Good afternoon, everyone and welcome to EVERTEC’s Second Quarter 2023 Earnings Conference Call. Today’s conference call is being recorded. [Operator Instructions] I would now like to turn the conference over to Beatriz Brown-Sáenz of Investor Relations. Please go ahead. Beatriz Brown-Sáenz: 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 would 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.

Thanks, Beatriz. We provided some very exciting news on the M&A front last week and we now have encouraging news on the earnings front. As previewed last week, we delivered strong second quarter results above our expectations. Revenue for all segments exceeded our internal plan and margins were also above our expectations. On today’s call, I will start with some highlights from the quarter and then we’ll turn it over to Joaquin, who will provide further details on our second quarter results, as well as an update to our expectations for the rest of the year, which include another increase to our guidance for 2023. Beginning on Slide 4, total revenue was approximately $167 million for the first quarter, an increase of 4% compared to the second quarter of 2022. Adjusted EBITDA was approximately $74 million, a slight increase when compared with the prior year quarter. Adjusted EBITDA margin was 44.6%, above our expectations and adjusted earnings per share was $0.71, an increase of 6% from the prior year quarter’s adjusted EPS of $0.67. As a reminder, we changed our calculation of adjusted EBITDA, adjusted net income and adjusted earnings per share metrics last quarter to exclude the impact of non-cash unrealized gains and losses from foreign currency remeasurement and all variances against prior year have been compared against recasted figures considering this change. We generated operating cash flow of $126 million and we returned approximately $22 million to our shareholders through dividends and share repurchases. Additionally, our liquidity remains strong at approximately $386 million as of June 30. Moving on to our business update on Slide 5. In Puerto Rico, we experienced strong growth in both merchant acquiring and payment processing, with Business Solutions down as expected. Merchant Acquiring revenue was up 7% year-over-year, driven by an increased spread…

Thank you, Mac, and good afternoon, everyone. Turning to Slide 7, you will see the consolidated second quarter results for EVERTEC. As a reminder, last quarter, we made a change to our calculation of adjusted EBITDA, adjusted net income and adjusted EPS to exclude the effects of non-cash unrealized gains and losses from foreign currency remeasurement. For clarity and comparability, we have recast prior period numbers to conform to the current period presentation. Total revenue for the second quarter was $167.1 million, up approximately 4% compared to $160.6 million in the prior year. We experienced strong growth across all of our payment segments, both in Puerto Rico and LatAm. The revenue strength was driven primarily by increasing sales and transaction volumes as well as better spreads. Revenue growth also benefited from the contribution of the 2 acquisitions completed over the past year, partially offset by the impact from the assets sold as part of the Popular transaction that mostly impacted our Business Solutions segment. Adjusted EBITDA for the quarter was $74.5 million, an increase from $74.1 million in the prior year. Adjusted EBITDA margin was 44.6%, an approximate 160 basis point decrease compared to the prior year. The decrease in margin, which was expected, reflects the impact of the Popular transaction, specifically the revenue sharing agreement and the sale of assets, which, as we have previously said, more of higher margin. I will highlight that the margin for the quarter was above our expectations, and driven by our ability to leverage our revenues, but also as a result of specific cost initiatives implemented during the quarter around personnel cloud costs and others in order to offset some of the impacts to our margin resulting from the Popular transaction. But in addition, in preparation for a potential acquisition in Latin America,…

[Operator Instructions] The first question comes from John Davis with Raymond James. Please go ahead.

Hi, good afternoon, guys. Joaquin and Mac, given the renewed focus here on LatAm, given the Sinqia deal, just 27% growth, maybe Joaquin, can you help us with organic growth this quarter. I heard you was going to step down to high-teens, low 20s for the full year. So I’m kind of getting mid-teens organic growth, but just curious if that’s in the ballpark.

We actually gave a range, John. It’s a low double-digit – yes, low double-digits to low-teens.

Okay. So, LatAm organic growth, low-teens, okay.

Yes.

That makes sense. And then any comments kind of quarter-to-date, we have seen for the networks, it’s kind of been similar to 2Q. Obviously, you have a little bit different of the geographic mix, but anything to call out, anything different in July versus kind of 2Q worth noting?

Actually no, I would say that even when we look at the sequence month-to-month during the second quarter, it was relatively constant or stable. There is nothing really to go out. Other than, for example, we did see gas station volume kind of move away from us mainly because we had such high gas prices last year. But other than that, we are seeing July behave very similar to what we saw in general during the second quarter.

Okay. And then last one for me. In the press release, you called out pricing actions and mix were kind of a higher spread in the acquiring business. Remind when you kind of made those pricing actions? And should we expect further kind of price actions in the future? Just how are you thinking about price in general in the acquiring segment?

Sure. So, some of the pricing actions we are mentioning and we are still benefiting from, I would say, took place during the third quarter. So, we will have some benefit still going to the third quarter, and that will start to diminish a little bit as we go into the fourth quarter. But as a reminder, John, and I think we have said this before, we are constantly looking at the portfolio in general and looking at different verticals where we see we have some pricing power. We are obviously very cautious as to how we go about making these pricing actions. But this is something that we are constantly doing, made smaller scale. The specific ones, we will lap in Q3.

Okay, sorry. Thanks guys.

Thanks John.

The next question comes from Marc Feldman with William Blair. Please go ahead.

Hi guys. This is Marc on for Bob. Just wanted to ask about Sinqia, if you could go into the competitive landscape in Latin America for the markets that they are in, who are you guys going to be competing against? Is it going to be local solutions? Is it going to be the large conglomerates, just any info there?

Sure. Hi. This is Mac. So, what I would refer back to is the presentation that we gave last week. And there is a slide that shows sort of the estimation of their share in Brazil across their four verticals. So, if you look at the far right on the consortium business, it was just primarily a business in Brazil, right, a way of financing transactions in Brazil. And in the appendix, we have a slide that kind of describes how a consortium transaction works. I mean they sort of dominate the market, and they have – it’s a much smaller market, much smaller addressable market, but they dominate that market. They have the best solutions. And then you go all the way the left, to banking, which is a much larger addressable sort of category, addressable market, but it’s much, much more fragmented as well. So, they are competing with locals and it’s a broader set of capabilities that banks look for versus a consortium or a fund. So, if you look at that page from right to left, right is where it’s a smaller market, and they tend to have more sizable market share. And they tend to dominate with their solutions. And to the far left, you will see, again, with banks much larger market, much broader set of products required for banks and it’s a much larger set of competitors. So, you are going to be competing with potentially some large U.S. players, you are going to be competing with some of the local players in Brazil and then maybe some niche best-of-breed competitors. But they have 7 banks of the top 10 banks have some type of solution with these guys. So, they are pretty entrenched in that segment. But as we close, we will give an even further view, but we are excited because again, like we said, this puts us in Brazil, which is by far the largest market with an extremely strong franchise, and it also gives us products and also not just products potentially that we can export, but we can roll out a similar type of assets in those verticals across the region.

Understood. Thank you. And then I guess, following up more with Sinqia. Could you talk about, I guess how does the tech stack compared to a lot of these new and emerging solutions is, everything cloud-enabled, modern API based. Just any details that you could have there, because obviously, we think tech can run the whole gamut.

Yes. Look, I mean they were – they have a significant amount of acquisitions they made over time and trying to rationalize those platforms and ensure that their cloud-based is an exercise that they have gone through and they continue to go through. We will provide more details when we get closer to the closing. But we do feel confident that the products they have are very competitive for the verticals that they participate in.

Understood. Thank you, guys.

Thank you.

[Operator Instructions] The next question comes from James Faucette with Morgan Stanley. Please go ahead.

Hi guys. It’s Michael on for James. Thanks for taking our question. I just wanted to follow-up quickly on the merchant business. You alluded to declining average tickets. I was hoping you could contextualize what that looks like and sort of how you are expecting that to trend over the next 6 months to 12 months?

Sure. So look, this is a dynamic that we saw kind of, let’s say, going the other way during the pandemic with the, let’s say, some of the Fed funds getting to people’s bank accounts and the extra unemployment benefits, etcetera, something that also happened in the U.S. is we saw really increasing and really high average tickets. We also saw a very similar situation after the hurricane here in Puerto Rico, where a lot of the insurance claims were getting paid, some of the FEMA money was coming in. And we also saw that, that excess cash in people’s bank accounts got reflected in really high average tickets. And when – after the hurricane over time, that really started to come back and normalize as people kind of get back to, let’s say, normal spending habits. And that is something that we also expected coming off of the pandemic. And I think that we have been noting that trend now for a few quarters. It’s something that we expected and that we had already taken into consideration as part of our guidance. Obviously, inflation has somewhat kept a little bit higher than what we originally expected. But we do see a little bit more space for those average tickets to come down when we look at what was, let’s say, pre-hurricane or pre-COVID levels.

Got it. That makes sense. And then maybe just on capital allocation more broadly. If I just think about the buyback, it looks like intra-quarter, it was generally executed at prices in the mid-30s. I know you guys obviously just increased the back authorization. But how are you thinking about the relative attractiveness of the buyback with the stock in the low-40s as you sort of balance your other capital allocation priorities?

Hi. This is Mac. So, let me answer that a little bit. I mean we are not going to sort of give commentary on our stock price and give you a direction where we are going to go on the buyback. We did – as you know, we do have to do some buyback as part of this transaction to offset the dilution from the 10%, but capital allocation will continue to be important for us. And we have talked about it for the last couple of years, and I think people rightfully so have focused that we need to deploy capital. We knew we were looking at transactions with the size of Sinqia, and we will continue to look at M&A. But we will – I mean the authorization was partially because we are going to need to buy back stock for the transaction. Joaquin, I don’t know if you want to add anything.

No, no, that’s exactly where I was going, so I think you give us rest.

Okay. Thank you, both.

Thank you.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mac Schuessler for any closing remarks.

Again, I want to thank everyone for joining our call. I want to thank my colleagues for a great quarter and also for helping get the Sinqia transaction to this point. We look forward to talking to you over the coming months at different conferences. Have a good night.

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