Evertec, Inc.

Good afternoon, everyone, and welcome to the Evertech second quarter 2022 earnings conference call. Today's conference call is being recorded. At this time, I would now like to turn the call over to Mr. 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 will now hand over the call to Mac. Thanks, Kevin, and good afternoon, everyone.

We are pleased with our second quarter results in both Puerto Rico and LATAM, driven by strong revenue growth. Puerto Rico benefited from increased transaction volumes and one-time revenue, while LATAM continues to benefit from organic transactional growth. We were also able to close both the Popular transaction and the BBR acquisition on July 1st, in line with our previously announced expected timing. And I want to thank the whole team who worked tirelessly to get these transactions to completion. 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 second quarter results, a review of the impact from the Popular transaction, and an update to our outlook. Beginning on slide four, total revenue was $161 million for the second quarter, an increase of approximately 8% compared to the second quarter of 2021. Adjusted EBITDA was $73 million, a decrease of approximately 9%. And adjusted earnings per share was 65 cents, a decrease of approximately 17% from the prior quarter. During the quarter, we returned approximately $18 million to our shareholders through dividends and share repurchases, an increase of $14 million when compared with the prior year. Additionally, our liquidity remained strong at $404 million as of June 30th. Moving to our Puerto Rico update on slide five. Merchant acquiring revenue increased slightly when compared with a year ago and in line with our expectations. Last year's second quarter was heavily impacted by COVID stimulus that did not repeat in the current period, resulting in lower sales volume during the quarter. However, we were able to offset this headwind with select pricing actions. Payments Puerto Rico benefited from increased POS transaction volumes, up 6% year-over-year, as well as continued strong growth from ATH Mobile and ATH Business, and an increase in issuing services for Medicare healthcare providers in Puerto Rico. The segment also benefited from a small token acquisition completed at the beginning of the quarter that allows us to process payments for government services in Puerto Rico. We expect these will continue to grow as the government continues to modernize its services and shifts towards digital payments. This further demonstrates our commitment to use our balance sheet for growth through acquisitions and our willingness to execute when opportunities arise. Our business solutions segment revenue increased approximately 7% year over year. Revenue in the quarter benefited from the printing contract discussed on prior calls, as well as contribution from one-time software sales in the Dominican Republic. We also benefited from higher volumes in certain services to Popular and the 5% CPI clause in our MSA with Popular, which will be credited in the third quarter now that the transaction is closed. Finally, a few comments on the macro environment in Puerto Rico. The unemployment rate has dropped to 6.6%, in 2022, down from 8.1% in 2021, and this is the lowest unemployment rate in Puerto Rico in over 60 years. The overall economic activity index continues to trend higher, up 3.5% year-over-year in the month of April, to a six-year high. And finally, travel and tourism continues to recover, with average hotel occupancy rates at 61%, up from 54% in 2021. So even though we are not shielded from broader macroeconomic challenges, we expect that we will benefit from the continued strengthening of the Puerto Rico economic environment. Turning now to Latin America on slide six. Latam revenue was up nearly 19% compared to the prior year. We continue to experience strong organic growth from our existing customer base with a healthy pipeline of new opportunities. We continue to grow in countries where we have had a presence for many years, like Costa Rica, while accelerating growth in countries where we have entered into more aggressively in the past few years, such as Chile and Mexico. Mexico is worth calling out, with very high double-digit growth in the quarter, albeit off a smaller base when compared to some of our other LATAM countries. Next, let's turn to slide seven to cover a few additional items. We are very pleased to have closed the Popular transaction on July 1st. We have worked hard to strengthen our relationship with Popular over the years, We are excited that Popular will remain a strategic customer for Evertech for many years into the future, and we look forward to growing our business with the bank. Recall that we extended our merchant acquiring contract with the bank through 2035. We extended our ATH network agreement through 2030, and our master service agreement was modified and extended through 2028. We also sold certain assets back to Popular that are solely used by them and aligned to their customer experience initiatives and that don't conform to our long-term strategy. The completion of this transaction resets our relationship with Popular, creates a partnership with them to grow our payments business, and allows us to focus our resources on other high-growth products and segments. Joaquin will revisit some of the impacts from that transaction on our Puerto Rico segments in a few minutes. We look forward to the increased flexibility we will have once we are no longer deemed to be a subsidiary of Popular for purposes of the Bank Company Holding Act, allowing us to grow other aspects of our business particularly in Latin America. On that front, we are also pleased to have closed the BBR acquisition on July 1st, which expands our capabilities in Chile, as well as provides an entry for Evertech into Peru. We look forward to the contribution from BBR in the second half of 2022. In connection with the closing of these transactions, we have made some organizational changes that will better align with our long-term growth strategy, strengthening different areas of our organization and leveraging our executive team strength. With that, I will now turn it over to Joaquin to provide a more in-depth look at our second quarter results.