Evertec, Inc.

Good afternoon, everyone, and welcome to Evertech's first quarter 2022 earnings conference call. Today's conference call is being recorded, and at this time, 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 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 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'll now hand over the call to Max. Thanks, Kevin, and good afternoon, everyone.

We achieved strong results in the first quarter, driven by payment volume growth in both Puerto Rico and Lantana. We also continue to make progress towards closing the popular transaction and the BBR acquisition, both announced on our last earnings call On today's call, I will start with some highlights from the quarter, and then we'll turn it over to Joaquin, who will provide further details on our first quarter results, as well as an update to our expectations for the rest of the year, which includes an increase in our guidance for 2022. Beginning on slide four, total revenue was $150 million for the first quarter, an increase of 8% compared to the first quarter of 2021. Adjusted EBITDA was $75 million, an increase of 9%, and adjusted earnings per share was 70 cents, an increase of 13% from the prior year quarter. We generated significant operating cash flow of $70 million, and we returned approximately $25 million to our shareholders through dividends and the execution of share repurchases. Additionally, our liquidity remained strong at $403 million as of March 31st. Moving on to our Puerto Rico update on slide five. We experienced strong transactional growth, and this drove a 14% increase in overall sales volume in merchant acquirements. We benefited from a full quarter contribution of First Bank's merchant portfolio this year, compared to a month last year. Recall that we expanded and extended our relationship with First Bank a year ago, after their consolidation was ended there. In Payments Puerto Rico, we continued to benefit from our digital payment channels, ATH Mobile and ATH Business, as well as a 9% increase in POS transactions process. Our business solutions segment benefited from the printing deal signed a year ago that began generating revenues in the second half of the year. Finally, the quarter also benefited from the 5% CPI clause in our current MSA with Popular, which positively impacted both our business solutions segment and, to a lesser extent, and payments Puerto Rico segments. As a part of the Popular transaction, we have agreed to provide Popular with a 5% credit on services provided through the closing date. Joaquin will provide more details around that in a few minutes. We are also pleased to announce that we will be launching our Place to Pay platform in Puerto Rico during the second quarter. Place to Pay will replace our existing payment gateway in Puerto Rico with a better product offering That includes enhanced functionality for clients in the small and medium business sector, looking to accept electronic payments, including the acceptance of ATH. We believe the introduction of this gateway in our main market will put us in a much better position to capitalize on the growth of e-commerce in Puerto Rico and continue to drive growth in our payment segment. Finally, a few comments on the macro environment in Puerto Rico. The labor participation rate has continued to climb in 2022. To 44.5%, the highest rate since 2009. The overall economic activity index was up 3.5% year-over-year in the month of February, reaching the highest level since 2016. And finally, travel and tourism continue to recover with airline passengers and hotel guests all either approaching or surpassing pre-COVID levels. We will continue to execute on our strategic objectives to take advantage of this stronger Puerto Rican economy. Turning now to Latin America on Flight 6. We achieved another strong quarter with lifetime revenue up 15% compared to the prior year, reflecting organic growth, including the contribution from the wins we have announced in the past year. We recently celebrated the one-year anniversary of the GetNet Chile relationship, for which over 60,000 merchants have been affiliated. And I am pleased to announce that the GetNet relationship in Uruguay, which we announced last quarter, is already in a pilot with the first transaction occurring in a friends and family phase. Next, let's turn to slide seven to cover a few additional items. We continue to expect a mid-year close for the popular transaction announced last quarter as teams on both sides are working diligently. As for the BBR acquisition, we are waiting on regulatory approval and continue to expect closing around mid-year. which will allow us to reflect benefits from the acquisition in the second half of the year. Before I turn it over to Joaquin, I want to emphasize that our values are what drive us at Evertech. So I'd like to take a moment to highlight our continued commitment to a high quality, diverse workforce. We are incredibly proud that for the fourth year in a row, we have been named to Bloomberg's Gender Equality Index, placing us among the leading global companies who value and demonstrate this commitment. I would also like to bring to your attention the new ESG section of our website, launched earlier this month, which articulates how our values are embedded in everything we do. With that, I will now turn it over to Joaquin to provide a more in-depth look at our first quarter results.

Thank you, Max, and good afternoon, everyone. Turning to slide 9, you will see the consolidated first quarter results for Evertech. Total revenue for the first quarter was $150.2 million. of approximately 8% compared to $139.5 million in the prior year. First quarter results in Puerto Rico reflected strong payment revenue growth as our merchant acquiring segment benefited from 14% sales volume growth and our payment Puerto Rico segment benefited from 9% growth in transactions process and the continuous growth of our digital payment channels, ATH Mobile and ATH Business. As Mac noted, We also benefited from a full quarter of revenue from the printing contract on last year in Business Solutions, as well as the 5% CPI increase under our MSA with Opula. In America, it continues to grow in the team as we benefit from organic growth, including new business wins that have begun to contribute in a more important way. Adjusted EBITDA for the quarter was $75.4 million, an increase of approximately 9% from $68.9 million in the prior year. Adjusted EBITDA margin was 50.2%, an approximately 80 basis point increase compared to the prior year. The increase in margin reflects a year-over-year benefit of approximately $3.1 million from current currency measurement of assets and liabilities denominated in U.S. dollars. Adjusted net income for the quarter was $50.8 million, an increase of approximately 13% as compared to the prior year. primarily reflecting the higher adjusted EBITDA and lower cash interest rate, partially offset by higher operating depreciation and amortization. Our adjusted effective tax rate in the quarter was 14.6%, slightly lower than the prior quarter and reflecting some discrete tax items that impacted the quarter. But we continue to expect the tax rate for the full year to range from 13 to 14%. Adjusted EPS was 70 cents for the quarter, an increase of approximately 13% compared to the prior year. Moving on to slide 10, I will now cover our segment results starting with merchant acquiring. In the first quarter, merchant acquiring net revenue increased approximately 15% year-over-year to $35.6 million, driven by an increase in sales volume of 14%, a higher average ticket the prior year, and a slightly higher spread per transaction. The higher volume was driven mainly by a full quarter contribution from the first and expanded relationship compared to a one-month contribution in the prior year. Additionally, the average ticket remained high as we saw year-over-year increases in categories impacted by inflation, such as gas, utilities, and supermarkets, which are important verticals in our portfolio. The growth in some of these verticals and the increase in more international card volume aligned to pre-pandemic levels, will continue to put some pressure on our overall spread going forward. Adjusted EBITDA for the segment was $17.1 million, up approximately 10%. Adjusted EBITDA margin was 47.9%, down approximately 230 basis points as compared to last year, reflecting higher operating costs from a full quarter of the first bank expanded relationship and other operating expenses. On slide 11, you will see the results for the payment services for Puerto Rico and the Caribbean segment. Revenue for the segment in the first quarter was $40 million, up approximately 10%, driven by strong POS processing and continued digital payments growth from ATH Mobile and ATH Business. POS transactions were up 9% from the prior year as we continue to see a move towards normalization in terms of card present transactions. The segment also continues to benefit from increases in transaction processing and monitoring revenue recognized for services provided to the Payment Services Latin America segment, as we continue to support Latin growth with some of our assets in Puerto Rico. Adjusted EBITDA for the segment was 23.8 million, up approximately 14% as compared to last year. Adjusted EBITDA margin was 59.4%. of approximately 210 basis points as compared to last year, primarily due to the higher transactional revenue, which is highly scalable, partially offset by higher operating expenses, including costs related to POS equipment maintenance. On slide 12, you will see the results for our payment services Latin America segment. Revenue for the segment in the first quarter was 28.8 million, of approximately 15% as compared to last year. This increase is driven by organic transaction growth as we continue to benefit from the secular trends of cash-to-card conversion in the countries in which we operate, and the client wins we have been discussing over the past few quarters and that have now started to contribute in a more meaningful way. Adjusted EBITDA for the segment was 12.4 million, and adjusted EBITDA margin was 43.2%, up approximately 310 basis points as compared to last year. This improvement in margin is driven primarily by the $3.1 million year-over-year benefit in current currency remeasurement of U.S. dollar-based assets and liabilities, which represented an approximately 760 basis points positive impact to the segment. Normalizing for the effect of remeasurement, margin would have been approximately 31%, a decline over prior years. This margin decline was expected as we continue to invest in our payment products in the region, localizing and adding functionality to scale over time. In addition, we've increased headcount in Latin America as we continue to actively leverage our Latin America footprint to identify labor arbitrage to support our regional operations, including Puerto Rico. On slide 13, you'll find the results for the business solution segment. Visit Solutions revenue for the first quarter was up approximately 3% to $62.6 million. The revenue increase in the quarter benefited from the 5% CPI escalator in our current MSA with Popular and the incremental volume resulting from the printing contract signed last year and that went into production in the second half of 2021. Partially upsetting this increase was a hardware sale recognized in the prior year quarter of $1 million. and services provided to the Puerto Rico Department of Education in the prior year that did not recur. As a reminder, once the POPLAR transaction closes, we will provide POPLAR with a credit amounting to the CPI benefit generated since the fourth quarter of 2021 and will not recognize any CPI for services within our business solution segment through September 30th, 2022. For the quarter, adjusted EBITDA was 29.6 million. and adjusted EBITDA margin was approximately 47%, down approximately 160 basis points as compared to last year. The adjusted EBITDA margin decrease was primarily driven by higher software and hardware maintenance costs. Moving on to slide 14, you will see a summary of corporate and other. Our first quarter adjusted EBITDA was a negative 7.5 million, a decrease of approximately 6% compared to the prior year. Our adjusted EBITDA as a percentage of total revenue was 5%, relatively flat when compared to the prior year as we continue to effectively manage corporate costs. Moving on to our cash flow overview, on slide 15, our beginning cash balance was approximately $286 million, including restricted cash of approximately $20 million. Net cash provided by operating activities was approximately $70 million, a nearly $36 million increase compared to prior year as we effectively managed our working capital. Capital expenditures were approximately $14 million, with most of the spend related to software development and hardware refresh. We continue to anticipate approximately $60 million of CapEx for the full year 2022. We paid approximately $5 million in long-term debt payments, $6 million in withholding taxes on share-based comp, and $1 million of other debt paydowns, which resulted in a total net debt decrease of approximately $11 million. We paid cash dividends of $4 million and repurchased approximately 522,000 shares of common stock for a total of approximately $21 million. We have approximately 129 million available for future use under the company's recently expanded share repurchase program. Lastly, we had negative impact of approximately 2 million from current currency exchange on the cash balance. Our ending cash balance as of March 31st was 304 million, and this included approximately 20 million of restricted cash. Moving to slide 16, you will find a summary of our debt as of March 31st, 2022. Our quarter-ending net debt position was approximately $179 million, comprised of approximately $284 million of unrestricted cash and approximately $463 million of total short-term borrowing and long-term debt. Our weighted average interest rate was 4.7%. Our net debt to trailing 12 months adjusted EBITDA was approximately 1.3 times. As of March 31st, total liquidity was approximately 403 million. This balance excludes restricted cash and includes the available borrowing capacity under our revolver. Moving to slide 17, I will now provide you with an update on our 2022 outlook. While we are pleased with the off-site consensus expectations in the first quarter, It is important to understand that a significant portion of the earnings upside was related to the CPI adjustment and foreign currency related benefits. As mentioned earlier, as part of the popular transactions, once it closes, we will provide them with a credit for the equivalent of the CPI impact since October 1st, 2021 and will stop recognizing CPI through September 30th of 2022. We are at this time evaluating the accounting considerations as to how this credit will be reflected in our results and the potential impact it can have to earnings. However, the guidance range for the remainder of the year takes into consideration some of these potential effects. With current currency, the $3.4 million benefit reflected this quarter could reverse in any period depending on how the currency in the regions in which we operate behave in relation to the US dollar. We are encouraged by the solid volume trends across our business segments and our progress with new relationships, and this provides us comfort to increase our revenue and earnings targets for 2022. We now expect revenue to be in a range of $597 million to $605 million, representing growth of 1% to 3%. This is off from our prior target range of $591 million to $600 million, We expect EBITDA margin for the full year to be between 45% to 46%, up slightly from our prior expectations of 44.5% to 45.5%. We are increasing our adjusted earnings per share outlook to a range of $2.52 to $2.60, from $2.47 to $2.56, and this represents a year-over-year decline of 8% to 5% as compared to the $2.74 of adjusted earnings per share in 2021. On a GAAP basis, earnings per share is anticipated to be between $1.87 to $1.95, excluding the impact of potential one-time effects from the popular transaction. Regarding the back half of the year, I will reiterate some of the key points from our call last quarter. We continue to assume closing the popular transaction by mid-year, and we also continue to assume that the BBR acquisition will close and provide a modest revenue contribution in the second half. For the full year, we continue to expect low to mid-single-digit growth in merchant acquiring, mid-single-digit growth in payments Puerto Rico and the Caribbean, mid-teens growth in payments Latin America, and a mid-high single-digit reset in business solutions. Once the popular transaction closes, we will experience a reset in margins for the merchant acquiring segment and both a revenue and margin reset in business solutions. And this is factored into the full year revenue and EBITDA guidance that has been provided. As I mentioned previously, our non-GAAP effective tax rate was higher in Q1, but we still anticipate the full year to be in a range of 13 to 14%. This guidance also includes the benefit of the sharing purchases in Q1 and an approximate 4.6 million reduction in share count related to the popular transaction. In summary, we are pleased with our results in Q1. We look forward to seeing you in person at upcoming conferences later in the coming months. Operator, please go ahead and open the line for questions.

We'll now begin the question and answer session. If you'd like to join the question queue, press star, then 1 to join. If you're using a speakerphone, it may be necessary to pick up your handset before pressing any keys. To remove yourself from the question queue, press star, then 2. We will pause momentarily to assemble the roster. And our first question comes from Vasu Govil with KBW. Please go ahead.

hi thank you for taking my question uh i guess the first question i had was on inflation maybe you could talk a little bit about your mix of revenues that are spread waste versus transaction base and how we should expect the impact of inflation to flow through uh the p l thank you hey sure so look obviously part of our our revenue merchant acquiring specifically has

some inflation natural hedge because our sales volume gets impacted by the increase in consumer prices. From a transactionality perspective, we continue to see very strong transactional growth. And then in Latin America and in our business solutions segment, apart from our popular contract where we have some CPI escalators that we've discussed and that will change once we close this transaction, We have different pricing levers that we've exercised in the past and that we can continue to use going forward. What I would say, though, is that from an expense perspective, we continue to also look for ways to manage inflation. And we kind of mentioned a little bit of this on the prepared remarks as to how we continue to look for ways to maximize our footprint in Latin America by looking for areas where we identify labor arbitrage I'm moving some of the jobs there to support some of the operations in Puerto Rico and some of our other countries, and also working with our suppliers in terms of longer-term contracts for stable CPI increases, et cetera. So it's something that we're continuously working on and that we have several levers to work with.

But I do think, and this is Matt, as Joaquin mentioned, about a fourth of our revenue is that that was subject to the 5% CPI, which we're not going to receive the benefit of. as part of the extension with the bank. He did mention the remainder of the revenue. Some of it benefits from inflation because we have a higher average ticket and higher volumes. We may have CPI conditions in other contracts. And we have the ability to adjust pricing as necessary if we need to make up some room there.

Super helpful. And I guess my follow-up question, could you comment a little bit on the M&A pipeline? I know the BPOP renewal that you announced last quarter gives you some more flexibility. Has that been noticed in the market and are you seeing any momentum as a result of that?

Sure, great question. As we said on the last call, this deal and the extensions give us a couple of things. One, great recurring cash flow that's predictable so that we can finance a deal if we'd like to. Secondly, in the event that there's a regulatory requirement once we close that, we won't have to get the same type of regulatory approval. We are very focused on capital allocation throughout this year and into next year. As you notice, we were more aggressive than we have been in the past on the buyback. We did announce BBR, so we're hoping to close that as well. And we're very focused on looking at M&A. And I would say we're looking at M&A as we have in the past, but we're even having a more thorough analysis internally on what's the art of the possible now that we have a you know, the extensions with the bank, and we're going to get rid of the regulatory approval process or part of it.

Excellent. And if I may sneak in a third one. Matt, just on Latin America, maybe you could give us an update on where you are seeing the most, you know, most incremental potential opportunities could be for you. Obviously, Santander, Chile, and Mercado Libre, all of those have been really great wins for you, and they're scaling now. But as you think about where next could you have one of these opportunities, where are you most focused with respect to that?

Sure. So, I mean, we're definitely focused on the countries that we've invested in and announced. I mean, we're very pleased that Santander, Chile, now that we have Santander, Uruguay, we are in a phase now where we've processed our first transactions. So we'll continue to focus on Chile, now Uruguay, as we've discussed. Mexico is a very important country. We announced Caja Popular Mexicana. We've announced Mercado Libre, so we'll continue to be very focused on Mexico. Additionally, we have been in Colombia for a while. We've seen more opportunities outside of Colombia. Again, we posted the deal in Mexico and Chile and now Uruguay, but we're intensely focused on Colombia again, and we're looking at localizing some of our newer products in Colombia this year as well.

Great. Thank you for the color.

Thanks, Vasu.

The next question comes from Jamie Friedman with Susquehanna. Please go ahead.

Hi. Good results here. I hate to start with a financial type detailed question, but the FX impact was so significant on the margins on the segment level. I heard some of your call outs there, Joaquin. Is contemplated in terms of FX in the annual 45% to 46% EBITDA margin guide?

We are not contemplating any incremental impact from foreign currency, Jamie. So we're pretty much just flowing through what we had in Q1. Again, I mean, we did benefit from some moves in Costa Rica and Chile that were to our benefit. Some of those currencies got pre-evaluated and we're expecting actually some of that to come back, but we still expect that to flow through for the rest of the year.

Okay. And then what was it that changed in, I have to go back to my Q4 notes, but what was it that changed or outperformed or was timed different in terms of way the quarter and now the year is landing relative to what you had anticipated 90 days ago?

I would say that we obviously don't give quarterly guidance. Last call, we gave a full year guide and we gave some highlights as to how the popular deal will impact mostly the second half of the year. What I would say is that if we look at some of our payment segments, we saw slightly better performance there than what we expected. And then in our business solution segment, we're benefiting still from the CPI that both Mac and I mentioned in the prepared remarks, that as soon as we close, we'll most probably go back as a credit.

Right, okay. And then if I could just sneak in one more, Mac, You know that metric that you give, oh yeah, labor participation. Last quarter, I think, was the first time I heard you talk about that. I realize it sounds like it's the highest that it's been in a long, long, long time, the 44%, but what do we do with that? How do you think about that, for example, simply in terms of your anticipated growth rates?

Sure. I mean, look, so it's hard to extrapolate directly the metrics. I mean, so last call as we set up for the year, we tried to give you some metrics on what's going on in Puerto Rico. And as you remember, you know, we gave the labor participation rate is up. It was up at 44.2 when we had the last call. Now we published a number of 44.5 to show you how active the economy is. We also talked about on the last call that bank deposits with businesses and individuals were up by $17.4 billion. So what we're trying to demonstrate and give you, um, statistics that are not always readily available to the sell side, sort of the health of the Puerto Rican economy. So it's hard to extrapolate it directly into how we would model our business. But, you know, if you look at the available cash to individual and businesses on the island, If you look at the number of jobs that have been created, and so money going back into the economy, you know, it's better than it's been in years. And we were just trying to make the point on this call that in December of 2021, the labor participation rate was 44.2, and then the last number that we recently received, it's at 44.5. So it continued to increase even after the last call.

Yeah, it's smart. All right, thanks for sharing that. I'll drop back in the queue.

Great. Thanks, Jamie.

The next question comes from Bob Napoli with William Blair. Please go ahead.

Thank you, and good afternoon, everyone. So I guess, can you comment on how payment volume has trended through the quarter and into April? And have you seen any rebound in the tourism part of your business? And can you remind me what, I think it was like 5% of revenue tied to tourism or something like that? but just any color on how payment volumes have trended through the quarter into April and then on the tourism side.

So what I would say first on the latter part of the question, Jamie, sorry, Bob, the 5% is impact of tourism to Puerto Rico GDP, specifically to Evertech. We have a very small portion of our portfolio that's directly tied to tourism. However, as you know, there's a lot of indirect spend that we do benefit from in terms of restaurants, retailers, where we do see that coming. Having said that, I will say though, from a spread perspective, and I mentioned this in the prepared remarks, tourism is definitely up, travel is up in some cases even above pre-pandemic levels, and that's driving a higher portion of international cards coming into Puerto Rico. that pay cross-border fees and that for that reason are slightly more expensive to us than some of the trends that we saw in the previous year when a lot of the volume was being driven by domestic cards that have a slightly higher yield. So that's why we mentioned that even though that's great for the economy and it's bringing some volume, it does put some pressure on our MAB spread. In terms of volume tendencies, I would say that and we mentioned this as well, we had a very good Q1, sorry, January and February, because we had yet to anniversary the first bank expanded relationship. I think when we moved into March, we were in the mid to high single digit sales volume growth. And something that we did expect moving into April, we're now getting into much tougher comps because of when other Fed funds got dispersed last year. So going into April, we're looking at slattish to slightly down. a sales volume, but mainly because of that. We are looking at April and May months that were the highest sales volume months for us in the previous year, so pretty tough comps. And that's part of the guidance that we gave last quarter and part of the guidance that we've incorporated in this most recent update.

Thank you.

Can you give any more color on the BBR acquisition? I know 60 million But can you give any color on any of the revenue or the growth metrics for that acquisition and strategically why you're excited about it?

Yeah. So, Bob, we can't really give you any details on – I mean, we haven't closed. We don't have any details on the financial attributes of the acquisition. But as we said on the last call, this really gets us deeper into Chile by providing with some large customers – more integration into how they run their payments business and providing more services to some of the large customers. And it also now gets us into Peru because we now have a couple of major clients in Peru. And so it's our first business in that country, which we're pretty excited about.

Thank you. And then just lastly, any metrics you can give on Chile and the size of that business, the growth of that business? revenue, growth rate, what do you think you can do over the next couple of years there?

No, I mean, so Bob, like we've said before, we're incredibly excited about Chile. This was our first, you know, major new win since we had acquired pay group. Our hope with Chile is that we can replicate, you know, to a smaller extent what we have in Puerto Rico and that we have multiple products across multiple clients. So we do believe it's one of the, I mean, it's one of the countries we're most excited about.

Thank you.

Thanks, Bob.

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

Hey, good afternoon, guys. Well, Cain, I want to touch on the margin real quick. Is it fair to say that all the margin upside in the quarter and therefore kind of the upgraded guide for the full year, is that all FX related? Or just if we were to exclude FX, you know, should we think about margins the same way as you guys guided at the beginning of the year or just any color there would be helpful?

Yeah, that's pretty much on point, John. We did have that benefit from FX. And as we said, the CPI, which, again, we gave a full-year guide or we guide on a full-year basis so that we do have a slightly benefit there also from CPI that will get kind of washed away once we close the transaction.

Okay, but that's... But that's constantly in the full year guide, right? What's going to get washed away in the transaction. That's correct. Then just any update on kind of relief funding? I know last quarter or before it seemed like we're finally starting five years later to see some real funding flow into Puerto Rico. Just curious there. It seems like macro conditions have improved pretty nicely in Puerto Rico. But curious if that has anything to do with funding or any kind of update there.

Well, honestly, some of the macroeconomic conditions that we've mentioned aren't necessarily tied to the funding per se. I would say that, and I might mention this, these are trends now that I think are being driven a little bit by some of the relief that got into Puerto Rico and how that momentum has kept going. From a funding-specific perspective, I would say and you can look at the banks, I've mentioned this, there is a little bit of more movement and activity, especially on the HUD and kind of reconstruction side of things. I would say that the electric authority has also mentioned very recently that they have almost 180 projects in front of FEMA. And if you remember, one of the biggest allocations of funds are related to the rebuilding of the electric grid in Puerto Rico. So the fact that now there's Private company managing some of this is starting to get reflected in terms of how they're moving some of these projects through the bureaucratic process. And the fact that those are in front of FEMA is encouraging. But again, I mean, in the last, let's say, 45 days since our last call, not a significant update in terms of anything I can point you to directly in terms of the funding that's coming through.

Okay. And then lastly, just switching to the balance sheet for a second. Okay, correct me if I'm wrong, but all the debt appears to be floating. Do you guys have any swaps kind of against that? Any thoughts on kind of locking in rates as they appear to be headed higher? Any thoughts there?

Yeah, we actually, John, we do have a swap. It's about 51, 52% of our total debt that is fixed. So... Obviously, the past year, if you look at our balance sheet, that was in a liability position given the significantly lower rates. And now with rates coming out of the back, that swap has come in. So that's why you see our weighted average interest expense kind of staying pretty level.

Okay. And then one last one for Mac. Obviously, you guys were a little bit more aggressive with the buyback last quarter, but the leverage is still down, you know, close to a turn, um, you know, I guess most who asked earlier, but you know, are you potentially able to be more aggressive in a minute perspective because of the lack of requirement to get kind of bank holding company approval, um, to do deals? Is that, are you viewed more favorably by targets because they're less worried about that? Just curious kind of what the activity looks like, especially now as we get kind of on the other side of COVID at least hopefully.

Sure. Yeah. So, I mean, you know, it's a great question. This is part of the reason we did the transaction with Popular. And like I told Basu, the fact that, to your point, we've got a great balance sheet, right? Now we have, not only does it look good now, but we've got great cash flows into the future because of these extensions. And it does, you know, once we close, change the regulatory environment for us. So we will be very, very focused on capital allocation through the remainder of this year into next year. And, you know, our priorities are organic growth, which we've invested in and demonstrated that we can get a payback with the wins we've posted. We're very focused on M&A. And given we've got the best balance sheet we've ever had, we can look at different size targets. And given that we're going to get rid of the regulatory hurdle, we can look at different types of M&A. And then after that, we will definitely continue to, you know, execute on our buyback plan.

Okay. Appreciate all the talk. Thanks, guys.

Great. Thank you.

Again, if you'd like to ask a question, press star then 1 to join the queue. The next question comes from James Cassette with Morgan Stanley. Please go ahead.

Hey, guys. This is actually Jeff Goldstein on for James. Within your merchant acquiring guidance for this year, how should we think about what's embedded for volumes and spread? I know you mentioned 14% volume in one queue and a higher ticket as well, but how should we think about that for the rest of the year?

I mean, what I would tell you is sales volumes this quarter are driven in part by the fact that we didn't have first bank, so that really drove higher sales volume in the first two months. I think I gave some color on kind of what April looks like, kind of flattish to slightly down, mainly because of the tough comps. That's something that we would expect starts to get back to that kind of low to mid single digit type growth in the second half of the year. And as we said, we expect overall revenue to be in the low to mid single digits for the full year. From a spread perspective, look, we had a slightly better spread this first quarter than what we expected in part because of a higher average ticket. And when we kind of break that down, we can see that some of the verticals that are more impacted by inflation are keeping that average ticket higher, which has helped that spread. I'm talking about kind of gas stations, utilities. As we move forward, we need to kind of see how that average ticket continues to behave based on how inflation continues to impact the economy. But as we said in the prepared remarks, we have some other things kind of putting some pressure on that spread, which is the mix of cards between domestic and international transactions, and also credit versus debit, which is something that we discussed in the previous year. With the pandemic, we saw a huge shift towards debit, a much higher percentage of our total transactions than what we saw pre-pandemic. And that has also started to normalize, and that should also put a little bit of pressure on the spread.

Okay, that's helpful, Keller. And then can you provide an update on Place2Pay? I know you mentioned launching in Puerto Rico, but maybe the number of merchants you have on that platform, any plans to further the geographic reach of that product? Just how should we think about the ongoing opportunity there?

Yeah, Place2Pay, this is Mac. Place2Pay, we're incredibly excited about. We are going into production in Chile and in Puerto Rico in Q2. So we're Very excited about the product. And once we localize it in several countries, we will truly have a regional gateway. We have plans to look at localizing to other countries through the back half of the year. And as we do that, we'll announce that on these falls.

Perfect.

Thank you. Thank you.

We have no further questions. So this concludes our question and answer session. I'll turn it back over to Max Schuessler for any closing remarks.

Thank you. I want to thank everybody for joining the call, and we look forward to seeing you this summer at several investor events. Have a great night.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.