EVTC - Earnings call transcript Q2 2018

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Operator

Good afternoon, and welcome to the Evertec Incorporated Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] please also note today’s event is being recorded. At this time, I would like to turn the conference call over to Ms. Investor of Head Sharpton, Relations. Kay begin. Ma’am, you may

Kay Sharpton

section be Schuessler, Good on website Chief and Financial for A call the Relations Mac Access listed under August Smith, release, afternoon. me today Officer. which will this of today’s With replay our replay until Executive information our evertecinc.com. of Chief Tuesday, X. President our are available in Officer; financial is Peter and available is Investor

XX. is July note, replay, conference section this the call a those that there Investor website. For to presentation held is listening the call, was and accessible Relations Please accompanies this our it of also on

Litigation only, Report begin, with current forward-looking Exchange could known to XXXX. cautions are These Reform call the like statements. to I’d expectations that everyone reflect remind for forward-looking may obligation any statements reflect any after update XX-K our Form we about our recent cause no statements undertake and results factors of statements that made to future forward-looking to forward-looking under future and that contain defined uncertainties. subject most our Annual performance are this and Evertec call. materially Company’s actual statements we these Please from statements Securities the performance. guarantees occur All Act Before this as the for refer and Securities differ on filed events of that today to Commission expectations to Private risks unknown not the

common Reconciliation today’s I’ll also information Mac. EBITDA, now adjusted slides. SEC call certain to and management measures that to rules, as supplemental and During GAAP adjusted earnings will are adjusted share. will per measures today’s related constitute under information and the in certain income hand earnings net included over release financial call, such provide additional non-GAAP

Mac Schuessler

everyone. good and Thanks, Kay, afternoon,

stronger-than-anticipated of Puerto Total benefit we pleased for exceeded that Rico’s the provide results developments. and quarter million Adjusted to due net operating was and increase of XX% of to $X.XX, was revenue Slide expectations highlights or and and X% last update X, $XX year. an which an volumes Beginning quarter’s share recovering the with increase $XXX year-to-date an last of are million, was and $X compared per generated is was approximately continued improved increased activity. above increased cover significant our compared revenue to adjusted $XX sales X% flow year. financial from on XXXX the We million, EBITDA XXXX, some over We to prior of recent you year, mix. on earnings rebuilding an cash our second million I’ll which

of provide quarter later remainder Given increased results details guidance, year, and we our further and the raising confidence call. are Peter the our will the on the with

and Evertec, This to for recovery to support of our turn their contributions I very XX, I June the I’m significant aftermath outstanding Award and to local timely Rico update, in the Chamber from recent of company the to Special a Slide Before the and Hurricane highlight Commerce for sector the of Puerto dollar. On want some Maria. was team X. business proud our achievements President’s business of honor received on the

grown has in billion ATH we Regarding volume. $X.X to million annualized innovation, our Móvil have and over application processed X.X users, over

quarter, will has XXXX. which revenue-generating June Our ATH we And features, create active Evertec Móvil Business over solution last incremental in profits for implemented XX,XXX businesses. launched last

it Móvil recently in users, by expanded donations XX receive organizations. is and from we ATH functionality to non-profit for Additionally, currently use non-profits

a raised single to feature. Rico, through over people in One with of medical the and Puerto $XX,XXX donation this services non-profits, SER provides telethon which day disabilities, new of education

members network ATH add to based developed Móvil, and our applications significant we on ATH continued ATH we brand. our more value and solutions As to

Lastly, from and and throughout to technology Parallel offer year foster beyond, offers support XX, our and Latin grow XX start-ups research business trust companies as and during scholarships with support XX Parallel a each recent Evertec as program, will Rico participating Puerto to XX them our Services startup the of generation collaboration science, a coaching I also well Rico America want free and to helps accelerator. next the five-month mentoring to highlight Payment Puerto entrepreneurs. program for

to Rico’s is with sector to these growth. private as contribute startups collaborate as emerging Puerto Our innovative, focus tech well to

first X.X% Rico’s on for year. progress Slide and months on Moving have is with in growth Tourism of X. the two the to Puerto year full recovering. sales growth of rebuilding in X.X% strong reports Retail been the

and the come of March island’s Rio Mar year. in later to are hotels several opened Grand expected major One hotels, online in other Wyndham the the

have typically remainder levels improvement merchant Merchant of And normal the year. to summer full levels. to processing the the improvement in pattern. months, We post continued to Approximately merchants attrition base. of to increased continue our reflecting immigration our modest see the see compared transactions throughout XX% are in hope year we

year’s thus programs. insurance as funds well attrition benefit for as Rico continued Puerto continued pattern different expanded encouraging. been funding than to flow is are benefited initial from HUD payments experienced the significantly release believe other has of prior and we and Relief today, this not we’ve that in, While increased private we years and

of Regarding continued and the the disagree, Puerto remains board the economy impact unfortunately unclear. premise fiscal government and on budget, Rico’s to the

the our we we said, our port course. continued deliver to services in and renewed be receive continued to continued normal government, that to payments the to contracts However,

encouraged the remains and While overtime. concerned, Evertec continued are the benefit economy believed funding relief and that stimulate will uncertainty the related to budget government’s we

I’ll Slide our continue to X. business turning with update. Now,

Rico, gained market average on cars. XX%. X%, stronger-than-expected share the which merchants transaction smaller with ticket, Merchant and We above volume significantly branded in the mix year, the processed quarter Caribbean. as X% volumes grew be improve we more prior grew include to to a Puerto the X% and the of continued First, continued revenue in ATH of pleased rest growing experienced you were increase approximately a approximately – if

all tax and payments. increased temporarily as from Additionally, well we up as were categories are expanded merchant programs benefiting benefit

was up Second, XX% in America, Latin year-over-year. revenue

Excluding the in attrition. was reflects digits, impact the client which of acquisition, growth PayGroup the the organic expected mid-single

business. Third, new regarding

Our continues to in America be sales PayGroup Latin strong the by driven acquisition. pipeline

and new milestone implementation an the model. accomplished and was market This risk this region. we unique risk will in of of solution has service outsource believe been to to in important to which our largest service, Chile. response the build we plan be with center card management at we first positive, incrementally more an invest risk our capability processing Santander, the implementation Additionally, The Banco with bank the software in the

our Lastly, on I to activity. comment want M&A

in shareholders, dividend will deal a quarterly You million share. based benefits provides we thorough shareholders. Latin long-term of and analysis, opportunity return a spinning expansion diligence carefully to for the to level while the that on every that potential per we We opportunity. of provided remain we fit $X.XX spent ultimately our to quarter, will note believe reinstate pleased decided this board committed our dividend Evertec flexibility. be but pass America, this shows our And This to on that could further on I’m related approximately to to capital transaction. evaluated providing balance conducting the lastly, which in LatAm, significant believe strategy $X.X We goals. a of due After strategy

well first in of Rico execute still after Although we environment the in results XXXX, half evolving. and is recovering to the the continue Puerto strong

opportunities. Peter. our We in shareholders, expanding cash returning focus as and opportunities will maintain turn to assess to and allocate will growth balanced we continue to I the now our With over to America Latin approach call of that,

Peter Smith

Mac, our everyone. Thank and second XXXX I’ll now you, good provide a results. review afternoon, quarter of

Turning you’ll million, to $XXX.X for up Total million XX% second compared see year. the consolidated for the was the Evertec. $XXX.X Slide quarter quarter in X, prior revenue results second to

X% the higher of prior quarter quarter was million, Year-to-date from of XX% tax range for lower-margin $XXX.X $X.XX and to tax we increase from Our Adjusted Total the XX.X%, merchant primarily prior year. rate effective earnings interest to million, across elevated adjusted margin in anticipate months income year. to in decline was up compared be share year. expense. EBITDA the X% Latin sales per as the adjusted in an EBITDA the reflecting was of the reduction offset an categories. was Adjusted in cost $X.XX, Year-to-date by full partially $XX.X taxes volume basis million, now the offset was compared $XXX.X $XX.X X% XX%. adjusted decrease the point million the in the year mix and $X.XX in a earnings was up grew was was continued income by XXX and and to year-over-year our for year, improved million, net prior increased an of this the was for X% the which quarter increase per represents in the increased reflects in in most to our of payment reflects initiatives. margin was compared contribution of increase XX.X% $XX.X adjusted an our X% six year-over-year. common tax EBITDA rate a $XX.X million X% year-to-date The increase and America, share margin quarter EBITDA revenue be year. The to revenue primarily and Adjusted the X%. prior and EBITDA net prior up PayGroup, Adjusted adjusted

the Acquiring. Merchant growth increased and cover the ranged higher to The of growth anticipate and high XX. approximately and net I’ll In this grew increase programs XX%, ticket, benefit to increase the in price a have quarter, contributed the revenue all reflecting smaller the encouraged Slide government drivers in by net were due steadily in electronic was driven increase the the In to contributed federal continue. in in to drivers to these volume quarter, which number year-over-year payments Merchant overall volumes. to volumes starting revenue assumed and gas. with the second approximately tax results of XX% merchants from our on We monthly believe that drove cards the year. insurance proceeds Moving to Acquiring sales to large $XX million. of also now significant through we increase margin. the were segment of that purchases revenue also gas sustain increased deployed that quarter, We volume, primary trend XX% the growth part a relief average We XX%, increased

We branded it since term million ATH the approximately also merchants their annual when and positive year, a and up have XXX while margin transaction loan XX.X%, and our resilience view million, improved of approximately basis resume up contribute population the that not XX%. they from increased transacting, processed revenue, increased and Adjusted offer as sales merchants ticket. will have unclear hurricane. volumes we was fee reflecting and segment on a continue to the card These EBITDA was as average remains to $XX.X of for $X.X the continue points cards to last them EBITDA assistance. compared the contribution margin Adjusted if

Merchant see as volumes the Services, for approximately the year. Slide referenced growing Acquiring a million, compared $XX.X For the million, for comparable will Rico second levels Transaction to increased margin quarter X% quarter XXX X% up the period, in segment Puerto as increase EBITDA in approximately the and you X% for EBITDA million, to volume I was the on six-month XX, segment. compared Adjusted basis. the was from and quarter. last XX%; was point reasons a Payment with Caribbean adjusted the $XX to first the XX.X%, to last primarily $XX.X Revenue increased results On up segment year-to-date same basis due year.

up $XX.X digits we as Solutions clients Adjusted down the in $X adjusted in $XX.X for to approximately revenue approximately points XXX for Year-to-date last last adjusted of Business Services, the the EBITDA Payment additional Slide year. XX%. million, to was million. flat our compared compared up Business. expenses points segment due initiatives. plans. compared Latin in of compared see increasing as range was Móvil up $XX.X XXX margin for as approximately impacted approximately for XX.X%, second as migration million, XXX million find last was updates year, revenue margin our million segment approximately delays you’ll year. last the quarter revenue of was XX, was growth or Revenue adjusted projected client the margin last adjusted as Year-to-date and a of revenue EBITDA second on PayGroup EBITDA Additionally, was for was $XX.X primarily incremental related now PayGroup, EBITDA basis just the infrastructure Solutions the related Year-to-date Adjusted to product year. expect in mid-single to million X% for compared $X attrition. segment driven impact Business decline $X approximately approximately On lower $X.X Adjusted million, for XX% year. project down attrition. client based by X% XX.X%, points million, in compared basis million on revenue by to as result was the such from We as contribution. and deferred $XX.X deconversion last to last half back compared primarily was to the their year, million the compared segment. approximately segment full for EBITDA the be the increases EBITDA and the margins driven project segment points $XX.X increased year results down expectations development up Revenue to the impacted margin due from client as segment. XX.X%, year for by Adjusted transaction this and primarily of last XX.X%, EBITDA we XX, basis XX% as year. to deliverable with to Slide margin down this PayGroup This the timing. was to the excluding revenue was This to On in was fees results increased services a America growth under quarter was lower segment consistent acquisition, was as slightly year. XXX ATH you’ll benefited $XX.X and was by EBITDA was to segment basis to quarter the new to Year-to-date million

revenue year-over-year in to the anticipate mid-single increase digits. low to continued the We

last with segment quarter, was margin to down adjusted compared project margin XX%, approximately the at as For reflecting increase adjusted and XXX EBITDA Business $XX.X and Year-to-date, was approximated $XX.X XX.X% and $XX.X EBITDA year. Solutions basis million, EBITDA the million year points was expenses. million last adjusted infrastructure revenue for a

our expense. XX, Moving corporate of and Slide to on you’ll summary a see other

second Our a XX%. $X.X reduction quarter year-over-year expense of was million,

primarily basis a other to last As the other a in additional percent The modest execute corporate in half and of revenue, corporate was corporate and actions $X.X X.X% from was decline as year-to-date as against reduction reflects the expense below our prior We expense year. second year. expense points XX% the total we and of expense-reduction planned XXX plan initiatives. compared million, Year-to-date, year. taken

corporate basis a percent As expense of other the total revenue, below year. points and was XXX X.X% prior and

our year-over-year corporate We other expenses anticipate be full continue to to a and on flat basis. year

on to on Slide year-to-date cash XX. our Moving flow

balance to million $XX by $XX or increase activities cash million. provided $X year-to-date Net million, cash a of year. beginning $XX prior restricted compared operating $XX Our as cash including approximately million. the was approximately Capital million were expenditures was

decrease approximately $XX in net Next, debt of and debt, we total reduced debt short-term other $XX and borrowings million million paid approximately payments resulting $XX a in in million.

last A in million. off loan $XX April, we As I call, our XXXX quarter’s paid term mentioned on

was balance XXth Our included restricted $XX of this cash as million, $XX ending of and cash. million June

Moving XX. Slide on to

of You’ll summary find of a XX, as our June debt XXXX.

ending net approximately debt of Our $XX position of million quarter unrestricted short-term comprised debt. and borrowings total long-term approximately was the $XXX and $XXX million cash of million

rate X.X%. Our interest weighted was average approximately

limits credit in to the million. net debt trailing net calculation times, the to debt $XX XX-month cash X.X which reflecting was the adjusted agreement, EBITDA Our applied

$XX XX, excludes reduced April. June and million borrowing the of was our million. under This revolver, As $XXX which capacity total available existing in balance cash includes restricted was liquidity to

Slide now on XX. XXXX will I update an our to Moving provide guidance.

volumes quarter. the in was July’s range a slightly The of the slightly Merchant range X% year. improved an for to well. second to the sales million last for remainder range of projection as the our and in revenue $XXX volume transaction raising are the over a X% approximated Acquiring segment, quarter representing In results year revenue revenue the second double-digits of the July’s primarily the lower our segment. X% million, in $XXX reflects We year-over-year increase year, than below to outlook year-to-date and low Merchant and

July’s Payment modestly Rico to digits. out Services, mid-double anticipated mid-single Caribbean the and is continue, Merchant projected to digits. We low grow to revenues to the now revenue Puerto have segment trends of segment our now project caution. but We decelerate grow And

Regarding will that be the first first the were that lower margin, adjusted an overall driven incremental other margin the by projected EBITDA be the anticipate the not expenses our to XX% of we ticket incurred primarily now the half, and a half in range anticipated year. of year in Margins XX% are of for lower average for assumed than to remainder year.

common earnings as compared to $X.XX $X.XX, to range XX% in $X.XX been adjusted to increased has of which per Our represents XXXX. share a to outlook XX%

the As a half and quarter by the we be benefit reminder, to of the Puerto recovery. quarter continue to the in year. performance economic encouraged summary, tends our stronger fourth Rico In back from year-to-date are our

We good and focused cost we for pleased strategic year. outlook Evertec, quarter remain goals. our our on are It was on for raise initiatives are executing our and the to

questions. open now the please ahead will the We Operator, for go and call line. open

Operator

and today Napoli our session. we’ll ahead Please Ladies the from go at [Operator this with And your gentlemen, from question-and-answer William first begin question. Bob question Blair. comes time, Instructions]

Bob Napoli

Congratulations Thank results. on solid you.

on numbers question. Just the

said, is segment? which from of million that Or million a $X.X a adjusted did out adjusted up EBITDA or show M&A not up? it show it of expense, Where think, is it Does expenses had You $X.X deal for I segment? In you EBITDA? does in occur. that in

Peter Smith

Peter. of and This it’s it adjusted of we of out performed Bob. is EBITDA, adjusted out, of so numbers. It’s – out our Yes, all

Bob Napoli

you. Thank

the in revenue and what the of still know like high margins? and what and Puerto have with confusing Rico? really model expanding like Evertec, guidance the grower the think revenue this does we type through. back growth any gave the has that you should thoughts? single-digit stabilized mean, I And this some with think and in. – Rico Should things to now margin longer-term to trying company XXXX, funds you about in – model give about it’s coming seems have stabilized. just But should the a I of half as for think rate year Puerto It seem be Or we what of As like. Can look longer-term, look the XXXX,

Mac Schuessler

I’ll Peter. then Mac. Yes. answer, to it Bob, this is I’ll hand

pretty a here to. beginning the that to at because we’re to we said, insurance good still XXXX I you – unpredictability on we XXXX, do the in and But looks still confident come going the As in be and years don’t the year, in continue executing Peter, Rico, like. trying is what Puerto focus LatAm. in funding and money to timing and a we’re job the past as difficult you this to forward. there’s it’s coming model of of those island. question, are we’ll know letting still well they know business But relief don’t of if uncertain. growing some to lot there’s address will that But XXXX want

Peter Smith

Yes.

an immigration. a little ticket color the on average And more our exceptionally had high anticipate continuation of guidance, this for year. of Just that insignificant XXXX, impact the we’ve from a end at we high

summer pattern on We’re still and of in middle immigration. the the the

point. So give better school we’re us see openings forth, to anxious data so a which and the will

We volumes July our in had factored projected year, low-double digits half we average which the and QX of of ticket volumes. the and volumes, in high-single experienced impacts digits a the margin. we lower were that As our than lower second

the year. the so And remainder of that projected throughout we

are open, in to billion items a those is out With more there timing. grant, the volumes recent end the a projected funding that process and and HUD with uncertain lower we than of caution, that Our the slightly, amounts but as of just Out we well. caution has been out respect of the our announcement of of the still slightly quite respect transaction guidance, reduced else. anything to on $X.X approximately rest were lower,

and plan impact the me, is going also item vis-a-vis or unresolved of forward aware, us, as look rest with year. to for situation which remains to and next So the fiscal the excuse year, respect are we board the to the also fiscal still government uncertain budget, the the an you here that’s as

Bob Napoli

And last me. question for

really LatAm Just healthy. on balance – looks your the Rico, non-Puerto and sheet

opportunities? to end the your back was. brought it You front? M&A at are a the dividend looking have by do interests X.X, on are what deals. of Debt year. most And the pipeline? the under I you be Where – And you see half Do EBITDA to to think, what of where going you is you

Mac Schuessler

past, our with expand with is Yes, a focused We’ve deals. pretty on got where the Bob, we’re continuing footprint footprint existing this good Consistent we Mac. the can. to already

on best So the we’re we’re sure focused making that. the very PayGroup acquisition, making of

we confident. feel you pretty we that And We’re deal on. announced look getting important part we expansion proceed to know, opportunities. still market focused the cross-sells, an – didn’t the products across with But are of which as is and we for continuing with, what the we’re that

Bob Napoli

Great, thank you.

Mac Schuessler

Bob. Thanks,

Operator

Please Our go from Goldman Sachs. Jim next Schneider question. your question with comes ahead from

Jim Schneider

the and Good effort, question recovery now? on helpful. it you’re recovery. Thanks to the of Is just Payment be it seeing business? parse wanted to strong Merchant how for I the Acquiring may isolate you right taking the of in the that the maybe seeing to relief is Services rest be business ask, between out the my much will vis-a-vis and business? afternoon. That specifically down benefit or you’re the Can of possible just balance kind congratulations the

Peter Smith

Peter. Hi Jim, it’s

benefit direct So effort there’s pinpoint our to is card this as EBT, we One volume we volumes. relief approximately cards on that identify those transfer, tie respect is discretely can do And just has contributed growth that volume to funding exactly. or X% the it’s that that with to electronic year. payment very difficult to direct release our sales item nothing

the is relief direct So as Apart a difficult. result that of it’s from direct very – effort. that,

Jim Schneider

off terms of now, and broader Payment Puerto sectors? provide in the Acquiring what of seeing to us in go-forward guess, maybe competitive competitors And any kind market environment, isolate. back to a the of just of review potentially your you retrench both you in importantly, seeing any I Rico of the more Understand. with exit? then, start or you competitors Services normalized Hard are Are or Merchant your can

Mac Schuessler

market of No, I strongest U.S. This Popular what times, given often it’s banks dynamics. change see benefit. do environment. FirstBank it it is business we financial partner We would their extension the exploring island, the or We it they’re that see again, are the the and significant say, Mac. that, through on typically that in a ISO. exploiting competitive the institutions with, our still But, and a which again, is plays to don’t

Peter Smith

are thing only is the levels. that on mentioned, provide service in more in as scale recovery to, greater things The so what the help to Mac are the with difficult respect to I’d island merchants as timely here arguably, go add just can we and we service

something on we’ve and focused island solution, that’s Móvil that Additionally, here on. added which we’re is the unique Business the ATH

Jim Schneider

one M&A. be respect one. may With earlier then on And Bob’s Great. question final to

a it us at doable for balance sheet scaling up sounds You’re, imagine this larger about you deal, would right see at much of you four desirable a or this how I as point? your sub maybe in you that give see obviously, leverage? reconsider like. You’re at latitude times considering Is now. the right transaction, point? sense three kind that something this could you mean, to Can you point

Peter Smith

respect asset. really and with it that, the our depends to on the on views strategy say, would I

to One would But comfortable asset, doing each business case, we that segment SG&A just in segment. in housekeeping, So respect we value charge, the just with the other follow-up to feel right add the the in Bob’s going shareholders is add case. that long-term. the it’s in it’s have corporate that, to earlier just for I’ll fund to if right question and to

Mac Schuessler

footprint I this unique Yes, we’ve Evertec what we’re And think built about no look, and three the a that we and comparable. over we years excited America. Latin think have the is the franchise proud in products think at Jim, – that we’re have, we I very is that building we mean, there’s is last Mac.

sheet. transactions we’ll but a focus away take at. complexity shareholder this for a is, for of we’ll big size the at sense. balance point, just any asset great our it company. our look look any mean, make got doesn’t we’ve from strategy financial if still sense create up, as if So and your makes equally And too to I that we comes hard one And walk is great value, or the But that

we’ll in So look the at opportunity every region.

Jim Schneider

very Understood. Thank you much.

Operator

next from comes Cowen. Please Georgios from question question. with ahead your Our Mihalos go

Georgios Mihalos

afternoon, Good gentlemen.

Let on the quarter. me as my add congrats well

for just Is Firstly, should breaks now template margin to Solutions, didn’t Pete, shouldn’t revenue Payment any half typical specifically Business XXXX. going back out half XQ. two Puerto of the those there why segments? as Rico on the you we back the expansion at wanted line I wanted how at year, we model we sort relates had bottom sort of Services the looking ask down ask flow some to reason back obviously, to if XXXX, as in we look margins, growth So of revenue be a and it to to over in that, the that expecting now seasonality? also Is use? down of there specifically good to the And then be

Peter Smith

Thanks. some we called fourth would pattern out that With it, to be quarter. for respect appropriate in absent weighted is George, seasonality, factors seasonal uncertain of the typical that at a think look the which earlier typically I I how

we we respect lighter. segment conversion, the the you so you that identified didn’t the if and margins on question initiatives, to in third Business that respect Payments get that look the With made and we quarter predicated individually, held back bit. investments on of a it’s the some tends be Business service to delivery. really And had Payment in which The that contribution, segment, happen to fall your infrastructure at, product Solutions then with as to and it on in Solution, quarter and timing and the

we don’t as but not recognition, some individually think the more and that could that is deferred anything a consequence timing-related have of revenue item. just I there’s out We that revenue call

Georgios Mihalos

But percentage post and I’m in thanks. remarks. not base still the the Thanks if And the prepared you on then Great, again. that’s hurricane? sure merchant update missed it I can your us congrats not of processing

Peter Smith

Yes, thanks. With processing. respect to not normal levels, amount XX% is that the is

and like in we’ve new but the that in a we continue, merchants say it decelerated. However, uptick still to seen would has environment, so we’re

and appropriate we this so at go And probably we factored is believe forward. level as

factored As second well. fees going from. in called in these away that we of as we generates and merchants the half that year half the per million still $X.X out, year, we have It we collect approximately approximately of

Operator

Our from with comes Please next ahead question your Tien-tsin Huang from question. go JPMorgan.

Tien-tsin Huang

Thank ask Great timing the right? American results. or on Why not wanted to Was Latin was not fit Mac? the acquisition. that, just the to do it you. decision I

Mac Schuessler

really around the business deal in. complexity also – markets asset the the was the conditions and market the that It of does

Tien-tsin Huang

Understood.

the but still it’s it’s on So – from a you from appetite there higher. interest like sounds like an resource sounds standpoint, – the in recovery, and and are it where deals level is doing

Mac Schuessler

it mean, in very were we so look, interested – asset. Yes, I not the was

one else region. in we a and no unique platform interested that I said, Like available got has. the assets are We’re products in that think we’ve

conditions. for it these didn’t market a So appetite that appropriate, the asset think lack just we again, was have things. given wasn’t the was we of It Peter?

Tien-tsin Huang

Okay.

Peter Smith

constraints also liked. added contributed process, Yes, the complexity which to changed got ultimately There really unique asset as or we the were worse market conditions, But it. regulatory it. just well which the as adding – some throughout this in

Mac Schuessler

company say we that the when – specifically operates conditions, markets country in. the we market mean that the And

Tien-tsin Huang

Yes, that Thanks got it. clarification. for

to something that? maybe bit. The that’s Can Just that you also are drive you ATH I little follow-up It that? And confirm? differently you was if pricing sounds doing think, so, up I share. as a Can too. branded And like a unrelated. heard Thanks. up clarify

Mac Schuessler

Yes. – with say, new quarter What out we ATH, I would to we for so features. new in announced we the have a We continue not-for-profits. roll feature

for some Móvil. also actually now ATH of small businesses accept We features to are the for charging

that service small also merchants a for we’ve fee POS, make than have charging provide. it’s So institutions, financial small because the actually we better solution investment. to that don’t And a a started some the transaction of for they

are because and features most year, we the within the the if the we’ve of in rolled product new to really it’s wallets the and the transactions but we’re expansion not of an out So see that the because last across it’s quarter. people’s island, only last beginning financial but innovations impact best the seeing over the ATH

Tien-tsin Huang

great. thank Right, you. [indiscernible]

Operator

comes question next Stanley. Our Please ahead from from Morgan question. with Vasu Govil your go

Vasu Govil

still congrats Hi, you wanted saw and the just headwinds that, ending. some insurance moratorium and great full a proceeds pretty on as bank is guess, from from had thanks solid – And for the volume to benefit this quarter. I my taking uptick. question ask on the growth, we payments quarter question I the

in but in So the reason – I comps easy given prudent and guess revenue half versus, growth growth half? why to back especially shouldn’t caution it’s have outlook, understand to think, in any the guiding quarter versus from your fourth the some the you’re I accelerate a here, I first stable

Mac Schuessler

the with predict funding. what’s timing you interest is my I’ll to Peter. Again, difficult view, and relief the funding then give

are locally. coming $X those If you think well. budget. believe billion, to the insurance as probably we island. that It from funds through how claims surprising the approval perspective on in funding specifically Again, needs has through companies. billion there’s that at come and the some the $XX look It’s a in it’s island. we of can talk to a to And Peter lot million the actually done be given the $X XXXX. relief about an process of But over see

Peter Smith

Yes.

the improve were in to a we it we’ve of July seen half. our not about second bit QX, to will to segment our in the we see a speaking What see that’s of that hurricane due factored as decelerate will effects we and continuation, what into in particularly is We growth outlook. merchant the the in

Vasu Govil

Understood. from client migration And could was year? anticipating if impact there you a that you’re for change this clarify, in

Peter Smith

a migrations. couple We to clients an had their Yes. of they’ve uptick chosen that from delay

the to previously the And that year outlook to we goes just view $X from forth $X as so $X million million same to for to done has we’ve year, next on next $X $X what reduced million is effect currently million. which change year, we’ve an million. to And the $X which million

Vasu Govil

side, of I’m America. that today if but do a Latin your only organic once would can expand on accomplished Understood. we’re be big your What on And to longer business not America wrong, Acquiring it’s potential in Latin assets piece sort focus it Merchant review M&A. just existing And the outside something with Payment correct my growth Acquiring client or through Merchant very then understanding Is me is of little the America on direct deconversion? most Rico. Puerto Processing past presence that sort of into of you term the Latin and but is

Mac Schuessler

Yes.

– so Mac. what given we sort to been market One to business aspirational got and licensing two from would to at needs think of is America, Latin To client the market low about the with has to at. grow the attrition, we’ve once Processing, is the Evertec – this the growth we it things. we PayGroup get change get a the at which that a processing. that’s to Merchant we the double at model whatever successful But that, also attrition, business your should is we The have the time. thing digits, is in So question is be offering like Acquiring to versus

what with – deliberately these very enter best we the So the for market what’s suited markets market.

these the Acquiring Merchant of duopoly. in So a monopoly we by are most owned through like or still a processor, or is markets banks

the done on ground it in has of slowly think resources up, opens business. some technology help it with larger As we be going merchant the we’re solution as their the to it markets, the will, to run which

Vasu Govil

quickly mostly can can there in. this like one measures. just how squeeze be budget. that it that been one, might That’s it view That’s last not Any seems I the Understood. if will on be the helpful. any guess, XXXX point, correct? Is situation government austerity At resolved? that get to it on And I finalized. impact still very a extent

Mac Schuessler

course, Peter, give taking That, that, wish I don’t time. but to that’s I I’ll know, of do result. we’d just I say, you knew the if you’ve any? gotten

Peter Smith

Yes.

for from next ruling on the courts a We’re waiting steps. the

place. what as and we’re uncertain so will And that to when take

Mac Schuessler

mean, unprecedented we’ll now some course, and that’s the that but… a outside, out. is state how conclusions, plays I in given hopefully, reach not this from to But, it’s this

Peter Smith

that’s recognition think what understood there’s by that, of closure importance hopeful is here and the into bring of resolving than it, Other all I we’re we’ll which shortly. parties

Vasu Govil

Thanks a Understood. lot.

Operator

comes from from Bryan next with Our your Deutsche Keane question. question Bank. Please go ahead

Bryan Keane

guys. Hi,

the ask guys idea in Do wanted what’s Acquiring July? any Just have on moderation. to causing Merchant that you

Peter Smith

a ticket. predominately It’s lower average just

the ticket. average categories. the just the it’s across But lower same We’re seeing spending generally

that uncertainty. any cetera, slightly the with observation in it? whether it know, the what terms as As related which cause has do immigration creates to or – other But caused off the the transactions we be et is would anything noted, well. are don’t funding, We what of is it perhaps to

Bryan Keane

Okay. a first know second And but that was then big there half the and half. different last a Obviously, a Historically, between why. EBITDA the just been margins. of all lot a hasn’t on year of we the impact, difference huge reasons

So and more half? this thinking, level wouldn’t reason why the of the for would depressed half be on just year, a is similar margins first they back stay there why to the

Peter Smith

acquired that although EBITDA or Well, at also early to has July. PayGroup first obviously, last comes an the as I that impact thing had revenue the on contribution. lower note biggest the impact, we And hurricane, is, want

by volume, ticket – the that Merchant think lower reasons it’s and So we to section, you than that rebound, Processing to And America, slightly Other out, if lower in I adversely. where Solutions, impacting Payment average expect us called that, the it’s which then in And we that. transaction a need Acquiring as segment, we just consider that and transactions it’s we volume. the Latin noted. attrition, which the is Business go

Bryan Keane

– in those more And in margins services it’s I year in timeframe Do that payment business there also those we a and we we this when end see these segment. do that is Yes. to the back the initiatives end segments? expenses get think, by development – specific of infrastructure product and – or also normalized in

Peter Smith

the in growth, the will grow. here challenge ensure Móvil just reduce Well, in and are With necessary safely segment, other that and expenses. for we’re those We, that’s infrastructure and represents. ourselves going future year, the help to that are to them. categories, ATH runs every always we’re us product business that But securely, initiatives to both the payment what respect solution building capabilities

Bryan Keane

the product to be growth? in ongoing costs, will initiatives And just those continue for then

Peter Smith

allocations. Throughout look We always at into going XXXX, carefully do very we’ll capital XXXX.

Mac Schuessler

we make to – we’re Móvil In when can We’ve any Yes. demonstrated the the back Mac. investments. list. at half look that exceed money. that demonstrated XXXX, trying And this we we’re roll of We’ve make we as is the year, features, we out ATH

and in accelerate some XXXX. investments we’re try those So to hard trying very of

Bryan Keane

Okay, all right. Thanks for the color.

Operator

Please Davis your Our James. go question. Raymond John next comes with from question from ahead

John Davis

on maybe, good guys. Hey, wanted just afternoon Really, to M&A. Mac, start

Just specifically the pipeline.

you deals looking what get like Latin I deal pipeline think, and there sense you deal. like would size quarterly? the at ebb to American trying Are the at of what a are obviously, and of you guys sizable that a four pretty guys three also feels looks potentially looked to flow? that Just it Is do.

Mac Schuessler

a tell to I Yes. continues I What don’t be it will done. mean, deals you, they’re we would until focus. about again, talk

deals been those, most if in of most space, and look of small be We’ve at to several there’ve historically outliers. a going handful. Processa. you larger If are That this tend Latin the the to of include typical size. deals, and done deals PayGroup the America you be the be tends The to

we’ve are So have thesis. really look the deals But sheet the our constantly into across past. they of deals but at of types larger smaller I because we unusual. types we could done leverage to types in fit are tend deals, opportunities the we where that of now, America, well But can to balance South those those going tell the right be different evaluating than will to be really you

John Davis

mobile remarks the Okay. app. of That’s mentioned your modernization helpful. you in And prepared then

mean, Like, today. think I what got the is are Is monetizing? And could that You’ve do how X over significant million meaningful you road? users like, paying X and million who’s how contributor you fee? the transaction or it actual P&L down fee? that be an – specifically

Mac Schuessler

rolled it out was PXP. and service of So as adoption, originally sort encourage free a ATH to Móvil was

use until people, a very one that you primarily have as transactions to small charging to for transaction. would were small institutions. paying their add things card other that features, businesses were for that had the The if will we we was we a as not they company, better transactions, ability consumers like get fees it other. and They well. $XX, we like businesses, babysitters, somebody it’s small only actually be processing each type the the also traditional were lawn And transactions we of of the And the the believe are businesses, charging are so for but weekly, new we to daily, owe good on you institutions, do charge those the we paying strengthening that basis on that it transaction. businesses because small as not or people features, charge kind to of have at growth look So But you credit features. we’re scale, brand was we we But of reporting actually going for financial on if the financial financial start if waited those to maintenance fees.

John Davis

guidance question you. my lower points half. math, basically versus margin second half first margin in Okay. quickly, basis XXX By And implies one Peter, for Very helpful. more

out I think, XXX In math, my attrition. you that’s called client points. like basis

a spending, not XXX we’re that kind are missing half. back points the little I of expenses of expected of want sure elevated any basis just So just to make really kind that there, that is big in conservatism? bit

Peter Smith

Yes.

has I based will volumes. most Acquiring call out you think operating that leverage, segment that’s on accurate. Merchant leverage, I would if the the –

the second So our that’s to in from biggest first the where is guidance. the impact half

John Davis

Thanks, All right. guys.

Operator

from is follow-up with Blair. your Instructions] question go Please William ahead from next a Our Napoli [Operator follow-up. Bob

Bob Napoli

Thanks.

that users questions was X.X asked users, around been is on quarter million ATH the the of what on But businesses, where and have Móvil. XX,XXX kind momentum ago and quickly businesses? Just adding

Mac Schuessler

Yes.

can historical haven’t we continually that’s you tell growing. What – So published mean, I information. I

you at of The population. it’s of significant got As the population amount same million, growing a on add, adult you’ve rate. X.X million and a not the X.X

as adoption rate we roll are features. We new seeing now out quick

launch products. base growing, we’re is is consumers of where the we acceleration when seeing but still new So the

of only out So the a nonprofits, That applications businesses. quickly of very, ramped Small nonprofits. to we because add that’s quarters. have for been a lot couple very

seeing new once So we adoption are we quick features. out roll a

Bob Napoli

revenue to the that is Or of on financials can off stream needle be? mean, this material the how I the XXXX? going move in

Peter Smith

I this wouldn’t it’s very XXXX. out say And update significantly. we stage, look can to but material very, we growing provide further on at it’s as that

Bob Napoli

Great, thank you.

Peter Smith

Thanks, Bob.

Operator

any and closing And turn over back for conference showing remarks. time, this at questions. the to call ladies I’m gentlemen, no additional I’d to like management

Mac Schuessler

This is Mac. conferences the again. forward I want to upcoming earnings everyone you thank call. for call. to the on seeing investor next at talking Thanks, and joining look to We you again

Operator

Ladies and thank conclude gentlemen, do you that does call. conference We for today’s joining.

disconnect lines. now may your You

EVERTEC (EVTC) 31 Jul 182018 Q2 Earnings call transcript