EVERTEC INC ((EVTC)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for EVERTEC INC painted a predominantly positive picture, underscored by robust revenue growth, strategic acquisitions, and effective cost management. The company set a promising outlook for 2025, though it acknowledged potential challenges such as currency headwinds and a looming discount to Popular. Despite these concerns, the overall sentiment remains optimistic, buoyed by the company’s strong performance and strategic initiatives.
Record-Breaking Revenue and Growth
In 2024, EVERTEC achieved a remarkable milestone with revenue reaching $845.5 million, marking a 22% increase from the previous year. The adjusted EBITDA also saw a significant rise to $340.2 million, reflecting a 17% year-over-year growth. The company maintained a strong adjusted EBITDA margin of 40.2%, showcasing its effective financial management.
Successful Acquisition Strategy
EVERTEC’s acquisition strategy proved fruitful as it successfully integrated Sinqia and completed two additional tuck-in acquisitions, Grandata and Nubity. These strategic moves contributed to a 62% year-over-year revenue growth in the LATAM region, highlighting the company’s ability to expand its market presence through acquisitions.
Strong Performance in LATAM
The Latin American region emerged as a significant growth driver for EVERTEC, with revenue increasing by 62% year-over-year. This impressive growth was fueled by the Sinqia acquisition and robust organic growth outside of Brazil, underscoring the region’s strategic importance to the company’s overall performance.
Margin Optimization
The company’s focus on cost efficiency measures paid off, resulting in margins that exceeded expectations. The fourth quarter saw an adjusted EBITDA margin of 40.9%, an increase of 410 basis points from the previous year, reflecting the success of its margin optimization strategies.
Robust Business Pipeline in Latin America
EVERTEC developed a strong business pipeline in Latin America, leading to significant business wins, including a notable deal with Grupo Aval in Colombia. This robust pipeline positions the company well for continued growth in the region.
Impact of 10% Discount to Popular
The upcoming 10% discount to Popular, effective in the fourth quarter of 2025, is anticipated to impact revenue and adjusted EBITDA by approximately $4 million, with a full annual impact of $18 million expected in fiscal 2026. This development presents a challenge that the company will need to navigate carefully.
Currency Headwinds
Currency fluctuations posed a challenge for EVERTEC, negatively impacting segment growth by 9.6 percentage points in the LATAM region. The devaluation of the Brazilian currency was a significant factor in this headwind, affecting the company’s financial performance.
Challenges in Payment Services Puerto Rico and Caribbean
The Payment Services Puerto Rico and Caribbean segment experienced modest growth of 4%, hindered by lower services provided to the LATAM segment and increased operating expenses. This segment’s performance highlights areas for potential improvement.
Slight Decrease in Puerto Rico Economic Activity Index
The economic activity index in Puerto Rico saw a slight decrease in 2024, though it remains above pre-pandemic levels. This indicates a stable economic environment, albeit with some areas of concern.
Forward-Looking Guidance
Looking ahead to 2025, EVERTEC provided a revenue growth outlook of 5.1% to 6.3% and an adjusted EPS growth of 1.8% to 5.2%. The company expects an effective tax rate between 6% and 7%. With a strong liquidity position of $467.5 million as of December 31, 2024, EVERTEC is well-positioned to pursue its growth objectives and navigate potential challenges in the coming year.
In conclusion, EVERTEC INC’s earnings call conveyed a generally positive sentiment, driven by strong revenue growth, strategic acquisitions, and effective cost management. While challenges such as currency headwinds and the discount to Popular pose potential hurdles, the company’s strategic initiatives and robust performance provide a solid foundation for future growth.