Business Overview and History
EVERTEC Inc. (NYSE: EVTC) is a leading full-service transaction processing business and financial technology provider in Latin America, Puerto Rico, and the Caribbean. The company has established itself as a powerhouse in the region, leveraging its robust technology platforms, deep customer relationships, and strategic acquisitions to drive consistent growth and profitability.
EVERTEC was founded in 2012 and is headquartered in San Juan, Puerto Rico. The company provides a broad range of merchant acquiring, payment services, and business solutions to a diversified customer base of leading financial institutions, merchants, corporations, and government agencies. EVERTEC owns and operates the ATH network, which is believed to be one of the leading debit networks in Latin America.
In 2010, EVERTEC Group, LLC entered into a 15-year Master Service Agreement (MSA) and several related agreements with Popular, Inc., establishing EVERTEC as the primary provider of transaction processing and other technology services to Popular. The company has worked to strengthen this key relationship over the years, including modifying and extending the MSA agreement in 2022.
EVERTEC has pursued strategic investments to expand its presence in the Latin American region. In 2011, the company acquired a 19.99% equity interest in Consorcio de Tarjetas Dominicanas, S.A. (CONTADO), one of the largest merchant acquirers and ATM networks in the Dominican Republic. More recently, the company has continued its growth through strategic acquisitions, including Sinqia, Grandata, and Nubity.
Throughout its history, EVERTEC has faced various challenges, including Puerto Rico's fiscal crisis, the impact of natural disasters like hurricanes, and the need to keep pace with rapidly evolving payment technologies. However, the company has demonstrated resilience, adapting its operations and investing in innovation to maintain its leadership position in the markets it serves.
Business Segments and Services
EVERTEC operates in four key business segments:
1. Payment Services - Puerto Rico Caribbean: This segment provides access to the ATH debit network and other card networks to financial institutions. Services include authorization, processing, management and recording of ATM and POS transactions, ATM management and monitoring, card processing services, and payment processing services. Revenue is primarily driven by transaction volume.
2. Latin America Payments and Solutions: This segment offers similar payment-related services as the Puerto Rico segment to financial institutions, government entities, and other issuers across Latin America. It also provides licensed software solutions for risk and fraud management and card payment processing.
3. Merchant Acquiring: This segment enables merchants to accept electronic payment methods such as debit, credit, prepaid, and EBT cards. Revenue includes discount fees, membership fees, debit network fees, and POS device rental fees.
4. Business Solutions: This segment offers a full suite of business process management solutions, including core bank processing, network hosting, managed services, IT professional services, business process outsourcing, item processing, cash processing, and fulfillment.
Financial Performance and Metrics
For the fiscal year ended December 31, 2024, EVERTEC reported total revenue of $845.5 million, a 22% increase compared to the prior year. This strong performance was driven by double-digit growth across all of the company's business segments, with the Latin America Payments and Solutions segment leading the way with a 62% year-over-year increase in revenue.
The company's profitability has also been impressive, with adjusted EBITDA reaching $340.2 million in 2024, up 17% from the previous year. This translated to an adjusted EBITDA margin of 40.2%, demonstrating the scalability and efficiency of EVERTEC's business model. Adjusted earnings per share (EPS) for 2024 was $3.28, representing a 16% increase from the prior year.
In terms of segment performance for 2024, the Payment Services - Puerto Rico Caribbean segment contributed $214.8 million in revenue, the Latin America Payments and Solutions segment brought in $302.8 million, the Merchant Acquiring segment recorded $180.5 million, and the Business Solutions segment generated $244.0 million.
For the most recent quarter, EVERTEC reported revenue of $216.4 million, representing an 11% year-over-year growth. This increase was driven by organic growth across all segments, a full quarter contribution from the Sinqia acquisition, and the impact of the Grandata and Nubity acquisitions. Net income for the quarter was $40.1 million.
Financials and Liquidity
EVERTEC's financial position remains strong, with $273.6 million in cash and cash equivalents as of the most recent reporting period. The company has access to a $200 million revolving credit facility, of which $193.9 million was available. The company's debt-to-equity ratio stands at 1.57, while its current ratio and quick ratio are both 1.89, indicating a healthy liquidity position.
In 2024, EVERTEC generated $260.1 million in operating cash flow and $171.6 million in free cash flow. The company's net debt position stood at $706.8 million, resulting in a net debt to trailing 12-month adjusted EBITDA ratio of 2.06x, well within the company's target leverage range of 2x to 3x.
Geographic Performance
EVERTEC operates primarily in Puerto Rico, the Caribbean, and Latin America. For the year ended December 31, 2024, approximately 64% of revenues were generated from Puerto Rico, while the remaining 36% came from Latin America and the Caribbean. This geographic diversification helps to mitigate risks associated with any single market.
Growth Strategies and Outlook
EVERTEC's growth strategy is centered around four key pillars: continued cross-selling to existing customers, leveraging its franchise to attract new customers in its current markets, expanding its presence in Latin America, and developing new products and services.
The company's recent acquisitions of Grandata and Nubity demonstrate its commitment to diversifying its product offerings and entering new geographic markets. Grandata, a data analytics firm in Mexico, and Nubity, a cloud services provider also based in Mexico, are expected to enhance EVERTEC's existing capabilities and provide cross-selling opportunities across its customer base.
Looking ahead, EVERTEC has provided guidance for 2025, projecting revenue between $889 million and $899 million, representing growth of 5.1% to 6.3% (5.5% to 6.7% on a constant currency basis). Adjusted EPS is expected to grow between 1.8% and 5.2% from the $3.28 reported in 2024, or between 2.6% and 6% on a constant currency basis. The company anticipates an adjusted EBITDA margin of 39.5% to 40.5% in 2025, with capital expenditures targeted at approximately $85 million.
This outlook reflects the company's confidence in its ability to navigate ongoing macroeconomic and industry challenges, such as the 10% discount on certain services provided to its largest customer, Banco Popular, which will take effect in the fourth quarter of 2025. The company remains focused on organic revenue growth, margin optimization, and strategic capital allocation as its key priorities for 2025.
Industry Trends and Competitive Landscape
EVERTEC operates in a dynamic and growing industry, benefiting from the ongoing migration from cash and paper payment methods to electronic payments. This trend is particularly strong in the Latin American markets where the company operates, as consumers and businesses increasingly adopt digital payment schemes.
The company's business model is characterized by recurring revenue, scalability, healthy operating margins, and moderate capital expenditure requirements. These factors, combined with EVERTEC's strong market position and technological capabilities, position the company well to capitalize on the continuing digital transformation and financial inclusion trends in Latin America.
Risks and Considerations
While EVERTEC's growth story is compelling, the company faces several risks that investors should consider. The company's reliance on its relationship with Banco Popular, which accounted for 31% of its revenue in 2024, represents a significant concentration risk. The loss or deterioration of this relationship could have a material adverse impact on EVERTEC's financial performance.
Additionally, EVERTEC operates in a highly regulated industry, with its services subject to various laws, rules, and regulations in the jurisdictions in which it operates. Failure to comply with these requirements could result in fines, penalties, or even the suspension of the company's operations in certain markets.
The company is also exposed to foreign exchange risk, as a substantial portion of its revenue is generated in Latin American countries with currencies that have historically been volatile. Fluctuations in these currencies could adversely affect EVERTEC's financial results when reported in U.S. dollars.
Conclusion
EVERTEC's journey from a payments processing division of a Puerto Rican bank to a leading regional fintech provider is a testament to the company's strategic vision, operational excellence, and commitment to innovation. With its diversified business model, strong financial profile, and proven track record of growth, EVERTEC is well-positioned to capitalize on the ongoing digital transformation and financial inclusion trends sweeping across Latin America.
As the company continues to expand its footprint, develop new products, and enhance its technological capabilities, EVERTEC's long-term growth prospects remain promising. However, investors should carefully monitor the company's ability to manage its concentration risk, regulatory environment, and foreign exchange exposure to ensure the sustainability of its financial performance and shareholder value creation.