminals, as we have all knew, we mentioned it regularly, a range of products coming in and ramping up now. We also have good visibility from that -- a good contribution of this new product range.
And Matthew, regarding your question on M&A, I don't know if I got it right. You were asking me if there would be some deal related to financial processing activities. Was it?
Yes, yes. Is it fair to assume that it's part of the discussions at the moment that, that's a fair...
Yes. As a matter of fact, the M&A pipeline, no big surprise for you guys. It's made of opportunities in the Merchant Services front and opportunities indeed related to financial processing platforms. So really, I guess, where we are focusing, of course, nothing happens by chance. Thank you for your question, Matthew.Is there any further question?
We'll next hear from Tammy Qiu with Berenberg.
So I only have one on PSD2. Can you give us an update in terms of how banks are planning in terms of the timeline to be compliant with PSD2? And you said previously that we can see significant momentum starting from second half of this year and into 2019. I'm just wondering has that been changed throughout the quarter?
Thanks for the question. Marc-Henri?
I can say all about that. So indeed, we mentioned in the full year call that the regulation has been a bit later than planned, with the latest publication in the so-called FTS being done in Q1 2018. So it is slowed down a bit the reaction of the banks, but now, we have all the elements to move. And they are creating -- they are moving faster. And So I can confirm to you that it is creating an additional momentum. And we mentioned that we have signed a deal with 7 banks in the northern part of Europe. And we are seeing an acceleration of the discussion. We -- I think, yes, we are in the range of circa 50 active leads of commercial engagement in this moment of various stages of maturity. So we really see that taking shape. So let's see now how fast it goes. And I can't predict fully how fast the banks will move and react, but what I can say is that now that we have put the elements on the table, they have no reason to deliver flat, and we're seeing this as they are materializing their projects and being more specific in their requests and then getting further in what they need to do. Including and sometimes surprising, in neighboring countries to Europe, they're going to adapt and be ready to the change.
Thank you, Marc-Henri. And by the way, indeed, so it should -- of course, we can only expect banks to fundamentally launch initiatives now in the coming quarters or semesters. And indeed, it is part of our anticipation that it should help the business to grow further by the end of 2019. In other regulatory event in the past, we could also witness some time last-minute rush of really latecomers that did realize that they needed to be compliant some time really at the very last stage. But hopefully, it won't be the case because PSD2 has been in the landscape for a while now. So nobody has the excuse to discover the regulation. More fundamentally, it will also mean to remind you that, as we said during the full year, we have various levers that should support the anticipated and projected acceleration of the company in H2 and in '19. Of course, regulatory aspects like instant payment of PSD2 are one, but there are also, as we start to see the synergies with the recently acquired businesses last year, that will materialize hopefully stronger and stronger over the coming quarters. They are, of course, the current good level of, I would say, traditional signings that we had, which is supporting a good order [indiscernible] again this quarter. Hopefully, the onboarding of one or maybe some larger opportunities in the months to come. And also the better structural mix that we have created for our Merchant Services business with a bigger exposure to higher-growth countries than what we were in capital shares back before the acquisition of PaySquare, the Komercnà banka transaction and, more recently, our expansion and reinforcements in online payment with WOPA. So all these elements are multiple levers. And everything being equal, if we pursue developing well the plans, I think all that should help to, indeed, land our company where we saw it in the full year. I understand we have maybe a last question, operator? Not sure.
Absolutely. Our question is from Derric Marcon with Societe Generale.
I've got 2 quick questions on my side. The first one is about Merchant Services. Would you say that the PACs that you sell to merchants, so the vendor offering, is something very positive for your top line? Or it's much more history related to the investment of your bottom line? That's my first question. And the second question is about data Baltics, so Worldline Baltic. You said it was growing in Q1. Could you quantify this growth rate? And was it the result of the expansion of First Data Baltics -- previously First Data Baltics in [indiscernible]?
Marc-Henri?
I can take your question, Derric. On the PACs, clearly, it doesn't really change your cost base. So it's mixed, but it contributes to the top line and thus, to the margin by adding a smarter way of pricing. Merchants, they love to have a substantive about the cost. And then clearly, a model which is based on a stronger lump sum and additional price when the glory of about the level of transaction is something that is appealing to them and contributing to our ability to have a bit more revenues. Then you...
Worldline Baltics.
Worldline Baltics is clearly growing in line with the rest of Financial Services, and so no material difference. Primarily, the impact of a good and growing momentum and being -- a team being now further proof of growth and freed from some constraints that they were having in -- under the previous owner. The synergies of revenues directly link to offers are in the pipe, but it takes a bit more time to materialize. And because you need to convince the banks, sign with a contract with them, start building and then seeing the revenues, that's in the making. And I would say that there is a bit of business on them with Scandinavia, but most of the group is still in the Baltics at this stage. But to be very precise, in the Baltics, but with banks that are headquartered in Scandinavia because a lot of the Baltic market is in the end of the Nordics banks.
And could you quantify maybe the upside or the potential upside that PAC would create with a specific customer, statistically? Does it improve your revenues by 10%, 20%, 30%?
No. Let's not be too explicit about the way we do our business and the commercial discussion we may have with our customers. So no, I will not be more specific than that. I'm sorry, Derric.
I understand. Operator, do we have any further question on your side?
There are no further questions at this time. I'd like to turn the conference back to our presenters for any closing remarks.
So thank you very much, guys, for having been with us tonight. Appreciate it as usual. Hopefully, the Q&A session could help you to get again a good understanding of the good dynamics of Worldline this quarter. And I look forward to our next interaction. Have a good evening. Bye-bye. See you soon.
And this concludes today's conference. Thank you for your participation. You may now disconnect.