Evertec, Inc.

Good afternoon, everyone, and welcome to the Evertech's first quarter 2023 earnings 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 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 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 website at www.evertechinc.com. I'll now hand over the call to Mac.

Thank you, and good afternoon, everyone. We delivered strong first quarter results, which benefited from both increased sales volume and transactions, as well as contributions from acquisitions, a testament to the strength of our business model. 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 raising our guidance for 2023. Before I begin with a summary of our financial results, I would like to highlight that we are revising our adjusted EBITDA calculation to exclude the effect of non-cash, unrealized gains and losses from foreign currency remeasurement. This will better present the overall financial performance of our core business and facilitate comparison with industry peers, while also aligning to our credit agreement definition of adjusted EBITDA. This change will also translate to changes in our adjusted net income and adjusted EPS metrics. For clarity and comparability, we have recast prior period numbers to conform to this revised calculation. Beginning on slide four, total revenue is approximately $160 million for the first quarter, an increase of 6% compared to the first quarter of 2022. Adjusted EBITDA was approximately $67 million, a decrease of 8% when compared with a prior year recast amount of $73 million. Adjusted EBITDA margin was 42%, in line with our expectations, and adjusted earnings per share was 69 cents, an increase of 5% from the prior year quarter's recast adjusted EPS of 66 cents. We generated operating cash flow of $55 million and we returned approximately $10 million to our shareholders through dividends and share repurchases. Additionally, our liquidity remained strong at $368 million as of March 31st. Moving on to our Puerto Rico update on slide five. We experienced strong growth in both merchant acquiring and payment processing with business solutions down as expected due to the impact of the popular transaction. Merchant acquiring revenue was up 13% year over year driven by sales volume increases, mix of cards, and pricing initiatives. Payments Puerto Rico was up 21% year-over-year, with strength coming from POS processing, as transactions grew 11% year-over-year, and ATH Mobile, which continues to drive growth for the segment, as well as contribution from the small acquisition completed last year and their anniversary Q2. Our business solutions segment revenue was down 11% year-over-year, as expected, due primarily to the business sold as part of the popular transaction. We are pleased to announce that we have extended our issuing relationship with Oriental for an additional seven years, which provides further proof of the strength of the ATH network with key institutions on the island. Oriental has been a long-term partner of the ATH network, one of the top three financial institutions in Puerto Rico, and will now continue to issue ATH branded cars through 2030. With this extension, we have now extended issuing relationships over the medium term with the top three banks in Puerto Rico. Finally, a few comments on the macro environment in Puerto Rico. While the overall backdrop remains positive, the economic data has clearly begun to moderate on many fronts. The unemployment rate remained at 6% in the first quarter, still at the lowest level in decades, but largely unchanged from the fourth quarter of 2022. The Economic Activity Index has begun to moderate, with an increase in January at less than 1%, and a reduction in February of approximately 20 basis points when compared to the prior year. On a positive note, travel and tourism continue to recover, with total airline passengers up 9.3% year-over-year in March. But on the negative side, auto sales in the month of March were down 4% from a year ago. So while we remain optimistic about our own business, we are not assuming significant tailwinds from the overall economy. Turning now to Latin America on slide six. LATAM revenue was up 23% year-over-year in the quarter. We continue to experience strong organic growth and revenue contribution from the BBR acquisition completed in the third quarter last year. And this quarter, we also had a partial contribution from the PaySmart acquisition that we announced in February. I'm also pleased to announce another key business win with an important partner in LITAM that further strengthens our strategy in the region. We have expanded our relationship with MercadoLibre to process their issuance of credit cards in Mexico. Recall that we currently process debit cards for MELI in Mexico and more recently in Chile. We expect this new business to ramp over the next few quarters with a more meaningful contribution in 2024 and beyond. Finally, aligned with our focus on capital deployment, I'm pleased to have welcomed Alberto Lopez Gaffney as Executive Vice President of Corporate Development. Alberto joined us in March and his hiring further demonstrates our commitment to our strategic objective of continuing to diversify the company and execute on M&A as a key driver of both growth and diversification. With that, I will now turn it over to Joaquin to provide a more in-depth look at our first quarter results and our increased outlook for 2023.