Evertec, Inc.

Good morning, everyone, and welcome to the Evertech's first quarter 2020 earnings conference call. Today's conference call is being recorded. At this time, I would like to turn the call over to Kay Sharpton, Vice President of Investor Relations. Go ahead.

Thank you, and good morning. With me today are Max Schuessler, our President and Chief Executive Officer, and Joaquin Castrillo, our Chief Financial Officer. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC report. During today's call, management will provide certain information that will constitute non-GAAP financial measures under SEC rules, such as adjusted EBITDA, adjusted net income, and adjusted earnings for common share. reconciliations to gap measures, and certain additional information are also included in today's earnings release and related supplemental slides, which are available in the investor relations section of our company's website at www.evertechinc.com. I'll now hand the call over to Max.

Thanks, Kay, and good morning, everyone. Before we begin, on behalf of our company, I'd like to share our sympathies with all of those who have been affected by this global pandemic. In particular, I want to express my regrets to those who have lost loved ones and my gratitude to those in the medical community and all essential workers who are on the front lines for the benefit of us all. I also want to thank my colleagues who are diligently working remotely, as well as those who have continued to tirelessly work on site, given the nature of their roles. Just as with Hurricane Maria, the Evertech team is continually demonstrating their adaptability, persistence, and strong values, making me incredibly proud and honored to lead this organization. While we continue to cautiously monitor the impact of COVID-19, we believe that our past experiences with extreme circumstances have proven the resiliency of our business and our people. We're fortunate to be able to highlight on this call the successful efforts of our team to maintain our business operations and even implement new solutions during the quarter. Turning to slide four, I'd like to cover some of these highlights. In preparation for COVID-19, we deployed our business continuity plans a few days before the Puerto Rico government enacted a shelter-in-place directive on March the 16th. Since then, every country in which we operate has implemented some type of social distancing measures. Our priority has been the safety and support of our colleagues as we transitioned to a work-from-home environment, while also implementing safety measures for those critical employees that were needed on site. Through our internal initiatives, we were able to provide equipment and remote access to our colleagues, as well as clear direction and focus throughout the organization to keep everyone informed and productive. For our colleagues who needed to be on site, keep the network operations running, as well as cash handling and other critical operations for our customers, we implemented safety procedures such as temperature checks each day as they entered the building, provide a productive gear, develop safe distancing spaces, and increase the overall sanitation at our offices. In March, a significant focus of ours was supporting our clients' evolving needs as well. For our largest customer, Popular, we assisted them in the transition of over 4,400 employees to a work-from-home environment. Many of our customers depend on us for communication, security, and numerous other business functions that require modifications in this new environment. Adjustments included increasing the capacity of our phone lines to allow for more customer calls, as well as modifying our systems for our customers as it related to late fees and interest charges, license and tax handling, and the acceleration of other projects necessary to serve clients in this new environment. For the small business clients in our Puerto Rico merchant portfolio, we are particularly mindful of the severe impact to their finances brought on by the pandemic. and are assisting them with applying for aid, as well as finding other ways that we can provide support. And for the community throughout our organization's footprint, we are already promoting our application to the 2020 scholarship program, to which we have contributed over $500,000 over the past five years. The need has never been greater to help these students, and our commitment firmly remains. While our results in the quarter were impacted by effects of the pandemic, both in Puerto Rico and Latin America, we believe our unwavering investment in our employees, customers, and communities during this time of crisis strengthens our relationship with each of our stakeholders over the long run. Beginning on slide five, I'll cover some of the quarter's financial highlights and provide you with an update on recent developments. Total revenue was $122 million, an increase of 3% compared to 2019. Our revenue results in January and February We're on track with our expectations, but in mid-March, transactional revenue was impacted by COVID-19 measures. Additionally, we had some one-time revenue last year that was a headwind for Q1 this year. Adjusted EBITDA was $56 million, or a 2% decrease as compared to the prior year, and adjusted earnings per share was 46 cents, a decrease of 8% compared to last year. We generated significant operating cash flow and returned approximately $7 million to our shareholders, through share repurchases. Dividends approved by the board in February were paid on April the 3rd, and our next dividend will be paid June 5th. Our quarter end liquidity was over $220 million. Moving on to our business update on slide six. First, in Latin America, we are pleased that we were able to continue to provide our customers with new innovative solutions, such as the new service implemented for Exodo, the largest supermarket chain in Colombia. Through a portal, customers can purchase a card for necessity that is then redeemable using a virtual card at Exodo establishments or online. For under 50,000 pesos of card purchases through April 30, Exodo contributed 5,000 pesos to a relief fund. This is a creative solution that is helpful during this challenging time to support the community in Columbia. This new service is supported by our recently acquired digital payment gateway, Place2Pay. We also implemented an e-commerce solution for a large U.S. retailer operating in Central America to further support their card not present payments. These payments became critical as a result of COVID-19 as they easily facilitate home delivery and pickup. Additionally, we implemented a virtual benefit card program for the Dominican Republic government to distribute aid to those families with economic needs impacted by the pandemic. This program, which was implemented by April 1st, has impacted over 530,000 families in the community by distributing over $64 million, which helped both the bank and unbanked population. Lastly, we are pleased with the progress on our Santander Chili project and have now successfully tested the acceptance of American Express. We still have more work to do, but this was a significant milestone. We have delayed our go-live date as most merchants are closed in Santiago, and we're using this time to do further testing and preparation with an expected implementation in just a few months. We continue to see interest in our products, and although timelines may be extended due to COVID-19, we are seeing growth opportunities. We have differentiated ourselves from our competitors through our customer focus, our service, and our investments, and we believe we will emerge as a unique payment service provider in Latin America. Moving on to Puerto Rico, the environment is challenging, and just like the rest of the world, we are seeing significant increases in unemployment and small businesses are struggling. Puerto Rico is anticipated to receive $5 billion in federal aid through CARES, and the government of Puerto Rico provided their own aid package, which included approximately $800 million. The local government has also supported the economy by continuing to employ the government workforce. As for the reopening of Puerto Rico, earlier this week, several industries were allowed to resume business, which is positive and will provide some economic activity. The government is evaluating the opening of additional business segments by May 18, depending on how COVID-19 cases develop over the next few weeks. We will continue to focus on serving our clients' needs, on innovation, and on executing the opportunities as they arise. Turning to the rest of 2020, while the COVID-19 impact was clearly evident in our results in March, it is challenging to provide annual guidance given the uncertainty around the depth and duration of the pandemic at this time. The best perspective we can provide on the impact to our business is to share preliminary trends we are seeing so far in the month of April. Joaquin will share those trends and provide an illustration of how, if they continue, they will impact Q2. We are encouraged by the recently released government plans for the gradual reopening of the economy, and we would expect to see some improvement as these plans are implemented. Fortunately, we continue to have a strong balance sheet with low leverage. We expect to continue to have positive cash flow under all the scenarios we have modeled, and we believe we have adequate liquidity to weather this storm. Our commitment is to continue to keep steady amidst the turbulence and focus on the longer-term opportunities that remain ahead of us. Whether the recovery is a V, a U, or a W, we are confident in one thing based on our previous challenges, the human spirit's ability to prevail over adversity. With this understanding, we will continue to focus on our values with a view to the future, and we believe we will become better for it. With that, I will now turn the call over to Joaquin.