EVERTEC, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Revenue and Earnings: Second quarter revenue was $230 million, an 8% increase over the prior year; constant currency revenue was approximately $233 million, up 10%. Adjusted EBITDA increased to $93 million, up approximately 8% year-over-year, and adjusted EPS was $0.89, up 7% year-over-year.
• Puerto Rico Update: Merchant Acquiring revenue grew 4% Y/Y, Payment Services Puerto Rico +4% Y/Y (ATH Móvil +17% Y/Y), Business Solutions +4% Y/Y. Stable economic conditions in Puerto Rico with low unemployment and strong airport passenger traffic.
• Latin America Update: Revenue +15% Y/Y (20% constant currency) due to organic growth and acquisitions (Grandata and Nubity). Pipeline active, confident in converting opportunities.
• Share Repurchase: Board approved a refresh of share repurchase program, authorizing up to $150 million of shares through Dec 31, 2026.

Segment Performance

• Merchant Acquiring: Net revenue increased approximately 4% year-over-year to $47.3 million. Adjusted EBITDA was $20 million with an adjusted EBITDA margin of 42.3%.
• Payment Services Puerto Rico and Caribbean: Revenue in the quarter was $56.4 million, an increase of approximately 4% from the prior year. Adjusted EBITDA was $33 million, up approximately 5% from the prior year, and adjusted EBITDA margin was 58.5%.
• Latin America Payments & Solutions: Revenue in the quarter was $86.1 million, up approximately 15% year-over-year or approximately 20% on a constant currency basis. Adjusted EBITDA was $23.3 million, an increase of approximately 33% from the prior year, with an adjusted EBITDA margin of 27.1%.
• Business Solutions: Segment revenue increased approximately 4% to $64.5 million. Adjusted EBITDA was $26 million, down approximately 13% from a year ago, and adjusted EBITDA margin was down approximately 750 basis points from the prior year to 40.3%.

Guidance

• 2025 revenue expected between $901 million and $909 million, representing growth of 6.6% to 7.6%. Constant currency revenue growth 7.8% to 8.7%.
• Adjusted EPS expected to grow between 4.8% and 7%, higher than previous assumption. Adjusted EBITDA margin 39.5% to 40.5%, effective tax rate 6% to 7%.
• Segment-wise: Merchant Acquiring mid-single-digit growth; Payments Puerto Rico low-mid single-digit; Latin America low double-digit (low-mid teens constant currency); Business Solutions low single-digit.

Risks

• Potential tariffs in Latin American countries, though no direct impact on results yet.
• Foreign exchange headwinds, particularly in Brazil.
• Impact of the 10% discount to Popular MSA services in Business Solutions starting in Q4 2025.

Question and Answer

Q: Vasu Govil asked about Sinqia initiatives.

A: Mac Schuessler discussed Sinqia modernization, repricing to improve margins, and margin optimization through customer-focused technology modernization.

Q: Nate Svensson asked about pipeline and ATH Móvil.

A: Mac Schuessler mentioned an active organic pipeline with potential announcements, and Joaquin Castrillo-Salgado talked about ATH Móvil's 17% growth driven by usage in Puerto Rico's economy.

Q: Christopher Nathaniel Svensson asked about pipeline areas and tariff impact.

A: Mac Schuessler stated no impact from tariffs on demand, with long-term technology upgrade decisions driving pipeline, and Joaquin Castrillo-Salgado discussed segment-specific guidance and impact of acquisitions and discounts.

Q: John Davis asked about M&A pipeline.

A: Mac Schuessler said balance sheet is in good shape, with active M&A pipeline and focus on strategic deals in regions like Mexico, Colombia, etc.

Q: James Friedman asked about competitive advantage in Latin America.

A: Mac Schuessler cited technology, industry expertise, presence in local markets, compliance capabilities, and on-ground workforce as competitive advantages.

Q: Unidentified Analyst asked about Merchant Acquiring consumer spend trends.

A: Joaquin Castrillo-Salgado mentioned no significant changes in consumer spend trends beyond gas price impact on sales volume.