EVTC - Earnings call transcript Q4 2019

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Operator

Good day and welcome to the EVERTEC Fourth Quarter 2019 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. Please note this event is being recorded.

At this time, I'd like to turn the conference over to Kay Sharpton, Vice President of Investor Relations. ahead. go Please

Kay Sharpton

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

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

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

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

over Mac. call hand now the I'll to

Mac Schuessler

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

efforts, recent sound touch uninterrupted. EVERTEC's First, and our on I'd Puerto diligent through that the team's planning I'm incredibly earthquakes proud affected to service that like Rico. was

the of Puerto that only island portion will southern that there While power particularly are throughout briefly structures disrupted the was rebuilding. Rico in were impacted, require

assessing costs. to result We those terminal and of credit their also are that as were giving transact them the for a merchants a earthquake unable

committed donations used EVERTEC activate of economic community development. rapid a long-term the impacted relief well are Additionally, initiatives both needs as help can in support which initiatives to $XX,XXX efforts, the of the to response has to as address areas being that short-term series support

million, year beginning our was Now an exceeded slide I'll year review full top our compared guidance of recent for to adjusted end XXXX, exceeded X. per which the earnings of X%. the increase approximately generated for up $XXX on of the for well XXXX year. share our We revenue and X% year $X.XX, results Total expectations most of initial the

also We million. million stock cash generated $XX $XX returned approximately shareholders operating buybacks million We $XXX flow to approximately our million $XX in of dividends. significant in and with

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

of benefit Merchant declined X%. from our continue approximately Acquiring Puerto with grew in to business, growth and performance the Business Solutions benefited continued Payment quarter. the which was see And to X% year-over-year. new approximately approximately X% managed in services. normalization we average transaction the ticket, We the in pleased revenue are we some and First in fourth the quarter. Rico revenue from one-time strong Caribbean continue

were the anticipated recovery earthquake impact another with was for Regarding encouraged we current funds added the hurricane that the focus macro are and federal response environment of XXXX. while island's on federal the setback, the from the the the

administration an and also disbursement Recently oversee authorized financial HUD announced to federal release and the the appointment monitor of billion. grant $X.X a process the

island. funds an step recovery important will is for of subject the This continued oversight. these be the However, strict to

outward less throughout trends will stable remained debt the in macro debt. showing board continues these The the restructuring sustained, immigration. and Puerto health, economy be metrics and are to outstanding Puerto work, has If lowering Rico. Employment Rico's fiscal the important to towards year long-term certain of

are our certain pricing note, to quarter disagreement say, we On mentioned related call. our a to Popular, resolved we that with was on earnings pleased items, positive third which

As disagreements, initiatives, the levels, our resolve among enhanced with with considerations. such case other as these relationship, of modifications we past in has product amicably been the service often to prioritization

their and over this we represents revenue recent our of on continue to with XX% negotiation, success. Popular focus

began executed on talk we Moving one and well to quarter, new like I'd this service, is team of a about, in the X. most year, January wins, which slide X, to offering our that the recent

we part of behalf to a providers. eligible a at works. of, As local how cards, shows chart benefit benefit are new Medicare on level, benefits, providing Medicare This now high it supplemental participants

beneficiary card refilled is network. ATH This a merchants issued that A receives service an use with they over with can is cards XXX,XXX benefit our via to-date. amount, at new a

opportunities and to continue to platforms value-added seek leverage partners. scale, deliver we and technology our operating customers to to our solutions, Puerto Rico, XXXX, in In

to previously year-over-year, on the we down attrition. QX to in discussed on as Moving continue revenue And see license sales uneven Latin quarter. X, any was the X% given in slide America impacts of

implementation performing That said, the wins and plans. with momentum, team is on new our well executing

about to progress excited implementation continue Santander the Regarding our for being made. be Chile, very we

work few EVERTEC, the Visa Work alternative in-house barista, market processing in we Even as and is Mastercard first Chile over complete Transbank. the this and in milestone pilot months, the significant in have incumbent a to with acquirer, though the for our is Santander, the to Santander Café. transactions next

are platform. is launched before the for for Citibanamex, completion on a which have collection And Citibank, year. end implementation of the For number targeted of clients our new we progressing on been our

funds, innovation codes. payments members through our recently We QR wallet for or at Compensar, Colombia. with make mobile merchants, Compensar first launched bar the application benefit allied also allow This to easily partner in will

leader, signed Alelo, sector, in Regarding market that client for a since recently company benefit to license the been a wins, we XXXX. Brazilian products sale our a has

us, of that for for Bank contract terminals new types Additionally, expanded services include that capabilities POS existing as well as be of offered Costa new Rica can small with their increased merchants.

reputation improved validation services, further are region. the and in our wins of These

of acquisition Colombia in enabling our primarily PlacetoPay, digital completed also payment and gateway on a based and card-not-present focused transactions. We

about beyond services are where these serves Colombia expanding today. Ecuador, and We it clients excited

expect localize Panama of the services offer markets, these QX, gateway Rica, Before them beyond. to we Costa and and end in other like

existing services sales strengthen new will These as open allow us our with relationship new to as clients, opportunities. well

evolving in and protests. environment, we monitor macro Chile the continue Regarding to the Colombia,

currently business. However, not on any impact, significant we are experiencing our

as update our executing focus service. pleased wins Chile. products significant high-quality and and our with X, partners begin is to Turning we to were with, you, America. with slide we providing XXXX, XXXX, on on strategies, the and I Santander, And Latin want in our excellent Citibank

low given America, as There continues significant to opportunity, as for well penetration growth across volumes growing card of be a middle class. a Latin the

of We presence continue fuel online and that to growth an see increasing usage, positive trends cash-to-card and conversion, smartphone should in e-payments. mobile and

countries the Even of environment the the regulatory still though evolving technologies the payment monopolies pressures, changes, many by space dominated as competitive the in change. XXXX to are the and are demonstrated, or duopoly, pressuring

grow recurring in growth to products we to our the processing more model made region. progress a in revenue of XXXX from, strategy trends shifting that advance provide by a with in licensing will America model our Latin further, transaction the To

are During payment further additional the products XXXX, we localizing throughout region.

we client specifically Puerto of choice. and the positioned Spanish-speaking of America market. of XXX and We we advantage that provide have are local take and uniquely We each with for can leadership Rico, to partner throughout our Latin developers, solutions, over outside customized developed believe and opportunities become employees

which XXXX, year are impressive we transparency quality. we in close companies and distinguishes again women and included being in reporting Gender-Equality out Index, an Bloomberg general As advancing proud to of committed also to the

our invest development their best all in Leadership one through workforce. well launched ingredient EVERTEC, University. Academy talent and regions, recruiting our employees as leaders competitive and programs all of training success We believe and our We coaching the high-performing of we successful to for innovation are and by that a in plans for diversity employees. At key for our EVERTEC development commitments our is In as colleagues. providing XXXX, salaries core development the offering of the our

I want strong building XXXX their and in our to for for growth thank a team for all dedicated XXXX beyond. and of commitment throughout members foundation

now will Joaquin. turn over call I that, With to the

Joaquin Castrillo

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

pricing revenue Total XX. in actions. the solutions, contracts slide XXXX value-added was up X% by the new to fourth volumes, million, $XXX.X and $XXX.X to for driven higher transaction Turning quarter prior million compared year

basis million, adjusted costs, negative expenses rent impact, EBITDA EBITDA expenses our year. year-over-year Adjusted prior the that year. is was million a for attributable EBITDA higher primarily to $XX.X X% XX.X%, project this represents in in cloud-related margin the the other decrease point $XX.X such and from compared quarter decline an in to increase was Adjusted in prior increased margin margin our margin XXX and The as QX. and impacted operating of FX

income net in of a on adjusted reflects amortization in and primarily and per-share to a basis operating an quarter X%. the $XX.X compared The as X% the increase quarter last the tax higher million, an $X.XX year. the Adjusted EBITDA increase depreciation rate and increase was prior increased year compared to increased offset as of by

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

Adjusted approximately was year-over-year. up and was net adjusted X% income up $XXX.X X% earnings share per million $X.XX, common

year XX.X% XX.X%, slightly non-GAAP Our year. prior tax was rate in full than lower

to both fourth results revenue and due year-over-year net slide million. The impacting the cover now Acquiring. increased as our as to well transactions on quarter, with pricing increased XX. was segment increase our revenue spread Moving non-transactional $XX.X Merchant our approximately to I In revenue. will starting X%

Our continue continue EBT see we approximately ticket the towards continues an move that to of and a X.XX% X% more to prior ticket we year-over-year, as to down tough relief compare average have included year volume decline as normal levels. to funding average was higher

XX.X%, a points year, EBITDA ticket. as XXX the Adjusted average was down $XX.X basis result a as of last for was compared to and million lower approximately EBITDA adjusted segment margin primarily

full up due the at year, Acquiring reflecting results, the primarily X% to quarter. For the same approximately $XXX.X last was over year's million, mentioned reasons growth in the Merchant

to compared average the year due EBITDA down adjusted X% was and full XXX last was the year, up for the million, EBITDA $XX.X as ticket. margin impact Adjusted lower basis of primarily points to XX.X%

On Business. slide X% as last Puerto to was million, on transaction approximately Services fourth Movil segment. fees grew as results from Transactions continue services such the Caribbean and approximately Rico XX ATH Movil and benefit $XX.X Revenue we in our year. the quarter to Payment ATH up and compared for X%,

as $XX.X down expenses, expenses. well as Adjusted EBITDA increased XX.X%. segment was EBITDA was Adjusted was primarily down EBITDA expenses for project post-implementation million, related margin to margin to and cloud-related adjusted increased the EBITDA X% due

For services from contract the million, softer transaction revenue ATH full driven primarily EBT the early year, XX% and grew segment year new such by Business. from fees benefit comparisons for one-time to revenue $XXX.X service the ATH Movil as Movil and in the

EBITDA as for adjusted basis to XXX expenses Adjusted full down contract XX.X%, up was project primarily last X% the to million, delayed renewals increased year, EBITDA in due was and government and $XX.X year margin the points compared QX.

the approximately will approximately growth, for On $XX.X and attrition mid-single-digit X% sales anticipated fourth America. Revenue primarily organic for down was as find million, partially by year. lapping Services $XXX,XXX driven results significant client last to slide compared quarter Latin license of the last in year, by the XX segment Payment offset you

for adjusted been the impact in XXXX QX EBITDA negative would down respectively primarily for and $XXX,XXX was segment to the positive margins million years, as impact relatively impact compared EBITDA for in of as FX year the compared quarter levels. $X.X a was of to Adjusted due similar margin last $X.X Adjusting have FX to both in million. at XX.X%, QX

compared driven For year adjusted revenue the XX.X%, offset and margin year to intercompany for client primarily was Rico XXX to to points the by transactions basis was segment million the Puerto X% the full the and grew organic last benefit attrition. full $XX.X of anticipated million, up full as $XX.X partially year. year growth EBITDA EBITDA by Adjusted

approximately XX, QX slide the XX% new Reliable. increase fourth of from well increased Solutions to to associated million. increase with to CPI in million $XX.X acquisition in began of the in benefited as Moving October related revenue project the a of and quarter completed that services XXXX, network Business as in volume Popular's from revenue the solutions $X.X We one-time

to million hardware lower-margin to to $XX points the as was margin related Adjusted EBITDA year EBITDA as basis the XX.X%, for higher-margin to was segment XXX sales. and last results compared a mix year last compared shift due adjusted revenue of up revenue primarily

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

XX, our you slide to will expenses. a of summary Moving Corporate see

Other a related expense higher to $X.X Our XX%. fourth reflects projects and expenses primarily of the million, last was year. in decrease of completed quarter Corporate year-over-year The fourth decrease quarter

year, full of and and million as Corporate the Other was For points expense approximately XX revenue a $XX.X increased X.X%. to basis percent

flow and operating in or was our were our a update an cash of spend infrastructure. included due activities Capital overview increase normal higher and Moving the innovation on compared improvements to than as $XXX XX. provided cash year. well year-to-date Net critical million by on a as $X to million investments expenditures approximately million as prior approximately $XX technology product slide to

earn-out in upon additional component of performance certain $X approximately for completed growth cash targets. an achievement as the may PlacetoPay We well as payable that acquisition become our million

to paid repurchased $XX to $XX total $XX a common million approximately approximately And returned for and million of million shareholders dividends stock finally, of we the of stockholders year. for our cash approximately

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

$XX million Our XXst which restricted includes approximately ending was as cash cash. million of balance in December $XXX

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

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

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

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

as our terms an agreement feature to sweep that reminder, cash include applies of on over to the our generated be paid to outlook, a loan. flow move cash current level I our Before certain excess a against

entered swap in in XXXX rate interest cash XXXX. remain in flat XXXX. relatively to We currently takes into effect of the addition interest QX In year-over-year anticipate April

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

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

of $X to a per range X% per Our XXXX of adjusted earnings of the to $X.XX. share earnings compared adjusted X% as outlook $X.XX in represent to share

analyzed earnings a of we highlight On will now be to and the GAAP that key underlying have between and anticipated uncertainties per basis, $X.XX some $X.XX. planned assumptions to I share is for.

will timing through flow of federal funds current billion to continue be While oversight when at impact is these the the least release anticipated funds subject will year, fiscal the $X.X these in of to economy. strict actually that the

plans the track distribution distribution approval actual for Rico use addition remains unclear The dependent In Puerto for providing the the funds. little very approved is of of on government us to timing the assess. record actual and with the

a have As growth we XXXX. result, assumed economic in modest

the on primarily to in funds flow average a continued deferral assumptions to mid-single-digit ticket. Merchant growth low project segments, as based of normalization well about we our Acquiring, Moving the as

revenue Puerto Services low Rico the is Caribbean Our grow anticipated segment digits. Payment single and to

lap ATH million XXXX as Móvil initial we of the anticipate While moderate in healthy fees project rate revenue. contributions we one-time Móvil will of from the the benefit this business Business as as XXXX from as to as continue $X.X and EBT well transaction growth growth well ATH introduction

Segment Our Latin including anticipated $X growth revenue of million client to million to attrition. low to be $X America Payment high-single is anticipated double-digit

As revenue a and recurring sales throughout is by driven portion a reminder, our may year. rather of be the therefore than still uneven license revenues

included have modest Additionally, in we FX XXXX. for negative impact some

risks negative guidance related reflects to Our some additional low currency. side foreign

to half Popular the began finally, impact the grow the mainly some tailwinds the year Solutions low growth in well full increase to and recent the of Business as segment Reliable. the as contracts services of for CPI to is related from reflecting And that revenue new of second anticipated mid-single-digits year

approximate total and our to are in expenses, of slight X% a items our guidance we Corporate EBITDA expect All these XX% considering we revenue. XX% generate adjusted Regarding increase margin to year-over-year. EBITDA of adjusted will range combined, believe over margin the would or this in

the lapping the as year to quarter. basis, as funds, the slow revenue project quarterly higher a was rest stronger the federal well On a first and quarter onetime to spending the of of that revenues softer anticipate in than be expenses to last recovery we year, hurricane the margins the due start related to first

down January some from volume the sales X% was approximately including impacts XXXX earthquakes.

largely and funds and growth be island. We half-weighted to earnings as begin the expect are federal flow implemented both to benefit new fully back revenue services

to is into as year $XX production Our to that operating new XXXX. production depreciation to projects in and million and increase amortization went $X approximately go as anticipated million well into $XX million that primarily up multiyear to reflecting to projects related $X anticipated to depreciation are last million amortization

to guidance increased anticipated average of rate non-GAAP to business shares million. approximately up XX.X the be mix slightly approximately diluted this is XX%. tax Our LatAm approximately flat effective of And reflects given

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

remains Our capital allocation strategy unchanged.

continue shareholders investments We will share on to is on we as excess and continue M&A. plan We available our internally through repurchase to as repurchase current to as dividends well focus our growth shares program. cash will

executed and generation. we during delivered XXXX well strong summary, In cash

As year. look you Rico LatAm we in coming innovation on Puerto to the opportunities and continue our to on in focus our business, and updating we progress forward our expanding

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

Operator

you. Thank

Instructions] of KBW. Our We will Vasu first Please now begin from the question-and-answer will ahead. question go come session. [Operator today Govil

Vasu Govil

to was for the Just any and economic quarter. to come understand guess see the the of, or the, to resolution. my Thanks happen there on results from Was takes to first impact within deal? I guys. trying good question. Thanks, give resolution it taking new BPOP the that and change the pricing sort

Mac Schuessler

Mac. is This Vasu. Thanks, Yes.

product felt given into year. a that So it we're quarter the pricing to have a considerations, able call not Often other it like than resolved resolve but last comment headwind we do on not going into than the to we we baked this it's issues, guidance. that. was service-level about lot we're with already type of the except to it's But dispute were potentially issue we the further going because talked through that these going and more have some comment to

Vasu Govil

outlook. But slightly gave saying flat then to year-on-year? on kind color also to a lot bit know, were be end but you a could got I'm of low at And would you I trying like it I everything. down margins the just be little make Joaquin, it the up sounded sure Great. of us the

And then am puts you, and the of, Did are you high delta? the so was and end range? towards kind like could on talk like, of going I something? missing low higher? the sort to that the the to guide be EPS of say the what just And based then Is takes D&A

Mac Schuessler

Yes.

So pieces. margin is I let of, to flat be I'll we up. mean the sort you let -- I'll going walk through -- Joaquin, to

Joaquin Castrillo

So higher. where next take to has To question that down main production. up Vasu. kind That through projects an impact to year will we going the additional plus last that yes, run D&A in And kind of we ended QX component you obviously your if into of go look expect that at EPS. and an first. increase is be we have of

the through make called that remainder XXXX As out. that of we the kind of difference we up go should

So to $X all-in-all $X in it's a increase D&A. million million

the of In our extent buybacks incentive we're and considering long-term from also to dilution terms the plan. of --

flat a forward. share considering count average weighted really we're So going

margin a called we out terms the on margin, the end. of In high flattish yes,

that. and can We the segments. will quickly in some in through terms We puts margin. Obviously, see very of the some expansion run that of takes

ticket. Merchant declining to In average we see terms of Acquiring, continue

into was at able segment, the margin flat payment what beginning to Rico -- think for we terms big QX So one-timer had of If that's last a that going our Puerto the key is margin. year. in We XXXX. level, being full we a maintain we about expect that negative that year of won't have a of which to in high

the had related a will key as P&L additional expenses flow a production And little we And that had through well. through flow higher going called bit for -- with out, expenses we've we some EBT. QX as That to stabilized we platform. platform into the as some

impact So the should negatively. that margin

the we $X negative to this out margins of we If $X expect have to in as we LatAm, attrition. look past, revenue coming at the high-margin growing is that that that's attrition. mainly be we million expected coming still we're said, top margin the enough that's we've in revenue there, erosion And And called healthy, out. line won't offset as But from right? million

as And flat we Solutions margin. expect slightly to Business at positive we a look

As of But us that to able as put corporate expansion. XXXX, these of we've flattish. margin through terms this end be might to kind volume lower some should then, we in keeping sales range see on potentially we have of lower than to seen we throughout lead the platforms, one-timers year. expenses, those other we're hardware of continue being And that

puts that's takes for positive. So kind and next as year. segments we see And a the that's of the different

Vasu Govil

did Thank Great. could one. but size you catch one just sneak from the I in I acquisition of XXXX outlook? know And revenue much. the if EBITDA on it, -- very sort I last and expected PlacetoPay the contribution you don't didn't if

Mac Schuessler

We did not.

Vasu Govil

more guess you offer could -- I some

Mac Schuessler

that We have adding mean, that presence So, look pretty I if about the nicely, we past where would transaction portfolio we're what's market look have segment, if occurred. and you at in what LatAm we've like say if if us Alelo. Santander organic and the we're a you now acquisitions a Citibank I a had you at you look and feel our at business excited look at is, this Chile, with to Rolodex given now

this Central but acquisition. PlacetoPay going out America us gateway. in plan it relatively that it's But and Already, a to is we operation and small not a breaking to we're it's very give year, separately. Colombia within this activate is nice. It's small

Vasu Govil

color. you Thank for it. Got the

Mac Schuessler

Thanks,Vasu. . Yes

Operator

will next ahead. Cowen. Mihalos Please from come with go question Our George

George Mihalos

obviously how company of that going follow Can think for is up could kind I a a think of on there that Thanks and guys. puts to an longer-term you're margin impacting we thinking XXXX. a or expansion But my some you question. framework think are know expansion around just deliver? margins. framework a help on annualized Hey, to prior be takes the of Maybe longer-term sort questions margin to of about of there as number taking about are long-term normalized on us basis? the basis,

Mac Schuessler

Yes.

you I it and already give tell company, is, Joaquin. I'll the continue margins come I'll then a view Puerto maintain We'll at What have peer and would that Rican margins continue margins hand our through with business. my So as you you we those high good when we'll group look maintain manage to to we and and growth. products, cost to so and try in invest fairly

When certainly at margin. a you is it look lower Latin at America,

see we break You segments those can out.

that over at so, will And time grow rate. a significant hopefully,

that will on it put margins. the So pressure

So got And, said, in the the industry. some we're already I focused best we've like very on it. of margins

Joaquin Castrillo

we license-based. Yes. model the add, acquired this And to Joaquin, when transition is thing of -- a is The only LatAm. Chile mostly I'll in we George, was processing operation, kind out that, our we've it called

have today not scale. which We license we take of model can of -- economies its our continue are advantage to sales where not a

of execute continue those position time, we and and running. to over But investing should as getting to be So and on able put expand executing we're a to we ourselves that up obviously, still, move on in strategy margin. processing

Mac Schuessler

you? loose we do George,

Operator

-- can I sir. Hey,

Mac Schuessler

Okay.

George Mihalos

Yes.

you. Sorry in about that. you sort maybe M&A there. on the just Thank any could pipeline around and of Mac, outlook provide color

Mac Schuessler

Sure.

won't we company. to that deals evaluating. are happy we have, what and pipeline continue we're started course, say, comment, M&A, would very actually we're -- on with a have I since of focused have as we're we focused before But as I've any on them. focused we we're currently George on. So the We

Operator

of question will Keane Deutsche next from go Our come Please ahead. Bank. Bryan

Bryan Keane

to Are ask -- gave. having Citi some impact the material XXXX? then Wanted pipeline a growth any does are about of Or and that they in update to impact? some Chile, are these Santander the these How implementations rate material just of changes you XXXX? that guys. Hi, the of

Mac Schuessler

Yeah.

for years, significant are in is would several that I the wins. say we're time again adding first really what So organic business

a So has then to Chile the a and lesser Santander to segment, meaningful impact extent. Citibank

XXXX. So they'll impact

as have to and to And we we these. also will have a those positive businesses wins grow then in that we continue hope impact those as then well. grows, relationships organic grows as years the it hope future and just And like volumes

will rate what beyond. was and tell they growth well. have an in Alelo impact us for core on that's So XXXX the and win to about that as But you

Joaquin Castrillo

is The bigger of I we're in still ongoing. we is as impact which prepared onto that these the will calls remarks, Citibank, back add kind the would bring was the most announced only still few thing continue be clients And ago of said up. Banamex platform. that to half-weighted. we bringing region we a

that's LatAm And Citi of Santander So to to the still in both and we're segment. phase. implementation able we'll is the once through when start get come see some that revenue

Mac Schuessler

said call, at the barista call it's said are on at already Santander I beginning I think mean, and do transactions I I to their internal important headquarters. processing pleased with we're the we Visa mean, is, with and the at their note then the of Chile, we And progress. Mastercard

Bryan Keane

lower about margins at bit the XX% our below quarter quarter? last they little of about and And know expected just they thinking being than kind XXXX I particular fell full a in surprise for Got EBITDA then to think year the estimates. a below came adjusted bit a EBITDA on that. for the you that margin be caused there anything little margins in it. Got to about Is Joaquin it. talked

Joaquin Castrillo

against that things the say currency. I us foreign one was would two quarter this So worked

QX. mentioned, then America a our day-to-day. negative in that platform, to towards a of So that Latin margin. complex effect now very on had work put the latter EBT half a we as project stabilizing we from we And is project, continue multi-year project into running I which FX impacted that on we're production And

on if we we as day you flow improvement something into OpEx. handle mentioned where that get continue slight bit in will understand XXXX of at that or still some to additional year now we are of that QX. a we're running expecting But look guidance, I in the expense last from at operation, margins XX% a a we have little so question, And kind the full to through And our XXXX. it's end the XX% for the as

Bryan Keane

Got Thanks much it. so guys.

Joaquin Castrillo

Thanks, Bryan.

Operator

will go next from question Davis of James. John Please Our come ahead. Raymond

John Davis

Can maybe at the think you think guys. two interest lows flat balance just expense I afternoon be was good get leverage over sheet? going you all-time the a on is year-over-year. to just believe start I said times shade I to Hey,

One question. then is do So floating there? about kind kind are. also maybe should little Remind of fixed that interest how the we talk going forward? think rates especially cash twofold takes us and And debt and about of puts or a what's an refi and being what's feels there given anything a where bit that flat like the ability just to

Joaquin Castrillo

Sure.

had forward of in as into part have last we terms interest, we of our So entered our refi. that the -- a swap we

of QX will into against when for April the are So -- XXXX, a XXXX. entered -- starts XXXX. where work remainder that's refi. of so We will the completed us what we given Obviously, that of rates

of how rates moved. So that's unfortunate have in terms

to Having debt our the be that, said of -- continues floating. about XX%

the offset the from get So that and that floating the the of XX% fixed impact we'll should swap. lower still rates benefit that's negative

hasn't that's actually on relates our overall do not to -- refinancing changed. want a to it's allocation And I or what mean I is just that we we before strategy refinancing. close capital it As clarify strategy, something our comment engage

will to for through to just the growth innovation continue for CapEx and through products. we and did acquisition PlacetoPay new look We like M&A first invest

flow the repurchase dividend. mentioned pay QX. to to to scheduled go continue cash extent pay our And also we in will that based hit although excess we have down We'll through cash as additional and we sweep the this of continue have downs, pay debt that remarks part we'll on our

John Davis

that's make Okay. But you just -- to prohibits would sure if on not from refi fee clarify, you're comment going just that see it us there's not outside? debt want you to there's any from but the I refi-ing that maybe to clear anything there for there's nothing there's any just not of kind debt? bit to penalty or that big premium keep -- you to a call That's little that

Joaquin Castrillo

that I put in where No. a position specific No an anything out us isn't we option. there make couldn't can put that that would

Mac Schuessler

anything John does an all-time it? that to hitting question do XX-year with treasuries doesn't have low,

John Davis

Mac here. then question And bigger-picture

got a think I so commented -- the of questions on we've lot far. you've margin

the was XXXX on of think company, as from last It about X% guiding to X%. EPS of the growth? to How the X% the revenue hurricanes. as the think kind growth XX% I year in growth rebound should we algorithm well revenue both

managing about some or were margins over Is like how Just not growth? a guidance cash it next flat about Is items. for years? going it some businesses on Is revenue EPS growth? seems think onetime how or think level you commentary it long-term the business? of should do maybe how asking manage take the give you higher several be just It flow kind but we -- growth? maybe I'm to the

Mac Schuessler

Yes.

said last year last the So of win. beginning year some what we of by we being are opportunities as that we markets on pursuing very confident the by of I opening demonstrated would beginning been say the to At this at focused in confident. At that are of able of the we in believe. -- said demonstrated the say we've are are America. these some year business transactions year opportunistic is, beginning the we Latin We we as we and

on given expand focused that fintechs which Rolodex size to believe few building and our our are we it to on footprint players. products expand the our to continuing continuing So expand complexity that both are continuing unique region given a the other we to are one we're really means and relative that very franchise frankly so the focused the of

look we by executing and those only careful done investments will that I think growing about expenses. by do believe those margin in maintaining, in well. continuing how good past years the years. growth LatAm you that done focused to making revenue but very I accelerate be in We've So can at of job over couple being on not a we've by some

a lower have does it margin. overall albeit But

are we through focused significant LatAm. has past over growth of a years. in Puerto share on been the different couple phases very and Rico, island we have the already of lot So In

more then single the taking ends low by are sort transactions very as Medicare maintaining the about as maintaining share, talked product. in moved on which up with electronic growing our We're as to advantage possible we trends of just mid-single-digit focused like new and of best margin our forms

past So continue what share as the about accelerating Rico we've couple fronts. our margin I sort things And in payments, the years done that's pretty on both of maintain and feel just of over growth really and LatAm. sort good on is Puerto but of electronic to focus grow our focus in to move then really,

John Davis

for just a Latin Okay. in on Maybe And one M&A then little me. last America. bit in zoom

most myself kind just out relatively to a that Maybe at on what's Is -- active? it's call, with it of bit look difficult for people probably think on for deals us specific. see it us of -- color help what's little been and has this I you trading. there nothing

deals active rational $XXX are $XX Are $XX market about state maybe where a million the the your view think don't of million, M&A deals? are mind? million, these these size in market Just deals? not they're multiples both? is But $XX of kind if or you million help how they and if of LatAm Are and M&A just us LatAm

Mac Schuessler

advantages. transactions start question lot of that a there's the what of not your one Latin and visibility is of in that's is to love our America I Well

what's So on valuations more good some the network extremely have our at that some what of are look you that but property today at going bigger of been a across particularly blow that's at those is environment if when those say consummated and are and multiples, the with pretty out we've I space transactions, niche look the There valuable. to Those that find we of payment harder for customers. transactions we paid time. are some in not spent our would we've tuck-in when we that Brazil where us can you look

smaller been we But a build -- America. are the finding as to Prisma franchise. along Every once Europe come they're the still that we may of that like in they're and America think we're opportunities still size. Latin be in the ones we to and Latin are seeing the again less but Brazil, U.S. active continue tend has So while a big

get to for four those good are think But Again multiple in because shareholders. it's years ago into it's this year I and turning This be you them was the about north big of growth. $XX those million. again segment then part for a EBITDA $XX be M&A And us And think than of and create fill year going revenue. it strategy, was more in to million. those can going we was $XX think in organic assets million this $XX a that value perfect if I and million

John Davis

Thanks all Okay, guys. right.

Mac Schuessler

Thanks, John

Operator

ahead. Our Please go next question will William come from Bob of Blair. Napoli

Bob Napoli

-- just for Thank growth for on you, that are a growth Latin -- America thoughts growth. The missed forecasting you're then good revenue the and XXXX. your I the Joaquin, Latin Mac for What on follow-up And America? organic what afternoon. longer-term revenue Latin America –

Joaquin Castrillo

Hi, Bob, so what high we low-double-digit single -- to XXXX. for mentioned we growth was

Bob Napoli

Okay.

Mac Schuessler

$X But rolling includes million that $X million to off.

Joaquin Castrillo

Right.

Mac Schuessler

percentage a the call So points. line of some $XX top -- you've if got it of you you've million in couple negative got round decline a numbers

in if So low you probably fully. that double you'd be normalize digits

now that's do it's low-double-digit. for us with we the headwind a been long So but time, living have

which tell give we low is, doing say I with digit, would million year, what guidance is $X can to but to again long-term off. high million Bob going you single this long-term coming we're we don't $X What be

M&A So to double. me organically and with a that's low little

it's is to grow that. grow these that hope and/or like those will that business continue It's as over transactions to posting Chile, relations grow. And we're organic. this it's of if growth Citibank, Alelo. the the deals time more continue lot It's on year A Board Santander win to we

So we're pretty optimistic.

position the product were that don't open we and at we in were ago and services that from And they really like as perspective. years know time reputationally markets are that well weren't a now. Five becoming I the same

we're So for in LatAm. this good we year is optimistic pretty like growth feel and a

Bob Napoli

No. in mean, least grow is the the single market line I I payments your expect guess at preferably high in I growth above with for given forecast would position think for long-term? market digits. you to mean, LatAm and market I in

Mac Schuessler

should share I Absolutely. some to some in very small of don't we're we're markets be markets banks, faster. won't we significant see going look we're out, break picking specifically, up where which these we growth. if growing Again we Yeah. Chile if in at mean you going from the then

the But fast have by you to to if look faster. as So yes market we not market grow intend as market.

Bob Napoli

bank offer but can had quarter And you coming New bank in to customer going bank a on if only not you digitization. more up there's a last you mean big contract even point lot area. bank tech and or you where to tech expand to have obviously mentioned the Okay. the but you market active America. bank I to on extent, I you tech Popular, -- technology it's the And side side I in then also mean, a -- will. mean, just on think that services, the large pretty in I have very a in your Neo Latin very, investing a are and partnership

to keep you all to into space? that Latin And companies then investing particularly the your side you just expand clients? then other see on So up New bank relationships other the in we banking and what that are bank with American the digital Neo point on innovation you need the can to for or that

Mac Schuessler

question. great a It's Sure.

So one customers talked one about is Brazil as two of calls think products. it in they're was risk we using I ago, or and our Bank CX our

What across of That's gave some gateway. PlacetoPay you it a us on our why externally. or using even because focused would is innovation new the So, bought it we're whether continued these in-house are banks tell we we region products. I do

with sort sure in continuing the long-term a deposits continuing at we're levels close have you make we if bank most they're are Popular, to the look one acquired, and can transfers, that And on It's of for product, the to where that. we're pretty to Móvil. ATH access their we're But with stay that products And specifically acquired of people of the understand, the proud product do even it's with. digital to online pleased Banco, check product. today products. that invest point building clients our I that service So are we think your products view

Bob Napoli

to I count down. people see – we you and back of that buy you are balance have so assuming the But an materiality don't about to – sheet. that mean, make just share go expect then the Would talked And would stock. going acquisition

other have extent to plans correct? any don't shares for buyback to flat than the the You incentive keep the

Joaquin Castrillo

apply that's continue I our allocation capital to Bob, we'll strategy. right mean,

Mac Schuessler

But Guidance think buyback assumes asking I share about just guidance. he's –

Joaquin Castrillo

Yeah. The we're guidance from assumes that goal. that – valuation flat the the buying just they're long-term

Mac Schuessler

Yeah.

purchase the authorization stock So I stock million? still – have buyback $XX mean, plan the we and

Joaquin Castrillo

That's right.

Mac Schuessler

flat just count. – And – share assumes the guidance now right but

So that's what you're looking?

Bob Napoli

a Right. buyback I that would That I But you expect. would would acquisition. buyback obviously guess significant authorization make – you expand unless

Mac Schuessler

do definitely use focused efficiently. how cash we on are We Yeah.

Bob Napoli

Yeah.

Appreciate Okay. Thank it. you.

Mac Schuessler

All you, Thank Bob. right.

Operator

ahead. come from [Operator next will Susquehanna. go Please James question Instructions] of Friedman Our

James Friedman

on guys. numbers. Congratulations Hey, the

Mac Schuessler

Thank you.

James Friedman

I'll just ask my two questions upfront.

than of seeing just are who these I'll one volume. my is and the The the Joaquin just in get page question, process we both I'm health you then second the we prepared Merchant it this of And one. as first Medicare very in revenue Mac, grow this trying Payment remarks. my about to in Rico some EVERTEC's is – That's understand thinking be Puerto customer a to should and the payment your first beneficiary? but X. insurance referred one. company, in segments Is simplistic it faster here? in

is there Thanks. in on second pricing Or So, something to? Medicare think versus volume revenue. one remarks on payments your that first in I referred you Is and on? to one else prepared referring ATH. this going the the you're

Mac Schuessler

Good questions. Yeah.

areas Medicare the the companies Solutions are program what in I MCS on on the they're I say customers say Business in the And customers is, insurance MMM. specifically. So would big payment island other segment that the and would big what

there to our a new position example digitize an to perfect in transactions, on we're scale of is this island. are just our assist the When presence sort them. opportunities and the of So

it – customers hand So on the are Joaquin. the this specific product I'll is And companies. the question, then to insurance other big

Joaquin Castrillo

to as continue customers merchants our the be – both well. Actually

as program So these benefit participants cards this our merchants within use will these well.

kind payments. the merchant same network Medicare we where their at And acquire type electronic the providing terms this of purposes we services network to this are we in access to time, places for So our our and and are of of of in companies two enabling those program, to using payment. are

your years. we've so sales of in Jamie, coming did other because Merchant growing though down, we keep those up Even us revenue of In have right, case part help our previous to been volumes to in pricing of spread that actions pricing terms Acquiring, able the compared question, keep actions.

applies. of the the same payment case processing In

had through ATH also Business Movil come Movil half ATH fees We and the XXXX. second of

And will them. a as So, we of moderation those the lapped in. as over at XXXX and XXXX, through of that growth all of Movil kind ATH ATH have the Business we we saw Movil fees, fees we've obviously our grow mentioned we coming also in script, implementation of look because from

James Friedman

Thank it. you. Got

Operator

Our next question will of come from James Faucette Stanley. ahead. Morgan Please go

James Faucette

you questions much. very A from of me. couple Thank

Should the on. levels come go mentioned Or the D&A, we OpEx, and will a into XXXX? come as to the D&A elevated remaining thinking projects new year be that course have to back that little do start as bit? of during up at we we be you about off specifically Going that

wanted second on out to And questions I follow-up guess the drawing my at I thing once. two

us you out a Or continued And to what called whether able as what like some give you're to benefit as ATH there? adoption Can services. growth in monetize in color You improvement there? payment the just itself? looks adoption Movil is

Joaquin Castrillo

Okay. This is Joaquin.

So, I'll start with question. your second

on Movil users continue growth million the sequential the continue given being of flowing adoption, but it app. a more platform relates specific basis. we over on terms X used PXP payments we And see see more In to to to app. as a is we frequent What to ATH to continue we have numbers, haven't the

to the our purposes. of equation actually have that of for use still the continue PXP of -- users ATH it given we Business we And business opportunities using push Movil see side

in growth forward. healthy to in to continue improve continue we and the move we So, see utilization we as also opportunity see a an side, the to business

which the In all coming that of have the on. of usually uptick We obviously working in we half through we're some of XXXX. second significance terms did production multi-year of the XXXX, are drivers of really to projects projects D&A, have

talking this about I than would projects the that larger are say around usual. we're that time

would we that this move So, will to We're that something we think but the sustainable something XXXX. as continue XXXX not into guidance, be definitely accordingly I it's we giving manage that through don't and uptick future. monitor

James Faucette

Great. Thanks.

Operator

this conclude At back like gentlemen, remarks. the our this any for conference turn session. question-and-answer time, to Ladies to over I'd will and closing Mac Schuessler

Mac Schuessler

night. year. you, updates to everyone throughout We and forward look Thank giving the Good you thanks on call. to the participating

Operator

disconnect thank for conference attending may now concluded. lines. The you has We now And today's you presentation. your

EVERTEC (EVTC) 25 Feb 202019 Q4 Earnings call transcript