Evertec, Inc.

Good afternoon, everyone, and welcome to Evertech's fourth quarter and full year 2022 conference call. Today's conference call is being recorded. At this time, I would like to turn the call over to Kevin Hunt of Investor Relations. Please go ahead.

Thank you, and good afternoon. With me today are Max Scherzler, 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 Mac.

Thanks, Kevin, and good afternoon, everyone. We are pleased to announce strong fourth quarter and full year results, especially against the backdrop of more difficult comparisons because of federal funds that positively impacted the prior year. I will start today's call with a summary of our financial results and business highlights for 2022. Next, I will move to a discussion of our Puerto Rico results and current environment, followed by a discussion of our Latin America businesses, and conclude with some areas of focus for Evertech in 2023. I will then turn the call over to Joaquin, who will provide some additional details on our Q4 and full year results, as well as our outlook for 2023. Beginning on slide four, let's start with some highlights from our 2022 results. We delivered a record $618 million in revenue for the year. a 5% increase over prior year, exceeding our expectations despite some growth headwinds in the second half of the year following the completion of the popular transaction. We finished the year strong with fourth quarter revenue of $162 million, a 4% year-over-year increase. Our LATAM revenue growth of 23% in the fourth quarter and 21% for the year was particularly encouraging. Adjusted EBITDA for 2022, of $270 million was down approximately 9% when compared with the prior year, driven by the impact of the popular transaction as well as the effect of non-cash foreign currency remeasurement losses. 2022 adjusted EPS of $2.42 was down 12% year-over-year. For the quarter, adjusted EBITDA was approximately $68 million and adjusted EPS was $0.65, mostly in line with our expectations. I will conclude this slide with some cash flow highlights. In 2022, we continued to generate significant operating cash flow, $223 million for the year, and returned cash to shareholders at record levels, approximately $14 million through dividends and $97 million through share repurchases, including $24 million in the fourth quarter. Additionally, our liquidity remained strong at $371 million as of December 31st. Turning now to Puerto Rico on slide five. We are pleased with the strong growth, especially given that we saw diminishing benefits from federal funds as the year progressed. In the fourth quarter, merchant acquiring revenue was $40 million, up approximately 8% year-over-year, driven by a strong holiday season that translated into higher sales volume and spread. Payments to Puerto Rico revenue increased $6 million, or 14% year-over-year, driven by an overall increase in POS transactions and ATH mobile business, which continues to be a big driver of segment growth. We also benefited from the tuck-in acquisition completed in the second quarter of 2022. Business Solutions revenue was down approximately 9% year-over-year due primarily to the assets sold mid-year as part of the popular art transaction. Finally, a few comments about the macro environment. Like the rest of the world, inflation in Puerto Rico remains elevated at an estimated 6% in December 2022, slightly lower than what the U.S. has experienced. It is worth noting that some of our businesses, like merchant acquiring, provide natural offsets in an inflationary environment, while in others we are able to push through price increases. We also continue to control costs and shift headcount towards Latin America to manage the impact of inflation. Other macro indicators, like the Economic Activity Index, have begun to moderate somewhat as we anniversary the 2021 federal COVID-related stimulus. Recent analysis indicates that Puerto Rico received 50% less federal funds in 2022 compared to 2021, mainly as a result of COVID-related funds estimated to have fallen to approximately $3.8 billion in 2022 compared with $17.4 billion in 2021. On a positive note, overall federal stimulus funds to Puerto Rico are anticipated to be fairly flat in 2023 compared to 2022. On the tailwind side, the employment picture remains strong, with the unemployment rate trending down throughout 2022 to levels not seen in decades. As it relates to tourism, airline passengers were up 6.5% in 2022 over 2021, accelerating during the months of November and December. While there are certainly some economic headwinds, we feel the overall macro backdrop in Puerto Rico remains supportive of growth for Evertech as we enter 2023. Turning to Latin America highlights on slide six, Fourth quarter revenue was up 23% year over year. We continue to benefit from strong organic growth across the region with both new and existing customers. For example, this quarter, Santander contributed incremental growth with our risk monitoring service. And in Brazil, we saw a positive contribution from new services to Alelo. During the quarter, we also secured business wins that will contribute in 2023, including a new deal with SumUp in Chile for issuing services that is already in production. Additionally, we were able to renew a key relationship in Central America with Banco de Costa Rica. This represents an important renewal with one of our longest standing relationships in Latin America and demonstrates our ability to retain key clients, which are so important as we continue to focus on expanding in the region. Finally, growth in LATAM also benefited from the BBR transaction completed at mid-year. Finally, on slide seven, I would like to highlight some 2022 business accomplishments that place Evertech in a strong position for growth in 2023 and beyond. I have already mentioned the popular transaction, a major milestone for Evertech, which strengthened the relationship with our largest customer, offering us up to pursue M&A more aggressively. We also expanded relationships with key customers in LATAM, including moving with MercadoLibre from Mexico into Chile and from Chile to Uruguay with GetNet. On the capital deployment front, we completed two tuck-in acquisitions during 2022, one in Puerto Rico and one in Latin America, and we continue to explore other opportunities to fuel growth. In fact, today we announced that we have signed and closed on the acquisition of PaySmart in Brazil. PaySmart provides issuer processing services and bid sponsorship services for prepaid programs under domestic and international schemes in Brazil. With over 100 customers, PaySmart accelerates our expansion in Brazil and complements our existing product offering in this important market. I would like to conclude by highlighting some areas of focus for Evertech in 2023. We continue to be committed to a high-quality, diverse workforce, and we are proud to have been named to Bloomberg's Gender Equality Index for the fifth consecutive year, placing us among the many global leaders who value and demonstrate this commitment to diversity. We also remain committed to our shareholders as demonstrated by the approximately $110 million we returned to shareholders in 2022 via dividends and share repurchases. Our top priorities in 2023 will be funding organic growth opportunities with product development, as well as inorganic opportunities through the pursuit of M&A. We also view repurchasing Evertech stock as a good return for our shareholders, and we expect to remain active in that area in 2023 when we have excess cash. I'll now turn it over to Joaquin.