EVTC - Earnings call transcript Q4 2018

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Operator

Good afternoon, and welcome to the EVERTEC Incorporated Fourth Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is also being recorded. And at this time, I'd like to turn the conference call over to Ms. of President Vice Sharpton, Investor Relations. Kay may you begin. Ma'am,

Kay Sharpton

of me Thank release, is section Executive Schuessler, evertecinc.com. Mac February under good XX. A Officer; until website for available be With listed you, afternoon. today Investor in replay Officer. of on our Financial replay Joaquín Access our our are call Wednesday, which Relations Castrillo, will available and and Chief this the President is information and the Chief financial today's

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

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

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

Morgan Schuessler

for Thank good and Kay, everyone. today’s afternoon, on joining you us Thanks, call.

our solid resiliency on reflect as as on for throughout and growth well execution strategies summary some Total beyond. fourth approximately XXXX increase Slide per up which XXXX Latin and expectations X, exceeded provide Puerto well we results and revenue both compared cover our of top our guidance in of comment of year. highlights America. was update to of and adjusted results. XX% with Rico exceeded full-year XX%. Our quarter XXXX then earnings $XXX most initial have our I'll here and you quarter the record the of and Beginning our generated in developments, recent We $X.XX, the our million, end of an for the recent on share XXXX, an

immediately the benefit flow employees $X.X midway also stock storm. dividends. of a We federal return to repurchased and the We retained the in million. QX year by and in in fourth included million generated million Hurricane stock our program resumed operating dividend approximately affected to Maria significant million with our a $XX in resulting shareholders million the through $X buybacks quarter, $XX This who in one-time connection in $XXX companies cash with of for related following

X. Now give to on I'd businesses our more for some Slide like you updates specific

transaction we First, the ticket post grew average decline begin Caribbean an the briefly would like talk we of quarter. year. start executed offset I'll the are the to at in team normalize. quarter, The well in revenues by before XX% as X% of Puerto I the do continued some we results, the that, pleased lap the Puerto Rico moment, but to positive in approximately the received about hurricane I ticket wind with mention exposure strong and a average see some of with of Rico XX%, and as of the approximately growth

and island, the XXXX impact kicked in Rico the interest hurricanes including the run listing as local House While Show the Times XX-member in Puerto the additional on devastating, will destination, one the aid. Jimmy Fallon were XXXX tourism, number featuring Hamilton, exposure Rico, a delegation three-week further with York the island, that travel visit. of of New the in investment create and lift recent this off congressional We additional Puerto hope renewed

proud side the a EVERTEC sponsor As note, Hamilton featuring himself. was Lin a event of Manuel

the $XX be billion XXXX timing funds in the projects in over XXXX. distributed of years $XX flows the federal federal approximately and plan While next of [ph] billion unclear, remains to certified insurance private XX PROMESA with

an the released a debt days $X.X to step first Just funds. judicial restructuring its for billion is important Puerto few I Rico reconstruction COFINA of the ago, address the approval in Further, problem.

business to will overall we on the progress federal funds funding, Puerto to economy relief address island’s the our the believe have federal the on the type from Although the depending of will a the various debt vary of funds impact positive and from year-to-year impact Rico. made

and how to these strategy business. overall to to grow to our relate of I'd Moving some Slide maintain X, wins highlights comment like our business our on and

While we to and and Puerto our continue we our market margin well overall as invest the as position market. Merchant service, will segments price Payment innovation Rico in a have through share in dominant expand in defend the and to

won top we our the over Rico. restaurants McDonald's of merchants off pleased As largest evidence we Puerto retained year, XX franchisee of our all and that commitment, we the XX in serves worldwide are that of topping

Chili's, signed of this Rico's International solution innovation, solution Restaurant dining increasing number new recently number of casual process, enterprises. as Largely client’s to and up as efficiencies table a largest Puerto Chang's. launched speeding Services, a payment renewal a our that franchises integrated As of This by tables for relates Macaroni brands, our which the X-year such integrated payment one with reconciliation served, can of pay the the it improves the clients. our be and PF we product, process. Grill result we streamlining at

intelligence, a additional successfully integration as for such other options business during with management, business which we With dynamic this support payments launched as as offering local we our Additionally, in but capabilities, market, Rico, integration tools back-office system in in competitive well the and Pvot, the a this for Puerto only management be processing Tortola as we planned Islands Recently, well. further for U.S. launched service our the not year, regions inventory presence. at enhancements, SMB clients point-of-sale a software. cloud-based we will Virgin and have reporting the integrates believe

solutions Additionally, we launched chain gas the the as our and partners. of Movil seek platforms deliver with in technology for Puma, ATH we applications and our chain to well, the Econo. to station largest are Puerto and quarter to leverage customers that websites XXXX, opportunities Rico, and our scale will to pleased largest the value-added with mobile fourth continue pilot supermarket e-commerce we In in solution operating

to be will and offset these investments avenues there new for growth we these innovations, with associated leveraging While expect with continued of our new investment costs infrastructure.

multiple the example, to services. For deliver most talent productive cost-effective to allow over time. believe our optimize company leverage We our recruit margins our we across and possible this can workforce locations our us overall regional now to will strategy

Turning and review opportunities wins our I'd like to to segment. Solutions Slide X, recent also the our in in discuss Business

a Rico of government priority Puerto us. the for is assisting First,

a of announced to addition new wins the Rico we Education last consulting In Department projects. with contract recently Puerto signed we quarter, technology the for two

pleased and to we the Santander with we Rico Puerto efficient. continue segment continued largest are be customers I'm to effective also is announce ways contract These unique Solutions of extended great assist in our competitive win which Business two value to and examples a Rico, the through on focus will more our client. to our compete to segment, second this in one banking that our and government As largest pricing of proposition. wins business ability Puerto new

continue forward, benefit and Popular continued would Looking other expect to as strengthening from market focus we in as the clients Banco to on our consolidation. with will relationship segment well

Latin EBITDA results doubled high-single-digit some intercompany and segment the cross-sell Slide PayGroup LatAm and we America between transactions acquired by growth in X. In the partially Rico to and three process just on we offset by organic Results ago. more our XXXX, anticipated products QX to as were client Moving one-time island, years driven and revenue compared from on attrition. began revenue strong, our as than Puerto to

Atlantida only Regarding not who client their contract leaving, but expanded previous also Banco were notified pleased they that us their contract, very in value. their has attrition, doubling Honduras, previously renewed relationship, I'm had

term switching services Additionally, of license top risk our the who in a country. agreement for product we signed of the Mexico providers the management two and serves institutions with one in E-Global, financial biggest

in the potential Turning to as growth as America of low opportunity these given Slide why its markets. presents are a middle-class. evolution X, review like about significant and excited well of volumes card growing Latin the to we America for penetration I'd opportunities its Latin

many largely by to continue of and by to local presence countries to also an utilization payments. which monopolies or these often the increasing trends to three are growth duopolies banks. online Processing, owned see will mobility fuel usage, positive authorized and Payment We are environment, conversion and primarily That said, pressures. and increase the growth due number cash-to-card card driven continue There's smartphone accept in This of at is the still in dominated cards. evolving however, for by merchants

First, there's regulatory pressure.

will divested. the Prisma the that XX%. banks in Prisma sale hope will America have the entrants processor, regulatory create opportunity in divest a new and as to government be to countries pressure add three international the remaining an example, Argentina, recently this or bank-owned years local Latin announced We to For the mandated shareholder extend other for partnerships. XX%

An recent competitive are renew Second, acquire other service that looking banks. Chile to the partners in sole now differentiate the for Santander example with processor offering American announcement there Transbank, new markets Banks market. Latin this to contract of is their not are order its pressures. in from in

stage and innovation, a to to open still evolution selected markets. be devices Third, payment of creates choice has markets solutions such markets Latin the as of in which fuel Brazil introducing for additional which entrants as mobile space, in resulted the technology open. POS markets started the in in change. in the development We pressure the will first our the innovative our to many for smart in America believe markets in other e-payments digital payments to of partner of new America, as Pvot is that technologies other growth banking, have Latin key is America, one being in Latin in solution,

Turning to Slide XX.

acquisitions have by such Our PayGroup Processa well strategy client for as our and base local that a offering. is expanded geography America product as driven our in as Latin strong developing

that a model to to We products revenue more in in provide recurring model region. a the are our processing shifting licensing the of will trends hopefully grow from transaction

our multiple created version countries. product management have is cloud-based of that risk a operating We in

payment Chile. XXXX Costa Rica, Mexico, further XXXX, into products, and specifically in additional are we During localizing and Colombia

anticipated to regulators, from recently to completed client operating opportunities each local the on the believe and environment market. Puerto rebranding can our the outside provide hand for XXX And XXXX with We as market. effort, as well of we developers, due increased our solutions $XXX additional our debt, strong markets. Spanish-speaking America specifically over And have positioned we under are free to Rico. we pressure revolver employees our of over uniquely We technologies of in grow cash our have throughout are to these and for solidify as with in cash Latin new one identity customized advantage of refinancing Furthermore, brand capacity our leadership completed the million competitive flow and take business. developed XXXX, in we on

turn which in year and As the At values also one inclusion impressive reporting provides an equality. over advancing thank team foundation of successful for to XXXX companies into innovation in growth am all With believe committed is distinguishes I commitment to XXXX a we that XXXX, Joaquin. workforce. to their Index, for high-performing transparency and gender dedicated throughout recent members call and diversity. I’ll ingredient and a women's now EVERTEC, that, We close strong core key and beyond. diversity of our I the of building proud Bloomberg for Gender-Equality for out want our the

Joaquin Castrillo

detail. greater Mac, fourth a full-year then begin review quarter results segment of our and with review consolidated and good XXXX you, I'll afternoon, each everyone. Thank in and

of attributable impacted of expenses Turning fourth initiatives, from year our reflects prior exchange also well year. were Latin $XX.X our We and as business. in margin assets by to quarter recovery foreign transaction results planned was corporate XX% tax higher last Adjusted one-time QX. of lower for was in up XX. sales resulting the offset contractual revenue year for charge year. basis, EBITDA the and expense. of $X.XX compared overall impacted the XX% an America is increase currency impairment EBITDA as quarter margin was $XXX.X activity the as by increase million, volumes and by cash in The to the XX%. prior $X was $XX.X as in million. other Hurricane rate business $X.X year, a year Total of to fourth the EBITDA, of Puerto the low reflects a remeasurement compared prior Slide as increase prior an and liabilities in share that last quarter an expenses and an year higher Rico favorably growth XXXX Adjusted mostly the to XXX post-hurricane compared year-over-year of for in Adjusted year's the last of corporate post-hurricane our million, increased increase basis increase to per prior as negatively growth and prior well to the lines the net higher over Sequentially, in as in results million compared a million represents $XX million, EBITDA this and margin XX.X%, million quarter impacted margin adjusted compared of taken interest quarter high was point margin to income the revenues of from a from XX% primarily our result as $XX.X primarily year. related to That over on on increase adjusted obligations impacted growth impacted partially

XX.X%, of and XXX full-year, basis total income year-over-year. per year. was with EBITDA was Adjusted adjusted as was up was $XXX.X year-over-year. net For $XXX.X an million, up XX% margin an XX% of earnings was prior $XXX.X compared increase the points up to XX% EBITDA and million approximately up million Adjusted revenue share XX% adjusted $X.XX

was full-year Our as tax XX.X% compared to the XX.X% rate in prior non-GAAP year.

spending approximately the increased now impacted our million. In to increase starting post revenue increased as a results The volumes Moving XX% volumes. segment increased $XX.X and in related quarter, net Acquiring. as XX, benefit with hurricane as compared to recovery well electronic to last included was year's cover due Slide activities increase Hurricane significant on cards to Merchant results to I'll revenue fourth year-over-year

distribution last merchants as spread ticket periods. XX.X%, toward adjusted driven low to Our Adjusted up EBT. Spread, the and ticket retailers levels the pre-hurricane a more as merchant well up year-over-year approximately of the segment dominated of compared sequentially, of year. for to aligned as between as normal and and was now points larger average last more which basis remained also by with was reflecting million revenue. average balanced EBITDA volumes last as year, more by mix $XX.X relative spread moving increased was and year, high Transaction declined primarily to compared was strong very EBITDA XXX result margin of

million EBITDA to Merchant hurricane up was margin up $XX.X was growth For and for the adjusted EBITDA XX% XX.X% mentioned Rico the Caribbean the to by Payment hurricanes increased Acquiring year-over-year over in benefited earlier. Slide XXX% was XXXX charge January that the year well Adjusted On grow the are XXXX full-year, to the was and primarily have from impacted year-over-year EBITDA quarter up XX Merchant for $XX.X last XXX saw the growth and XX.X%. Hurricane revenue segment We last compared Hurricane the million Transaction Revenue compared approximately segment growth Services, transaction quarter over year's year. year's basis January the approximately up impacted reflected of to was XX%. adjusted as reflecting the as significant impairment I and million was million Puerto EBITDA negatively growth was XX% approximately also fourth last due Adjusted segment results. resulting XX% as last in points the Adjusted in impacted Hurricane. for impacts. results full-year segment. $XX.X as volumes $XX still for as the up EBITDA compared

year results. to results the by last in primarily to licensing primarily key Puerto continue Adjusted and intercompany and fourth Payment as quarter Adjusted was For due compared last margin you non-functional progress up by driven the growth approximately intercompany Puerto This full-year last XX% compared license quarter mentioned revenue as to find million was margins the for last XX, portion Services to segment million in year. up the EBITDA compared the and a year’s offset EBITDA sales, America. gain our been benefited from $X high XX% of XX.X%, to the currency. of segment was single-digit million, Slide planned would approximately year, to$XXX.X assets was which the Rico segment to charge. full-year, On primarily Revenue to Latin approximately FX license segment transaction EBITDA and have $XX.X the and due the an Hurricane one-time in adjusted in consistent sales liabilities partially This the growth of of Adjusting $XX.X $X.X and primarily gain, was significantly year’s adjusted intercompany remeasurement a over the processing we up to Rico, Payment $X.X by basis XXX last XX% was will for services result prior previously million, in as as FX with organic XX%, million, and initiatives points up impairment as attrition we regions. growth grew and the Hurricane EBITDA was margin million. for for in margins. quarter due to services is and of for

Puerto the Rico. and Rico. to XX.X%, was year $XX.X XXX intercompany for from the XX% adjusted the Puerto transaction primarily was to impacted Adjusted driven of up margin also by also and and points acquisition PayGroup intercompany basis compared to segment $XX.X last the to was EBITDA full-year, million, million the full-year the the benefit For EBITDA benefited by transaction was full-year grew

$XX.X Moving the of $XX.X as to million, the revenue lower including such from as and basis other sales, CPI due XX%, and well increases to EBITDA margin also on revenues compared the the was almost quarter revenue last year's to Slide approximately in and segment EBITDA increase as million. category Business and points software last We Solutions increase fourth sales as expenses. XX% by was results. to hardware for in as compared impacted was software mostly non-recurring benefited hardware to XXX in and XX. an MSA increased expenses increased Popular hurricane Banco margin $X.X year down million obligations contractual Adjusted impacted adjusted

For the grew million, Business adjusted year-over-year. $XXX.X margin up basis EBITDA was X% X% to Solutions Full-year the EBITDA million. and segment was year, XXX adjusted XX.X%, down for $XX.X points

Moving Slide to XX.

You will of corporate expense. see our summary a

and quarter fourth XX%. of increase other quarter. the year-over-year in of corporate increase expenses That completed reflects the fourth a $X.X higher to Our million, expense projects related primarily was

other was percent just and a corporate million, $XX.X we even the of revenue For with full-year, expense prior as as year anticipated. about have

to on compared a was increase initiatives spend million activities Rico in cash and our Net operating Capital by and million $XX or prior as year-to-date flow XX. year. innovation to Moving related approximately $XX additional include million the development product provided some overview Slide cash LatAm. were Puerto and on to $XXX approximately expenditures

$XX our shall a to and financing approximately we of stock related repayments approximately and Loan million repurchased dividends million the shareholders for change on of finally, from activities total of resulted our $X return A year. comment repayment approximately $XX of Next, our transactions for that to And common a we matured our paid moment. million $XX million debt Term cash in to April, in financing our approximately stockholders

use approximately repurchase the share future have program. under for We company's million $XX available

as balance in XX of $XX December including approximately restricted million Our million, ending was $XX cash. cash

XX that of I and to We X-year November. December have I'd refinancing million, and of Loan Loan plus X-year debt as Term basis XX, Moving Term basis was $XXX our Term XXX a previous on like A December our B. $XXX completed reduction on B Loan that rate LIBOR revolver, XX, to before of facility plus Term A The rate Loan Loan points, senior B. Term X-year is from as revolver from a credit Slide $XXX a Loan our review basis XXX, revolver comment million LIBOR point XXX A. previous on XX of Term in a million now our point secured is increase consists

revolver $XX additional flexibility. us pleased to capacity million, giving are million from We increased with the capital $XXX

steps ratio monthly remained X.XXx Our at to this down October XXXX. and Xx leverage in

million a a we swap at April As of XX% or XXXX. X.X%, in which currently a reminder, our have in of $XXX for approximately place rate debt terminates approximately

entered of swap million that will at approximately into of become forward approximately a or $XXX rate XX% we April of our XXXX X.X%. debt Additionally, a effective

as our anticipate cash approximately we a the million XXXX, interest increase $X refinancing. of will For result

of Now on summary to a our debt.

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

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

to XX-month facility. net with million $XX in trailing accordance credit adjusted reflecting cash Our on our a debt cap EBITDA was X.Xx,

was As the barrowing $XXX of cash capacity, December and available liquidity, restricted XX, million. total excludes which includes

to XXXX provide Moving with I will XX, our you Slide outlook. now

revenue range $XXX a expect in of to to representing We million growth X%. to million, $XXX X% of be

adjusted XXXX last quarters between are analyzed a March planned represents uncertainty year. three of the expected funds the anticipated funding GAAP for. X% that to underlying and I incremental continue basis, Our to the to to $X.XX the levels, and share outlook in compared share key Payment of the $X.XX our have would expect adjusted negative and reduced highlight $X.XX. share merchant we Once EBT is impact now Services earnings incremental Caribbean Puerto be segments $X.XX. to minus in the EBT is XX. normal and Rico $X.XX in a the some X% we On per to earnings of to plus range earnings will of to per as per of assumptions through

The the the slow, unclear plan assumes funds While in timing of released. PROMESA will and billion to received be be it's the fiscal distribution year, be quickly continues how $XX will current still actual grow rate from by being suggested Puerto benefited Furthermore, these the XXXX funds through FEMA consumers to private Rico the and EBT. plan. to direct to fiscal funds claims, able insurance key on funding is

netting funds the impact same received expected our to efforts, to are And although consumers. not positive, forward, to the restructuring Going not for business. are which we are expecting direct be

fiscal for the also growth. achieve Additionally, plan response to sustainable structural calls government the to

three funds timing, and the of growth type some reforms, these factors have last government of we Given modest XXXX. in quarters three

to negative anticipate project Moving to growth first flat Merchant continued growth Average driven in pre-hurricane decline impact is the segments, to by strong and determination of quarter, anticipated spread we in we the Acquiring, of offset the ticket continue mid-single-digit the by volume majority levels, post-hurricane a extraordinary EBT year. funding. of relatively for to

grow Business. Caribbean ATH Services, segment Rico Movil Puerto also continue benefit from will mid-single Movil digits Payment Our and to anticipated to revenue is ATH we and and

offset America attrition segment. for is organic to flat be to the $X growth high of payment positive to segment by $X slightly million Latin growth, resulting Our anticipated million single-digit anticipated client in

revenues therefore, by and portion from segment driven a to the is revenue uneven in processing. decline digits XXXX Business grow revenue contracts is than CPI increase year. by finally, throughout and license And new low- continued still item of Solution the recurring from sales reflecting reminder, anticipated partially recent growth a mid-single maybe rather tailwinds offset to and the cash our As the

even represented margins have believe generate the a approximately will basis, losses somewhat margin in to we than this our rest range On or expect versus EBITDA or given XXXX we comp included margins guidance year from All adjusted XX% items combined, million. still XXXX Regarding we been outlook. impact. of that an revenues to stronger of corporate were XX% QX impact a gains a basis our expenses, to with would No anticipate hurricane quarterly levels these are year of percentage positive the revenue. of year-over-year. QX FX as These and of EBITDA our recovering in approximately adjusted a easier considering and in prior $X.X the be approximate

quarters of even. be relatively the expect We rest to the

going $XX during to anticipated up primarily is will depreciation amortization year. new million approximately million, the and depreciation operating increased $X.X production projects to be related increase that reflecting to Our into

in of $X I anticipated impact our our new by As cash facilities. expense is referenced, debt XXXX based to approximately interest on increase million

Our compensation. diluted XX.X any is XX%. non-GAAP effective incentive be which anticipated repurchase reflects related shares assume million, tax of guidance approximately to offset we approximately would flat average that to approximately The dilution shares rate we long-term to

expenditures for a and model our ongoing investments are in XXXX our in America million of to Latin licensing localization range $XX $XX capital to products our reflect to in a anticipated and in be investment model. processing in LatAm Our technology, transitioning million of

review to capital XX, our deployment I'd like Turning to Slide strategy.

investments focus as to internally We continue on well growth as through M&A.

to these continue based evaluate returns capacity. excess decision strategic and our also as We level maintenance ratio year In growth Our are and targets actively acquisitions for to regions Most to capital. adjustment or keeping available, upside million. to this our as of we opportunities capital million within delivered current carefully repurchase shares plan to executed current on cash available dividends extraordinary adjusted comply available million for acquisition We investment would in program. shareholders. risk opportunities we And on can arise. into this up fit our cash anticipate and strong during reach to and be structure returns is of our $XX well uses to our our executed capital $XX $XX flow and be is approximately use looking will expenditures and we year our Xx potential approximately leverage revolver generation. our We us million summary, current EBITDA, within share other repurchase which cash Xx allows $XXX the

forward LatAm the continue focus our and we expanding the ahead our Rico now innovation our Operator, in We'll Puerto open to on progress. and As go on for call opportunity updating line. questions. we to you and please business, look open

Operator

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

Robert Napoli

and Thank afternoon, Mac, Kay. Appreciate Good the you. question. Joaquin,

not paying you’re obviously, company year. your count of and lot generates not cash count, you're next on guidance really share for debt. reducing Just and the down share This a the

guess, So that which you a building in model, of lot lot obviously a M&A. you're cash, I your right for assumption? the Is gives flexibility of

Joaquin Castrillo

Hi Joaquin. It’s Bob.

in we’ve we remarks, the are as growth. detailed of So kind prepared investing for

So LatAm move looking processing, well as of our some and as we licensing from both through through externally to go M&A. we're products on products our as internally

and answer been share have we we the looking repurchases. we yes, And apply debt, M&A, the to any how are dividend, we've normal in first scheduled down which pay at is and is then we our our through So excess consistent pay-downs. cash,

Robert Napoli

have don’t in share that you the your repurchases? But model,

Joaquin Castrillo

our No. consider model, the from basically as at we've what point. incentive out leveling we In this plan said long-term our dilution is

Robert Napoli

And Okay. the is what that essentially EBT the EBT off? are runs is So the lineas expectations. The revenue line program, when guidance, with program in then in in our which PROMESA $XX effect effect no you're not that the runs assuming would. stimulus benefit off, additional from on benefit the that there's the economy, you're if getting you're margins but that any funds billion, you assuming

Joaquin Castrillo

think that we're percentage funds. key down slower we're in seeing a the expected, the that and timing considered your relates -- timing disbursement that we've of of able EBT, So a keep of as of to we terms next growth year growth because it to in is I funds funding. of segment as that the and in know to of our don't growth to represents first And Merchant into such, question impact considering. of at it this what than momentum that the What slow is what relates is to been answer being part these has we've transactions is point, no Acquiring seen. as

Morgan Schuessler

Bob, Hey Yes. is this Mac.

just give little bit let color. So more a me you

year, the came that direct and that’s merchants. funding. coming XXXX. no through There's through straight That last flows billion EBT subsequent $X.X the program out So our in in

Now million, about the approved. has and talk there an still $XXX been within is funding incremental for air still Congress it's not but that up debate. It's in

and billion, of processes those or Congress. to making funded now modeled as in the types and which all or that of they the the an that's business. still the we've funded the place, some being programs programs to So like have funding whether government are already not into example it at $X.X There have been are by they'll once get right island debated where some proves

specifically, add at But as again, on away. last timing request through it has the billion this million, a on question volume there to of call to point. But that's is not to most is So piece economic is there's call, the on mean, uncertain But I been but that we the island. another there $XXX up there going and is, has that approved. we've the have a your go the significant forecasted said pass this $X.X to stimulus EBT,

Robert Napoli

Great, Appreciate it. thank you.

Operator

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

Vasundhara Govil

guide? far been the right there versus And more approved so it? to approvals could if upside expected. is $XX Is about were saying the Thanks be the that's that of potentially what Hi. taking stimulus fiscal terms just my for have guess you it in modeled a follow-up, first you're question. like that only versus that your billion seems think what's Mac, I into way guidance

Morgan Schuessler

answer Joaquin talk specifically I'll to of of have I'll mean, some complicated But the economic model. timing that, let it's that. modeled but Joaquin the stimulus. significant because again, let we Yes. I

Joaquin Castrillo

Right, Vasu.

the and of would, to are saw as through, we're timing the reflected type go XXXX, get that's then Rico is numbers. into again, the actually And that the that in uncertain. some and Puerto growth We’ve earmarked at for reconstruction the able our companies reconstruction funding something that is considering that that factored people our model force would of specific. that that But expectation some that this doing here into of but the funding, in to [ph point, to end Obviously, the increase different labor which their which that consumers. funding impact. So it's delay you're is is directly actual obviously funding, a corporations funding number more impact work. going going spend to to of The have the expecting, we ]very this different of very at what the being day, is said, is and is in not an coming we

Vasundhara Govil

you trends December October, what know then the like sort XX% far? of I've quarter? a So sort you initially you've and were the Could just maybe because I ticket. give growth, on in then quarter, much. through comps very say, And how Jan, Thank the trended the got November, easy us decline in transaction growth seen that Feb maybe Understood. so the average but of in

Morgan Schuessler

Sure.

a transaction terms obviously communication, quarter. limited almost in were because for That So no year-over-year power, XXX% was we towards electronic so of there course of trended trended in perspective, from as that the hurricane, growth. transaction how no very closer to growth October month the XX% the was of

XX% we how the had mentioned. that’s So get that to we

now at and look months normalized the approximately the somewhat in we’re we January was saw pick looking We up still XX%, impacted and get February by March. start of As more to hurricane. that January, into [indiscernible]

Vasundhara Govil

you Thank much. very it. Got

Morgan Schuessler

Thanks, Vasu.

Operator

question from with Stanley. James comes Morgan question. Faucette next your Please go Our ahead from

James Faucette

expound the about bit taking plans question. but I'm Thank much little my talked you’ve coming OpEx year you you a a hoping and very your for know little on in bit, can I for years.

opportunities. seeing kind to Just that's for I your investment bit opportunity you additional because have But we little be of competitively an towards as targeted. kind it from directed pushing revenue the of look about and seems particularly at what you're looking seems a both mean, perspective to more profitability that,

additional just looking So incremental opportunity that seeing you’re from for where investment? color,

Morgan Schuessler

share We up to of open that it's Puerto mean, other our I margin our us some some help and going answer Yes. finish let Movil think that in I’ll Joaquin off. in and investing maintain are markets. both market ATH it here we innovations. the and and hopefully, Rico

as marketplace be call. new do by that, And winning in the so successful talked the We when business about in on think are we we that. we we'll making investments

to are be markets up some We America. going that innovations Latin very of interesting in also the as think open those

solution So because – talk solution for be mature. that of And market talked find Candace they that that those many type very less we the we American interesting partnerships, a to countries. about, South product Pvot tend is in when not

the side business. for So innovation piece of the ATH house that on the in we’re investing merchant business and the

we look investing in you we're localizing if Secondly that and Latin our for also Processa. business platform at purchased the America,

And in So markets we we that's as product expense have presence of you'll the clients, we're where have a have where we localizing prospects. see part where good that specifically and well.

So in Rica Costa Colombia, Chile. we're Mexico, it localizing and

the Puerto trend the OpEx. I it's We're So to here of that's don't because investment Rico to but in not an a how you want about investing know for our a we're really, market least competitiveness perspective, you growth. investing and margin market from anything at expand pricing think because we see add and markets also America, or... open up maintain Joaquin, if an in Latin new opportunity

Joaquin Castrillo

with you've to model No, in are position trying trying ourselves model it. to processing moving covered focused a the licensing and from and that more into we I Latin I recurring future. into a think, these base to and mean, products America on innovation convert of a revenue

Morgan Schuessler

one add more me Let thing.

employee are year year call. make to it that were comment we We is efficient – the base very across able region, now feel we very and beginning our in you did do of last sure like that are on have employee the we that leverage the expenses. try we to at regional early on the We

that's employees and So to moving we manage workforce cost find more year and can the is cost that side doing can around as something the very this efficient the so that be work we're And expense on cost effective we or well. most active effective.

James Faucette

et other new One, an how improvements other that enter And the as to to opportunity make to that the markets transportable road? just cover comments and you have and applicable you and may down markets made. following up on is the cetera, you platform, that

Morgan Schuessler

of Well couple things, I'd say. a

one around or get you up, First markets there's players. two these usually

people and we look capability for in this alternatives alternative, market. they the only of few of one this because haven't may created as one So the be an or historically done

market-to-market it of regulations to monitoring the localization, not are similar lot tends as the takes The a far product. required market-to-market depends from on it change to that from more report be product. As work that to risk really amount there's of product

have On got acquiring some of that port already product let's integrate the, a say networks. platform, can we to you've the local we it So cloud-based to market-to-market. from

add. like got tax of have may to local there's a that certain that regime, you've loans unique You and features payment are types

but least even So we really the as localization. though depends product, we more make does a trying of component on investment significant to are require at it this

model We are sure or more scale new as put in we markets. bring easily it scale can make an trying easily we that that to to operating it

James Faucette

much. so you Thank great. That's

Operator

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

John Davis

guys. afternoon, good Hey,

full-year and in touch are question. on XQ little bit assumptions is further lot to the a guidance. trying that Puerto get spending just rest understanding there how wanted of of a a year spending what sense in versus underlying just kind the the the some that to Rico Bob's relative of was for it we’re you're to Okay for trends XXXX, in What variability embedded the

Morgan Schuessler

system people coming XXXX, I the in mean working again, bringing here of of island, of times had period electrical XXXX we reconstruction a just when at very for the erotic – we staying terms a extended work year was on mitigation lot into of look the spend, system.

through going private also billion. affected funds by hurricane. We that economy were the specific have to FEMA $X.X EBT flowing that had about the through insurance that's additional We and the coming claims funding we're and people

XXXX, part billion additional the the billion through fiscal fiscal All a$XX the in expected looking to there's I'll year. to went of plans $XX $XX previous an those which be XXXX, are an in of expectation billion. economy for

modest Now, are coming subject spend that What those funds now the you basically look the deployment very going funding as to is additional that at that island are bureaucracy away our decline what by we've pre-hurricane what than guidance companies tries type funds, after those into average seen slower again, is a to is slowdown types would've coming given if levels. money. ticket modeled the making growth of funding of of expected. to And of it into range assimilate to the additional have or specific and what composition EBT different to we basically we've the to reconstruction for work work be done that's we where we're going continuing or a that's corporations funds QX

we how And due it to that's thinking the the would. – payment segment processing to as processing transactions. thought well of As our back

John Davis

Okay.

suffice a reasonable far in So to going the as that if the as the embedded quarterly be are for historic as assumptions taking probably far I trends away spending levels, full-year, kind likely that as say growth but it's XXXX guidance? Is were spending above to below to that cadence? underlying of levels

Joaquin Castrillo

Yes. That's reasonable.

John Davis

just I expansion. international to Okay. Mac, touch want on

it I kind feels it think sounded bullish that be Chile, those in while, the more you would Transbank for partnership on opportunities like and this in example, M&A, Chile of specifically a potentially most Prisma in also model. a is but with on it JV of

capital buy and little that traditional not decide or America? and M&A to whether bit spending probably look would a going at you you about on more you as to opportunity partner which less expand $XXX versus Latin the out cut is talk intensive how versus maybe in and South where So out million America something

Morgan Schuessler

Yes.

optimistic we about even little these a and the with time explaining public, bit of and I competencies opportunity This then explain depth, it of this we sort I've capabilities. approach capabilities more the is because call because because the aren't me really, with LatAm and the differently explaining did changes always been bit Let as explaining a we our as call. wanted the spent though market investors, our in some realized visible people in explaining more opportunity opportunity.

two it in footprint three and I six more markets. we of of because market these reasons. years part months a it And than upbeat better we that because we the ago say I because am So movement we call the One two have time better understand was feel very much progresses products. is more today that I have do enthusiastic see we more in last, did also than of deliberate over before as help major investors to will story. two the business have I'm

the that. about funding, optimistic pretty our Puerto Rico am I the market's timing like opening, impact position again, can't with but it's So we and

multiple to markets, us create regulators banks you tell any across it would these look I opportunities now. opportunity or creates by Prisma was banks alternatives deal the is market is leave, different is for then for And when to chooses deal country. entire in partner the what with to the So Transbank and those forced going to that an potentially and disruption that bank within the banks for

the it a nice of So already with, our with product. EVERTEC these some institutions be about relationship financial – have is we could thing fraud

could also or So be could processor, may a products. a we their We side. on the we processor the try for Acquiring business JV and we fraud so be acquiring could Merchant sell

the the are markets timing model challenge very that encouraging. movement two we But the the of could key specific flexible for us in each most we're for is big again, in these recently create but So partners markets. these in these the of markets,

John Davis

how Okay. Great. ATH Movil, or there one efforts monetization And either it's last me, for any trended. update on

I think X impressive quarter. stats million of you over gave users some last

I curious, be Any provide it could think just growth you seeing pretty for How Is So started the still there? significant you that's charging it great. would in color going? fourth quarter.

Morgan Schuessler

Sure.

specific product, not continues a a tell breaking of because the be increase very value for network. to it's tool is What ATH out would you don't Movil we're the separately, report product I we it us So to effective revenue. ATH

of we revenue that it We year. are off now recurring last because getting monetize

underserved good to pay days be the helped early has like secure like some and we reduce that done It's some going product on the it's And now, SMB other feel but Pvot, for some table, So mean, the at the us that of with today. that island. business we've along innovation things of market. largest I accounts the do that's a

feel of the would what So we about Rico. are providing all across they Puerto innovations, opportunities in these good I say

John Davis

guys. Thanks

Operator

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

George Mihalos

deconversions. for thanks. Thanks some you LatAm segment. as the off of to kind questions million it Maybe relates prior of taking said Mac, I million on start some over grow questions. guys, my to of from think of $X $X to the these Hey

growth your to there you you the in have the growth this single-digit include sense somewhat just now? then better based deconversions, I that some targeting wins high able single-digit curious does additional book than you current on just the sure ex of new make me, excuse Just the news mid that quarter. about the to that business or were that And want also that or given positive had do that, maybe being is

Morgan Schuessler

Yes.

talking we I business. say is pleased Again, segment by, double find focus. we years continue the gone businesses. we're were and trading sell retention will think highly the a not products meaningful to them. time timing start it to about that able our very if and as for of said, out we would that account not we to accomplished that that ago, more given probable with the will can And two continue we we that, be them, we that's that to So what will continue or the the I to was it's But keep – retain those when

was the number. in On growth I'll what rate, actually Joaquin that organic let answer

Joaquin Castrillo

what So What grows. is in ex-attrition. we're George at the additional would say, now always single-digit high to to we’re low Obviously, a is regions is targeting rate double-digit. expectation least and I our that market the grow at

And that's or at. we're more so where less

Morgan Schuessler

market, know, And grow processing what that's we in because to you more to then market model move as to licensing that is. and going reason, the be George, that's the reflective a with transaction growth trend a from a

George Mihalos

Great.

the interesting. higher that. that I trends ask traditionally assume seen. sense. there very have discount would related just sounds I of you wanted Maybe and pricing Okay, are somewhat which to than you would the the makes demand of rates product, Pvot terms can share kind on that in to the what

Morgan Schuessler

with the takeaways. that on Yes. the we're are initial we Most days, I or launch. business is, but many putting product you number very a meaningful are that would them, tell of early of it’s competitive pleased

it because a a profitable very POS And fact. at cost. margin more standalone that's higher So we're charging a is interesting than a similar

teaches music provide all would Using instruments. with this lessons service taxing. we of not merchants rollout I new a as I expertise, you is bring is the And implementation, his we'll as can a the merchant I say, a these fact of actually value-add store. be our you these but maybe and localize like and then believe and offer on market – upload to of a capabilities, think unique can able local PC networks local we sales us where to a that integrate that capability is the is mean a also able we being here it that we mean, technology EVERTEC. to This inventories So or to music and is we are island providing we local music products, musician that being to one teacher. some

and again finding the the but for So product early way the there's days, we its are are deliver demand service. unique. we very we localization finding that the And is

George Mihalos

Thanks, guys.

Operator

Please Bank. next [Operator from Keane your question go comes Instructions] ahead Bryan Our question. from Deutsche with

Bryan Keane

Yes. Hi, guys.

right? couple just the then the clarifications be on quarter. throughout help It sounds the that it of the guidance. will Is cadence Joaquin, year. like quarter a can first Just decelerates revenue and you maybe by with of the strongest

Joaquin Castrillo

That’s correct.

QX slightly the expecting year. of stronger We are to quarter how behaved they relatively current We're in the the to expecting rest be quarter. as behave

based. in that's LatAm license revenue piece Now I'll of do just remind everybody, still we a have

it are necessarily be don't little of out lumpy have we called the year. we So as called that end get which the And relates to year. we've can't of the in a expecting. accelerating necessarily know it expect past, to this out, LatAm. we the not attrition that I to We the case

Bryan Keane

Okay, that’s helpful.

of Acquiring region by the a so America sounds kind segments some didn’t kind post what you like, about And it to some there taking think sounds segments for out about if the Payment I funding natural a the Merchant EBT like and that’s Caribbean like the we're its would EBT look and hard high single-digit. of think base that and kind is the then does PR of revenue the by where of we But the just what say trying to stimulus, have it's after rate? get mean normalized of just know they Latin growth then to segment. going, stimulus way normalized and But think funding? I Services,

Morgan Schuessler

factors that I and that of we these out into we in going called of I would are what have than say we that for different the more out provide what takes mean, future. and like what today terms there's would many into expect uncertainty puts numbers would to and is, Bryan

So are of today, what obviously federal XXXX. funding we delays the specifically is impact and on assumptions the based coming to off seeing funding, just of XXXX of

Joaquin Castrillo

And heard going about I I with I make that's certified – But to the PROMESA budget funding is the mean, right. when over sure And I Bryan, again because add billion. want the to question be just Governor. has $XX multi-years.

a going this in that is So be Puerto occurs to Rico. phenomenon

going is just the the along large first estimate next years. EVERTEC is is occur view, is not those The but who XX the the and I place volumes right? the – four, with think those And to to north the going least the funds this majority per is the going phenomenon. been think four timing it's maybe XXXX funds, not to smoothness be has of years, $XX I of but XX by be Congress, not this – Again, is governor. think of I billion they're this for at within year challenge PROMESA view the

Morgan Schuessler

take just the with are that doesn't that for reform has numbers that add overall Puerto plan within reform hand-in-hand economy just will different. growth that place. I structural expectations government. to The mean I plan nothing go Rico very

we're key this that's needs be looking factor that another considered when longer-term. So in to a at

Joaquin Castrillo

has X, PROMESA believe Exhibit the And government, and want that on the the but PROMESA if I to governor the is in PROMESA how forego the see you plan. website

Bryan Keane

know that's Yes. good I clarification.

EBT question on a for way some it. know to factors? consumer Just a you think is margins is and of the to to margin attrition, just of trying what think a the last But the will, a to talked directly of about to we about increases get flattish businesses kind funding year-over-year margin one-time so to me, these is guidance able which foster which on investments trying I some bit should exing client consumer plan, the basis but there out be little about Margins, PROMESA to think versus is down difference between my margins. the about let the the normalized

Morgan Schuessler

get I LatAm with mind, we’re right? mean, processing in in to that margin. able a that these what on and products innovation licensing from leverage And our actually to I scale execute is actually what we model level that the say would need looking we're a Trying on to grow trying trying to focus to our to to we’re in and LatAm, today, do trying and be model what to move strategy.

ways reduce on margin expand but look do additional we and a to and have we're always costs, so some margin focus it's today, trying as for our And cost that's to flattish. definitely focused making

Joaquin Castrillo

that mean have I Puerto a in Rico the Puerto pretty margins of this margin, maintain already to investments lot when margin, we year our Rico. healthy

you over lower the XX margins, XX If LatAm they're at time. points look segment, to percentage

of markets. those we As couple we have a make can hopefully we investment years, that expand

higher time, platforms on do looking going in call you one Every the Rico, think to workforce we've that's use have that would bringing in think the we the about I locations different we that hope But really margin as come localized a these mentioned would investments, is then a the earlier these about the that would margins on as now. through business. I leverage investment we we the grow other think make thing of company take up industry. two places. was LatAm the customer margins we I that should overall I across at incremental that I Puerto margins. think we bring because margin, are So overall of new at And can about across maintain how managing best in

Columbia, employees couple have hundred a a Puerto Rica, in thousand a So of hundred in Rico. couple in of of over in Costa a we Chile, hundred couple

across best margin at those of move ability to level. the blend corporate types So possible out the move work, the we things the calls to region have processing now try and to paperwork,

efficiency that something as the become well. more focused managing is we've So on operational

Bryan Keane

it. for Got color. All right. the Thanks

Joaquin Castrillo

Thanks Bryan.

Operator

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

Morgan Schuessler

look you And interest the the call. continued want So couple Operator, for We I can and to the to I Company. call close forward you of the your appreciate Joaquin months. everybody today. seeing over in joining thank

Operator

today's that conference for Ladies conclude today's and call. And presentation. you does gentlemen, thank attending

now your may disconnect You lines.

EVERTEC (EVTC) 20 Feb 192018 Q4 Earnings call transcript