EVERTEC, Inc. (EVTC) Q2 2021 Earnings Report, Transcript and Summary

Good afternoon, everyone, and welcome to EVERTEC's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the call over to William Maina of Investor Relations. Please go ahead. William Maina 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'd 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.

Thank you, and good afternoon, everyone. Thank you for joining us on our second quarter 2021 earnings call. We delivered another strong quarter of financial results as we continue to benefit from increased transactions in Puerto Rico versus last year's volumes, which were impacted by the pandemic. In Latin America, we continue to benefit from recent implementations as well as effective management of our operating expenses. Based on our Q2 results and the momentum we see heading into the second half of the year, we are again increasing our guidance for 2021. Joaquin will provide further details later in the call. Beginning on Slide 4, our total revenue was $149 million for the second quarter, an increase of 26% compared to Q2 of 2020. Adjusted EBITDA was $80 million, an increase of 60% as compared to the prior year. Our margin for the second quarter was approximately 54%, over 1,000 basis points higher than last year, reflecting the scalability of our business. Our adjusted earnings per share was $0.78, an increase of 105%. We continued to generate significant operating cash flow during the quarter of $112 million, and we returned approximately $32 million to our shareholders through dividends and share repurchases. Additionally, our liquidity remained strong at $319 million as of June 30. Moving on to our update for Puerto Rico on Slide 5. We saw strong volume and revenue growth in Q2, driven by the incremental inflow of federal stimulus funds and increased consumer spend versus last year, which was significantly impacted by the COVID-19 lockdown. Merchant Acquiring sales volume growth was approximately 63% year-over-year, reflecting transaction growth of approximately 68%. Most of this growth was driven by the months of April and May, which experienced sales volume increases of approximately 118% and 69% year-over-year, respectively. Our results in Puerto Rico also benefited from continued strong growth in ATH Movil products, which delivered approximately 60% year-over-year revenue growth. I'm also pleased to report that our previously announced large printing contract, which we signed in the first quarter, is fully implemented and in production. As a reminder, this is one of the largest printing contract in EVERTEC's history and is anticipated to benefit our Business Solutions segment in the back half of 2021. Turning to the operating environment in Puerto Rico. As I mentioned, and as you can see in our results, the combination of the reopening of the island and the incremental federal stimulus funds continue to positively impact our results. Vaccinations continue to increase, and with over 60% of the population fully vaccinated, the Puerto Rico government further reduced restrictions in early July and the economy is mostly open today. We do continue to monitor the effects of the Delta variant, which as has been the case in other places, has resulted in an increased number of positive cases over the past few weeks. Now turning to Latin America on Slide 6. As I mentioned in our last call, we continue to see varying levels of COVID-19 restrictions, vaccination levels and reopenings from country-to-country. For example, vaccine distributions began in late February in Brazil, Colombia, Chile and Mexico. However, infection rates still remain relatively high in these countries, so we remain cautious with respect to our outlook for recovery throughout the region. Nevertheless, we are pleased to have delivered another quarter of strong double-digit revenue growth in Latin America. Our performance continues to be driven primarily by the implementation and go-live of the major wins and expanded relationships we discussed throughout last year, including Banco Popular of Costa Rica, Mercado Libre in Mexico and Santander Chile, as well as our regional expansion of PlacetoPay. In summary, we delivered strong second quarter results, and we are again raising our 2021 outlook. While we will continue to monitor the impacts of COVID-19 across our geographic footprint and remain cautious in certain countries, underlying demand for our solutions is robust, and we continue to execute well against our growth plan. Our cash flow generation and balance sheet remain very strong, enabling us to continue executing on our capital deployment strategy. I will now hand the call over to Joaquin to review our results and guidance in more detail.

Thank you, Mac, and good afternoon, everyone. Turning to Slide 8, you will see the consolidated second quarter results for EVERTEC. Total revenue for the second quarter was $149.1 million, up approximately 26% compared to the prior year's COVID-impacted results of $117.9 million. As Mac mentioned, our Q2 results reflect increased transaction volumes in Puerto Rico, mainly impacted by the influx of federal stimulus and by improved consumer demand, as well as double-digit growth in LatAm driven by our recent new business implementations and expanded relationships. Adjusted EBITDA for the quarter was $80.3 million, an increase of 60% from $50.2 million in the prior year. Adjusted EBITDA margin was 53.8%, and this represents an increase compared to the prior year of over 1,000 basis points. This expansion in our margin primarily reflects the higher payment revenue in both Puerto Rico and Latin America, the favorable impact of foreign currency and the benefit of dividends received from our investments held under the equity method. Adjusted net income for the quarter was $57.1 million, an increase of 106% as compared to the prior year, primarily reflecting the higher adjusted EBITDA and lower cash interest expense. This was partially offset by increased operating depreciation and amortization, driven by capital expenditures in the prior year as well as key projects that have gone into production. Our adjusted effective tax rate in the quarter was 11.7%, while the prior year tax rate was impacted by the COV19 lockdown, shifting our revenue mix toward higher tax business. Adjusted EPS was $0.78 for the quarter, an increase of 105% compared to the prior year. Moving on to Slide 9, I will now cover our segment results, starting with Merchant Acquiring. In the second quarter, Merchant Acquiring net revenue increased 55% year-over-year to $38.3 million, driven primarily by increased sales volume, reflecting stronger consumer demand and a significant impact that COVID-related federal stimulus had on overall sales. Sales volumes in the quarter increased approximately 63% and transactions increased approximately 68% year-over-year. On a month-to-month basis, sales volumes were up 118% in April and approximately 69% in May, reflecting the severe impact of COVID-19 lockdowns in the same months last year. Sales volume growth slowed to approximately 27% in June as the initial shock of the pandemic during the prior year began to subside and we saw consumer demand improve toward the end of the second quarter in the prior year. Our results also benefited from incremental EBT funds that began in March of this year and extended through the second quarter. Partially offsetting our revenue growth in Q2 was reduced spread, primarily due to a lower average ticket as well as a change in card mix from debit to credit as the mix between products also moved toward normalization. We expect average tickets will continue to decrease as these move toward more normalized levels in the second half of this year. Adjusted EBITDA for the segment was $20.5 million, up 54%, driven by higher revenues in the quarter. Adjusted EBITDA margin was 53.6%, a decrease of approximately 40 basis points as compared to last year, primarily driven by a higher number of transactions processed as a result of a lower average ticket. On Slide 10, you will see the results for the Payment Services, Puerto Rico and the Caribbean segment. Revenue for this segment in the second quarter was $38.6 million, up approximately 41%, driven by increased transactions across POS, ATM and ATH Movil compared to last year's COVID-impacted results and also positively impacted by COVID-related federal stimulus flowing through the Puerto Rico economy. Consistent with the Merchant Acquiring segment, Payment Services transaction growth was highest in April, and then moderated in May and again in June. ATH Movil and ATH Movil business transactions contributed an incremental $1.7 million of revenue in the second quarter. Additionally, the segment benefited from increased intersegment revenue for transaction processing and risk monitoring services for Latin America. Adjusted EBITDA for the segment was $23.6 million, up 78% as compared to last year. Adjusted EBITDA margin was 61.2%, up over 1,200 basis points as compared to last year. The significant increase in our margin was primarily due to higher revenue and scalability of this segment compared to last year's pandemic-impacted results in a segment with a high percentage of fixed cost. On Slide 11, you will see the results for our Payment Services, Latin America segment. Revenue for the segment in the second quarter was $25.8 million, up approximately 30% as compared to last year. As Mac mentioned, this increase was driven by the new business implementations and expanded relationships such as Banco Popular in Costa Rica, Mercado Libre in Mexico and Santander Chile as well as increased revenue from PlacetoPay. Adjusted EBITDA for the segment was $11 million, and adjusted EBITDA margin was 42.5%, up approximately 1,200 basis points as compared to last year. driven by higher revenue and the benefit of balance sheet remeasurement in nonfunctional currencies of approximately $1.5 million. As a reminder, our Latin America segment margin is currently benefiting from established minimums in the Santander contract with low transaction levels. We would expect margins to move toward mid- to high 30s as transactions continue to increase over time. On Slide 12, you will find the results for the Business Solutions segment. Business Solutions revenue for the second quarter was up approximately 9% to $60.7 million. The revenue increase in the quarter benefited from incremental volumes on core banking services provided to Popular, growth from services that started in the second half of last year and growth of our new printing contract, which Mac referenced earlier. For the quarter, adjusted EBITDA was $30.6 million, an increase of 27%; and adjusted EBITDA margin was 50.5%, up approximately 720 basis points as compared to last year. The adjusted EBITDA margin improvement was primarily driven by the revenue growth as well as lower operating expenses, primarily a decrease in cost of sales, coupled with lower employee expenses as the prior year included special payments for employees working on site during the pandemic lockdown. Moving on to Slide 13, you will see a summary of Corporate and Other. Our second quarter adjusted EBITDA was a negative $5.5 million, a decrease of 16% compared to prior year. Adjusted EBITDA as a percentage of total revenue was 3.7% and lower than prior year by approximately 190 basis points, primarily due to the higher revenues and cost controls. Moving on to our cash flow overview on Slide 14. Our beginning cash balance was approximately $221 million, including restricted cash of approximately $18 million. Net cash provided by operating activities was approximately $112 million, a nearly $25 million increase compared to prior year. Capital expenditures were approximately $30 million, in part, driven by higher obsolescence spend as we accelerate some projects as well as continuous focus on innovation. Regarding capital expenditures, for the full year, we now anticipate approximately $60 million of CapEx, up from our prior guidance of $50 million to $55 million. We also recorded approximately $15 million for the extension and expansion of our relationship with FirstBank during the first quarter and debt securities purchased in the prior quarter of $3 million. We paid approximately $25 million in long-term debt payments, $9 million in withholding taxes on share-based compensation and $2 million of other debt pay downs, which resulted in a total net debt decrease of approximately $35 million. We paid cash dividends of approximately $7 million and repurchased approximately $24 million of common stock, for a total of approximately $32 million returned to our shareholders. We have approximately $76 million available for future use under the company's share repurchase program. Our ending cash balance as of June 30 was $219 million, and this included approximately $19 million of restricted cash. Additionally, we recently announced another $0.05 dividend to be paid on September 3, 2021 to shareholders of record as of August 2, 2021. Moving to Slide 15, you will find a summary of our debt as of June 30, 2021. Our quarter ending net debt position was approximately $276 million, comprised of approximately $200 million of unrestricted cash and approximately $476 million of total short-term borrowings and long-term debt. Our weighted average interest rate was 4.5%. Our net debt to trailing 12-month adjusted EBITDA was approximately 1.47x. As of June 30, total liquidity was approximately $319 million. This balance excludes restricted cash and includes the available borrowing capacity under our revolver. Moving to Slide 16, I will now provide you with an update on our 2021 outlook. Given our Q2 results and additional visibility, we now expect revenue to be in a range of $570 million to $579 million, representing growth of 12% to 13%. Our adjusted earnings per share outlook of $2.56 to $2.66 represents a growth range of 24% to 28% as compared to the adjusted earnings per share in 2020 of $2.07. On a GAAP basis, earnings per share is anticipated to be between $2.01 to $2.11. Our payment segments in Puerto Rico had a very strong first half of the year, driven mostly by the impact of COVID-related federal stimulus impacting consumers directly. We will continue benefiting from this tailwind in the second half, but do expect some moderation when compared to the first half as we begin to move away from when these funds were disbursed and as some of the recurring funds in these programs begin to end. As an example, EBT funds for certain programs ended in June, and funds expected in the second half of the year will be lower than those seen through June 30, and enhanced unemployment is expected to end in the third quarter. Additionally, we continue to expect normalization of the average ticket as well as mix of cards, which will pressure our merchant spread. We continue to expect our LatAm growth for the full year to be in the high teens. Our Business Solutions segment should see some moderation in comparison to the first half and down in comparison to prior year as we had a significant one-time benefit from the Department of Education contract last year, and as some of the COVID-related services provided to the government begin to subside. We now believe adjusted EBITDA margins will be in a range of 49% to 50%. We continue to expect some margin headwinds from the normalization of the average ticket and the high margin benefit of the Department of Education contract last year. We are also expecting incremental expenses in the second half of the year as the annual merit increase given to employees in July takes effect and as we execute on specific initiatives that will continue to improve our operations and products going forward. We continue to expect our full year tax rate to be in a range of 13% to 14%. Our guidance also includes the benefit of the share repurchases we completed through Q2. In summary, we generated strong second quarter results, which led us to again raise our full year 2021 guidance. We are executing well against our growth plan on a track to deliver continued solid results in the second half of this year. With that, operator, please open the line for questions.

[Operator Instructions] And our first question comes from Bob Napoli with William Blair.

Yes, thank you. Good afternoon. Congratulations. Really strong results.

Thanks, Bob.

I guess, the tricky part is trying to figure out what's the change for the long-term. The Puerto Rico, Latin America has a lot of cash, and COVID has -- I think it probably accelerated permanently the digital shift. Is that -- do you have any feel for that? Is -- I mean, is that able to -- are you able to parse that out of the numbers and what you think is like a permanent secular shift versus temporary led by stimulus programs and the like as we think about 2022, if you would?

What I would say, Bob, we definitely see, obviously, the move toward the digital channel, and as we continue to report ATH Movil, ATH Movil business, specifically in Puerto Rico, we are seeing and we expect, as we've said in the past, some of that definitely stay. In terms of parsing it out, obviously, as things start to open up and you start to have, again, kind of people going into more restaurants, we are expecting to see some of that card present come back. But again, I don't know if we can parse that out specifically that we will right now for 2022.

I would add, Bob, I mean, some of it is permanent. And if you noticed during the quarter, we did grow 60% in some of those channels, which is still incredibly healthy. It's much lower than -- I mean, it's lower than we saw in previous quarters when we were in lockdown mode or coming out of the lockdown. The 60% is still healthy. What I would say is some of the trends and more P2P transactions, more ATH Movil business transactions, the increased demand of PlacetoPay our e-commerce gateway, that we're seeing increased demand in Costa Rica more than we saw prior to the pandemic. And that's the combination probably of a shift of spend and also that we have a better product that we've rolled out in some of these markets. Some of this is a permanent shift, we believe, and a trajectory that will continue to be helpful to our business. But at this point, it's very difficult to parse that out, but some of this is definitely permanent.

The large credit contract for Business Solutions, is that like a one-time revenue source? Or is that an ongoing benefit? And can you quantify it?

The printing contract, Bob?

You said you had a very large credit, I think, contract.

Yes. So it was actually a printing contract, Bob.

Right. Okay. Printing contract.

Yes. But it was -- I mean, it was meaningful to that segment, to that business in particular. It is not just a one-time deal. It's a longer-term contract. So it will have a positive effect into the future. It started during the quarter. So it's not fully annualized in our numbers. It will fully annualize next year. But it's not a one-time deal. It is an ongoing contract with a very large company in Puerto Rico to do their printing.

Okay, great. And then just what was the driver to July transaction growth? And last question for me, how is Chile doing?

Sure. So I will take Chile. Chile, again, we've been pleased with our progress. We said on the last call, they reached -- exceeded where they thought they would be at this point during the year by rolling out the product. To our knowledge, they were the first ones in the market rolling out a product that competes with Transbank. We are in the process of localizing now the e-commerce gateway, PlacetoPay. So that project is going very well and exceeding expectations. When it comes to the July numbers, I will hand that to Joaquin.

In terms of the July numbers, Bob, we are still going through and kind of cleaning the numbers, but there was some moderation sequentially from what we saw coming out of the month of June. So -- and that is something that, as we said in the prepared remarks, we kind of expect, right? I mean, we did see a very significant pickup here in Q2, mainly driven by kind of the push of all the stimulus coming into Puerto Rico and kind of making that month of April, May really high bars. And what we're seeing as we kind of move a little bit away from when that was dispersed, the month of June, just on a sequential basis, was slightly lower than the month of May, and the month of July slightly lower than the month of June.

Thank you. Appreciate it.

Thanks Bob.

Thank you. And the next question comes from Jamie Friedman with Susquehanna.

Hi. Thank you. Great results here, Mac and Joaquin. You had mentioned, Joaquin, a dividend benefit.

Oh, yes.

Yes. What's that about?

So we have a -- we have an equity method investment, where we usually just kind of recognize the -- our portion of ownership of their net income. But this time around, they provided or they paid a dividend that, from our perspective, impacts positively our EBITDA even though it's a cash transaction. In the Dominican Republic with CONTADO. So we own a stake in the Dominican Republic processing company, Cardnet, and that's what we're referring to. We received the dividend this quarter, and that dividend is impacting positively the margin.

Okay. Did you -- I’m just trying to get the kind of normalized EBITDA margin. Did you quantify that? It's on Page 8, right?

I can tell you. The normalized margin for the quarter is about 51%. If you exclude -- actually, if you exclude the CONTADO dividend, and we usually also normalize for the foreign currency remeasurement.

Got it. Okay. And then, Mac, is there any way to proportionalize MELI, BPOP and Santander Chile? And I didn't hear you mention Citi this time. Like, which of those is the most significant? Or just generally, what stages are they, maybe is a better way to say it?

So let me tell you. So to be clear, it's Banco Popular, Costa Rica. So it's not Puerto Rico. And so -- and the largest of those is Santander Chile. Each of them are meaningful to the segment. And reputationally as you know, Jamie, Mercado Libre is one of the most valuable companies in the region and the most sophisticated e-commerce company in the region. So reputationally, we think that they're all important. But Santander Chile is the largest.

Okay. And any reason you didn't mention Citi Mexico?

No. No reason in particular.

Yes, Citi continues -- we continue to work on Citi. I think the only difference there that I would kind of bring to your attention is MELI have gone into production, and we are already kind of seeing some of the progress. Citi is on our platform, that even though it's now in production, will grow as we start to kind of create more volume within that platform. So it's something that we are growing to something more meaningful over time as we start to drive more and more transactions.

Got it. Thank you. I will drop back in the queue.

Thanks Jamie.

Thank you. And the next question comes from Vasu Govil with KBW.

Hi. Thanks for taking my question and congratulations on a strong quarter.

Thank you.

I guess, my first question, just on the second half guide, it seems like the -- despite the tough comps, you guys are expecting to grow through that. And it sounded like the delta versus your prior expectation is mostly better stimulus funding that sit in the hand of the consumers. Is that kind of the biggest delta now versus before? Or are you also seeing just better underlying macro trends with the federal stimulus moving in and things like that?

I mean, I think it's a little bit of everything, right? Definitely, stimulus is impacting many of the macro trends that we follow in Puerto Rico. So again, it's very hard to parse out how much of the stimulus will continue to have kind of a long-lasting effect. But for sure, I mean coming out of Q2 and the amount of funds that have been received and what we are expecting will continue to be a tailwind, will be part of what we are expecting or what we now expect in the second half of the year or in the new kind of guidance that we provided. So it is an important part of that.

Understood. And then just following up on the margins, even with the adjustments, delivered a strong margin quarter, and you have some puts and takes in the back half. But as we think about margins longer term, I mean, I would think that you should continue to see an upward bias as revenues expand. I mean, can you frame for us how you think about annual margin expansion in the normalized environment?

Look, we’ve been consistent in this in saying that as we grow our top line, we should be in a position to expand margin. Having said that, we are growing very fast in Latin America, where we are driving kind of a lower margin than what we have in some of the Puerto Rico segments. In addition, just kind of thinking about the second half and some of the puts and takes. As we have some of the average ticket in our Merchant Acquiring portfolio and some of the slowdown in just the overall stimulus plus the change in product mix, that will put pressure on the overall yield per transaction. So that should get reflected on the overall margin. But in general, as we look forward, I mean, we do see this -- we are very margin focused. And you can see the scalability of the business when we drive top line.

Got it. And just a quick one for you, Mac. Just the M&A pipeline, what’s that looking like? Clearly, devaluation seem to be getting out of hand in this environment. So should we expect you guys to keep doing more buybacks, or just updated thoughts on M&A?

I would say our thesis hasn't changed. I mean you've seen some pretty high valuations in Latin America with some of the more recent deals. But we do have opportunities that we are looking at, opportunities that we are excited about. So I would say we have a healthy pipeline on things that we are working through. And I would say it's not only -- I know this isn't part of your question, Vasu, but it's not only on the M&A front, but organically well. So organic, we also have a pretty good pipeline. So it's something we are still focused on. We will try and have a balanced approach to capital allocation and continue to pull the other levers when and where we need to.

Great. Thank you for the color.

Thank you, Vasu.

Thank you. And the next question comes from James Faucette with Morgan Stanley.

Thank you very much. Just wanted to follow-up on Vasu's questions, and particularly as you're thinking about how you're incorporating the stimulus and as that rolls off. And I’m wondering how you're taking into account things like -- or if you're seeing visitorship change to Puerto Rico? How you're anticipating that maybe coming back or having an impact? Just looking at some of the other dynamics that can be at play, particularly for that market.

Sorry, James, did you mention visitors, you mean, tourists?

Yes, visitor -- yes, tourism, et cetera, to Puerto Rico and what's happening and how that’s impacting your outlook?

No, it does. I mean -- and that's part of what I mentioned in terms of product mix. We’ve been now, for a few quarters, kind of calling the attention of a higher spread in our Merchant Acquiring segment, driven by the average ticket, but also the product mix. In the past few quarters since the pandemic, we’ve seen a lot more debit and a lot more domestic transactions than we had in the past. So we are definitely, as we move forward, considering that those three main factors will start to look toward normalization. That’s something that we’ve actually already seen. And in the case of domestic versus, let's say, international or cross border transactions, that is almost back to pre-pandemic numbers. And the reason being, over the past quarter, travel to Puerto Rico has actually improved significantly. I believe it's only -- if we go base it on numbers, about 6% below 2019. And actually, the month of June, I believe it's one of the highest passenger month we've had since the airport went private, which was close to 10 years ago. So we are definitely seeing some of the tourism come back. And we are considering some of those kind of nuances that the change in -- just in the overall economy can have. Having said that, remember that tourism for Puerto Rico is only about 5% to 8% of GDP. So it's not a huge number.

And I think what we are -- I mean I think what we are seeing, to some extent, is what the rest of the company -- country has seen, is the stimulus money. And as that rolls off, it's the economy getting reactivated. We are hopeful that with hurricane money coming in, potentially with the infrastructure bill coming through, that we will continue to see some nice tailwinds for the remainder of the year going into next year. But again, it's hard to predict with Delta variant, what will get and how quickly will funding come through Puerto Rico. But to Joaquin's point, tourism is back in Puerto Rico, but it's not a significant part of the island's economy nor really our business per se either.

Yes. No, I appreciate that. I’m just trying to make sure that we have kind of all the pieces at least as complete as we can. On that -- on hurricane relief and the infrastructure bill, are there any areas that you're paying particularly close attention to in terms of sizes or projects and other things that will merit monitoring as to that impact depending on, obviously, how that whole process plays itself out politically? But are there specific projects or things that you're paying closer attention to?

Look, I think the infrastructure bill is an important one just because of its sheer size. I would say that there are other projects that involve some of the, for example, Medicare and social security parity for Puerto Ricans, which is something that we haven't considered because, again, it's something that has gone back and forth in Congress a few times, that if it does go the way of Puerto Rico, it should be incremental federal funding on a recurring basis going into the future. So I would say that that's an important one that we haven't necessarily discussed in the past, that's out there. And I would say, just the overall progress of the reconstruction funds continues to be something very important for us to track as well as the reconstruction of the electric grid, right? There were about $13 billion allocated toward just the revamp of the grid. And even though that is not something that we were expecting or expect to see kind of impact the economy in the next 6 months. It is something where LUMA has been selected, progress has been made. And hopefully, the government moves fast enough to start putting some of those funds into the economy next year.

That’s a really good color. Thank you very much.

Thanks, James.

Thank you. And the next question comes from John Davis with Raymond James.

Hey good afternoon, guys. Joaquin, maybe if you could just help us a little bit with the updated outlook. Obviously, great to see the revenue raise by more than the 2Q upside. But maybe by segment, I think you guys have laid out some kind of growth targets at the beginning of the year on what you're kind of modeling or assuming. Clearly, those have been upgraded. But just curious, maybe if you can't get by segment exactly, like where the most upside is and how we should think about growth in the business segment?

So I mean, I think what we can do for purposes of doing by segment, John, is kind of give where we expect to be top line growth for the whole year, right? We don't give quarterly guidance, and I think we already have, obviously, the first half. But as it relates to Merchant Acquiring, I mean, our expectation is given, obviously, the range, we will be kind of in the high teens to low-20s in terms of where that segment will be. When we look at payment in Puerto Rico, we would expect that to be in the high teens for the full year. LatAm, we would also expect that to be high teens, low-20s. And then in the Business Solutions segment, we expect that still to be kind of low single digits. I mean as we go into the second half in Business Solutions, we do have the headwind of the Department of Education contract, which was, again, about $4 million in Q3, and that was pretty significant to both the top line and EBITDA because of how we recognize it net of expenses. So it was a pretty good contribution to margin. And so at a high level, that’s kind of the breakdown of the different segments.

Okay. No, that’s exactly what I was looking for. Super helpful. And then maybe just around ATH Movil, just trends. Curious how that’s trended during the reopening. Have you seen kind of continued growth and traction within ATH Movil? And I apologize if I missed it, and maybe any updated stats that you can give around that would be great.

Yes. So that we mentioned in the early comments, about a 60% growth for the quarter. So we are still seeing -- and I think it alludes back to one of your colleague's questions, I think, Bob. I mean, we are continuing to see very healthy growth in that product line. It's not what it was two or three quarters ago, but we do think that’s a permanent trend where people will continue to use ATH Movil, and they will continue to use it for more transaction types. But it's not what it was the last couple of quarters, but 60% is pretty healthy given that we sort of have come out of the lockdown.

Okay, great. And then, Mac, maybe a bigger picture, more philosophical question for you. Leverage is now 1.5 turns, headed toward one probably by the end of the year, given the significant growth that you guys are achieving this year. I assume you're not going to let leverage just continue to go lower. And I understand M&A valuations are somewhat stretched. So if I go back pre-hurricane, you had $0.10 dividend. I believe now it's $0.05 a quarter. How do you think about dividends versus buybacks? Is special dividend something you guys would consider? Just curious on capital return for shareholders, how you guys think about it.

Yes. So our number one priority is growth, and we do -- and we think that’s through investing in our business organically and then M&A. So that will continue to be our focus. I think the balance sheet, we are in a great position to continue to invest in those areas. And we do know that M&A remains important for us. So that will be our top priority, is to continue to grow the company, because we think we are building a unique franchise in Latin America. That is unusual and is creating value long-term for shareholders. We do look at buybacks and we do look at dividends. I wouldn't parse those out on this call as to which we would move on in any certain direction, but our focus is growth.

Okay. All right. Thanks, guys.

Thank you.

Thank you. And that does conclude the question-and-answer session. I would like to return the floor to management for any closing comments.

Again, I want to thank everyone for joining the call today, and we look forward to catching up with you in conferences over the quarter. And everyone have a good night.

Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.