Evertec Inc (EVTC) 2013 Q4 法說會逐字稿

Good day, everyone, and welcome to the Evertec Incorporated fourth quarter 2013 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Luis Cabrera, Senior Vice President and Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone. Welcome to the Evertec fourth quarter and full year 2013 earnings call.

I'm Luis Cabrera, Senior Vice President, Head of Investors Relations for Evertec. With me today is Peter Harrington, our President and Chief Executive Officer and Juan Jose Roman, Executive Vice President and Chief Financial Officer.

A replay of this call will be available until Wednesday, February 19. Access information for the replay is listed in today's financial press release which is available on our website under the Investors Relations tab. As a reminder, this call may not be taped or otherwise reproduced without Evertec's prior consent. For those listening to the replay, this call was held and recorded on February 12, 2014.

Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. The forward-looking statements about our expectations for future performance are subject to known and unknown risk and uncertainties.

Evertec cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statements to reflect events that occur after this call. Please refer to the Company's most recent prospectus on Form 424B4, filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statements.

During today's call, management will provide certain information that constitutes non-GAAP financial measures under SEC's rules such as adjusted EBITDA, adjusted net income, and adjusted net income per share. Reconciliations to GAAP measures and certain additional information 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 Chief Executive Officer. Peter?

Thank you, Luis, and thanks, everyone, for joining us today. Our fourth quarter results capped a great first year for Evertec as a public company. The results demonstrate the strength of our diversified business model and solid execution by our entire team.

In 2013, we continued to advance our position as the leading transaction processor in Latin America by successfully executing on the growth strategies we discussed with you during our IPO. I'd like to briefly recap some examples of how we've delivered on the growth plan in the past year.

We continued to penetrate and gain share in our core markets across all of our products and services. We signed 12 new payment customers in Mexico, Costa Rica, Belize, El Salvador, Honduras, the Dominican Republic, Panama, Puerto Rico and Jamaica.

We signed deals to provide technology related services to the government of the US Virgin Islands and to the largest hospital management company in Puerto Rico. And we partnered with one of our large existing bank clients to increase the scope of services we provide to them in several geographies. These are just a few examples of how we further penetrated and gained share in our core markets in 2013.

We also continued to work with the major payment networks to bring more value-added services to our customers, and we launched brand-new services like dynamic currency conversion in Costa Rica and security solutions for financial institutions through our partnership with Tyco.

And finally, we continued to seek further expansion of our business through joint ventures and alliances. As I mentioned before, we're engaged in active discussions with several potential merchant acquiring partners in Latin America, and we're optimistic that we will execute one of these partnerships in the near-term.

In addition to our commercial achievements, we reached several financial and corporate milestones in 2013. In April, we completed our IPO and successfully refinanced our debt, which resulted in significant annual interest expense savings. In August, we initiated a regular quarterly cash dividend of $0.10 per common share, taking advantage of our strong free cash flow generation and financial flexibility to increase total value to our shareholders.

In the second half of 2013, we completed two secondary offerings and bought back $75 million worth of our common stock, further underscoring our confidence in our long-term growth prospects.

In September, we added industry veteran Frank D'Angelo to our Board. As you saw in our press release this afternoon, the Board of Directors elected Frank as Chairman. We're happy to have Frank as our Chairman and confident Evertec will benefit from his extensive experience in our industry. So, 2013 was, as I said earlier, was a busy and great year for Evertec.

Turning to our financial results. In the fourth quarter, we again delivered strong revenue growth in our payments related businesses, with merchant acquiring revenue up 9% and payments processing up 6%. Revenue growth in our payment businesses outside of Puerto Rico continues to be strong, again, increasing in the double-digits year-over-year.

We are seeing strong demand for our products an services in all of our non-Puerto Rico markets with countries like Panama and Costa Rica leading the way, demonstrating not only the strong secular growth trends in these markets, but also the value we bring to our customers. We expect the solid momentum we built in our payments businesses to continue through 2014. Our adjusted net income grew a strong 28% in the fourth quarter, and adjusted earnings per diluted share increased 19% to $0.43.

During the fourth quarter we completed a $15.2 million share secondary offering from Apollo and Popular, which resulted in Apollo selling all of its remaining shares in Evertec. This offering included the repurchase of 3.7 million shares of our common stock.

As you saw this afternoon, our Board of Directors declared a regular quarterly dividend of $0.10 per common share. We remain committed to the proven return of capital to our shareholders and continue to dynamically evaluate the best use of our excess cash in the context of our strategic objectives.

For the full year 2013, we delivered revenue of $357 million and adjusted EBITDA of $178 million, both up 5% from the prior year. Our adjusted net income of $121 million was up 44%, and our 2013 fully diluted earnings per share were $1.49, which was at the high end of our expected range. Overall, our solid results for 2013 reflect the successful execution of our growth strategy and the continued secular growth in the payment markets in which we operate.

In 2014, we will remain intensely focused on the execution of our growth initiatives. We will continue to leverage our scale and leadership, our best-in-class network and our broad set of differentiated value-added products and services to further penetrate and gain share in our core markets, expand into new geographies, drive innovation, enter new verticals and create merchant acquiring alliances across Latin America.

I will now turn the call over to Juan Jose who will take you through our financial results in more detail. Juan?

Thank you, Peter, and good afternoon, everyone. As Peter mentioned, Evertec delivered solid financial performance in the quarter and year. I will spend some time going through our fourth quarter and full year financial results in more detail and then conclude by providing our financial outlook for 2014.

Beginning with our fourth quarter, on a consolidated basis, total revenues increased 3% to $93.3 million, up from $91 million in the fourth quarter of last year. In the underlying segments, merchant acquiring net revenue increased 9% to $19.8 million, driven mainly by increased transactions and sales volume.

Payment processing revenue for the fourth quarter increased 6% to $26.2 million, up from $24.8 million in the prior year period. Revenue growth in the quarter was driven mainly by an increase in the ATH network and POS processing transactions and accounts on file within our card product business.

Finally, business solutions revenue decreased 2% to $47.3 million. As we mentioned in the earnings release, the year-over-year decrease in business solutions revenue was primarily due the to the completion of certain projects in the fourth quarter of 2012 and to higher deferred revenue partially offset by higher product sales. For the year, business solutions revenue grew 4%, which is in line with our previously discussed expectations.

Moving to expenses. On a GAAP basis, our fourth quarter total operating expenses were up approximately 2% compared with the prior period. Cost of revenues excluding depreciation and amortization was $41.1 million, an increase of $0.7 million, or 2% from the corresponding 2012 period. The increase in our cost of revenues was mainly due to higher cost of sales and compensation benefits, partially offset by a reduction in other expenses and lower operating taxes.

Selling, general and administrative expenses for the quarter were $8.3 million, up $1.4 million, or 20% from the corresponding 2012 period. The increase was primarily due to a $1.1 million of one-time expenses related to a secondary offering of common stock we completed in December.

Income from operations for the fourth quarter was $26.6 million, an increase of 3% compared with the corresponding 2012 period. Excluding one-time expenses related to a secondary offering, our income from operations increased 7% compared to the prior year.

Total nonoperating expenses were $4.9 million, a decrease of $8.3 million from the corresponding 2012 period. The decrease was driven mainly by interest expense reduction of $8.7 million resulting from our debt refinancing.

We recorded an income tax expense of $1.6 million in the fourth quarter. On a cash basis, our income tax expense was approximately $0.3 million. As of December 31, 2013, we had approximately $85 million of NOLs available to offset future tax payments related to our operations in Puerto Rico.

Adjusted EBITDA for the fourth quarter was $49.1 million, a decrease of $3 million, or 6% from $52.1 million in the corresponding 2012 period. This decrease was partly due to increased cost of sales resulting from higher product sales and lower dividend from equity method investment.

In addition, as we mentioned in today's earnings release, the year-over-year adjusted EBITDA comparison for the quarter was affected by the inclusion of the pro forma adjustment in the prior year quarter related to the estimated net savings from the elimination of certain employees, temporary employees and professional services. Please note that this cost saving adjustment will not have an impact on adjusted EBITDA comparisons in future periods.

In the fourth quarter, we again delivered industry-leading EBITDA margins of 52.6%. Our adjusted net income in the first quarter was $35.4 million, up 28% from $27.7 million in the prior year. This increase was mostly due to lower cash interest expense resulting from the debt refinancing we completed in April of last year. Adjusted net income per diluted share increased 19% to $0.43 from $0.36 in the prior year.

Turning to a summary of financial results for the full year 2013. Total consolidated revenue was $357.2 million, up 5% compared with 2012 revenue. Merchant acquiring revenue was $73.6 million, up 6% from the prior year, driven primarily by an increase in transaction and sales volume, partially offset by the impact in the first half of the year of certain effects of the Durbin Amendment.

Payment processing revenue was $99.3 million, up 5%, predominantly driven by an increase in ATH network and POS processing transactions and accounts on file. Finally, business solution revenue was $184.3 million, up 4%, driven mainly by increased demand on our network and core banking product and services.

Adjusted EBITDA for the full year 2013 was $177.7 million, up 5% from 2012, driven by top line growth. Adjusted net income was $121.3 million, up 44% from 2012, and adjusted net income per diluted share was $1.49, up 35%.

Moving to our balance sheet. As of December 31, we reported $22.5 million of our restricted cash and $735.8 million of total short-term borrowings and long-term debt. During the fourth quarter, we used approximately $25 million of cash on hand and borrowed approximately $50 million under our existing revolver credit facility to fund the $75 million share buyback we completed in December, concurrent with the secondary offering.

During the quarter, we also made a mandatory repayment of approximately $4.8 million on borrowings outstanding under our Term A and Term B senior secured credit facilities and paid dividends of $8.2 million. As of December 31, total liquidity, which includes unrestricted cash and available borrowing capacity under our revolver, was approximately $72 million.

We continue to generate significant levels of free cash flow. For 2013, our free cash flow, defined as adjusted EBITDA minus CapEx, cash interest expense and cash income taxes, was approximately $124.6 million, up 38% from $90.4 million in 2012.

Now, I will review our financial outlook for 2014. We currently expect total consolidated revenue of between $375 million and $382 million for growth between 5% and 7% in 2014.

This expectation is based on two factors. Our success last year increasing sales to both new and existing customer and the continued strong cash to card conversion trend we're seeing in Puerto Rico and Latin America. We expect our adjusted EBITDA growth rate will be at least 100 basis points higher than our revenue growth rate.

Finally, we expect our fully diluted earnings per share to come in between $1.65 and $1.71 in 2014, representing growth of 11% to 15%. Our fully diluted earnings per share outlook assumes operating depreciation and amortization of approximately $32 million, cash interest expense of approximately $23 million, cash income tax of approximately $3 million, and fully diluted shares of approximately $79.1 million. We expect our 2014 effective tax rate on a GAAP basis to be between 10% and 12%.

With that, operator, we will now open up the call for questions.

Thank you.

(Operator Instructions)

We will take our first question from George Mihalos of Credit Suisse.

Hello, guys, thanks for taking my question. Just hoping to get an update, if you could parse out revenue growth from non-Puerto Rico geographies in the quarter, how that trended, and maybe your outlook for that going into 2014, if that accelerates further. Thank you.

We saw again double-digits growth in the payments revenue outside of Puerto Rico, and we expect that to continue throughout 2014.

Okay. And just in terms of getting to sort of mid-teens or high teens growth, is that a 2014 event or more aspirational, beyond that in 2015?

No, I think we will get close to the mid-teens for a year-over-year basis. I would feel comfortable with that.

Okay. Great, and then just your commentary around signing a merchant acquiring agreement in Colombia. I think you commented, Peter, that you're looking to do something near-term. Can you elaborate on that? Is that a first quarter, first half 2014 event? Or any comment --.

We thought we would get it done by year end. We said that before. It is taking obviously longer than we had initially anticipated. We are still actively engaged. My hope is that we will get it done in the near-term, and that would probably be in the next few months.

Okay, great. Just last question from me, capital allocation priorities, acquisitions versus buybacks, debt repayment, any color you could provide there. Thank you.

Well, I think first and foremost, we'll always -- we will always focus on using it to help grow the Company. And whether that's through alliances, whether it's through transactions, whether it's through product development, that's where we will always focus first. And then I think certainly as we have in the past, we will discuss with the Board as to whether future buybacks or other mechanisms to return value to the shareholders will be contemplated. But I think as you saw in 2013, we are more than willing to find ways to return value to the shareholders.

Thank you. We will take our next question from Tien-Tsin Huang of JPMorgan.

Thank you so much. Good afternoon. Just -- maybe just, can we get a little bit of guidance on the three business lines and what you're expecting for growth in 2014? Especially curious about business solutions and the outlook there.

Yes, I think we expect the payment businesses to continue to grow as they have, more in line with what you saw probably in the fourth quarter.

Okay.

Throughout 2014. And again, as we've said in the past, we would see business solutions probably growing in, give or take the low-single digits.

Okay. What's the visibility look like there in business solutions? You saw Banco Popular and their projects from a visibility standpoint, is it better today than it was last year, or is it worse? Any flavor there?

No, I would say it's about the same. We have a large number of projects in the queue. Some of them will take much longer to just execute on because of the size of the project. But I would say we're not expecting anything significantly different up or down from Popular in 2014.

Okay, great. Couple more questions. Just, it sounds like same store growth, in terms of volumes and transactions, have you seen anything unusual in the fourth quarter or even in January, Peter, worth calling out? The numbers here look good on the payment side, but just wanted to make sure.

No, as I've said in the last call, we track kind of the growth of year -- month over month POS transactions.

Yes.

And what we saw in the fourth quarter, allowing obviously for Christmas, but I can tell you that even in January, we're seeing similar growth rate in the POS transactions year over year, so.

Yes. That's good to know. You guys can't blame weather like the weather we're getting up here.

No. (laughter) We've gotten -- from what I read the other day, we've gotten more rain here than we're used to, but we can't complain about that too much.

Yes. Better rain than ice. I guess it does impact travel coming in. Just last one from me, just I guess for Juan Jose, I wanted to make sure. Still flipping through the numbers here, the secondary cost, about $0.01, is that not being added back in adjusted net income?

It is. It is adjusted. It is in the operating income, it's part of the operating income number.

Okay.

That's why we just exclude from the operating. It's included already or adjusted in adjusted net income.

So, you have adjusted it out.

Yes.

Just wanted to make sure.

Let me clarify. In 2014, just for a moment, that our fully diluted shares will be 79.1 million.

Got it. 79.1.

Yes.

Thank you, guys. Thanks so much.

And we will take our next question from Bryan Keane of Deutsche Bank.

Yes, hello, guys. Just want to ask on how yields are trending in the acquiring business and any competition increasing from some of the US acquirers that we hear noise about.

No, we haven't seen any real change in the competition landscape in Puerto Rico at all, to be honest with you. We did have a fairly good win in the fourth quarter, which was one of the larger supermarket chains here in Puerto Rico, where we actually competed against those guys. So, it's pretty much -- it's been -- it's really not been any different than what we've seen over the last couple years. We don't see any real increase in competition here than from what we have.

Okay. That's helpful. Then there was a downgrade on the Puerto Rican munis, just curious if that has any impact on your business?

We have certainly been following that, as you can imagine. As we've said before, we didn't see, as you could see in the fourth quarter, we saw no negative impact to our payment businesses.

At this point, certainly we will continue to keep a very close eye on the situation, but our 2014 guidance expects us to continue to operate as we have in the past. And we don't have any real specific kind of exposure to, for an example, the debt, we have none -- we're not exposed to that. We'll have to see as to what shakes out, but at this point, we don't see any real significant impact to Evertec's business.

Okay. And then just last question from me, the guidance for revenue for 2014 I think was 5% to 7%. This quarter you did 3%. So, should we start to see revenue be in the 5% to 7% range starting in the first quarter, or will it the take a little while before the business solutions group ramps back up to get to that 5% to 7% for the total Company?

Yes, as you know, we don't provide quarterly guidance, but I think it's a good observation. We expect our payment businesses to be kind of stable throughout the year, to keep growing every quarter. We might see, as you know, business solutions was a little bumpy last year. We actually expect most probably that it will be the other way around in 2014.

So, just as a reminder, in the first half of last year we have significant higher expense of hardware. We're not expecting that in the first half of 2014. On the contrary, we most probably will see some increase in the third and fourth quarter of this year. So again, you should expect a little bit of bumpiness in the business solution, especially in the first half. Merchant and payment together, they should be stable throughout the year.

Okay, helpful. Thanks, guys.

And we will take our next question from Chris Brendler of Stifel.

Thanks, good afternoon. Is there any impact or are you hearing anything from merchants with the Target breach and all the headlines? Is that having any impact or any fears, in creating opportunities for you in Puerto Rico?

Yes, certainly there's been a lot of questions from our merchants to us about it. I think we advised them that they should process with Evertec and not try do it themselves.

Okay. Everything's already PMV in your country, so there's no upgrade cycle there at this point.

I'm sorry, I didn't get the question.

It's already EMV, so there's no technology upgrade coming in Puerto Rico.

Yes, exactly. There's no technology upgrade. And again, just remember that we are predominantly, I mean strongly predominantly, a chip-based -- I mean a PIN-based debit market.

I'm going to ask one more time on the Puerto Rican economy, just so I'm clear. It sounds like from your earlier comments that there wasn't any deceleration that took place during the quarter, like October, November, December, and relatively stable all the way into January. Results, as we looked at them, looks pretty solid. Just want to make sure there's no -- that the headlines we're seeing don't have any impact on your business.

They haven't. I think from a consumption point of view, we haven't seen any change.

Okay, last question from me is, the deal you're trying to sign or you're expecting to sign near-term, can you give us a locale, or is that still everything's kept under wraps? Is it Colombia, or any details there?

I can't give you a locale. I will tell you it's in one of our existing markets. Outside of Puerto Rico, obviously.

In terms of significance, fairly meaningful?

Well, it depends on your definition of significance. For us, it's significant.

Great. Thanks, guys.

We will take our next question from Bob Napoli of William Blair.

Thank you. Good afternoon.

Just a comment, question on your guidance relative to what your long-term targets are. You're somewhat below what I think you've discussed as long-term targets. Do you -- what does it take to get up to those long-term targets, and over what time frame do you think you can get? I think 8% to 9% revenue growth, 10% to 12% EBITDA growth is something that you have been targeting.

Hi, Bob, this is Juan Jose. Yes, as discussed in our IPO process, it's a combination of our payment businesses growing much faster than business solution. And as you saw in the quarter, we're just growing faster. So, that will accelerate the growth. As our payment businesses are bigger in terms of total revenues, we will see an acceleration in the top line. Those two business have the most significant EBITDA margins. So, as we keep growing the payment side of the house, we will see also our EBITDA margins or adjusted net income growing faster.

We also, considering the long-term growth, that we will close certain alliances throughout that midterm. As we said for our midterm is 3 to 5 years, so we do still see the opportunities, especially as we mentioned outside Puerto Rico, again, as a result of faster growing merchant and payment, but as well as adding alliances or an acquisition in the process.

Okay. The Colombia as a market, I think the market you've highlighted as being probably the biggest opportunity in the near-term. First of all, did the bank come on-board that you had signed, or the financial institution, the relatively large customer that -- did that come on-board before the end of the year? And what are -- what is the activity? What is your strategy right now? Is Colombia still the biggest target?

Oh, yes, yes, it is. We are actively involved in the implementation process of the customer. So, this is not that we're trying to sign it, this has been signed. We're trying to put it up on the platform. We expect that either late first quarter or second quarter is now what I would tell you our expectation is for -- to have it fully implemented.

What is the strategy around Colombia, Peter? Are you -- do you have more assets going at that market from a marketing perspective? And maybe what does the pipeline -- what are you targeting?

In the fourth quarter, we had an event in Colombia where we had something north of like 20 potential customers, where we presented to them. We are aggressively selling in the market, presenting. And we have Mike Vizcarrondo, the guy who runs our payment business will be back there, I think it's next week. We are aggressively now talking to customers across the board.

Right now, like we always have been in every market we operate in, first and foremost we focus on growing the Company organically by signing new customers and by expanding the relationship with those customers. And that's true about Colombia as it is about Costa Rica and Panama.

Just broadly, you're focusing on not the largest banks in the market, correct, but you're focusing more on --

Yes, we -- our bread and butter has been the tier II and tier III banks, and yes, that's what we're focused on.

Are you seeing more competition there? Are you seeing incremental, or is it the same -- who are you competing against? I know it's different by market.

There we're competing against the local players who have been there for a long time. We don't see a lot of external competition in Colombia, to be honest with you. What we're trying to do is take these customers away from the long-term providers that had been there, that have been bank-owned for many years.

Great. Thank you.

And we will take our next question from Sara Gubins from Bank of America.

This is David Ridley-Lane for Sara. How should we think about the timing of revenue recognition for the $5.6 million of unearned income on the balance sheet? Does that come in mainly in the first half or?

Yes, we will see some of it probably late in the year, but the most significant one will start really at the end of 2015. So, the most significant project, actually we will still would be working with it. We estimate right now that we will complete that by summer of 2015, so that as soon as we deliver on that, we will start recognizing revenue. So, although there will be some of it in 2014, really, it's more of a 2015 where we will start really seeing that revenue getting into our P&L.

Got it. And then when you look at the merchant acquiring deals that are in your pipeline, are these -- are you approaching prospects outside of an RFP situation, or are these -- are some of these more of a competitive bid situation?

I would say it's probably 50/50. I would say about half of them are competitive bids and half of them are just cold calling on customers and being in a one-on-one kind of situation to win the business.

Got it. And then just a quick numbers question. How would you -- would you expect to utilize the full amount of the NOLs in 2014, or would you still have some remaining for 2015, based on your guidance?

We will use a significant amount, is our expectation in 2014. However, right now we think there will be some that will go over for a couple of years, based on the different buckets that you allocate NOL. But we expect to use a meaningful amount really in 2014. So, by 2015, although we still will have some benefit, it will be lower than it is expected for 2014.

Okay. Thank you very much.

You're welcome.

We will take our next question from Smitti Srethapramote of Morgan Stanley.

Hello, there. Was wondering if you could give us the percentage of revenues that you guys generated in Puerto Rico in 2013 and what that number is expected to be in 2014?

It is about -- for this year will be around 86% Puerto Rico and 2014, just keep in mind that we have a significant increase in hardware and software sales that were mostly in Puerto Rico. So, in total, although we grew double digits outside Puerto Rico, you will not see necessarily the impact because of the fact that we actually grew Puerto Rico also very fast, which is bigger pie -- a bigger portion of the pie.

How is that expected to change, that percentage expected to change in 2014?

It probably will come down probably around 84%, 85%, depend. Obviously we close on alliance, then that will change for sure how much is Puerto Rico versus outside Puerto Rico. So, let's say assuming an alliance, it probably will be 84%, 16%, give and take.

But again, it depend on the alliance and the timing. If we close the alliance really soon and start migrating those merchants to Evertec, let's say in Q2, then you will see obviously that our revenue outside Puerto Rico will accelerate and it will be a bigger portion of the total revenue.

Got it. And just on the EBITDA margin growth guidance, which was, I think you said 100 basis points higher than revenue growth.

Yes.

Given that the payment businesses which have significantly higher EBITDA margins that you alluded to earlier will be the primary driver of revenue growth next year, why shouldn't the EBITDA margin growth be higher than just 100 basis points higher than revenue growth?

That's some -- in our cost for next year, for 2014, we're considering some of the costs of putting together Colombia, our expansion into Colombia. So, there are some investments there we're making in 2014 that we will start seeing revenue later in the year or in 2015. So, there's some of the expenses are mitigating why we don't grow faster in terms of the EBITDA growth rate. That's mostly really what it is in terms of not growing faster in 2014.

That impact should fade away by 2015? Is that a --

Yes, you're totally right. As we start, especially Colombia, as we start seeing revenue from Colombia, we set up the customer, then you will see a different proportion, right? Because we will have the adequate revenue or the margins will be similar to those we have today in Puerto Rico or in the other countries outside Puerto Rico.

Thank you.

(Operator Instructions)

We will go next to Ramin Kamali of Credit Suisse.

Hello, thanks for taking my questions. I guess a lot of my questions have been asked.

I guess you referenced a couple times during the call that Panama and Costa Rica kind of led the growth with double-digit growth rates and payments. Can you comment what the actual growth rate was just in Puerto Rico during the quarter?

We don't actually -- we don't have that number in front of us, to be honest with you. We track what we grow outside of Puerto Rico.

And then another question --

It is around 5%, our growth in Puerto Rico. Quarter probably was a little lower because we saw a reduction in business solutions. As you know, business solution is mostly Puerto Rico revenue.

Got it. And then focusing a little more on business solutions now, it seems like a lot of the government -- I know you have a very small percentage of revenue in that segment coming from the government. Could you comment on a year-over-year basis in Q4 and for the full year what the government related revenue was?

Yes, we have around 10% of our total revenues come from the government of Puerto Rico. A very minor, most of that revenue is mission critical services we provide to the government. And also, close to 40% of the revenue we generate actually is funded by the US government. So, like even there's some -- some of the services that we provide are not necessarily 100% funded by the Puerto Rico government. So, around 40% of the total revenue is really funded by the US.

Understood. But could you comment on what the year-over-year change was for Q4?

It was -- I would say year over year, it was relatively flat.

Flat, yes. Last year was close to 10% also, so no major changes.

And what are the expectations for 2014?

Same thing, relatively flat. Again, most of these are (multiple speakers) they are relatively -- we charge them on a per case basis. We don't expect the number of cases to change dramatically in 2014.

For some of the network stuff that is the mission critical services that Juan alluded to, those contracts are relatively flat by nature, because we don't expect them to dramatically grow the number of users on the network. When you look at the government contracts, as a rule, they're relatively flat.

Are there any -- shifting to the repurchases for a second, are there any limitations in your credit agreements, any restricted payments, limitations that limit your ability to continue to repurchase shares? What's the basket?

Yes, we do have some limits in the credit agreements. What a credit agreement also allow us to build capacity over the quarters. We have not disclosed what the capacity is, but it's -- we're very comfortable with the amount that we have left.

Okay. Thank you.

And this concludes our question-and-answer session for the day. I will turn the call back to Peter Harrington for closing remarks.

Thank you. All right, in summary, I'm pleased with our many accomplishments over the past year, and I'm proud of the entire Evertec team whose efforts made these achievements possible.

Evertec is well positioned to continue to increase its share in Latin America, and to deliver even stronger financial performance in 2014 and beyond. We will remain focused on executing on our growth initiatives, serving of our clients, and driving profitability and shareholder value. Operator, you may now end the call.

Thank you. This does conclude today's conference call. Thank you once again for your participation, and have a wonderful day.