Evertec(EVTC) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - EVERTEC reported a record revenue of $590 million for 2021, representing a 16% year-over-year increase [6][35] - Adjusted EBITDA grew by 23% for the year, reaching $294.8 million, with an EBITDA margin of 50%, a 290 basis point increase from the previous year [37] - Adjusted net income for the year was $199.7 million, a 32% increase year-over-year, with adjusted EPS also increasing by 32% to $2.74 [37][35] Business Line Data and Key Metrics Changes - Merchant Acquiring revenue increased by 27% year-over-year to $37.2 million, driven by a return to normalized spending patterns [38] - Payment Services in Puerto Rico and the Caribbean saw revenue growth of 22% year-over-year, reaching $41.8 million, with POS transaction growth of approximately 18% [40] - Payment Services in Latin America reported a 29% revenue increase to $28.3 million, driven by new client implementations and organic growth [43] Market Data and Key Metrics Changes - The labor participation rate in Puerto Rico reached 44.2%, the highest level since 2010, indicating improved economic conditions [22] - Individual and commercial bank deposits in Puerto Rico increased by 41% over the past two years, from $42.2 billion to $59.6 billion, suggesting increased consumer spending potential [23] - Federal funding for Puerto Rico is expected to provide approximately $10 billion in stimulus, representing about 15% of the island's GNP, which should support economic growth [25] Company Strategy and Development Direction - EVERTEC has undergone a strategic transformation since 2015, focusing on service improvement, geographic expansion through M&A, and product development [9][10] - The company aims to strengthen its relationship with Banco Popular, extending key payment contracts and modifying agreements to incentivize growth [12][15] - The acquisition of BBR is expected to enhance capabilities in Chile and provide access to the Peruvian market, which presents further growth opportunities [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic environment in Puerto Rico and Latin America, highlighting improved economic indicators and the potential for future growth [21][28] - The company anticipates revenue growth in 2022 to range between $591 million and $600 million, with adjusted EPS expected between $2.47 and $2.56 [60] - Management acknowledged the impact of the Popular transaction on margins and revenue, projecting a decline in average ticket sizes and spreads as consumption behavior normalizes [62][66] Other Important Information - EVERTEC generated significant operating cash flow of $228 million in 2021 and returned approximately $39 million to shareholders through dividends and share repurchases [7][47] - The company has increased its buyback authorization to $150 million, providing flexibility for capital allocation [8] - The net debt position at year-end was $202.3 million, with a net debt to trailing 12-month adjusted EBITDA ratio of approximately 1.4x, down from 1.8x a year ago [48] Q&A Session Summary Question: Impact of the Popular transaction on EBITDA margin guidance - Management clarified that the EBITDA margin guidance of 44.5% to 45.5% includes the impact of the Popular transaction taking effect midyear [72][73] Question: Expectations for normalized EBITDA margin in 2023 - Management indicated that the normalized EBITDA margin would be assessed based on the impact of the Popular transaction and current run rates [77][78] Question: Dynamics affecting ticket size and yields - Management explained that the average ticket size is expected to normalize, impacting yields as travel restrictions ease and consumer behavior shifts [84][85] Question: Guidance on the Santander contract and minimums - Management confirmed that minimums on the Santander contract would benefit the company through 2022 and 2023 [82] Question: Variables affecting 2022 outlook - Management discussed the complexity of the Puerto Rico economic landscape, including federal funding and its impact on consumer spending [96][97]