Evertec Inc (EVTC) 2012 Q1 法說會逐字稿

Good morning. My name is Caris and I will be your conference operator today. At this time I would like to welcome everyone to the EVERTEC 2012 first quarter earnings call. At this time all lines have been placed on mute to prevent any background noise. Later we will conduct a question and answer session.

(Operator Instructions)

Thank you. Mr. Luis Cabrera, you may begin your conference.

Thank you, operator. Good morning, everyone. Welcome to our 2012 first quarter investors conference call. With me today are Peter Harrington, our 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 May 29. 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. These forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties. The Company cautions that these statements are not guarantees of future performance. All forward-looking statements made today, May 15, reflect the Company's current expectations only, and the Company undertakes no obligation to update any statements to reflect events that occur after this call.

Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 27, 2012, and in other reports the Company files with the SEC from time to time 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, we'll begin by turning the call over to Peter Harrington, our President and CEO.

Thank you, Luis, and good morning, everyone. Welcome to our 2012 first quarter results conference call. I am very pleased to report that revenues across all business segments increased during the first quarter. Total consolidated revenues increased $6.7 million, or 9%, to $82.5 million compared to $75.8 million in the first quarter of 2011.

Adjusted EBITDA for the quarter ended March 31, 2012 was $38.5 million, an increase of $4.8 million, or 14%, when compared to $33.7 million for the same period in 2011. The increase was primarily due to higher revenues. Adjusted EBITDA margin continued to improve as well, increasing to 46.7% versus 44.5% in the first quarter of 2011 as a result of operating leverage and successful implementation of our cost savings initiatives.

Subsequent to the end of the quarter, we announced that EVERTEC was converted from a Puerto Rico corporation to a Puerto Rico limited liability company for the purpose of improving the consolidated tax efficiency of EVERTEC and its subsidiaries. Through this new structure, the Company will benefit from at least $30 million of net operating losses and certain other tax attributes for Puerto Rico income tax purposes that prior to the conversion and change in tax law were available to the Company's parent but not to the Company.

Earlier this month, we raised an additional $210 million of debt split between $40 million of new senior notes and $170 million of new term loan under our credit facility. With the combination of debt proceeds and cash off our balance sheet, we paid a dividend of $267.2 million on May 9, 2012. We'd like to thank our existing investors and our new investors for showing the confidence in us to complete this debt raise. With that, I'll now to turn it over to Juan Jose for the financial details of the quarter.

Thank you, Peter. I also want to welcome everyone to this call. I'm very pleased with the results achieved during the first quarter of 2012. Total revenues increased $6.7 million, or 9%, to $82.5 million, compared to $75.8 million in the first quarter of 2011. The increase is attributable to revenue growth across our three reportable segments.

Transaction Processing segment revenues increased by $2.6 million, or 13%.; Merchant Acquiring segment net revenues increased by $2.9 million, or 20%; and Business Solutions segment revenues increased $1.2 million or 3%. Revenue growth was primarily attributable to higher sales volume and transactions in both the local and international markets and the increased penetration of our products and services in the markets we serve.

Now on the cost side, total operating costs and expenses, excluding depreciation and amortization, were $46.7 million for the quarter ended March 31, 2012, an increase of $700,000, or 2%, compared to $46 million for the same period in 2011. The modest increase in operating costs and expenses was primarily attributable to costs to support incremental growth of the business.

Non-operating expenses for the quarter ended March 31, 2012 were $13.3 million, compared to $17.7 million for the same period in 2011. The decrease of $4.4 million was mostly related to a reduction in interest expense as a result of lower outstanding debt attributed to prepayments and the refinancing completed during 2011 and a reduction in other expenses.

Income tax expense for the quarter ended March 31, 2012 amounted to $1.1 million, compared to an income tax benefit of $29.1 million for the corresponding 2011 period. Income tax benefit for the three months ended March 31, 2011 was driven by a reduction in the marginal corporate income tax rate from 39% to 30% as a result of the tax reform enacted in Puerto Rico effective January 1, 2011 and to a taxable loss for the period. The change in tax rates caused a reduction in the current tax expense and in the Company's deferred tax liability.

Our adjusted EBITDA for the quarter ended March 31, 2012 was $38.5 million, an increase of $4.8 million, or 14%, compared to $33.7 million for the same period in 2011. This increase was primarily due to higher revenues partially offset by a slight increase in cash expenses. Adjusted EBITDA margin also improved to 46.7% versus 44.5% in the first quarter of 2011 as a result of operating leverage and successful implementation of cost savings initiatives. With that, I will now the call over to Luis.

Thank you, Juan. We ended the quarter with a very strong liquidity position. As of March 31, 2012, we reported $80.4 million of unrestricted cash and $535.5 million of total debt, which represents total net debt of $455.2 million. For the first quarter of 2012, total net debt to the last 12 months adjusted EBITDA was 2.96 times. Our liquidity stood at $130.4 million, which includes the $80.4 million of unrestricted cash on our balance sheet plus $50 million of available capacity on our revolving line of credit, which remained undrawn.

Our Senior Secured Credit Agreement requires us to maintain a maximum senior secured leverage ratio no higher than 3.6 times. As of March 2012, this ratio stood at 1.79 times, so we are comfortable within the requirements. With that, we'll open up today's call, so operator, please provide the instructions.

(Operator Instructions)

And at this time, there are no questions in queue. And I would now like to turn this call back over to Mr. Harrington for his closing remarks.

I want to thank you all for joining us on our call today and for your ongoing support of EVERTEC. I have great confidence that we can continue to drive organic growth and execute our ambitious expansion strategy. We look forward to updating you again when we report second quarter results during August. Operator, you can now end the call.

This concludes the 2012 EVERTEC, LLC first quarter earnings conference call. You may now disconnect.