EVERTEC Inc. Signals Strong Growth in Earnings Call

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, highlighting solid top-line growth, resilient margins, and a clear path for expansion across Latin America. Management acknowledged pressure points in Business Solutions and merchant acquiring, as well as FX volatility and slightly higher leverage, but emphasized disciplined capital deployment and confidence in both organic and acquisition-driven growth.

Revenue Expansion Driven by Organic Growth and Tecnobank

EVERTEC reported quarterly revenue of $247.9 million, rising about 8% year over year, or roughly 5% in constant currency. The increase reflected broad-based organic gains across segments, complemented by a full-quarter contribution from Tecnobank, which helped diversify the company’s portfolio and sustain momentum despite FX noise.

Profitability Holds Firm with Stable EBITDA Margins

Adjusted EBITDA climbed to approximately $97 million, up 9% from a year earlier, underscoring efficient cost control. The adjusted EBITDA margin of 39.1% remained essentially flat versus last year, even as the company absorbed cost inflation, FX fluctuations, and investment in growth initiatives.

Earnings and Net Income Show Steady Progress

Adjusted EPS came in at $0.90, about 3% higher than the prior-year period, supported by disciplined operating performance. Adjusted net income of roughly $56 million was broadly in line with last year, reflecting higher depreciation, amortization, and non-controlling interests that tempered the flow-through from revenue growth.

Latin America Becomes a Growth Engine

Latin America was a standout, delivering roughly 32% reported revenue growth, or about 24% on a constant currency basis, to $110.3 million. Segment adjusted EBITDA reached $32.8 million, also up around 32%, with results boosted by a significant FX tailwind of about $6.8 million, mainly from a stronger Brazilian real.

Strategic M&A: DIMENSA and Tecnobank Broaden the Platform

The company closed its acquisition of DIMENSA, positioning EVERTEC for deeper penetration in Latin American financial technology markets. While management expects DIMENSA to be neutral to slightly accretive in 2026, they see meaningful longer-term synergies, building on the earlier Tecnobank deal that has already expanded capabilities in insurance, risk, funds, and banking.

Upgraded 2026 Outlook Signals Confidence

EVERTEC raised its 2026 revenue target to a range of $1.073 billion to $1.085 billion, implying reported growth of 15.1% to 16.4% and constant-currency growth of 13.8% to 15%. The company also projects adjusted EPS growth in the mid- to high-single digits, reflecting the combined impact of organic expansion, M&A, and measured margin preservation.

Capital Returns and Ample Liquidity

The company continued to return cash to shareholders, repurchasing roughly 683,000 to 700,000 shares for about $20 million and paying $3.1 million in dividends. EVERTEC ended the quarter with around $450 million to $460 million in liquidity and about $314.5 million of unrestricted cash, leaving significant flexibility for further repurchases or strategic investments.

Disciplined Cash Flow Management and Deleveraging Efforts

Net cash from operating activities reached $31.2 million in the quarter, funding $22.7 million in capital expenditures and about $6 million of debt repayment. The weighted average interest rate on debt fell to around 6%, down roughly 55 basis points year over year, demonstrating prudent balance sheet management.

Strength in Payment Services Puerto Rico

In Puerto Rico, Payment Services revenue rose about 6% year over year to $58.4 million, with segment adjusted EBITDA advancing 11% to approximately $34.7 million. Margin expanded by roughly 240 basis points to about 59.4%, underscoring the profitability of this core franchise even as the company invests in new capabilities.

Business Solutions Hit by Popular Discount and Tough Comparisons

Business Solutions revenue declined about 9% year over year to $59.5 million, pressured by the ongoing 10% discount applied to Popular. The absence of a prior-year one-time hardware and software sale also weighed on results, making this segment a near-term drag despite stability in underlying services demand.

Merchant Acquiring Faces Margin Compression

Merchant acquiring adjusted EBITDA margin fell by roughly 240 basis points to 40.3%, on segment adjusted EBITDA of $19.5 million. Management cited higher processing costs tied to CPI-linked increases and a modest decline in spread, indicating that inflation and competition are compressing profitability even as volumes remain healthy.

FX and Local Cost Dynamics Create Mixed Effects

Management highlighted FX headwinds in markets where contracts are denominated in U.S. dollars but expenses are in local currency, notably Uruguay and Costa Rica. While Brazil’s currency provided a notable tailwind, other markets offset some of that benefit, adding complexity to margin management and reported growth rates.

Popular Discount Remains a Known Revenue Drag

The 10% discount to Popular continued to weigh on Business Solutions, reducing revenue by roughly $6 million in the quarter. While fully expected, this concession has a meaningful short-term impact on reported results, and management framed it as a continuing but manageable headwind in an otherwise growing portfolio.

Leverage Edges Higher but Stays Within Target Range

Net debt totaled about $826.2 million at quarter end, calculated as approximately $1.1 billion of total debt less around $290.9 million of unrestricted cash. Net debt to trailing 12-month adjusted EBITDA ticked up to about 2.15 times from 2.04 times a year ago, still comfortably within the company’s 2 to 3 times target range.

Corporate and Tax Headwinds Trim Consolidated Earnings

Corporate and other adjusted EBITDA was a negative $11.7 million, equating to roughly 4.7% of total revenue and slightly worse than internal expectations. The adjusted effective tax rate also rose to about 10.9%, driven by faster growth in Latin America and higher statutory rates, while higher depreciation, amortization, and a 25% non-controlling interest from Tecnobank further tempered net income.

Guidance and Outlook Emphasize Sustainable Growth

EVERTEC’s updated 2026 guidance assumes adjusted EBITDA margins of 39% to 40% and adjusted EPS growth of 6.6% to 9.9% from a 2025 base. The outlook incorporates DIMENSA contributions without yet factoring in synergies, expects an effective tax rate around 11% to 12%, capex near $90 million, strong high-30s growth for Latin America, mid-single-digit gains in core payments segments, and modest declines in Business Solutions.

The earnings call painted a picture of a payments company balancing robust growth in Latin America and Puerto Rico with margin and FX challenges in other segments. Investors are likely to focus on the integration of DIMENSA, the path to unlocking synergies, and management’s ability to offset headwinds in Business Solutions and merchant acquiring while maintaining disciplined leverage and high returns on capital.