Evertec, Inc.

And welcome to the Evertech fourth quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. And to withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Kevin Hunt of Investor Relations. Please go ahead.

Thank you and good afternoon. With me today are Max Schuessler, our President and Chief Executive Officer, and Joaquin Castrillo, our Chief Financial Officer. Before we begin, I would 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 FCC report. During today's call, management will provide certain information that will constitute non-GAAP financial measures under FCC rules, such as adjusted EBITDA, adjusted debt income, and adjusted earnings per common share. Reconciliations to GAAP 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 website at www.evertechinc.com. I will now hand over the call to Max.

Thanks, Kevin, and good afternoon, everyone. We have a lot to cover this afternoon. Beginning on slide four, I would like to provide an overview of our call today. I will start with a summary of our financial results and business highlights for 2021, followed by a walkthrough of the strategic transformation that has occurred at Evertech, since 2015 and how we have evolved today. I will next cover the announcements related to our relationship with Banco Popular and then provide some color regarding our announcements on Latin America. Finally, I'll provide an overview of the Puerto Rico economic environment and our viewpoint on Latin America. I will then turn the call over to Joaquin to cover 2021 results as well as our outlook for 2022. Beginning on slide five, let me start with some highlights from our 2021 results. We delivered a record year with $590 million in revenue, an increase of 16% year-over-year. We had a strong finish in Q4 with results above our expectations, including a particularly impressive month of December. Most satisfying was our LATAM growth of 29% in Q4 and 25% for the year. Driven by our successful partnerships with Santander and MercadoLibre, the expansion of our digital platform, Place2Pay, and organic growth in Central America. Our earnings and cash flow performance were even more impressive, with adjusted EBITDA growing 23% for the year and adjusted EPS growing 32%. In addition to the strong financials, business highlights include the announcements today regarding Popular as well as those in Latin America, which I will discuss in a moment. In 2021, we continued to generate significant operating cash flow of $228 million for the year, and we returned approximately $39 million to our shareholders through dividends and share repurchases. Additionally, our liquidity remained strong at $386 million as of December 31st. We are also pleased to announce that we have increased our authorization for buybacks to $150 million, providing increased flexibility to execute on our capital allocation strategy. To provide context of today's announcements, please turn to slide six. Since 2015, we have been in the process of a strategic transformation that has included five key imperatives. The first was to invest in and improve our service and infrastructure by designing new metrics and a better organization to improve execution and increase customer satisfaction. In addition, we invested in new infrastructure, operations, and information security capabilities. Second, there was a focus through M&A to expand our geographic footprint in Latin America, which allowed us to enter markets such as Colombia, Chile, Uruguay, as well as deepen our presence in some of our existing markets. Third, we focused on accelerating product development and innovation to ensure that we were building products that our customers wanted and needed. We created a new organization solely dedicated to product management and development. This team evolved ATH Mobile in Puerto Rico, transformed the PayStudio platform into a service model for LATAM, and localized our Place2Pay gateway in multiple countries. Fourth, regarding Popular, there's been a focused effort to strengthen that relationship by implementing tools to better assess client satisfaction across multiple constituencies within the bank. Over the years, we have improved our SLAs, introduced new ones for services that were not previously measured, and even increased penalties for missed SLAs. We have also established pricing tiers on certain products to encourage collaboration and mutual growth. That brings us to the fifth imperative in our transformations. extending and modifying the agreements with our largest customer, Popular. Turning to slide seven, I will cover some details of this accomplishment. First, we are pleased with the extension of our key payment contract. We can drive our growth through this predictable long-term revenue stream and provide certainty in our cash flow. Our merchant acquiring agreement, which was scheduled to expire in 2025, was extended an additional 10 years through 2035. We also modified the agreement to include a revenue share provision consistent with industry practices that we believe will inset Popular to help us grow that portfolio. Our ATH network agreement, which was expiring in 2025, was extended for an additional five years through 2030, committing Popular to the continued issuance and support of the ATH network and our services as their processor, including ATH Mobile. And further, we're extending our master services agreement for three years through 2028. Modifications of the MSA include the elimination of the exclusive services requirement, adjustment to the CPI clause for existing services, and the inclusion of annual minimums established through 2028. All of these changes, we believe, will incentivize Popular to continue being a key strategic partner for the foreseeable future. Second, we are divesting certain assets to Popular that are exclusively used by them and are not part of AdlerTech's long-term growth and investment strategies. In return for these assets, Popular is exchanging EverTech stock worth approximately $197 million. This sale demonstrates our desire to focus on higher growth segments while reducing our exposure to single client products consistent with our long-term strategy. Third, we expect to eliminate the regulatory hurdles necessary to execute M&A and investment activities. Popular has agreed to reduce their voting interest in EverTech to 4.4%. over a period of three months after the close of the transaction through either the sale of shares or conversion to non-voting preferred shares. At that point, we believe Evertech will no longer be deemed to be a subsidiary of Popular for purposes of the Bank Holding Company Act, and thus we will no longer be subject to regulation and oversight by the Board of Governors of the Federal Reserve System. Given the increased competition for M&A transactions and our possible interest to make investments beyond what the regulations permit, This is a key aspect of today's announcement and should provide increased flexibility and agility to pursue growth. Turning to Latin America highlights on slide 8, we're excited about the success of our two key partnerships implemented in 2021. The first is Mercado Pago, the payment subsidiary of Mercado Libre. As you recall, we had a very successful debit card launch in Mexico, where we exceeded our projections for cards issued by over 300%. Based on the success of this initiative, we are confident that we will have further opportunities in the region with MercadoLibre. Second, as you recall, Santander's payment arm, GetNet, in Chile, has exceeded their projection for enrolled merchants by over 17,000. Consequently, we have now expanded our relationship with GetNet into Uruguay, again using our proprietary technology to enable the bank to acquire merchants in the country. These announcements are a gratifying testament to the progress we've made to organically expand in the region. Additionally, in Latin America, today we announced the acquisition of BBR, a transaction that we expect to close by mid-2022, subject to customary regulatory approvals. This acquisition will allow us to expand our capabilities in Chile, where BBR services over 30,000 terminals. It also gives us direct access to larger retailers in the country who use a more integrated and customized form of payment acceptance. BBR also services over 12,000 terminals in Peru, which opens a new country for us. Peru is a country dominated by a duopoly, which we believe will provide further opportunities of growth for Evertech as that market opens. I would now like to turn to the constructive environment we see ahead in Puerto Rico and Latin America that we believe will provide a backdrop to fuel our future growth. Starting on slide nine, the Puerto Rico economic environment is better than it has ever been. As you can see, economic indicators continue to improve, and in some cases, have now surpassed pre-pandemic levels. I will point out two key statistics on this page. The first is the labor participation rate of 44.2%, which is at the highest level since 2010. As we have mentioned in the past, 2021 benefited from the inflow of pandemic-related federal stimulus funds, resulting in increased consumer spending. We are now noting that a good portion of the federal funds received in Puerto Rico were deposited in local banks. As such, perhaps the most impressive indicator on this page is the individual and commercial bank deposits in Puerto Rico, which have increased 41% over the past two years, from $42.2 billion to $59.6 billion. These are additional funds that should translate into future spending that will continue to drive growth for Evertech. Turning to slide 10, we'll provide an overview of federal funding for Puerto Rico. As you can see, 2021 was an exceptional year in terms of funding given the significant impact from COVID-19 relief. As we look forward, we are encouraged that federal funds are expected to continue to flow into the island. This detail shows you that economic disaster funds, COVID-19 relief, other federal benefits, and inflows related to the infrastructure bill are expected to provide approximately $10 billion in stimulus that will flow through the economy in both 2022 and 2023 which represents approximately 15 percent of the island's GMP. We believe that this level of funds flow should remain a strong stimulus for the economy. And finally, turning to slide 11, as many of you may have read, Puerto Rico debt restructuring has been approved by the bankruptcy judge assigned to the PROMESA proceedings, and this will cut the island's debt roughly in half, from $70 billion to approximately $34 billion. The left side of the slide shows you the components which provides stability to the economy while reducing the annual debt service from $3.9 billion to $1.15 billion. This will allow the Puerto Rican government to get back to making investments that will improve areas such as education, health and public safety, and continue to work on measures that make Puerto Rico a better place to do business. Now turning to Latin America on slide 12, we highlight some data that shows the region is primed for growth. As we have noted in the past, Latin America continues to be underbanked when compared with more mature economies around the world, presenting a significant opportunity for us as these markets are on average twice as large as Puerto Rico. Credit card penetration and consumer spend on cards in our core markets is significantly lower than that we see in the U.S. As an example, Chile, Mexico, and Colombia are particularly interesting in areas of focus for our company. Turning to slide 13, given the nature of the opportunity that we have outlined, Evertech is as well positioned as we have ever been in Latin America. Since 2015, we have doubled our offices in the region, more than tripled our employees, and increased revenues from $37 million to $106 million, a compounded annual growth rate of approximately 19%. Additionally, with the BVR acquisition, our presence will grow into Peru, This is quite a contrast to what this map looked like in 2015 when we had no presence at all in South America. We believe Evertech is well positioned to be the regional payments processing leader. We have now extended and reestablished our relationship with Popular, creating a roadmap for growth in our main region. We've also established an enviable footprint of people and products in Latin America and a more flexible structure for M&A going forward. Given the state of our key markets and the expected benefits from the transactions announced, we are more optimistic than ever about our company's future. In closing, we believe that our employees are the key ingredient for successful innovation and a high-performing workforce. I want to thank all of our dedicated team members for their commitment throughout 2021 and for building a strong foundation for growth in 2022 and beyond. I'll now turn it over to Joaquin to provide some comments on our 2021 results and our 2022 outlook.