Evertec(EVTC) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for 2020 was approximately $511 million, up 5% compared to 2019, exceeding initial expectations [9] - Adjusted EBITDA for the year was $240 million, an increase of 6% [9] - Adjusted earnings per share were $2.07, also up 6% [9] - For Q4 2020, total revenue was $134.2 million, up 6% from $127.2 million in the prior year [32] - Adjusted EBITDA for Q4 was $63.9 million, a 16% increase from $55.3 million in the prior year [33] - Adjusted net income for Q4 was $42.8 million, up 23% compared to the prior year [34] Business Line Data and Key Metrics Changes - Merchant Acquiring revenue increased 8% year-over-year to approximately $29.3 million in Q4, driven by higher sales volume and increased spread [37] - Payment Services - Puerto Rico & Caribbean segment revenue was $34.1 million in Q4, up 5% year-over-year, benefiting from digital transaction growth [41] - Payment Services - Latin America revenue was approximately flat at $22 million in Q4, impacted by anticipated penetration and negative effects on year-over-year growth [45] - Business Solutions revenue increased 6% to $60.5 million in Q4, benefiting from CPI increases and COVID-related services [49] Market Data and Key Metrics Changes - In Puerto Rico, unemployment levels have improved since the pandemic began, but remain significantly higher than prior years [15] - The federal stimulus payments supported an increase in sales lines in Q4, although transactions were down compared to the prior year [16] - In Latin America, Q4 revenue was flat year-over-year due to the ongoing impact of COVID-19 [23] Company Strategy and Development Direction - The company anticipates benefiting from the consolidation in the banking industry in Puerto Rico, which is expected to positively impact merchant segment growth rates [11] - There is a focus on digital transactions, with plans to launch a new mobile app for electronic benefit users [13] - The company aims to shift from a licensing model to a processing model to grow with payment transaction trends and expand recurring revenue [28] - Acquisitions will continue to be important for growth, leveraging a strong local presence and financial capacity [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth opportunities in Puerto Rico and Latin America, driven by the transition from cash to digital payments [24] - The company expects revenue growth in 2021 to be in the range of $533 million to $544 million, representing a 4% to 7% increase [58] - The first half of 2021 is anticipated to see strong revenue growth due to stimulus programs, while the second half may be flat to down [60] Other Important Information - The company generated significant operating cash flow of $199 million and had a liquidity of $320 million as of December 31, 2020 [10][56] - The company returned approximately $22 million to shareholders through stock buybacks and dividends [10][55] - The company was included in the Bloomberg Gender Equality Index for the third consecutive year, highlighting its commitment to diversity [29] Q&A Session Summary Question: Pipeline for additional deals in Latin America - Management noted a strong pipeline of organic deals in Latin America, with recent implementations including Citibanamex and Mercado Libre [70][71] Question: Capital strategy and M&A pipeline - Management emphasized a focus on appropriate capital allocation and ongoing evaluation of M&A opportunities, while also investing in organic growth [75][76] Question: Inactive merchants and sales improvement - The number of inactive merchants has returned to pre-pandemic levels, with sales improvements being broad-based across various verticals [86] Question: Growth in Business Solutions segment - Management indicated that specific projects, such as the Department of Education contract, have driven faster growth in the Business Solutions segment, but future growth may revert to low-single digits [88] Question: Expansion of ATH Movil product outside Puerto Rico - While the ATH Movil product has not been sold extensively outside Puerto Rico, management is exploring opportunities and expanding product offerings in other regions [90]