Good afternoon, everyone and welcome to the EVERTEC's Fourth Quarter and Full Year 2015 Earnings Conference Call. Today's conference call is being recorded. At this time, I would like to turn the call over to Alan Cohen, Please go ahead.

Welcome to the EVERTEC's fourth quarter and full year 2015 earnings call. With me today are Mac Schuessler, our President and Chief Executive Officer; and Peter Smith, our Chief Financial Officer. A replay of this call will be available until Wednesday, February 24. Access information for the replay is listed in today’s financial release, which is available on our Website under the Investor Relations tab. As a reminder, this call may neither be recorded nor otherwise reproduced without EVERTEC’s prior written consent. For those listening to the replay, this call was held on February 17. Please note, there is a presentation that accompanies this conference call, and it is accessible in the IR section of our Website, as well as via the link provided in the press release earlier today. Before we begin, I would like to remind everyone that this call may contain forward-looking statement as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties. EVERTEC cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that occur after this call. Please refer to the company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements. 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 share. Reconciliations to GAAP measures and certain additional information are also included in today's earnings release and related supplemental slides. I will now hand over the call to Mac.

Thank you, Alan, and good afternoon everyone. Thanks for joining us on today's call. We're pleased with our results for 2015 as we met our expectations in a challenging environment. I'll cover some of the year's highlights, provide you with an update on recent developments and close with some comments on 2016. Beginning on Slide 4 we have a summary of our 2015 results. Total revenue was almost $373 million, an increase of 3% compared to 2014, which was slightly ahead of our most recent guidance. We generated adjusted EBITDA of $185.6 million, an increase of 2%, and adjusted earnings per share of $0.68, an increase of 2%. We generated significant free cash flow and returned approximately $86 million to our shareholders this year through our $55 million stock buyback and $31 million in dividends. Additionally as we announced in the earnings release, the Board of Directors approved an increase and extension of the company's current stock repurchase program with a total of $120 million now available for our future use. I am pleased that we have the cash flow and capital flexibility to repurchase shares, pay dividends and pursue other business development opportunities. On Slide 5 is a summary of our 2015 accomplishments. Our focus in 2015 has been to transition the organization both from one that has operated like an IT department of a bank to professional, technology, and processing company. We continue to make good progress as we deliver on the promises made at the beginning of the year. First, we focused on executing well in Puerto Rico. Between the expansion of our relationship with FirstBank, our conversion of Doral Bank and the performance of our local payments business, I feel confident we've done well within this challenging environment. As the economy has worsened, our local service…

Thank you, Mac and good afternoon, everyone. I'll now provide a detailed review of our fourth quarter results and our full year performance and then provide our financial outlook for 2016. Turning to Slide 11, you will see the fourth quarter and full-year segment revenue details in the same for the total company. Total revenue for the fourth quarter of 2015 was $95.5 million, up 2% compared to $93.5 million in the prior year. Total revenue for 2015 was $372.9 million and up 3% year-over-year. With respect for the segment mix in the fourth quarter, merchant acquiring net revenue increased 12% year-over-year to $23.4 million, reflecting sales volume growth primarily driven by the addition of newly acquired First Bank Merchant Contract, which contributed approximately 10% growth. The overall sales volume increase we experienced was also driven by significant increases in tax payments where we worked with the Government of Puerto Rico to accept card payments and this growth was partially offset by lower volumes for gas and utilities driven by the ongoing year-over-year decline in oil prices. In terms of recent trends we note that in the quarter smaller merchants receive less payment volumes and large retailers grew payment volumes. This trend results mean lower net revenue mix for EVERTEC. For 2015 merchant acquiring grew 8% to $85.4 million and this represents approximately 23% of our total revenue. The growth during the year was primarily attributable to the continued payment migration from cash to card transactions in Puerto Rico and the factors I just referenced. Payment processing revenue in the fourth quarter was $27.7 million approximately flat with the prior year. Increases in our ATH debit network volume were offset by reduced revenue from contracts with Puerto Rico Government of approximately 3%. Additionally, approximately 1% pertaining to FirstBank payment processing…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from George Mihalos of Cowen.

Thanks for taking my questions guys. So just wanted to start off on the guidance, how we think of the first half versus the back half you mentioned some contracts coming off on the LATAM side. Should we expect revenue growth to be more weighted to the first half of the year relative to the back half?

Hi George, it’s Peter Smith. We would look at the year on a balanced approach actually. We expect some of the fall-off to occur as we indicated that there are some other items on the front half that keep the balance.

Okay. And then Mac you spoke encouragingly about the pipeline, can you elaborate on that? Obviously the new wins, new wins would not be in the guidance I would presume, but how long will it take to ramp in your estimation a new business win?

Yes so hi George. Typically it's this industry, 9 months to 18 months because you have the sales process and then you actually have to convert them on to your platforms. What I would tell you as we've talked about previously, the focus by the end of this year of '15 and in the focus early '16 is really to rebuild the pipeline. We've got an active pipeline today and get some big wins and I don’t think it will have a big impact on '16, but I think it will have a good impact on the future growth of the business.

Okay. And then just last question from me a housekeeping item, I think you mentioned LATAM grew about 8% in the fourth quarter. So back of the envelope Mac, does that imply that Puerto Rico in aggregate grew about a percent, is my math right there?

That's correct.

Okay. Thank you.

Thanks George.

And the next question comes from Bob Napoli of William Blair.

Thank you. First I guess what would be -- you accepted the cadence of buybacks to be like you bought back, what about $54 million worth of stock this year. Does the $120 million that you have out there was more than 10% of the company? How would you anticipate executing on the buyback?

Hi Bob, we look at the first -- we're pleased by the announcement and the authorization by the Board. As we look at buybacks, we just follow our capital allocation methodology where we were first looking for growth. And then to the extent we don’t have those investments available and we have extra cash, excess cash, we return it to shareholders. As we go through the year, that's how it's going to flow. We're going to follow that methodology consistently.

Okay. And then the VAT tax that’s coming into play is that a risk to the guidance here? You're assuming that the trade off with the business tax there is no net effect from those two, but isn’t that VAT tax risk that is going to compress consumer spending?

The way we've looked at, you're correct in that we've isolated the B2B tax and its overlapped one quarter that basically neutralizes it. With respect to the VAT tax, there is some opportunities that we expect to offset, what you referenced, which is a potential outcome. Specifically as we're incurring the B2B tax now as it transitions to a VAT tax, we will be able to recover that through our remittances with the Government.

Okay. And then last question I guess on the Columbia, what is you strategy once you close that deal? How much revenue does it bring and what is -- do you have a -- what is the strategy to grow in that market?

Sure, Bob, this is Mac. We can't really talk about revenues. It's a private company right now and it would be inappropriate at this point to disclose the revenues, but we will tell you is we were just in Bogota a couple of weeks ago visiting the Management Team there. As we talked about previously, they have a fantastic roster of clients including the other equity investor conference to -- we told you it’s the second largest in its space as far as a fund distribution company. The second is the largest retailer is also a customer. So the roster they have that customers need they're cross sell into those is part of the strategy. Secondly, the ability to do additional development for the entire enterprise out of Columbia because of the workforce they have and then the ability to leverage some of their products and services outside of Columbia. So we're incredibly excited about the investment and making them part of EVERTEC.

Okay. Thank you.

Thanks Bob.

The next question will come from Jim Schneider of Goldman Sachs.

Good afternoon. Thanks for taking my question. I was wondering if you could maybe give us an update Mac on your strategic priorities, specifically the things that you’ve looked at outside of Colombia and you want to invest more in and then specifically, can you address anything where you -- the company is already been investing in, but you might look to pull back?

Yes so let me talk a little back, there is a couple of pieces. From an M&A perspective we focus on different types of investments. One is where we can increase our footprint. So Columbia, clearly the Processa deal was an opportunity to expand outside of where we currently do business. The second would be defined new product capabilities and fortunately Processa offers that as well. And then finally, we look at investments where we can leverage our scale. So we would look at an opportunity in Puerto Rico if we were able to get a good multiple on it and we're able to do it -- process those types of transactions like the FirstBank deal using the scale and leverage that we have. We're very focused on investments right now from a technology perspective where we do business today. So Puerto Rico, Central America and the Caribbean and focusing on organic growth in those markets and as I said earlier, we’ll look at trying to increase our footprint through an M&A outside of where we do business today.

That’s helpful. You’re investing on things, you want to grow the business down and you don’t want to sacrifice those, but to the extent the macro environment were to worsen further are there -- what kind of leverage do you have to pull back on the cost control side? Are we pretty much tapped out on that or is there still more that can be done?

Let me take the question and hand it to Peter so you can get his view. I would say we've been doing that as we go along today. We’ve been very effective at trying to cut cost where we can in Puerto Rico and as we invest in LATAM, make sure we’re very diligent about this. So as we progressed throughout the year and adding some of the incremental investments we’ve added even in '15 by adding a Latin American Management Team that's still making their numbers is something that we’re always conscious of. As far as levers going forward, I'll let Peter give his view.

Yes as Mac alluded to, we’ve already taken some class action to offset some of the headwinds we’ve outlined here. Additionally, we have other projects underway that we’re working on that are longer in nature that we are focused on that should deliver more savings. So there are just not really going to add a lot into '16, but we look forward to completing those and reducing our cost structure accordingly.

Great, thank you.

Thanks Jim.

And next we have a question from Vasu Govil of Morgan Stanley.

Hi, thanks for taking my question. I guess starting with Puerto Rico first, given that the macro conditions there are still in flux, I'm wondering if you can help us think about whether there's much buffer baked in guidance if consumer spending was to take another step-down in coming months?

I'll let Peter take that.

Yes, well what we've planned in our guidance is for a bit of a tail off in volume and what we're seeing is less spend per ticket and a bit of a mix shift in terms of transaction volume with smaller merchants to larger merchants. All those are incorporated into our outlook. So we planned for some of that and our view is that, that is cautious and out best estimate at this time I think anything step below that would be unexpected to us.

That’s into the guidance.

Great. Thank you. And then just quickly, I know the last couple of quarters you talked about some legislative changes, which could potentially drive increased card acceptance in Puerto Rico. Have you started to see any benefit from that and is there a way to quantify what the benefit could be?

Yeah, I think we've seen a couple of things. We have seen an increase in government payments and the government accepting payments. We're seeing legislations we've talked about earlier for certain types of merchants has to accept now more than just cash. So that is part of the upside that they were seeing in on business today but to Peter's point, we’ve also seen some weakening among the small merchant side.

Got it. Thanks very much.

The next question comes from Sara Gubins of Bank of America, Merrill Lynch.

Hi, this is Fatom Bagole calling in for Sara Gubins. My first question is what are the incremental costs associated with managing the outage that occurred in early 1Q? Are there additional costs associated with updating systems?

For everyone who is unaware, we had an outage on January the 9, that had about a two hour duration. I would say if you look at the January numbers and the transaction volume, it’s consistent with our expectations. So it doesn’t appear to impact in our volumes. As far as ongoing cost, I will let Peter address that.

Yes they were relatively insignificant. We had some cost with respect to the press and so forth that we did and then we hired some consultants to help us investigate the outage and really those were the incremental costs that we incurred.

And they're baked in the guidance?

Correct.

Got it. Got it. All right. And then my second question is can you give us guidance on revenue by segment? I believe you said mid single digit for Merchant Acquiring, but what were for the other two?

What we referenced in the comments was potentially similar to Q4.

Got it. Got it. All right. That's all I had. Thank you.

The next question comes from Tien-tsin Huang of JPMorgan.

Great. Thanks. I was wondering, Mac, if the DOJ investigation has any potential impact on your pipeline and your ability to close deals?

So what I would say is there is no indication of that today. We operate in a very competitive market. We’re still winning business and our view right now is that it has no impact on our ability to compete Puerto Rico.

Okay, good. Just wanted to check. Then I guess the loss of the lottery business, is there a replacement product potentially there that you can compete for? Because I know that was something you had built specifically for that. So is that…

So everybody on the call knows the Evalodo was actually every time a sales receipt was printed, there was a lottery number on it to ensure that consumers would ask for receipt and ensure the taxes were calculated and actually paid and remitted. The government now that it's moving to VAT system has decided they have new tax regimes. As part of the new VAT system, they're replacing some of these old legacy systems. We’re actively competing for that and we plan to be part of these new systems they are implementing, but we still have work to do to continue to win some of that business, but we're very actively working with the government.

Okay. Got it. So that's still in the -- like you said, in the pipeline…

Right.

As a potential win. Okay. And just last one, just I think I feel like I always ask this question, so forgive me. Just in general around IT spending with Banco Popular and some of the other banks, take away the government cost quite a bit. How does the spend environment feel on the IT side with your larger bank clients?

Yes, I would say this is a challenging environment for any company headquartered at Puerto Rico, but if you look back at the first bank transaction, I think what we realize on the island is more increasingly they're looking at EVERTEC as an opportunity to do business with us. So they're still investing, they still want to have the best products. They also have businesses in the U.S. that they're investing in. So we don't see what I would call a pull back. So there is still opportunity to do more with the banks at Puerto Rico.

Yes, I'll just add that we continuously are engaged with Banco Popular and hence their core platforms and the rest of their infrastructure. So that has an ongoing focus I think probably for their efficiency as well.

Okay. Great. No, that's helpful and the slides are helpful. Thank you.

Okay. Thanks Tien-tsin.

And the next question comes from John Davis of Stifel.

Hey, good afternoon, guys. Peter just a quick one, did you guys quantify the acquiring revenue from FirstBank in the fourth quarter?

We referenced the percentage that it contributed, which was 10% out of the 12% growth. So you can kind of calculate.

Okay. Perfect. Then if I can especially drill down a little bit on the transaction growth, assumptions embedded in -- embedded in 2016 guidance both in Puerto Rico and outside of Puerto Rico and maybe just help a little bit about the puts and takes there and what the underlying transaction growth assumptions are?

Yes, well in Latin America, we're still experiencing double-digit growth on our existing clients and that is a indication that with respect to the business we have it's healthy and growing nicely. With respect to Puerto Rico as I referenced earlier, we've modeled in a bit of a decline in the volume as the year goes on as we expect the economy and sales tax and a few other impacts to impact our volumes more so on the payment volume side as compared to transactions, which generally will occur, but at a lower value.

Okay. That's helpful. And then one for your Mac maybe how do you guys look at capital allocation given where the stock is trading? Does that influence buyback versus M&A or if there is M&A opportunity doesn’t matter how cheap the stock is, that's the first priority. Just want to get your thoughts there.

Yes, I think it's a healthy balance and I'll Peter describe how he thinks about it, but M&A is important to the company and as we've talked about long term, it allows us to expand our footprint in a very effective manner because you don't have to create all the operating overhead and you can move more quickly in the market. So M&A is still something we're very focused on. However, we do have to balance that again sort of the current stock price, but we're focused on both, but M&A is still something we're very keen to do. We have a very healthy pipeline and we're looking forward to close the Processa transaction.

Okay. That's helpful. And last one for me. The DOJ investigation, any chance that it jeopardizes any government contracts and the rules. Are there any big ones up for renewal we should be you aware of, just any thoughts there would be helpful.

Yes, so at this point, we haven't been formally served with any type of documents or requests. So we don't know the full scope of the investigation. It primarily in some of the initial conversations that we've seen in the -- that we had discussions in the legislature has been focused on some of the payments business, not on our government contracts. I would say the government contracts that we have, we won competitively. We're one of the most mission critical vendors to the government and we have seen them pull back from those discussions. So my view is this probably will not impact them.

Okay. Great. And then maybe one last one, sorry, on Processa, given the regulatory approval environment has been considered as subsidiary. Does that make the new strategic shift towards smaller deals, does that impact it where it's such a headache to get done, maybe you need to do bigger deals or how is this kind of elongated process had any impact on your thinking as far as M&A goes?

Yes, so what I would say is again we're still optimistic that we'll close on Processa and we love the opportunity because although it is a small company, they have a great reputation in Columbia and we think we can accelerate the growth faster if we do this deal. We're still very focused on closing this transaction and are speculating on future deals. Like I said, we are actively talking to sellers and we still actively have a pipeline.

Okay. Very helpful. Thanks guys.

[Operator Instructions] And our next question is a follow-up from Bob Napoli of William Blair.

Hi. Thank you. Just on the EBITDA margins, what are your thoughts longer term on the ability to expand those margins or are you expecting to be in investment mode for the next few years?

Bob, the first thing I would like to mention is with respect to volumes as we bring them on, on our existing platforms, we should see increases in our margin. As we look into each market, we're really looking to invest based on return on invested capital and metrics around that given our capital and cash availability. We're very focused obviously on driving margins through some of the cost actions that I referenced and I believe as we look into our specific investments in these markets, we can better assess what the overall margin will be, but margin percentage itself isn’t going to direct those investments, can be the return on invested capital.

Okay. So you expect those margins to grow over time as you grow the business?

As I mentioned, I think with respect to each investment in each market, it may be different, but with respect to our existing assets and platform to the extent we're bringing on volume, we would expect those margins to go up.

And then the de-conversions that you've had and have you had new customers that want to de-convert or are you, the issues that caused those de-conversions are behind you, do you have that under control and how much revenue are you losing from the clients that are de-converting.

Yes, so Bob, this is Mac. What I would say is the losses are in the guidance that we're not providing more detail beyond that. We have a great team in place that I think is doing a good job of getting in front of customers, understanding we make sure we understand the issues, we're already resolving the issues, we're already seeing them impact into our customer satisfaction. So we believe we've gotten in front of the issue and we're working through it now. Additionally as I said they're working on new opportunities. So we think that we've got our arms around it at this point though.

Okay. And then the Evalodo, how much revenue was the Evalodo?

We don't give specific information on contracts at that level. I'll just add that as we -- as Mac mentioned earlier, we're looking to offset the majority of it through some other opportunities that we're pursuing with the government.

But those are not in your guidance.

No, they are, they are.

The new opportunities are in your guidance.

Correct. Yes we're in active, active stages of those opportunities.

Great. Okay. Thank you very much.

Thanks Bob.

And this concludes our question-and-answer session. I would like to turn the conference back over to Mac Schuessler for any closing remarks.

I want to thank everybody again for joining us on today's call. I look forward to meeting and spending time with each of you this spring in some of the conferences and some of our meetings and again, have a great evening.

I am sorry, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.