Evertec(EVTC) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $228.8 million, an 11.4% increase year over year, with a currency headwind of approximately 3.3% [5][12] - Adjusted EBITDA was $89.4 million, up approximately 14% year over year, with an adjusted EBITDA margin of 39.1%, reflecting a 100 basis point increase from the previous year [5][12] - Adjusted EPS was $0.87, a 21% increase year over year, driven by strong adjusted EBITDA growth and lower interest expenses [6][13] - Operating cash flows generated were approximately $37.6 million, with liquidity remaining strong at approximately $460 million as of March 31 [6][20] Business Line Data and Key Metrics Changes - Merchant Acquiring revenue grew 11% year over year to $47.6 million, benefiting from higher spreads and sales volume growth [14] - Payments Puerto Rico revenue increased by 4% to $55.2 million, driven by ATH Mobile and higher POS transaction volumes [15] - Latin America Payments and Solutions revenue rose 13% year over year to $83.8 million, or 22% on a constant currency basis, with double-digit organic growth [16] - Business Solutions revenue increased approximately 13% to $65.6 million, primarily due to projects completed in the previous year and nonrecurring hardware and software sales [17] Market Data and Key Metrics Changes - The Puerto Rico economy remains stable, with total employment increasing and an unemployment rate near 5.5% [7] - In LATAM, revenue grew 13% year over year, with organic growth driven by the GETNA Chile relationship and a reacceleration in Brazil [8][16] - Currency fluctuations, particularly the devaluation of the Brazilian real, presented a 9% headwind in LATAM revenue [16] Company Strategy and Development Direction - The company continues to focus on M&A as a key part of its strategy, with a robust pipeline of potential acquisitions [31] - The company is optimistic about its ability to navigate through macroeconomic uncertainties and is closely monitoring potential impacts on its business [25] Management's Comments on Operating Environment and Future Outlook - Management noted strong consumer confidence contributing to performance, particularly in Merchant Acquiring and LATAM segments [29] - The company expects constant currency revenue growth for 2025 to be between $903 million to $911 million, representing a growth of 6.8% to 7.7% year over year [21] - Management acknowledged potential headwinds from customer attrition, particularly with MercadoLibre, impacting future performance [22] Other Important Information - The company paid down approximately $11.6 million in debt and returned $3.2 million to shareholders through dividends during the quarter [19] - The net debt position at quarter end was $704 million, with a net debt to trailing twelve-month adjusted EBITDA ratio of approximately 2.04 times [20] Q&A Session Summary Question: Revenue performance and outperformance relative to expectations - Management indicated that all segments outperformed original expectations, particularly in Merchant Acquiring and LATAM, driven by strong consumer confidence and volume growth [29] Question: M&A strategy and positioning - Management confirmed a focus on M&A, with a robust pipeline and ongoing interest in acquiring sizable assets [31] Question: Performance in Brazil and Chile - Management noted that Brazil's growth is back within expectations due to leadership changes and specific initiatives [36] Question: Economic monitoring in LATAM - Management highlighted Brazil as a significant focus due to currency fluctuations and potential economic impacts [38] Question: GetNet Chile partnership progress - Management confirmed that the GetNet partnership is fully rolled out and performing well, contributing to strong segment growth [43] Question: Merchant margins and future trends - Management explained that while margins increased due to pricing actions and transaction types, they expect pressure on margins moving forward [51] Question: Impact of MercadoLibre exit - Management indicated that the impact of MercadoLibre's exit will not be fully felt until Q3, with partial effects in Q2 [54] Question: Relief funds from previous hurricanes - Management confirmed that relief funds are continuing to flow through and positively impacting economic conditions in Puerto Rico [56]