Evertec, Inc.

Good afternoon, everyone, and welcome to the Evertech second quarter 2024 earnings conference call. Today's conference call is being recorded. At this time, I would like to turn the conference over to Ms. Beatrice Brown-Signs of Investor Relations. Please go ahead, ma'am.

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 the call over to Max.

Thanks, Beatriz, and good afternoon, everyone. We're pleased to announce second quarter results that reflect solid revenue growth across all our segments and strong overall margins. Revenue continues to benefit from strong transactional growth in Puerto Rico and Latin America, complemented by the contribution from the Syncia acquisition, as well as higher-than-expected revenue in our Business Solutions segment. I will begin today's call with a summary of our second quarter 2024 financial results, followed by a discussion of our Puerto Rico segments, and concluding with an update on Latin America, including progress we are making with Sync in Brazil. I will then turn the call over to Joaquin, who will provide additional details on both our Q2 results and our updated 2024 outlook. Beginning on slide four, let's start with some highlights from our second quarter results. We reported $212 million in revenue, a 27% increase over the prior year. Revenue growth in our Puerto Rico payment segment was driven by strong sales volume growth, improved net spread, and continued growth in ATH and ATH mobile business. Latin America revenue benefited from the CINCIA contribution, as well as continued organic growth across the region. Business Solutions revenue benefited from a one-time impact from a project in the quarter. Adjusted EBITDA for the quarter was $86.1 million, up approximately 16% when compared with the prior year, driven largely by the revenue increase and the effect of the CINCIA acquisition. Adjusted EBITDA margin was 40.6%, down from a year ago, driven by the lower margin profile of the CINCIA business. However, the margin was above last quarter due to the revenue growth driven by the payment segments and the effect of the one-time impact in business solutions. Adjusted EPS for the quarter was $0.83, up 17% year-over-year and above our expectations, with a higher revenue, strong margins, and lower-than-expected tax rate all contributing to the upside. EPS was partially offset by higher operating depreciation and amortization expense and higher cash interest expense as a result of the incremental debt raised for the CINCIA acquisition. We continue to actively manage our cost of debt, and as announced back in May, we completed the successful repricing of our term loan B, which was leveraged neutral and effectively reduced our interest rate by 25 basis points. We are pleased with the resulting future interest cost savings and believe this reflects the high confidence level that debt holders have in Evertec. We generated operating cash flow of approximately $131 million during the first half of the year, and we returned significant cash to shareholders, approximately $6 million through dividends and $70 million through the accelerated share repurchase program. We completed the ASR on July 9 and retired a total of approximately 1.9 million shares through the program. Our liquidity remains strong at $452 million as of June 30th. Turning now to our Puerto Rico update on slide 5. Just like in the first quarter, all of our Puerto Rico segments generated strong growth. Merchant acquiring led the way with approximately 10% growth on a year-over-year basis, benefiting from sales volume growth and a higher spread. Payments Puerto Rico revenue grew approximately 7% year-over-year. The business solution segment delivered strong performance, up approximately 9% year-over-year, due mainly to the one-time revenue impact to the segment, which was 100% margin accretive. The Puerto Rico macro environment continues to be supportive for Evertech as we move through 2024. As we have noted on other calls, there continues to be a significant amount of federal funds committed, and we're beginning to see the disbursement of these funds accelerate. The employment picture remains strong, with total employed up 1.8% year-over-year and the unemployment rate at 5.8%, still near the lows of the past decade. Tourism remains a positive factor, with arrivals to the International Airport in San Juan approximately 18% year-to-date, and non-resident hotel registrations are up 4.4% year-over-year through April. In sum, the macro backdrop continues to be supportive of continued organic growth for Evertech. Turning to Latin America on slide six, LATAM revenue was up 91% year-over-year in the quarter with the acquisition of Syncia being the major driver of growth. and we continue to see organic growth from our legacy business that remains in line with historical growth trends. In Brazil, we have seen some softness in the software market that has impacted Syncia as well as other technology providers. However, we continue to focus and have made progress on the five areas that we laid out last quarter, which we are confident will increase Syncia's growth rate. We continue to be excited by the prospects of this business. As we interact with more clients, the strength of Syncia's position in the market and the strength of their franchise remains clear. Additionally, we are starting to see progress from the combination of Evertech and Syncia as conversations with clients, both new and existing, begin to get broader in terms of potential service offerings that include Evertech assets, which is also encouraging. Let me conclude by emphasizing that we are very pleased with the overall performance we delivered in the first half of the year. We remain enthusiastic about our long-term prospects throughout Latin America and believe the Puerto Rico economy will continue to support our growth in this market. With that, I will now turn the call over to Joaquin.