Earnings call transcript: Evertec’s Q4 2024 earnings beat expectations, stock rises

Evertec Inc . (NYSE:EVTC) reported its fourth-quarter and full-year 2024 financial results, surpassing analysts’ expectations. The company achieved an earnings per share (EPS) of $0.87, compared to the forecasted $0.72, while revenue reached $216.4 million, exceeding the anticipated $215.29 million. Following the announcement, Evertec’s stock rose 4.51% in aftermarket trading, reflecting investor optimism. InvestingPro data shows the company maintains strong fundamentals with a current ratio of 1.97, indicating robust liquidity. The company has also maintained consistent dividend payments for 13 consecutive years, demonstrating financial stability.

Key Takeaways

• Evertec’s EPS of $0.87 surpassed forecasts by 20.8%.
• Revenue for Q4 2024 was $216.4 million, slightly above expectations.
• The stock increased by 4.51% in aftermarket trading.
• Full-year 2024 revenue grew by 22% year-over-year.
• Evertec expanded its presence in Latin America, now contributing 33% of total revenue.

Company Performance

Evertec demonstrated strong performance in 2024, with a notable 22% year-over-year increase in revenue to $845.5 million. The company’s adjusted EBITDA rose by 17% to $340.2 million, maintaining a robust margin of 40.2%. This growth is attributed to strategic acquisitions and an expanding market presence in Latin America, which now accounts for a significant portion of its revenue.

Financial Highlights

• Full-year revenue: $845.5 million, up 22% YoY
• Adjusted EBITDA: $340.2 million, up 17% YoY
• Adjusted EPS: $3.28, up 16% YoY
• Operating cash flow: $260 million
• Shareholder returns: $95 million through dividends and share repurchases

Earnings vs. Forecast

Evertec’s Q4 2024 EPS of $0.87 beat the forecasted $0.72 by 20.8%, indicating strong operational performance. Revenue also exceeded expectations, coming in at $216.4 million against a forecast of $215.29 million. This positive surprise is consistent with the company’s historical trend of outperforming market predictions.

Market Reaction

Following the earnings release, Evertec’s stock rose 4.51% in aftermarket trading, closing at $33.80. This price movement reflects investor confidence, especially considering the stock’s recent performance within its 52-week range of $28.76 to $41.32. According to InvestingPro analysis, EVTC appears undervalued at current levels, presenting a potential opportunity for investors. The stock has seen a -20.21% total return over the past year, despite maintaining strong fundamentals and growth prospects. For deeper insights into EVTC’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Outlook & Guidance

For 2025, Evertec projects revenue between $889 million and $899 million, representing a growth of 5.1% to 6.3%. The company anticipates adjusted EPS growth of 1.8% to 5.2% and expects adjusted EBITDA margins to remain robust at 39.5% to 40.5%. Growth is expected to be driven by mid-single-digit expansion in Merchant Acquiring and low double-digit growth in the Latin America payments segment. InvestingPro data reveals the company has maintained a strong 24.45% revenue growth rate in the last twelve months, with analysts expecting continued profitability. Additional ProTips and detailed financial metrics are available to InvestingPro subscribers, offering valuable insights for investment decision-making.

Executive Commentary

CEO Max Schuessler stated, "We delivered another year of record revenue with great execution across all our core markets." He emphasized the company’s progress in diversifying its revenue mix outside of Puerto Rico, highlighting the strategic importance of expanding its footprint in Latin America.

Risks and Challenges

• Potential economic instability in Latin America could impact revenue growth.
• Integration challenges from recent acquisitions may affect operational efficiency.
• Currency fluctuations could pose risks to international earnings.
• Competitive pressures in the payments industry may affect market share.
• Dependence on Puerto Rico’s economic conditions could limit diversification efforts.

Q&A

During the earnings call, analysts inquired about the integration of the Cinqia acquisition and the anticipated growth reacceleration. The management expressed confidence in managing the upcoming service discount for Popular Bank and highlighted a strong mergers and acquisitions pipeline, indicating continued focus on strategic growth initiatives.

Full transcript - Evertec Inc (EVTC) Q4 2024:

Conference Operator: Good afternoon, everyone, and welcome to Evertec’s Fourth Quarter twenty twenty four Earnings Conference Call. Today’s conference call is being recorded. I would now like to turn the conference over to Beatrice Brown Saenz of Investor Relations. Please go ahead.

Beatrice Brown Saenz, Investor Relations, Evertec: Thank you, and good afternoon. With me today are Max Schuessler, our President and Chief Executive Officer and Joaquin Castrillo, our Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company’s most recent periodic SEC report. During today’s call, management will provide certain information that will constitute non GAAP financial measures under SEC rules, such as adjusted EBITDA, adjusted net income and adjusted earnings per common share. Reconciliations to GAAP measures and certain additional information are also included in today’s earnings release and related supplemental slides, which are available in the Investor Relations section of our company website at www.evertechinc.com.

I will now hand the call over to Max.

Max Schuessler, President and Chief Executive Officer, Evertec: Thanks, Beatrice, and thanks to everyone for joining us today. I’m pleased to announce a strong finish to 2024, a very significant year for EVERTEC on multiple fronts. We delivered another year of record revenue with great execution across all our core markets. We successfully integrated Cinqia, the largest acquisition in EVERTEC’s history, and have started to see growth reaccelerate an important area of focus for us in 2024. We continue to execute our acquisition strategy with two tuck in deals closed in the fourth quarter, Grandata, which we discussed on our third quarter call, and Nubity announced today.

Additionally, we developed a robust business pipeline in Latin America, the strongest in years, and I’m pleased to report that we have begun converting these opportunities into important business wins. Moreover, we initiated cost efficiency measures that resulted in margins exceeding our expectations for twenty twenty twenty four. These achievements set the stage for 2025, where our focus will remain on organic revenue growth, margin optimization and capital allocation. On today’s call, I will provide a brief summary of our 2024 financial results, a discussion on the Puerto Rico environment and an update on LatAm. I will then turn the call over to Joaquin, who will provide some additional details on our Q4 and full year results, as well as our outlook for 2025.

Starting on Slide four are some highlights from our 2024 results. Revenue for the year was $845,500,000 a 22% increase over prior year. We achieved strong growth across all our segments. Merchant acquiring grew by 11% due to pricing initiatives and increased sales volume. Payments Puerto Rico grew 6%, driven by higher transaction volumes and continued strong performance from ATH Movil.

And business solutions revenue grew by 7% as we recognized revenue from key projects that went into production throughout the year. LATAM revenue increased by 62% year over year due to the full year contribution of Cinqia, continuous organic growth across the region and the contribution from GREN data in the fourth quarter. We continue to make progress on our goal of diversifying our revenue mix outside of Puerto Rico, with LATAM making up approximately 33% of our total revenue in 2024 compared to 10% in 2015. Adjusted EBITDA was $340,200,000 up approximately 17% year over year and adjusted EBITDA margin was 40.2% for the year. This reflects our focus on efficiency and expense management aimed at improving our profitability and offsetting the 10% discount for Popular that will come into effect in the fourth quarter of twenty twenty five.

Adjusted EPS of $3.28 was up 16% year over year, driven by strong adjusted EBITDA growth, lower tax expense and a lower share count that benefited from the ASR completed in 2024. These benefits were partially offset by higher interest expense associated with debt raised for Syncyon. For the full year, we generated approximately $260,000,000 in operating cash flows, and we returned approximately $95,000,000 to shareholders through share purchases and dividends. At 12/31/2024, we had approximately $138,000,000 still remaining on our repurchase program to be used through 12/31/2025. Our liquidity remains strong at approximately $468,000,000 as of December 31.

Let me now provide an update on Puerto Rico beginning on Slide five. Overall conditions in Puerto Rico remain stable, while the economic activity index in 2024 decreased slightly. It remains healthy and above pre pandemic levels. Total (EPA:TTEF) employment has remained at its highest levels since 02/2009 and the labor force participation rate has remained above the previous seven year average. Both commercial and individual bank deposit levels continue to exhibit elevated liquidity.

Although there has been a slight decrease from the peak levels observed in 2021, overall liquidity remains significantly higher compared to pre pandemic levels. Additionally, passenger traffic in the San Juan Airport grew approximately 9% year over year. On Slide six, from a federal funds perspective, there’s still a significant amount of reconstruction funds that have yet to be received, including incremental funds pledged during 2024, mainly for energy, municipalities and housing. Of the $48,400,000,000 pledged, approximately 23% has been received with the electric grid reconstruction funds continuing to be the largest portion pending to be dispersed. In 2024, Puerto Rico received approximately $7,000,000,000 in reconstruction funds and a similar amount is expected for 2025.

To summarize, while we do not expect major macro tailwinds, we do believe economic conditions should continue to be supportive for Evartech in Puerto Rico as we move through 2025. Turning to LatAm on Slide seven. Revenue was up 62% year over year, mainly as a result of the Cinqia acquisition, which we closed in November of twenty twenty three and the double digit organic growth outside of Brazil. We also benefited from the grand data tuck in deal announced last quarter and from one month of Nubity, a small company we acquired in December, as we continue to execute on our capital deployment strategy focused on growth and diversification. Nubity is a managed service provider based in Mexico.

It provides ancillary services in the cloud to customers in several LatAm countries. We believe NuVD provides a significant cross sell opportunity to other regions, including Puerto Rico, where NuVD will allow us to provide better service offerings that will build and strengthen our existing customer relationships. Now let me provide an update on Cinqia. We are pleased to report that we have observed a reacceleration in growth and remain optimistic about the opportunities in Brazil. Nodal improvements in customer engagement, positive feedback on our platform modernization and contract repricing adjustments are encouraging indicators for 2025 and beyond.

Our work at Cinco is ongoing and we will continue to prioritize efforts to accelerate growth in Brazil. Outside of Brazil, we’ve begun converting our strongest pipeline in years into actual successes. We are pleased to announce that we have signed a deal with Grupo Evol, one of the largest financial groups in Colombia. We will provide acquiring processing and risk monitoring services to two banks within the financial group. We continue to work diligently in converting more pipeline opportunities into wins and expect these efforts to contribute to organic growth, primarily in 2026 and beyond.

Before turning over to Joaquin, I want to thank the team for our success in 2024 and the plans that have been put in place for 2025. I look forward to updating all of you throughout the year on our progress. With that, I will now turn the call over to Joaquin.

Joaquin Castrillo, Chief Financial Officer, Evertec: Thank you, Mac, and good afternoon, everyone. Turning to Slide nine, I will first review the fourth quarter and full year results for EVERTEC. Total revenue for the quarter was $216,400,000 up approximately 11% compared to the prior year, reflecting organic growth across all of the company’s segments, a full quarter contribution from Cincia as the deal closed in November of the previous year and the effect of the two tuck in acquisitions completed in the fourth quarter. In Puerto Rico, we benefited from higher transaction volumes, continued growth from ATH Movil business and higher spreads in MAB. On a constant currency basis, revenue growth would have been approximately 14.5%.

Adjusted EBITDA for the quarter rose to $88,600,000 up 24% from last year with a margin of 40.9%, an increase of four ten basis points. This growth resulted from strong revenue and the positive impact on operating expenses from efficiency initiatives aimed at offsetting the 10% discount on Popular Services starting in October 2025. Adjusted net income was $56,000,000 dollars an increase of approximately 37% year over year, driven primarily by the growth in adjusted EBITDA and a lower adjusted effective tax rate. The adjusted effective tax rate for the quarter was 5.1%. Adjusted EPS was $0.87 an increase of approximately 40% from the prior year, driven by the higher adjusted net income and the benefit from a reduced share count from repurchases completed throughout the year.

For the full year, total revenue was $845,500,000 an increase of approximately 22% from the previous year. This growth reflects strong performance across all segments, driven by higher transaction volumes, improved spreads and the contribution from projects that have gone into production. Additionally, our Latin America segment benefited from a full year contribution of Cinqia. On a constant currency basis, revenue growth was approximately 23.5%. Adjusted EBITDA was $340,200,000 an increase of approximately 17% with an EBITDA margin of 40.2%, a decrease of approximately 180 basis points from the previous year.

The reduction in margin is primarily due to the inclusion of Cinqia, which has margins below our corporate average and the impact of the $6,300,000 onetime revenue recognized from Getnet Chile in 2023 compared to the $2,400,000 recognized in the current year, both of which were 100% accretive to margin. Adjusted net income was $213,200,000 an increase of approximately 15% from the prior year and adjusted EPS of $3.28 increased approximately 16% from prior year. Moving to Slide 10, I will now cover our fourth quarter results by segment beginning with Merchant Acquiring. Net revenue increased approximately 16% year over year to $46,600,000 driven by an improved spread and an increase in sales volume even as these volumes are offset by a reduction in the price of gas, which is down over prior year for the second consecutive quarter. We also had higher non transactional fees driven by terminal rent as our mix has shifted towards more profitable terminals and a positive number of net new merchants in our portfolios.

Adjusted EBITDA for the segment was $19,900,000 with an adjusted EBITDA margin of 42.7%, reflecting an increase of approximately six eighty basis points from the previous year. The margin increase is attributed to top line growth driven by improvements in spread and non transactional fees, such as terminal rent and decline fees, all of which positively impact margins. This favorable effect on the margin was partially offset by higher transaction processing costs resulting from a lower average ticket. At this point, we have already seen that January numbers are in line with expectations and aligned to our full year guidance in 2025. On Slide 11 are the results for the Payment Services Puerto Rico and Caribbean segment.

Revenue in the quarter was $54,800,000 an increase of approximately 4% from the prior year. The revenue increase was driven by 4% transaction growth and mid teens revenue growth from ATH Movil business, partially offset by lower services provided to the LATAM segment mainly as a result of lower transactions being processed in Mexico as a result of the Meli attrition. Adjusted EBITDA was $31,300,000 up approximately 2% from the prior year, and adjusted EBITDA margin was 57.2%, down approximately 170 basis points over the prior year. The decrease in margin was due primarily to higher operating expenses in part driven by higher POS retirement costs. On Slide 12 are the results for Latin America Payment And Solutions.

Revenue in the quarter was $77,900,000 up approximately 18% year over year. Recall that the fourth quarter of twenty twenty three included just two months of Cinqia versus the full three months this year, and we also benefited from partial quarter contributions from both Grandara and Nubit. The quarter also benefited from organic growth across the region and from the $600,000 adjustment related to the GetNet Chile relationship as volumes came in better than expected. Currency was also a more significant headwind than expected in the quarter, negatively impacting segment growth by 9.6 percentage points, mainly driven by the devaluation of the Brazilian currency. Adjusted EBITDA was $25,100,000 an increase of approximately 38% from prior year with an adjusted EBITDA margin of 32.3%, up approximately four sixty basis points.

The margin was affected by the 100% margin accretive net adjustment, a positive impact from the lower MELI contribution due to it being a low margin business, higher software development capitalization in the quarter and realized gains from foreign currency. Moving to Slide 13. The results for our Business Solutions segment resulted in revenue of $62,400,000 representing an increase of approximately 8% from the previous year. The increase is attributed to revenue recognized from projects that went into production throughout the year. The quarter also saw a slight benefit from the CPI escalator that started on October 1 of 1.5% for services provided to Banco Popular.

As a reminder, starting on 10/01/2025, our CPI escalator with Popular will permit us to increase pricing annually when CPI exceeds 2% up to a maximum increase of 2%. Adjusted EBITDA was $24,400,000 up approximately 22% from a year ago, and adjusted EBITDA margin was up approximately four forty basis points from the prior year to 39%. The improved margin was primarily due to the higher revenue and lower expenses as the prior year included certain provisions for operational losses that did not recur. Moving to Slide 14, you will see a summary of our corporate and other expenses. Corporate and other was $12,200,000 in the quarter or 5.6 percent of total revenue, slightly above our expectation, but lower than prior year due to specific corporate initiatives executed in the prior year quarter.

Moving on to our cash flow overview for 2024 on Slide 15. We continue to effectively manage our working capital resulting in net cash from operating activities of $260,000,000 Capital expenditures were $88,400,000 for the year as we capitalized software development projects, executed the refresh of key hardware while also continuously investing in our products and enhancing our information security capabilities. We spent approximately $34,000,000 on the Grand Data and Nuiti acquisitions, paid down approximately $34,500,000 in debt and returned approximately $95,000,000 to shareholders through share repurchases and dividends. We did not repurchase any shares during the fourth quarter. And at year end, we had approximately $138,000,000 available for future use under the company’s share repurchase program through 12/31/2025.

Our ending cash balance for 2024 was $314,600,000 a decrease of approximately $29,000,000 from the year ended 2023. Moving to Slide 16. Our net debt position at year end was $706,800,000 comprised of $980,500,000 in total long and short term debt, offset by $273,600,000 of unrestricted cash. Our weighted average interest rate was approximately 6.45%, a decrease of 100 basis points from 2023, driven primarily by the successful repricing of our TLB throughout 2024, which collectively reduced the spread on our term loan by 75 basis points. Our net debt to trailing twelve month adjusted EBITDA was approximately 2.06x, down from 2.24x a year ago and at the lower end of our leverage range of 2x to 3x.

As of December 31, our total liquidity, which excludes restricted cash and includes borrowing capacity, was $467,500,000 down approximately $22,000,000 from a year ago. Now I’ll turn to Slide 17 for commentary on our 2025 outlook. For 2025, we expect revenue to be between $889,000,000 to $899,000,000 or growth of 5.1% to 6.3%. However, these growth figures include approximately 40 basis points of foreign currency headwinds resulting from the strengthening of the U. S.

Dollar against the LatAm currencies we do business in. On a constant currency basis, we expect revenues for 2025 to grow between 5.5% to 6.7%. Adjusted EPS is expected to grow between 1.85.2% from the $3.28 reported for 2024 or between 2.66% on a constant currency basis. This assumes an adjusted EBITDA margin of 39.5% to 40.5% and an effective tax rate of 6% to 7%. I will now walk you through some key underlying assumptions that we considered in arriving at the outlook, beginning with revenue expectations for our business segments.

For Merchant Acquiring, we anticipate mid single digit growth in 2025, supported by a stable Puerto Rico economy contributing to sales volume growth, along with additional benefits from our ongoing pricing actions. However, we are not expecting the same tailwinds we had in 2024 from more substantial pricing increases as as we are close or have already anniversary most of these, resulting in a smaller impact moving into 2025. In Payments Puerto Rico and Caribbean, we expect low single digit growth resulting from continued transaction growth and continued growth from ATH Movil, but offset by lower processing services being offered to the LatAm segment mainly due to the loss of maili transactions. For Payments Latin America, we expect constant currency growth to be in the low double digits with several offsetting factors to consider. As I highlighted on our third quarter results call, we are expecting some client attrition in 2025, most notably MercadoLibre (NASDAQ:MELI).

We expect the acquisitions that we have recently announced and the acceleration from Brazil to offset most of this client churn, resulting in low double digit growth for the year on a constant currency basis. Finally, in Business Solutions, we expect revenue growth of low single digits for the full year. Now turning to overall margin. Last quarter, we walked you through the impact of the 10% discount on certain MSA services beginning on October 2025. As a reminder, this will begin to impact our revenue and adjusted EBITDA in the fourth quarter of twenty twenty five by approximately $4,000,000 with a full annual run rate of $18,000,000 expected in our 2026 fiscal year and mostly impacting our Business Solutions segment.

Last quarter, we also spoke about our commitment to execute cost efficiencies across our business segments to offset the headwind from the discount. Those initiatives have already started. They even had a slight impact on our Q4 results and continue to progress as planned. We expect to see a gradual improvement in overall margins over the next few quarters, then a reset lower in the fourth quarter as the effect of the 10% discount takes effect netting out to the 39.5 percent to 40.5% margin expected for the full year. In terms of other items, we expect interest expense for the year to be lower than $2,024,000,000 dollars due to the impact from the term loan repricing mentioned before and debt pay downs.

And as a reminder, we continue to have interest rate swap agreements in place that fix $550,000,000 or approximately 58% of our outstanding debt. We expect an adjusted tax rate of 6% to 7%, which is higher than prior year due to a higher expected contribution from LatAm and a lower expected interest expense, which has been a key input to keeping our overall effective tax rate low throughout 2024. A capital deployment perspective, our priority continues to be deploying capital for growth through M and A. However, we will continue investing in our business and products and have a CapEx target of approximately $85,000,000 for 2025. We expect to continue to return cash to shareholders via dividends and when appropriate share buybacks.

In summary, we are pleased with our fourth quarter and full year results in 2024. We believe EVERTEC is well positioned to deliver strong top line growth in 2025 and beyond. We look forward to updating you on our progress in the coming year and hope to see some of you at conferences over the next few months. With that, operator, please open the line for questions.

Conference Operator: We will now begin the question and answer session. The first question comes from Nate Benson with Deutsche Bank (ETR:DBKGn). Please go ahead.

Nate Benson, Analyst, Deutsche Bank: Hi guys. Nice results. Thanks for the question. So Joaquin, I appreciate you walking through the 2025 guide by segment. Super helpful, preempted some of my questions there.

I think maybe the related question is, as we seek to better understand the normalized growth profiles of each of your segments, have you given any thought to giving some sort of midterm guide to help investors better understand the business? I’m just asking, I think it might be helpful to put a line in the sand to help underwrite future growth, particularly as you’ve gone through so many changes incorporating Cinqia and now the two additional acquisitions. We have the MSA later in the year. So just any thoughts on that and how we can help sort of underwrite future growth beyond

Joaquin Castrillo, Chief Financial Officer, Evertec: beyond ’25? So right now, I think we’re focused on giving really guidance for 2025.

Max Schuessler, President and Chief Executive Officer, Evertec: And to your point, I think we

Joaquin Castrillo, Chief Financial Officer, Evertec: have some moving pieces here and we’re trying to be very clear on kind of what are the areas of focus as we move into 2025.

Max Schuessler, President and Chief Executive Officer, Evertec: So that will be the kind

Joaquin Castrillo, Chief Financial Officer, Evertec: of the guidance that we’re focused on for the time being.

Nate Benson, Analyst, Deutsche Bank: Okay, understood. Yes, yes. No, I agree that it was definitely clear on the outlook for 2025. So I appreciate that. The follow-up is on Cinque.

So I haven’t had the chance to try to do the math on the implied growth in 4Q. But I think at the time of the acquisition, Cinque is growing low double digits. It obviously decelerated through 2024, but it sounded like from Mac’s comments that it started to reaccelerate in 4Q. And I know you’ve talked about some of the initiatives you’ve done to sort of work on reaccelerating further in 2025. So maybe just some more color and more granular updates on how you expect the Cinquia business perform, particularly given everything that’s going on with the Brazilian economy and sort of how confident you are in your ability to get Cinquia back to that kind of normalized low double digit growth maybe later this year or in 2026?

Max Schuessler, President and Chief Executive Officer, Evertec: Hey, Nate, this is Mac. Yes, so look, we just had our board meeting last week, Cenkia, so the board could get close to the management team and better understand the market there and we’re all pretty excited. As you noted, it sort of decelerated as we started to close the acquisition and then it decelerated last year. We were very focused at the beginning of the year, making sure we had the right leaders in place and then focusing on again, they had acquired 24 companies over a ten year period. And we knew going in, there were going to be some things that we could do to optimize the business.

So we were very focused early on the year. Number one is upgrading their technology so that we could upsell to new platforms, and we’ve had success this year doing that with some of our key clients. Renegotiating some of our contracts, some of these contracts were not volume based. So now we’ve renegotiated, upped pricing and now we have volume based contracts in place. And then also focusing on margin optimization, so making sure that we kind of move the margins north by making some efficiencies.

We’ve said look, we’ve been very focused on getting closer to customers. They had sort of lost sight of getting close to their customers performing well so that they could cross sell and up sell and we feel like they have a good cadence now. So as we said in our prepared remarks, it’s definitely accelerate the growth is accelerating off of last year. We’re very optimistic and it’s one of the reasons that we have double digit growth expectations for the entire LatAm segment this year.

Nate Benson, Analyst, Deutsche Bank: Thanks, Mike. Appreciate

Max Schuessler, President and Chief Executive Officer, Evertec: it. The

Conference Operator: next question comes from Chris Kennedy with William Blair. Please go ahead.

Chris Kennedy, Analyst, William Blair: Just a follow-up on Cinqia. Can you provide an update on bringing some of EVERTEC’s processing business into Brazil? How is that going?

Max Schuessler, President and Chief Executive Officer, Evertec: Yes. What I would say, Chris, thanks for the question. We really, really focused the beginning of last year on taking their existing businesses and trying to make them better perform on the existing six verticals that they had, the four verticals and the service and the digital business. And we’re seeing reacceleration there. We have had some small successes on the payment side, and we’re optimistic that going into this year and going into the next year, that’ll be sort of a renewed area of focus as well.

But we’ve really focused on the businesses that you have, and had the management team sort of head down on that. But we are seeing interest in the payments products as well.

Chris Kennedy, Analyst, William Blair: Got it. Understood. And it sounds like you’re very confident in your ability to navigate the 10% discount slated for October given all of your efficiencies and cost initiatives?

Max Schuessler, President and Chief Executive Officer, Evertec: Absolutely. I mean, one of the things that the team early last year, even as last year started, we put this initiative in place to take a look at how do we get cost to accommodate that. I mean, we hadn’t run the company for over a decade and we really haven’t taken a hard look at our cost to the extent that we have. We were really focused on stabilizing in our business, renewing the popular, making these acquisitions. So we had a very, very big effort with Joaquin and Alberto who now own strategy for us at looking across the organization to find those efficiencies.

So they’ve already kicked in and that’s why you saw great margins at the end of ’twenty four and we’ve got a good start to this year on our margins as well. So we’re incredibly well prepared for the discount that we’ll provide at the end of twenty five for the bank.

Chris Kennedy, Analyst, William Blair: Great. Thanks for taking the questions.

Conference Operator: The next question comes from Jamie Friedman with Susquehanna. Please go ahead.

Jamie Friedman, Analyst, Susquehanna: Hi. Congratulations on a strong finish to ’24. I had two questions, I was just asking upfront. So Mac, now that you got like a third or more of the revenue coming from LatAm growing 60%, I’m just curious what sort of trans what how transferable is the skill set and technical confidence that you have taken from Puerto Rico into LatAm? What do you know now that you didn’t know before you started?

That’s the first one, high level. And then Joaquin, with regard to the I think it was Chile GetNet payments, the 600,000 one that sounded like was high margin. Could you just remind us what that’s about, like how that works and is it thresholds or I mean it’s quite lucrative when it does happen? Thank you both.

Max Schuessler, President and Chief Executive Officer, Evertec: Hey, yes, great question. This is Max. So what I would say is our knowledge and expertise has made a big difference in what you’ve seen over the last ten years. I mean, you’ve seen our team, Mike Viscarando, has managed ATH for a very long time. You’ve seen the knowledge he’s had allow us to even actually grow our market share in Puerto Rico with ATH with new innovation and we continue to do more business with the major banks there.

And then you look outside of Puerto Rico, I mean, we bought new platforms, so we just announced on the Skol Group of All, which is one of the largest banks in Colombia, Dollars Seventy Five Billion in assets. They’ve been a customer in the past, but this is a significant deal for us in Colombia. In fact, our largest deal in Colombia since I’ve been CEO. So a lot of that payments knowledge has been transferable. And then throughout the region as we’ve acquired platforms, we’ve been able to deploy those.

So GetDebt and Chile uses the same platform they use in Uruguay. We’re using our issuing platform and we’re using that platform as well now in Costa Rica. Our issuing platform, we are now using in Mexico. We also will now use that in other countries as well. So we have been able to use the expertise from Puerto Rico throughout the stirring.

We’ve also been able to leverage these platforms and these technologies across the region. And we hope to do that with some of these Brazilian technologies that we have. So, and the other thing that we talked about on this call a little bit as well, we talked about Randown on the last call. Now we also have Nubity. So Nubity is a great company out of Mexico.

The majority of their business is in this country, which again, Mexico, we want to continue to invest here. But NuVity now has new skills to help sort of modernize our infrastructure and the infrastructure of our clients by helping them migrate to the cloud and manage their applications in a more modern way. So we’ve been able to leverage the existing skills and the acquired skills throughout this journey.

Joaquin Castrillo, Chief Financial Officer, Evertec: And then, I guess, I’ll take the second part of the question, Jamie. And the deal that we have with Getnet had some minimums originally. Actually that deal ended now in December. So we’re entering into a new phase of that relationship where we I’ll call it catch ups or one time events. We will now move to a price per transaction.

So our transactionality flows in, we’ll charge that in that same cadence. So, we won’t see these, let’s say, blips every once in a while.

Joaquin Castrillo, Chief Financial Officer, Evertec: Okay. Thank you, both.

Conference Operator: The next question comes from John Davis with Raymond (NSE:RYMD) James. Please go ahead.

John Davis, Analyst, Raymond James: Hey, good afternoon, guys. Obviously, really strong results in Merchant this year, up 1116% in the fourth quarter. Joaquin, hoping you could help us a little bit on what the contribution from pricing was just so we calibrate our models as we look at 2025. I know you gave us some color, but we’d really like to understand how much pricing was in there and then also just double checking there’s nothing from an inorganic perspective that’s in the Merchant segment?

Joaquin Castrillo, Chief Financial Officer, Evertec: So number one, no, there’s no inorganic effect within the growth rates. I would say that in the fourth quarter, if we look at kind of what we’ve done throughout the year, it’s been pretty split, kind of a third pricing, a third volume, probably a third non transactional type fees. I think that when we look at Q4, it is more skewed towards pricing than volume, because as I said, we had some offsetting effects from kind of lower price of gas, which is an important part of the portfolio. As we move into 2025, as I said in kind of the outlook, we’ll still have some tailwind in the beginning of the year from some of those pricing initiatives as we continue to anniversary them. And then as we start to kind of get out of Q1, we’re expecting kind of that mix to kind of come back to half and half or

Joaquin Castrillo, Chief Financial Officer, Evertec: a third, a third, a third in terms of

Joaquin Castrillo, Chief Financial Officer, Evertec: the contribution to growth going into 2025.

John Davis, Analyst, Raymond James: Okay. And then, Mac, just on capital allocation, balance sheet is in great shape back down towards the lower end of your kind of midterm leverage range. It feels like the deal pace has picked up a little bit. So we just love to get your comments on the state of the M and A market in Latin America, what you’re seeing, have prices rationalized, you’re seeing more opportunities, we expect this kind of quicker pace of M and A versus historically over the last, call it, decade since you’ve been there?

Max Schuessler, President and Chief Executive Officer, Evertec: Yes. So, I mean, look, the Cinco deal was the biggest deal in our history. So as a team, we were very focused on that and myself personally, I spent a lot of time in Brazil. And that’s so once we sort of started working on that deal, closing that deal, integrating that deal, that was a significant amount of focus and we wanted to get that right. As we saw and we gained more confidence in that deal, we got closed on Grandata and Nubity.

What I would say is we have a pretty good M and A pipeline. We’re still very focused on diversifying the company, growing through good smart deals. And so we will continue to engage in M and A, probably more the size of the ones we’ve recently announced or the ones we’ve been on historically. But we’re very focused on M and A. And we have a good pipeline.

Joaquin Castrillo, Chief Financial Officer, Evertec: All right.

Max Schuessler, President and Chief Executive Officer, Evertec: Appreciate the color. Thanks, guys.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Mac Schuessler for any closing remarks.

Max Schuessler, President and Chief Executive Officer, Evertec: Thank you. Again, I want to thank my colleagues for a successful year in 2024 and for putting great plans in place for 2025. I want to thank each of you for joining our call and we look forward to seeing you in the coming weeks at various conferences. Thank you.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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