Evertec Inc (EVTC) 2011 Q4 法說會逐字稿

Good morning, my name is Erica, and I will be your conference operator today. At this time I would like to welcome everyone to the EVERTEC, Inc. Fourth Quarter and Year-End 2011 Earnings Call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference.

(Operator Instructions)

Mr. Luis Cabrera, you may begin your conference.

Thank you, operator. Good morning, everyone. Welcome to our fourth quarter and year-end 2011 investors conference call with me today are Peter Harrington, our new President and CEO; Juan Jose Roman, our Executive Vice President and CFO; and, Mike Vizcarrondo, our Executive Vice President of Merchant Acquiring Business and ATH Network.

A replay of this call will be available through April 17th. Access information for the replay is listed in today's financial press release, which is available through our website at www.evertecinc.com under the Investor Relations tab. As a reminder, this call may not be taped or otherwise reproduced without the Company's prior consent. Before we begin, I would like to remind everyone that this call may contain forward-looking statements. As that term is defined under the Private Securities Litigation Reform Act of 1995.

This forward-looking statement about our expectations for future performance are subject to known and unknown risk and uncertainties. The Company cautions that these statements are not guarantees of future performance. All forward-looking statements made today, March 27, 2012 reflect the Company's current expectations only. And the Company undertakes no obligation to update any statement to reflect the views that occur after this call.

Please refer to the registration statement on Form S-4 and other reports filed from time to time with the SEC posted on the Company's website for factors that could cause actual results to differ materially from any forward-looking statements.

In addition, during today's call management will provide certain information that will constitute non-GAAP financial measures under the SEC rules such as adjusted EBITDA. Certain information and reconciliations to GAAP measures required to be disclosed about these non-GAAP measures are also included in today's earnings press release.

With that, I would like to introduce Juan Jose Roman, our Executive Vice President and CFO.

Thank you, Luis and welcome everyone. As you all know, in February we announced changes in leadership for our next phase of growth. Felix Villamil was elevated to Vice Chairman of EVERTEC's Board of Directors, and passed on day to day leadership duties to a new Chief Executive Officer, Mr. Peter Harrington.

Peter brings to EVERTEC extensive experience managing and growing payment process businesses in Latin America as well as North America, Asia, and Europe. Before joining EVERTEC, Peter served as President of Latin America and Canada for First Data Corporation for six year. He also served as President of PaySys International, a wholly owned subsidiary of First Data. We believe that Peter has the depth of experience and global perspectives to lead EVERTEC in this next phase of growth.

With that, I am pleased to turn the call over to Mr. Peter Harrington.

Thank you, Juan, for that warm welcome. And thank you all for joining us for today's call. I am honored to serve as President and CEO of such a great company and to work closely with this strong management team. I am confident that I will be able to leverage my many years of experience in this industry. Working with companies to facilitate growth in new and existing markets.

I look forward to leading EVERTEC through a period of continued organic growth in our existing markets and expansion into new ones in solidifying EVERTEC's position as a world-class organization. 2011 was a very good year. Highlighted by 8% revenue growth and 16% growth in adjusted EBITDA compared to 2010. This is an impressive starting point for a company in its first year as a standalone company.

I want to thank each member of EVERTEC's team for their contributions to this success. With this strong foundation, the knowledge and expertise of our management team, and my experience developing new markets and services, EVERTEC is well positioned to execute its strategy and achieve further growth.

Now, I will turn it over to Juan Jose to go through our financial results.

Thank you, Peter. Let me start with our fourth quarter results. For the quarter ended December 31, 2011, total revenues were $85.6 million. An increase of $3.2 million or 4% as compared to total revenues of $82.4 million for the three months ended December 31, 2010. The increase was mostly driven by higher sales volume and transactions in 2011 in both our local and international markets.

The addition of new clients and services also positively impacted our business. Excluding certain one-time items in the quarter ended December 31, 2010, revenue increased in each of our three reportable segments. Our Transaction Processing segment, revenue grew 7% to approximately $22.4 million. Primarily due to higher volumes process in our payment services and card products. Our Merchant Acquiring segment net revenues were approximately $17.9 million, an increase of $3.2 million or 21%. Again, driven by higher sales volumes and transactions as well as higher margins.

Excluding one-time items in the 2010 fourth quarter, Business Solutions segment revenues increased by $1.3 million or 2.9%. Total operating costs and expenses, excluding depreciation and amortization and non-recurring expenses were $47.5 million in the 2011 fourth quarter, a decrease of $1 million or 2% as compared to the $48.4 million in the 2010 fourth quarter. The decrease was mostly related to personal costs, as a result of the cost controlled measures implemented through the year.

Our non-operating expenses totaled $13.3 million for the quarter ended December 31, 2011, as compared to $14.6 million for the prior year quarter. The decrease of $1.3 million or 9% from 2010 was mostly related to a reduction in interest expense, as a result of a lower outstanding debt attributed to a combination of scheduled principal payments and voluntary pre-payments made during 2011 partially offset by $300,000 costs related to a one-time cost of the voluntary prepayment program expense and $300,000 in other expenses.

We recorded an income tax expense of [$1.6 million] (corrected by company after the call) for the quarter ended December 31, 2011, compared to an income tax benefit of $200,000 for the 2010 period. The $1.8 million variance is mainly the result of a taxable loss during the fourth quarter of 2010 resulting from the non-recurring expenses incurred as part of the merger transaction. Our adjusted EBITDA was $40.2 million for the fourth quarter of 2011, 10% higher than in the fourth quarter of 2010. The increase was primary due to higher revenues and lower cash expenses in the 2011 quarter.

Now for the full year results. Our total revenues for the year-ended December 31, 2011 were $321.1 million, an increase of $23.7 million or 8% as compared to the total revenues of $297.4 million for the year ended December 31, 2010. Revenue increased in each of our reportable segments. Transaction Processing segment revenues increased by $7.9 million or 10%.

Merchant Acquiring segment net revenues increased by $7.4 million or 14%. And the Business Solutions segment revenues increased by $8.4 million or 5% over 2010. The increases were primarily due to higher sales volume and transactions in both our local and international markets, new services, and clients.

Total operating costs and expenses, excluding the acquisition and amortization, and non-recurring expenses were $184.1 million for the year-ended December 31, 2011, an increase of $3.2 million or 2% over 2010. The increase was mainly due to higher equipment expenses to support business growth and higher professional services costs, offset by a decrease in personnel costs as part of the cost control measures.

Excluding a non-recurring expense related to the voluntary retirement program, non-operating expenses for the year-ended December 31, 2011 were $53 million. An increase of $43.2 million, compared to $9.8 million for the year-ended December 31, 2010. The increase was mostly due to higher interest expense of $37.5 million related to the debt issued in connection with the merger.

We reported an income tax benefit of $33.1 million for the year-ended December 31, 2011. Compared with an income tax expense of $22.8 million for the same period in 2010. A $55.9 million variance was primarily driven by a reduction in the marginal corporate income tax rate from 39% to 30%. This reduction was related to a tax reform enacted in Puerto Rico in January 2011, which reduced the Company's current income tax expense and our deferred tax liability.

The income tax benefit was also impacted by a taxable loss for the year-ended December 31, 2011, mostly due to expenses related to the cost of the voluntary retirement program and an increase in interest expenses. Compared to a taxable income for the year-ended December 31, 2010.

Adjusted EBITDA for the year-ended December 31, 2011, was $149.1 million, an increase of $20.3 million or 16% over the prior year. The increase was primarily driven by the revenue growth experienced across all business segments, offset in part by higher professional fees mainly related to the Company's transition to a standalone entity. Adjusted EBITDA margin, which is adjusted EBITDA as a percentage of total revenues improved to 46.4% as compared to 43.3% in 2010.

Now, let me turn the call over to Luis Cabrera to review our liquidity position.

Thank you, Jose. We ended the year with a strong liquidity position. As of December 31, 2011, we had $53.5 million of unrestricted cash and $535.5 million of total debt, which represents total net debt of $482 million. For the fourth quarter 2011, our total net debt to adjusted EBITDA ratio was 3.23 times.

Our liquidity stood at $103.5 million, which includes the $53.5 million of unrestricted cash on our balance sheet plus $50 million of available capacity on our revolver line of credit, which remains undrawn. Our senior secured credit agreement requires us to maintain a maximum senior secured leverage ratio of 3.6 times. As of year-end 2011, this ratio stood at 1.84 times, so we are comfortably within the requirements.

During the quarter, we opportunistically made a $9.5 million open market purchase of our senior unsecured notes for an aggregate purchase price of $9.7 million. The notes were subsequently retired.

With that, we will open up today's call for your questions. Operator, please provide us the instructions.

(Operator Instructions)

And we have no audio questions at this time.

All right. I want to thank you all for joining us on our call today. And for your ongoing support of EVERTEC. I am very excited about the prospects and the future of this company, and I have great confidence that we can continue to drive organic growth and execute our strategy to expand, while achieving and maintaining the high standards of execution of our world-class organization.

We look forward to updating you again when we report our first quarter results in May.

Operator, you may now end the call.

Thank you for your participation in today's conference. This concludes the presentation. Everyone may now disconnect, and have a great day.