Good afternoon, everyone, and welcome to EVERTEC's Fourth Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Today's conference call is being recorded. At this time, I would like to turn the call over to Beatriz Brown-Saenz of Investor Relations. Please go ahead.

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, and good afternoon, everyone. We are pleased to announce another record year of results, as revenue continues to benefit from strong organic growth across most markets, complemented by the contribution from acquisitions, including the Sinqia deal that closed during the fourth quarter. I'll begin today's call with a brief summary of our 2023 financial results, followed by a discussion on the Puerto Rico environment, an update on Brazil, and finally, some comments about our focus for Sinqia in 2024. I will then turn the call over to Joaquin, who will provide some additional details on our Q4 and full year results as well as our outlook for 2024. Beginning on Slide 4, let's start with some highlights from our full year 2023 results. We delivered a record $695 million in revenue, a 12% increase over the prior year. And while some of the growth was driven by the closing of Sinqia, revenue excluding the acquisition also exceeded our expectations. Our LATAM revenue was up nearly 45% with growth in the high teens excluding M&A. Increased sales and transaction volumes benefited both our Payments Puerto Rico and Caribbean segment and our Merchant Acquiring segment. Payments Puerto Rico revenue grew approximately 14% year-over-year, reflecting continued strong digital payments growth, primarily from ATH Movil Business, while Merchant Acquiring grew approximately 7% on a year-over-year basis benefiting from sales volume growth and pricing initiatives. The Business Solutions segment was down modestly year-over-year as expected, mainly due to the impact in the first half of 2023 from the Popular transaction completed in 2022. Adjusted EBITDA for the year was $292 million, up approximately 6% when compared with the prior year, driven by the revenue increase partially offset by the full year effect of the Popular transaction and an increase in operating expenses. Adjusted…

Thank you, Mac, and good afternoon, everyone. Turning to Slide 14, I'll first review the fourth quarter and full year results for EVERTEC. Total revenue for the quarter was $194.6 million, up approximately 20% compared to the prior year reflecting strong growth in our Latin America segment that benefited in the last two months of the year from the Sinqia acquisition as well as continued strong organic growth. In Puerto Rico, we also benefited from higher POS transaction volumes and continued growth from ATH Movil Business. Adjusted EBITDA for the quarter was $71.7 million, an increase of approximately 4% from the prior year. An adjusted EBITDA margin was 36.8%, down approximately 590 basis points from the prior year, partially as a result of the Sinqia acquisition, which, as expected is coming in at lower overall margins. The quarter also reflected an overall increase in operating expenses, including specific corporate initiatives that were expected to impact Q4. Adjusted net income was $40.8 million, a decrease of approximately 6% year-over-year driven by higher interest expense resulting from the increased debt raised to finance the Sinqia acquisition, higher operating depreciation and amortization partially offset by a lower adjusted effective tax rate. The adjusted effective tax rate for the quarter was approximately 7.2%. Adjusted EPS was $0.62, a decrease of approximately 6% from the prior year for the same reasons pointed out impacting adjusted net income and to a lesser extent the impact from the incremental shares issued to complete the Sinqia acquisition. For the full year, total revenue was $694.7 million, an increase of approximately 12% from the prior year and above our initial expectations. Throughout the year, we benefited in Puerto Rico from overall strong volumes, higher spread, pricing initiatives and continued growth of ATH Movil Business, partially offset by the impact…

Yes. Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Nate Svensson with Deutsche Bank.

Hi, guys. Thanks for the question. Wanted to ask a couple on Sinqia. So I know when you announced the deal, Sinqia had been growing at a mid-teens CAGR and looking at some of their filings, it looks like that growth had decelerated to something like high-single-digits the last time they reported. So maybe you can give an update on how Sinqia growth ended up in the back half of the year and then what growth you have embedded into your 2024 guidance. And then if that growth is below the historical 15% CAGR, what do you need to do to return to that historical level of growth and sort of what's the timeline there?

Hey, Nate. So this is Joaquin. So I'd start saying we're not going to break out Sinqia specifically. We certainly have an expectation that our LATAM segment as a whole continues to grow double-digits. Sinqia has certainly been growing at that pace historically. And as Mac said, we have certain initiatives that we're focusing on throughout 2024, some of which include revenue synergies that should continue to put us in the same pace that we were before.

[indiscernible] Nate.

Nate?

[indiscernible].

Give me -- maybe he stepped away from the phone. The next question comes from Chris Kennedy with William Blair.

Good afternoon. Thanks for taking the question. Just an update on Sinqia. Can you talk about the expected accretion of that business in year one and as you think about year two and three going forward?

Hey, Chris, this is Mac. Thanks for joining. So what I would say is this year in 2024, it's probably more neutral than accretive. As we've gotten into the business, we're incredibly optimistic and excited, as I've spent a lot of time, they're spending time with customers. I've met some of the largest customers of the business. They're an important partner for most of the Brazilian institutions because they're a large enough company to be able to invest in some of the best products in the market. But they also adapt to local regulations, which is important to the banks and to the consortiums and to the pension plans. We're very focused this year on, as Joaquin was saying, ensuring that we focus on getting closer to the customers. They've spent a lot of time rolling up assets. They were dealing with a transaction with EVERTEC. I've spent a lot of time there, really pushed the team there to get close to the customers and make sure we're cross-selling the existing Sinqia products into the customers, looking at new payments products. We've already started talking to them about our payments products, but making sure we're getting close to the customers so we get the growth rate that we want and that we can get the business to continue to grow. Secondly is we're focused on margin optimization, as I said. So we're taking a look at a lot of these contracts are very old and they haven't gone through a repricing initiative, making sure they're more at market, that they're charging for all the services that they now deliver. And we're also looking at cost optimization as it looks at efficiencies like can this organization be more efficient now that they have all these acquisitions. So, like I said, we're very, very excited about the acquisition. We're very close now to the operation doing for Sinqia what we've done for EVERTEC, so that we can grow the LATAM segment double-digits and so that we can -- as you've noticed in the past, we've been very focused on our margins as we've acquired new assets. Most of the assets we've acquired in the past had a lower margin than the segment, and then we brought those to the segment margin over some period of time. So that's the focus this year around those five different areas.

Great. Thank you for that. And then just to follow up, any update on the size of ATH Movil, if you could talk about that? Thanks for taking the questions.

Yes, Chris. I mean, ATH Movil continues to grow very well, continues to be a very important source of growth for us in the Payments Puerto Rico segment. I think in the past we've said it's been in the low-single-digits. That continues to be the case. And obviously now with Sinqia coming in and our top line being a much bigger number going forward, that will obviously impact what ATH Movil represents to overall EVERTEC.

Great. Thank you.

Thanks, Chris.

Thank you. [Operator Instructions] And the next question comes from John Davis with Raymond James.

Hey, good afternoon, guys. I just want to follow up on Chris' question there a little bit. Mac, you went from neutral to accretive to neutral. So just curious, kind of what caused that modest downtick? Is it slower? Just more investment needed, slower revenue growth than you expected? Just curious. Again, I know it's slight, but just curious kind of what that downtick is driven by.

Yes. No, sure. So, I mean, look, when we announced the deal, we said this was neutral to accretive year one. It's closer to neutral. I'll tell you a couple of things. One is they did, as Deutsche mentioned, they did decelerate a bit towards the back half of last year because they were focused on the transaction and different things. So now we're trying to get them to reaccelerate, and that's sort of in our guidance for this year. Secondly is we do believe there's some opportunity to sort of improve some of the margins, but we didn't want to do that out of the gate, right? So we do think that there is some opportunity to reprice part of the business. We do think that there's some opportunity to be more cost-efficient. But we don't want to go into a new part of the company and announce that to employees and customers and make that our first focus because that'll alienate both of those constituencies. So we're really focused initially on getting to know customers, where they want us to invest. We do need to modernize some of the platforms, so we'll build a multi-year plan to do that. But that's sort of the reason for it's more neutral this year. But what I can tell you is having met with the customers, I'm incredibly excited about their desire to do more business with Sinqia as we invest and our ability to sell our payments products to their nearly 1,000 customers.

Okay. No, that's helpful. And then Joaquin, I understand you guys don't want to give too many details on the Sinqia contribution, but they were a public company. So just running some quick math, it looks like if you exclude the Getnet contribution in 2023, the midpoint of the rev guide is about 2% organic growth. And I think Mac, you talked about earlier, the economy and the picture in Puerto Rico is kind of looking up. So just curious, kind of how we square 2% organic revenue growth with healthy kind of Puerto Rico macro. And you guys have historically been conservative and I appreciate it's February and you're given a full year guide, but just anything else to kind of call out as you kind of thought about the top line outlook on an organic basis in 2024.

Hey, John. I mean, I'm trying to follow some of that math that you're doing, but in theory, if you were to exclude the Getnet impact from the prior year, we should be in the low- to mid-single-digit range, right?

Okay.

I'd like to kind of understand that a little bit better from you, but that's a little bit different from what we're seeing.

Okay. Maybe my Sinqia contribution embedded in the guide is just a little bit higher. Mac just commented that decelerated a little bit. So maybe that's the delta between 2% and kind of closer to mid-singles. But that's super helpful, Joaquin. And then finally, just on the tax rate, nice positive surprise there, taxes being lower. Is that sustainable? Like, how should we think about the tax rate going forward? You're not looking necessarily for 2025 guidance by any means, but just is this something that is kind of one-time in nature this year or something? How do we just think about the tax rate going forward, I guess?

No, I mean, look, I think that obviously, we're not going to give multi-year guidance here. Some of the factors that are driving this, we understand we can sustain. But that's something that, as the year goes on, we'll be in a much better position to kind of discuss. For this year, we've given, obviously, a guidance that's significantly lower than what we've done in the past. And that's for very specific reasons that we tried to convey as part of the prepared remarks, one being, obviously part of the tax shield that we're getting from some of the interest expense and then some of the benefits that we're getting at the Sinqia level.

Okay. No, appreciate it. Thanks for the color, guys.

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

Again, we want to thank you for joining the call today. We want to thank our colleagues for a successful year in 2023 and look forward to reporting our results in 2024 and seeing many of you at upcoming conferences. Thanks and good night.

Thank you. The conference has now concluded. Thanks you for attending today's presentation. And you may now disconnect.