EVERTEC, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Leadership Transitions: Joaquin Castrillo promoted to Chief Operating Officer, Karla Cruz-Jusino promoted to CFO from Chief Accounting Officer.
• Cybersecurity Incident: Unauthorized activity in Sinqia's PIX environment in Brazil was detected, contained, and systems are now operational. Funds mostly recovered, incident isolated to PIX system in Brazil.
• Third Quarter Results: Revenue $228.6 million, 8% YoY growth; constant currency revenue $227.9 million, 8% growth; Adjusted EBITDA $92.6 million, 6% YoY growth; Adjusted EPS $0.92, 7% YoY growth.
• Puerto Rico Business: Merchant Acquiring grew 3% YoY; Payment Services grew 5% YoY; Business Solutions grew 1% YoY; favorable economic conditions in Puerto Rico.
• Latin America Business: Revenue increased 19% YoY (18% constant currency) driven by organic growth, acquisitions (Grandata, Nubity), and key wins (Banco de Chile, Financiera Oh); Tecnobank acquisition closed in October strengthening Brazil presence.

Segment Performance

• Merchant Acquiring: Net revenue increased approximately 3% year-over-year to $46.8 million. Adjusted EBITDA was $18.6 million with an adjusted EBITDA margin of 39.8%.
• Payment Services, Puerto Rico and Caribbean: Revenue in the quarter was $55.2 million, an increase of approximately 5% from the prior year. Adjusted EBITDA was $29.9 million, up approximately 5% from the prior year, and adjusted EBITDA margin was 54.1%.
• Latin America Payments & Solutions: Revenue in the quarter was $90.4 million, up approximately 19% year-over-year or approximately 18% on a constant currency basis. Adjusted EBITDA was $24.4 million, an increase of approximately 18% from the prior year with an adjusted EBITDA margin of 27%.
• Business Solutions: Revenue increased approximately 1% to $61.7 million. Adjusted EBITDA was $25.1 million, a decrease of approximately 2% from a year ago, and adjusted EBITDA margin was down approximately 100 basis points from the prior year to 40.7%.

Guidance

• 2025 Outlook: Revenues expected between $921 million and $927 million (+8.9%-9.6% growth); constant currency growth 10%-11%; Adjusted EPS growth 8.5%-10.4%; Adjusted EBITDA margin ~40%.
• Segment-Specific Expectations: Merchant Acquiring: mid-single-digit growth; Payment Services Puerto Rico and Caribbean: mid-single-digit growth; Latin America Payments and Solutions: high teens growth (partially offset by foreign currency headwinds); Business Solutions: low single-digit growth (impacted by 10% discount to Popular).

Risks

• Cybersecurity: Isolated incident in Brazil's PIX system, though contained, could have potential indirect impacts if not managed properly.
• Puerto Rico Government Shutdown: Potential impact on welfare-funded programs (NAP, SNAP) which could affect business if funding is disrupted.
• Foreign Currency: Headwinds in Latin America, particularly in Brazil, affecting revenue growth on a reported basis.

Question and Answer

Q: Congratulations, Joaquin and Karla, on your respective promotions. Also, in terms of LatAm, up 19% YoY. Any perspective on product scalability and mind share gained?

A: Morgan Schuessler stated that EVERTEC's products are scalable across LatAm, with wins like Banco de Chile and Financiera Oh demonstrating this, and the Sinqia deal aiding in further acquisitions like Tecnobank.

Q: About CPI and cost of living adjustments, what's the contribution typically?

A: Karla Cruz-Jusino explained the CPI for September was 3%, capped at 1.5% for MSA agreement and 2.5% for ATH processing agreement with Popular, with changes in 2026 allowing increases above 2% capped at 2%.

Q: Potential cross-sell opportunities between Tecnobank and Sinqia?

A: Morgan Schuessler mentioned significant cross-sell opportunities as Tecnobank customers can use other EVERTEC products and vice versa.

Q: Impact of government shutdown on Puerto Rico business?

A: Joaquin Castrillo noted no direct impact so far, but monitoring closely as welfare-funded programs could be affected if funding is disrupted, though funded through November.

Q: Security incident in Sinqia, any adverse impact on business momentum?

A: Morgan Schuessler stated no adverse impact on commercial business, as it was ring-fenced to 2 banks, which were worked through, and no impact on pipeline or momentum.

Q: Margin trends and capital allocation?

A: Joaquín Castrillo said margins were in line with expectations, and Morgan Schuessler mentioned evaluating capital allocation including potential M&A and stock buybacks considering stock price and pipeline.