Evertec, Inc.

Good afternoon, everyone, and welcome to Evertech's fourth quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please sit to a conference specialist for 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, then one on your touchtone phone. To address your question, please press star, then two. Today's conference call is being recorded. At this time, I'd like to turn the call over to Beatriz Brown-Signs 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 reports. 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 the call over to Matt.

Thanks, Beatrice, and good afternoon, everyone. We're pleased to announce another record year of results as revenue continues to benefit from strong organic growth across most markets, complemented by the contribution from acquisitions, including the CINCIA deal that closed during the fourth quarter. I'll begin today's call with a brief summary of our 2023 financial results, followed by a discussion on the Puerto Rico environment, an update on Brazil, and finally, some comments about our focus for CINCIA in 2024. 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 2024. Beginning on slide four, let's start with some highlights from our full year 2023 results. We delivered a record $695 million in revenue, a 12% increase over the prior year. And while some of the growth was driven by the closing of Syncia, revenue excluding the acquisition also exceeded our expectations. Our lifetime revenue was up nearly 45% with growth in the high teens, excluding M&A. Increased sales and transaction volumes benefited both our Payments Puerto Rico and Caribbean segment and our Merchant Acquiring segment. Payments Puerto Rico revenue grew approximately 14% year-over-year, reflecting continued strong digital payments growth, primarily from ATH mobile business, while Merchant Acquiring grew approximately 7% on a year-over-year basis, benefiting from sales volume growth and pricing initiatives. The business solution segment was down modestly year over year, as expected, mainly due to the impact in the first half of 2023 from the popular transaction completed in 2022. Adjusted EBITDA for the year was $292 million, up approximately 6% when compared with the prior year. Driven by the revenue increase, partially offset by the full year effect of the popular transaction, and an increase in operating expenses. Adjusted EPS for the year was $2.82, up 11% year-over-year and in line with our expectations. In 2023, we continued to generate significant operating cash flow, $224 million for the year, and we returned significant cash to our shareholders, approximately $13 million through dividends and $36 million through share repurchases, including approximately $12.5 million in the fourth quarter. Additionally, our liquidity remains strong at $490 million as of December 31st. Turning to slide five, the Puerto Rico macro environment continues to be supportive for Evertech as we look to 2024. Overall conditions in Puerto Rico remain stable with the economic activity index increasing 6% over the past two years, reaching its highest level in a decade. The labor participation rate is at the highest rate since 2010, well above the average of the past seven years, and the number of employed is at the highest level since 2009. Additionally, arrivals to the International Airport in San Juan are above pre-COVID-19 levels, positively impacting tourism on the island. Commercial and individual bank deposits remain elevated, similar to pandemic levels, as the higher labor participation has contributed to offset the lack of incremental stimulus funds. On prior calls, we have spoken about the various sources of federal stimulus coming into Puerto Rico. Turning to slide six, the latest data we have seen indicates that COVID stimulus was approximately 49% of Puerto Rico's GDP, the highest ratio when compared to any individual state in the US. Additionally, there's still a significant amount of reconstruction funds that have yet to be received. Of the $33.7 billion pledge, only about $8.6 billion, or approximately 26%, has been received. with the electric grid reconstruction funds being the largest portion pending to be dispersed. As we can see on slide seven, in 2024, approximately $8 billion in federal funds are expected, consistent with what was received in 2023. Disaster relief remains the biggest anticipated source of funds. This fund inflow should largely benefit the construction sector. Lastly, on slide eight, I would like to highlight the manufacturing sector in Puerto Rico. as this segment has seen a boost in recent years. On the slide, we highlight some major investments coming from international companies based in Germany, India, and the US. These companies have either expanded operations or moved entire operations into Puerto Rico, and these investments should strengthen and broaden the economic base on the island going forward. To summarize, given what we've discussed, we believe economic conditions should continue to be supportive for Evertech in Puerto Rico as we move through 2024. Turning to Brazil on slide nine. As in Puerto Rico, we expect the macro environment in Brazil to be supportive of Evertech in 2024. The Brazilian economy was expected to slow substantially entering 2023, but instead exceeded the expectations of economists. GDP growth of 2.9% was well above expectations entering the year. Both inflation and interest rates moderated more than expected, and the unemployment rate also came down. Looking forward to 2024, the Brazilian unemployment rate is expected to remain steady at around 8%, with continued moderation in interest rates from 11.8% to 9%, and inflation from 4.5% to 3.8%. On slide 10, let me make some brief comments about PIX. PIX was launched by Brazil's central government in 2020, and today, over 85% of the bank population have registered for PIX. Given no transaction costs for consumers, PIX has a lower average ticket, making it very attractive for P2P use. Since launch, PIX has been the fastest growing payment method in Brazil. Today, PIX transactions exceed both credit and debit transactions. Syncia and PaySmart have been involved in PIX via partner relationships. The combination of Evertech and Syncia provides a more competitive offering where, with a PaySmart upgraded license, we can rely less on partners to deliver a better commercial offering. This is a good example of the scale benefits and synergy we can achieve with our increased presence in LATAM. Turning to slide 11. On November 1st, we closed on the acquisition of Syncia in Brazil. We have now been working for the past four months as an official part of Evertech, and we remain confident that Syncia will be a big part of Evertech's success going forward. I would like to start by highlighting five areas that will be a focus for us in 2024 as we continue to integrate Syncia into Evertech. The first area of focus is increasing our engagement level with our customers by prioritizing their needs and building deeper relationships. We work hard at Evertech to make sure that all our customers are satisfied with the service we provide and feel a high level of engagement with us. And we're committed to getting to know every single customer to make sure we are meeting their expectations and providing the highest level of service at every level. The second area will be technology modernization. Syncy has completed a number of acquisitions in recent years, which have added a significant number of platforms in each of the verticals with different levels of advancement. We're committed to building a strong product roadmap by modernizing product offerings while also consulting platforms over time to meet our customer needs. The third area of focus is revenue synergies, leveraging increased engagement with our customers and our product portfolio to cross sales. We highlighted this as a major opportunity when we announced the deal, and we remain committed to finding ways to export Stinkia products to other parts of LATAM while bringing Evertech products to Brazil. Our fourth area of focus is M&A. Stinkia has a distinct team with unique knowledge of the Brazilian market, which we will leverage to continue exploring inorganic growth opportunities. Finally, we will focus on margin optimization. Some of our client contracts have not been revisited in years, providing the opportunity for us to pursue pricing initiatives. At the same time, we will look for cost efficiencies. We believe these are areas that will provide benefits on a multi-year basis. Finally, on slide 12, we continue to sign new wins and extensions that should keep our strong organic momentum going in 2024 and beyond. We were able to renew our GetNet Chile acquiring relationship through 2027 and expanded our business with them to now include ATMs in Chile. We also renewed our relationship with Compensar, our largest customer in Bogota, and we brought on Sears as a new client in Mexico to our issuing platform. Let me conclude by highlighting capital allocation as a continued area of focus in 2024, as we continue to strive to provide the best returns to shareholders. With that in mind, We announced an accelerated repurchase program by which we aim to repurchase $70 million in shares, demonstrating our commitment to a balanced capital allocation approach. With that, I will now turn the call over to Joaquin.