EVERTEC Inc. Earnings Call Signals Confident Growth

EVERTEC INC ((EVTC)) has held its Q1 earnings call. Read on for the main highlights of the call.

EVERTEC Inc.’s latest earnings call struck an upbeat tone, underscoring broad-based revenue growth, resilient margins, and renewed momentum in Latin America. Management acknowledged pockets of pressure in Business Solutions, merchant acquiring margins, and FX, but stressed disciplined cost control, ample liquidity, and the strategic upside from recent acquisitions as they raised multi‑year guidance.

Quarterly Revenue Growth

EVERTEC reported first-quarter revenue of $247.9 million, an increase of roughly 8% year over year, or about 5% in constant currency. Management highlighted that the advance was driven by organic expansion across most business lines, complemented by the first full-quarter contribution from Brazilian platform Tecnobank.

Strong Profitability and Margin Stability

Adjusted EBITDA climbed about 9% from a year ago to roughly $97 million, leaving the adjusted EBITDA margin at 39.1%, essentially flat versus last year. Executives emphasized that this margin resilience came despite inflationary cost pressures, higher processing expenses, and FX volatility across several markets.

Earnings Per Share and Net Income

Adjusted earnings per share rose around 3% to $0.90, while adjusted net income was about $56 million, broadly in line with the prior year. Management framed this as solid bottom-line performance given higher depreciation and amortization, a higher tax rate, and non-controlling interests that dilute reported earnings.

Latin America Reacceleration

Latin America emerged as a key growth engine, with revenue up roughly 32% year over year, or about 24% in constant currency, to $110.3 million. Segment adjusted EBITDA also grew by nearly one third to $32.8 million, helped by a roughly $6.8 million FX tailwind, mainly from a stronger Brazilian real, and continued demand for payment and banking solutions.

Strategic M&A—DIMENSA and Tecnobank

Management spotlighted the closing of the DIMENSA acquisition as a strategic milestone, expanding EVERTEC’s presence in financial software and services across Latin America. Together with earlier deal Tecnobank, the company now reaches deeper into insurance, risk, funds, and banking verticals, with DIMENSA expected to be neutral to slightly accretive in 2026 and synergies targeted from 2027 onward.

Raised Full-Year 2026 Guidance

The company raised its 2026 outlook, now calling for revenue between $1.073 billion and $1.085 billion, implying 15.1% to 16.4% reported growth and 13.8% to 15% on a constant-currency basis. Adjusted EPS is expected to grow 6.6% to 9.9% from a 2025 base of $3.62, with an adjusted EBITDA margin in the 39% to 40% range, reflecting confidence in both organic initiatives and deal integration.

Capital Allocation and Liquidity

EVERTEC continued to return cash to shareholders, repurchasing about 683,000 to 700,000 shares for approximately $20 million and paying $3.1 million in dividends during the quarter. The company closed the period with roughly $450 million to $460 million in liquidity and around $314.5 million of unrestricted cash, while retaining a sizable share repurchase authorization of about $130 million.

Cash Flow and Balance Sheet Discipline

From an operating standpoint, the company generated $31.2 million of net cash from operating activities in the quarter, while investing $22.7 million in capital expenditures to support growth and platforms. EVERTEC also paid down about $6 million of debt, and its weighted-average interest rate declined by roughly 55 basis points year over year to around 6%, underscoring prudent balance-sheet management.

Segment Strength—Payment Services Puerto Rico

Payment Services Puerto Rico delivered steady expansion, with revenue up about 6% to $58.4 million and adjusted EBITDA rising around 11% to $34.7 million. Segment margin improved by roughly 240 basis points to 59.4%, as management cited solid transaction growth and operating efficiencies that more than offset local cost pressures.

Business Solutions Revenue Decline

Not all segments moved higher, as Business Solutions revenue fell about 9% year over year to $59.5 million, reflecting structural headwinds. The main drag came from the ongoing 10% pricing discount to key customer Popular and the absence of a one-time hardware and software sale that boosted last year’s results, leaving the business under near-term pressure.

Merchant Acquiring Margin Pressure

The merchant acquiring business maintained revenue momentum but saw profitability compressed, with segment adjusted EBITDA of $19.5 million and margin sliding roughly 240 basis points to 40.3%. Management attributed this to higher processing costs linked to inflation indices and a modest decline in pricing spread, signaling a more competitive and cost-inflationary environment.

Foreign Exchange and Local Currency Headwinds

FX effects were mixed across the portfolio, underscoring the complexity of EVERTEC’s regional footprint, with Brazil providing a meaningful tailwind while other markets weighed on results. The company flagged unfavorable dynamics in countries such as Uruguay and Costa Rica where contracts are denominated in U.S. dollars but expenses are in local currencies, creating margin pressure when those currencies strengthen.

Impact of 10% Popular Discount

Executives reiterated that the 10% pricing discount to Popular remains a deliberate but visible drag on the Business Solutions segment, reducing revenue by roughly $6 million in the quarter. While the concession supports a strategic long-term relationship, it is expected to keep near-term growth muted in that line as the rest of the portfolio works to offset the headwind.

Net Debt and Leverage Movement

Net debt at quarter end stood at $826.2 million, reflecting total borrowings of about $1.1 billion offset by $290.9 million in unrestricted cash, leaving leverage at roughly 2.15 times trailing twelve-month adjusted EBITDA. This is modestly higher than the 2.04 times level a year ago but remains comfortably within the company’s stated target range of two to three times.

Corporate and Other Drag

Corporate and other expenses continued to weigh on consolidated profitability, with adjusted EBITDA in this category at negative $11.7 million, about 4.7% of total revenue. Management acknowledged this drag but characterized it as slightly worse than expected and largely tied to central investments and overhead required to support expanding regional operations.

Localized Operating Cost and Tax Effects

The adjusted effective tax rate rose to about 10.9% in the first quarter, reflecting the growing contribution from higher-tax Latin American jurisdictions and rising statutory rates. Results also incorporated higher operating depreciation and amortization and a 25% non-controlling interest from Tecnobank, which dampened the portion of that business’s earnings consolidated by EVERTEC.

Guidance and Forward Outlook

Looking ahead, EVERTEC’s raised 2026 guidance assumes DIMENSA will be neutral to slightly accretive next year, with no synergies recognized until 2027 and beyond, and capex around $90 million to support platforms and integration. The outlook calls for mid-single-digit growth in Merchant Acquiring and Payments Puerto Rico and Caribbean, high-30s reported growth in Latin America, and low- to mid-single-digit declines in Business Solutions, under tax and FX assumptions that keep margins near current levels.

EVERTEC’s earnings call painted a picture of a payments company leaning into Latin American growth and strategic M&A while keeping leverage and margins under control. Despite segment-specific challenges in Business Solutions and merchant acquiring, the firm’s upgraded 2026 targets and robust liquidity suggest management sees ample runway for both organic expansion and deal-driven upside, a mix likely to keep investors’ attention on execution.