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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 currency headwinds of approximately 3.3% [6][13] - 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 [6][14] - Adjusted EPS was $0.87, a 21% increase year-over-year, driven by strong adjusted EBITDA growth and lower interest expenses [7][14] - Operating cash flows generated were approximately $37.6 million, with liquidity remaining strong at approximately $460 million as of March 31 [7][22] Business Line Data and Key Metrics Changes - Merchant Acquiring revenue grew 11% year-over-year to $47.6 million, benefiting from improved spreads and increased sales volumes [8][15] - Payments Puerto Rico revenue increased by 4% to $55.2 million, driven by ATH Mobile and higher POS transaction volumes [9][16] - Latin America Payments and Solutions revenue grew 13% year-over-year to $83.8 million, or 22% in constant currency, with strong organic growth driven by the GETNA Chile relationship [10][18] - Business Solutions revenue increased by 13% to $65.6 million, primarily due to key projects and one-time hardware and software sales [19] Market Data and Key Metrics Changes - The Puerto Rico economy remains stable, with total employment increasing and an unemployment rate around 5.5% [9] - LATAM revenue grew 13% year-over-year, with organic growth driven by initiatives in Brazil and the GETNA Chile relationship [10][18] 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 [33] - The company is optimistic about its ability to navigate through macroeconomic uncertainties and is closely monitoring potential impacts on its business [26] Management's Comments on Operating Environment and Future Outlook - Management noted strong consumer confidence contributing to performance across segments, particularly in Merchant Acquiring and Latin America [30] - 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 [23] - Management acknowledged potential headwinds from customer attrition, particularly with MercadoLibre, impacting future performance [24] Other Important Information - The company has not seen material disruptions in any business segments but remains cautious about potential indirect impacts from tariffs and economic conditions in the countries served [11][12] - The adjusted effective tax rate for the quarter was 5.3%, aligning with expectations [14] Q&A Session Summary Question: Revenue performance and outperformance relative to expectations - Management indicated that all segments outperformed original expectations, with strong consumer confidence and volume growth contributing to the results [30] Question: M&A strategy and positioning - The company remains focused on M&A, with a robust pipeline and optimism about potential acquisitions [33] Question: Performance in Brazil and relative growth - Management noted that Brazil's growth is back within expectations, driven by leadership changes and specific initiatives [39] Question: Economic conditions in LATAM and potential monitoring - Brazil is highlighted as a significant area to monitor due to currency fluctuations and economic conditions [40] Question: GetNet Chile partnership and its impact - The GetNet partnership is fully rolled out, contributing to strong performance, with over 200,000 active merchants using the technology [49] Question: Merchant margins and future trends - Margins are expected to face pressure moving forward due to the lapping of pricing actions and a decline in average ticket size [56] Question: Impact of MercadoLibre exit on future quarters - The impact of MercadoLibre's exit will not be fully felt until Q3, with partial effects expected in Q2 [58] Question: Benefits from hurricane relief funds in Puerto Rico - Management expects continued flow of relief funds, contributing to economic resilience in Puerto Rico [61]