Good day, everybody, and welcome to the EVERTEC First Quarter 2025 Earnings Call. All participants will be in a listen-only mode. After today's presentation, there'll be an opportunity to ask questions. Please note that today's event is being recorded. I would now like to turn the conference over to Beatriz Brown from Investor Relations. Please go ahead.

Thank you, and good afternoon. With me today are Mac 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.evertecinc.com. I will now hand the call over to Mac.

Thanks, Beatriz, and thanks to everyone for joining us today. I'm pleased to announce a strong start to 2025 for EVERTEC against what has become a backdrop of increased macro uncertainty. All of our business segments delivered strong growth over the prior year and exceeded our internal expectations as we continue to execute at a very high level across all regions. On today's call, I will provide a brief summary of our first quarter financial results, a discussion of the Puerto Rico environment and the LatAm update. I will then turn the call over to Joaquin, who will provide some additional details on our Q1 results and our improved outlook for 2025. Starting on Slide 4, I'll cover some highlights from our first quarter results. Revenue for the quarter was $228.8 million, an 11.4% increase over the prior year as we saw growth across all of our segments. Currency represented a headwind in the quarter of approximately 3.3%. Adjusted EBITDA was $89.4 million, up approximately 14% year-over-year, and adjusted EBITDA margin was 39.1% for the quarter, up approximately 100 basis points from a year ago. The margin increase reflects the strong revenue performance and our continued focus on efficiency and expense management across the company, partially offset by the revenue mix in the quarter that includes more hardware and software sales coming in at lower margins. Adjusted EPS of $0.87 was up 21% year-over-year, driven by the strong adjusted EBITDA growth, lower interest expense, and a lower share count. In the quarter, we generated approximately $37.6 million in operating cash flows and returned $3.2 million to shareholders through dividends. Our liquidity remains strong at approximately $460 million as of March 31. Let me now provide an update on Puerto Rico beginning on Slide 5. Merchant Acquiring grew 11% as we continue to benefit from an improved spread and increased sales volumes. Payments Puerto Rico grew 4%, driven by continued strong performance from ATH Movil and higher POS transaction volumes. Business Solutions revenue grew 13% as we recognize revenue from key consulting projects completed during the second and third quarters of the prior year and also benefited from one-time hardware and software sales. In terms of the overall condition of the Puerto Rico economy, it remains stable. Total employment continues to increase while the unemployment rate remains in multi-decade lows of around 5.5%. Tourism was a bit mixed in the first quarter, with passenger traffic in the San Juan Airport remaining strong, up approximately 9% year-over-year through February, though cruise line passengers were down approximately 7% in January after being up low double digits in 2024. Turning to LatAm on Slide 6. LatAm revenue grew 13% year-over-year or 22% measured in constant currency. Organic growth across the region was double digits, driven by the GetNet Chile relationship and the reacceleration of our Brazil business, which benefited from initiatives put in place throughout last year, such as repricing efforts and product modernization. Before I turn things over to Joaquin, I want to make a quick comment on the tariff discussions and the potential impact on EVERTEC. At this point, we've only identified a few areas where tariffs can have a direct impact on our business. However, we remain cautious given the overall impact on customer confidence, employment, and other factors that could indirectly impact our business. A number of the countries we serve do rely heavily on exports, so there is potential for disruption to their economies as 2025 progresses, and this could impact the payment volumes that drive our business. For example, Brazil exports steel, oil, and agricultural products, while Chile relies heavily on exporting metals. At this point, we have not seen any material disruptions to any of our business segments or countries, but I assure you that we will be monitoring events closely, and we will be proactive in managing our businesses if conditions change. With that, I will now turn the call over to Joaquin.

Thank you, Mac, and good afternoon, everyone. Turning to Slide 8. I'll review the first quarter results for EVERTEC. Total revenue for the quarter was $228.8 million, up approximately 11% compared to the prior year, reflecting strong organic growth across all of the company's segments and a small contribution from the two tuck-in acquisitions completed in the fourth quarter. Constant currency revenue growth was 15% in the quarter, with most of the headwind coming from the Brazilian real. Adjusted EBITDA for the quarter rose to $89.4 million, up approximately 14% from last year with a margin of 39.1%, an increase of 100 basis points. This growth resulted from strong revenue and a continued focus on expense management, partially offset by a mix shift toward lower-margin areas within Business Solutions, mainly hardware and software sales. Adjusted net income was $56.3 million, an increase of approximately 17% year-over-year, driven primarily by the growth in adjusted EBITDA and a lower cash interest expense, which is a function of the lower sulfur rates in comparison to the prior year and the effect of the Term Loan B repricing efforts executed last year. The adjusted effective tax rate for the quarter was 5.3% and aligned with expectations. Adjusted EPS was $0.87, an increase of approximately 21% from the prior year, driven by the higher adjusted net income and the benefit from a reduced share count resulting from the repurchases completed during 2024. Moving to Slide 9. I will now cover our first quarter results by segment, beginning with Merchant Acquiring. Net revenue increased approximately 11% year-over-year to $47.6 million, as we benefited from a higher spread and sales volume growth. The positive spread continues to benefit from pricing initiatives implemented last year that lapped in the latter part of the quarter, a slight shift in the mix of cards, and the repricing of key relationships last year that will anniversary by the end of Q2. We also benefited from mid-single-digit volume growth driven by high-volume merchants signed last year. Adjusted EBITDA for the segment was $20.4 million, with an adjusted EBITDA margin of 42.7%, an increase of approximately 510 basis points from the previous year. The margin increase is attributed to the spread-driven top line growth as well as cost optimization efforts. On Slide 10 are the results for the Payment Services, Puerto Rico and Caribbean segment. Revenue in the quarter was $55.2 million, an increase of approximately 4% from the prior year. The revenue increase was primarily driven by growth in the ATH Movil business as well as 4% POS transaction growth, partially offset by a decrease in services provided to the LatAm segment, mainly as a result of lower transactions being processed due to customer attrition discussed on previous calls. Adjusted EBITDA was $31.4 million, up approximately 4% from the prior year, and adjusted EBITDA margin was 57%, down approximately 20 basis points from the prior year. The slight decrease in margin is related to the loss of scale from the decrease in transactions processed for the LatAm segment. On Slide 11 are the results for Latin America Payments & Solutions. Revenue in the quarter was $83.8 million, up approximately 13% year-over-year or 22% on a constant currency basis. We experienced double-digit organic growth across the region due to the GetNet Chile relationship, the positive impact from one-time revenues in the quarter, and the reacceleration in Brazil, driven by the initiatives put in place last year around repricing of contracts, technology modernization, and getting closer to clients. This segment also benefited from a full quarter contribution of Grandata and Nubity, the two acquisitions completed in the fourth quarter last year, which are performing as expected or better. In terms of currency, this represented a 9% headwind in the quarter, mainly driven by the devaluation of the Brazilian currency. Adjusted EBITDA was $24.9 million, an increase of approximately 53% from the prior year, with an adjusted EBITDA margin of 29.7%, up approximately 780 basis points. The margin increase was due primarily to the higher revenues, the impact from the one-timers mentioned, which were highly accretive, and the reversal of a contingency accrual from last year. Moving to Slide 12. The Business Solutions segment revenue increased approximately 13% to $65.6 million. The increase is due primarily to the tailwind from projects that went into production last year and that will lap in the second and third quarters and nonrecurring hardware and software sales completed in the quarter. Adjusted EBITDA was $22.2 million, down approximately 4% from a year ago, and adjusted EBITDA margin was down approximately 580 basis points from the prior year to 33.9%. The lower margin was due primarily to the mix shift in revenues with more hardware and software sales, which come in at lower margins and an increase in professional services related to key initiatives around our products and services. Moving to Slide 13, you will see a summary of our corporate and other expenses. Corporate and other was $9.5 million in the quarter or 4.1% of total revenue, slightly below our expectations but higher than the prior year, mainly due to personnel expenses. Moving on to our cash flow overview for the first quarter 2025 on Slide 14. Net cash from operating activities was $37.6 million. Capital expenditures were $22.3 million in the quarter and in line with our plan for $85 million in CapEx for the 2025 year. We paid down approximately $11.6 million in debt, paid approximately $8.7 million in withholding taxes on share-based compensation, and returned approximately $3.2 million to shareholders through dividends. Also during the quarter, we exercised our option to acquire the remaining non-controlling interest in a Sinqia subsidiary that provides technological solutions primarily for managing digital signatures for approximately $5.2 million. We did not repurchase any shares during the first quarter and at quarter end, we had approximately $138 million available for future use under the company's share repurchase program through December 31, 2025. Our ending cash balance was approximately $290.1 million, a decrease of approximately $8 million from year-end 2024. Moving to Slide 15. Our net debt position at quarter end was $704 million, comprised of $969.8 million in total loan and short-term debt offset by $265.9 million of unrestricted cash. Our weighted average interest rate was approximately 6.5%, a decrease of approximately 70 basis points from the first quarter of 2024, driven by the lower sulfur rates and 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 12-month adjusted EBITDA was approximately 2.04x, down from 2.5x a year ago and at the lower end of our leverage target range of 2 to 3x. As of March 31, our total liquidity, which excludes restricted cash and includes borrowing capacity, was $459.7 million, up approximately $52 million from a year ago. Now I'll turn to Slide 16 for commentary on our 2025 outlook. We now expect constant currency revenue to be between $903 million to $911 million, representing growth of 6.8% to 7.7% year-over-year and above our prior constant currency range of 5.5% to 6.7%. We are now assuming 160 basis points of foreign currency headwinds based on Q1 rates, which would result in growth of 5.2% to 6.1% on a GAAP basis. Constant currency adjusted EPS is now expected to grow between 4.9% and 7.6% from the $3.28 reported for 2024, which is higher than our previous assumption of 2.6% to 6% growth. We continue to assume an adjusted EBITDA margin of 39.5% to 40.5% and an adjusted effective tax rate of 6% to 7%. I will now walk you through some of the key underlying assumptions that we considered in arriving at the outlook, beginning with revenue expectations for our business segments. For Merchant Acquiring, we continue to expect mid-single-digit growth in 2025, as we are coming up against tougher comps over the next few quarters, offset by the tailwind from some of the pricing initiatives. In Payments Puerto Rico and the Caribbean, we continue to expect low single-digit growth and reiterate our assumption that continued growth contribution from ATH Movil will be partially offset by lower processing services being offered to the LatAm segment, mainly due to the loss of MercadoLibre transactions, which will begin to take even more of an effect starting in Q2. For Payments Latin America, we continue to expect constant currency growth to be low double digits. As a reminder, we are expecting some client attrition in 2025, most notably MercadoLibre, that will begin to have more of an impact starting in Q2. Finally, in Business Solutions, we continue to expect revenue growth of low single digits for the full year, with margins improving from the level reported in the first quarter. Now turning to overall margin. As a reminder, the 10% popular discount that we have previously discussed will begin to impact our revenue and adjusted EBITDA in the fourth quarter of 2025 by approximately $4 million. The cost initiatives put in place to offset this impact continue to progress as planned, and we expect gradual improvement in the overall margin over the next two quarters before a recent lower in the fourth quarter as the discount takes effect, netting out to the 39.5% to 40.5% margin expected for the full year. We continue to expect an adjusted tax rate of 6% to 7% and CapEx of approximately $85 million for 2025. We expect to return cash to shareholders via dividends and, when appropriate, share buybacks. In summary, we had a strong start to the year and believe EVERTEC remains well positioned to deliver strong top-line growth in 2025. Our guidance range does account for some variability given the uncertainty in the macro environment and the potential impact on our business. However, we are confident in our ability to navigate effectively through complex environments and different types of economic cycles as we have done in the past. We will continue to closely monitor potential impacts to our business, either direct or indirect, and adjust accordingly. 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.

Our first question today comes from Vasu Govil from KBW.

I guess first just on the revenue, strong revenue performance in this quarter. 15% constant currency growth is sort of one of the strongest I've ever recalled at the company given that most of it was organic. Joaquin, you said very small contribution from the two M&A deals. So just curious, relative to what your internal expectation was where you saw the outperformance come through? And sorry if I missed that, but it sounded like you're not incorporating anything from a macro standpoint at this point in time in the guide, is that correct?

So what I would say, Vasu, is we really outperformed in pretty much every segment compared to what was our original expectation. I think if we look at Merchant Acquiring, we continue to see strong consumer confidence, and that came through in both volume and as we continue to see a tailwind in spread. Latin America continues to perform very well. As we said in the prepared remarks, Brazil's reacceleration is reflected now in the performance that we're seeing in that segment. And obviously, as we move forward throughout the year, as we said, we do have some headwinds that we are expecting, mainly as we have some attrition that we mentioned in the past. And then in Business Solutions, we had some one-timers on hardware and software that really propped up that performance this past quarter. In terms of the second part of the question, what I would say is the low side does include or have some space for a degradation in consumer confidence as we move forward, but nothing drastic really. At this point, in the month of April, it continues to look aligned to what were our expectations, but it's something that we will continue to monitor and that we've considered slightly within our guidance.

And then, Mac, I have a more high-level strategic question for you, a little tricky, but I'll still ask. So it seems like M&A has really picked up in this space again. We've seen some big announcements in the last two to three weeks. So just curious how you think about EVERTEC positioning both as an acquirer of more sizable assets, but perhaps also as a potential strategic target?

Yes. So what I would say is, look, we continue to focus on M&A. I mean we just did Grandata and Nubity. The M&A pipeline continues to be robust and full, and we're very excited about some of the assets that we're looking at. So that will continue to be an important part of our strategy. I mean I really don't opine on how other people view us from a strategic acquisition perspective. I do think what we're focused on is running the best business we can for our current investors. But like I said, we're pretty optimistic about our M&A pipeline.

Our next question will come from Cris Kennedy from William Blair.

It's good to hear about Brazil reaccelerating. Can you characterize kind of how the business is performing down there relative to prior, when you acquired that asset?

Yes. So Cris, this is Mac. As you know, we won't break it out. I mean because we manage it as far as the LatAm segment. What I would tell you is at the beginning of last year, we were very focused on a leadership change, very focused on some very specific initiatives, getting close to the customer, making sure that we are modernizing the platform so that we could maintain their business, but also sort of change the contracts and reprice them so that we can get the benefit of their growth. And we're seeing the effect of all of that. So the growth is back within our expectations. We won't compare it to previous numbers, but we're very pleased with the performance of Brazil this quarter and are optimistic about the remainder of the year.

Great. And then just you gave a little bit of commentary on kind of the environment in Brazil and Chile. You gave great information on Puerto Rico. But when you think about your Latin American exposure, any countries from an economy standpoint kind of stand out that we should be monitoring?

I don't have anything specific to mention, but Brazil stands out due to its significance in our business and the currency fluctuations we've experienced under Luiz's administration. This has been the most challenging area from a currency standpoint. Regarding tariffs or any economic downturn, as Joaquin mentioned, we haven't observed any meaningful effects so far, and we hope that situation continues. However, we will keep a close eye on developments in all the countries.

Our next question comes from Jamie Friedman with Susquehanna International.

Nice results here. Mac, I wanted to ask you about the observations also about LatAm. You called out in your press release that you saw that the double-digit growth was driven in part by the GetNet Chile relationship and the reacceleration in Brazil. I was hoping you could unpack those a little bit. And at least in terms of GetNet Chile, where are you in the journey of delivering on that partnership?

Yes. So like we said earlier, the segment grew double-digit organically. So we're very pleased with that. Grandata and Nubity were great as well. And we're very pleased with the performance of both of those acquisitions. They're performing at, if not above our original expectations. When you think about GetNet, it is fully rolled out. So we've rolled out the capability for Santander, and they're now using that to enroll their merchants throughout Chile. So that is why you're seeing such a strong performance because they have been the most successful bank using our technology to move away from Transbank, and that continues.

My understanding of GetNet may be a bit unclear, but originally, Chile had a national issuer scheme that was later privatized, and GetNet became involved. Do you have any insights on how this has developed? Specifically, how many cards are still in circulation and what the market distribution looks like? Any information that we can analyze to determine the size and opportunity for EVERTEC would be helpful.

Sure. So originally, and it's a great question, so for particularly those that are newer in the story. So Transbank used to be the primary acquirer across all of Chile. So all of the banks owned an equity stake in Transbank and they referred all their leads to Transbank, and Transbank was the acquirer and processor for all of the merchants in the country. Santander was one of the first banks that decided to leave Transbank and create their own business. In addition, BCI did it with EVO, which is now part of Global Payments. In the marketplace, GetNet now has over 200,000 merchants that are active using our technology. So we believe we've been the most successful at helping them grow as they've chosen to leave Transbank. Across the country, I mean, Transbank has been rumored to be for sale on many occasions. So I think it's created a lot of disruption for the original incumbent. And other banks in the region continue to look at alternatives, other banks in the country. So I mean, we're optimistic with our relationship with GetNet and the performance that we've seen, but we also believe that as there's more disruption, there may be more opportunities to process for other banks.

Our next question comes from John Davis with Raymond James.

Joaquin, just wanted to touch on merchant margins for a second. I think they were up about 510 basis points year-over-year. I see in the slide deck, you talked about just spread-driven top line growth and cost optimization, but hoping to dig in a little bit there? And also maybe get some color on how we should think about those margins trending throughout the rest of '25?

Sure. We have several factors affecting our spread. First, we are beginning to see the impact of previous pricing actions, which have already been factored in, providing a positive effect in the initial months of Q1. Additionally, an increase in card-not-present transactions, which tend to yield higher returns, is also contributing to the spread. Thirdly, one of the main banks in Puerto Rico transitioned to a regulated bank last year, which has lowered the cost per transaction and reduced the interchange fees we pay on those transactions. These three elements are the primary catalysts for growth, largely driven by pricing and proving beneficial to our margins. However, as we will see the effects of these factors throughout the year, we anticipate a slight decline in the average transaction amount, which may start to create pressure on the margin going forward. Therefore, we do not expect any margin expansion in the Merchant segment from our current position.

Okay. And then as we think about MercadoLibre and them rolling off. I'm not expecting exact answers here or numbers. But is second quarter going to be kind of a full run rate quarter of them being off? Or is it kind of a partial quarter, and we had a full quarter impact in Q3 and Q4? Just trying to calibrate the models for their exit.

It won't be a full quarter, but I would say, let's say, 2/3 of the quarter will be already impacted.

Okay. So not much of a drop off from 2Q to 3Q then as we think about it. And then last one for me. I guess Mac or Joaquin, as we circle back to the hurricane relief money from, I guess, 7 or 8 years ago now. Obviously, you highlighted pretty healthy just general economic stats in Puerto Rico. Are you starting to see benefits from the relief funds? Is it something that you think should continue? Just curious, kind of any update there would be helpful.

What I would say, John, is, yes, we continue to expect those funds to come through. I think that they have been, in fact, flowing through. And if you listen to some of the banks in Puerto Rico, they also are seeing more movement. How much of that or what the amount is going to impact any given year, I think it's still very hard to tell. But I think a lot of what's already coming in is getting reflected. And again, some of the resiliency that we're seeing in some of our payment segments in Puerto Rico. Actually, coming back to your previous question, John, to clarify, we did also call out, we have a few one-timers in the LatAm segment this quarter that, in addition to the attrition starting to show up over the next few quarters, will also right not recur a portion of the top line we have in Q1 because it's onetime. Thanks, John.

And that will conclude our question-and-answer session. I would now like to turn the conference back over to Mac Schuessler for any closing remarks.

Again, I want to thank everyone for joining the call. I thank my colleagues for a great quarter, and we hope you have a great rest of your night.

Thank you very much. The conference has now concluded. Thank you, everybody, for attending today's presentation. You may now disconnect.