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01/11 14:25
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects a positive sentiment with strong revenue growth in Latin America, increased adjusted EPS, and robust liquidity. Although there was a slight decline in margins, it was attributed to a one-time event. The company has also announced a $150 million share repurchase program, which is a positive indicator for shareholders. The Q&A section highlights successful integration of acquisitions and optimism for continued growth, particularly in LatAm. Overall, despite some uncertainties, the company's strong fundamentals and strategic initiatives suggest a positive stock price movement.
Revenue Revenue for the third quarter was $228.6 million, an 8% increase over the prior year. Constant currency revenue was approximately $227.9 million, representing growth of 8%. The growth was driven by strong organic growth across all segments and contributions from acquisitions.
Adjusted EBITDA Adjusted EBITDA increased to $92.6 million, up approximately 6% year-over-year. Adjusted EBITDA margin was 40.5%, a decrease of 80 basis points from a year ago. The growth was supported by strong revenue, M&A contributions, and cost initiatives, but partially offset by higher tax expenses.
Adjusted EPS Adjusted EPS was $0.92, up 7% year-over-year. This was driven by strong adjusted EBITDA growth and lower interest expense, partially offset by higher tax expense.
Operating Cash Flow Operating cash flow for the first 9 months of the year was approximately $157 million. This reflects strong cash generation and financial stability.
Merchant Acquiring Revenue Merchant Acquiring revenue grew 3% year-over-year to $46.8 million. Growth was driven by higher sales volume, new merchant relationships, and events like the Bad Bunny residency. However, there was a slight decrease in spread due to a shift towards more card-present transactions.
Payment Services Revenue (Puerto Rico) Payment Services in Puerto Rico grew 5% year-over-year to $55.2 million. Growth was driven by strong performance in ATH Móvil, particularly ATH Business, and POS transaction growth.
Business Solutions Revenue Business Solutions revenue grew 1% year-over-year to $61.7 million. Growth was primarily driven by completed projects and higher hardware sales, partially offset by a one-time credit related to a managed services contract.
Latin America Revenue Revenue in Latin America increased 19% year-over-year to $90.4 million, or 18% on a constant currency basis. Growth was fueled by organic growth, reacceleration in Brazil, contract repricing, and contributions from acquisitions like Grandata and Nubity.
Liquidity Liquidity was approximately $518.6 million as of September 30, reflecting strong financial health and an increase of $50 million from the prior year.
Tecnobank acquisition: Strengthened financial technology capabilities in Brazil and opened new avenues for growth and scale.
ATH Móvil: Continued strong performance, particularly ATH Business, driving higher sales volume and transactions.
Latin America expansion: Revenue increased 19% year-over-year, driven by organic growth, acquisitions (Grandata and Nubity), and new deals with Banco de Chile and Financiera Oh in Peru.
Puerto Rico market: Merchant Acquiring revenue grew 3% year-over-year, supported by higher sales volume and events like the Bad Bunny residency.
Cybersecurity incident: Incident in Brazil's PIX real-time payment system was contained, with most funds recovered and systems back online.
Cost efficiencies: Targeted cost initiatives contributed to maintaining adjusted EBITDA margin at 40.5%.
Leadership transitions: Joaquin Castrillo promoted to COO and Karla Cruz-Jusino to CFO, ensuring continuity in leadership.
M&A strategy: Acquisition of Tecnobank and previous acquisitions (Grandata and Nubity) driving diversification and growth in Latin America.
Cybersecurity Incident: A cybersecurity breach in the PIX real-time payment system in Brazil resulted in unauthorized activity. Although the situation was contained and most funds were recovered, the incident incurred costs and potential claims related to client losses, impacting financials.
Regulatory and Compliance Risks: The PIX system is governed by the Brazilian Central Bank, and the incident required approval from the bank to resume operations. This highlights regulatory dependencies and potential risks in maintaining compliance.
Economic and Currency Risks in Latin America: Revenue growth in Latin America is subject to foreign currency fluctuations, particularly in Brazil, which could impact financial performance.
Banco Popular Discount Impact: A 10% discount on selected services for Banco Popular, effective October 2025, is expected to reduce revenue by approximately $14 million annually, impacting primarily the Business Solutions segment.
Interest Rate and Debt Management: While interest expenses have decreased due to debt repricing, the acquisition of Tecnobank has added incremental debt, which could offset some benefits.
Tax Rate Increases: Higher tax rates are anticipated due to increased contributions from Latin America operations and reduced interest expenses, which previously provided tax efficiencies.
Operational Challenges in Latin America: While Latin America shows strong growth, the integration of acquisitions like Tecnobank and the ramp-up of new contracts may pose operational challenges and delay financial contributions.
Revenue Expectations: Revenue for 2025 is expected to be between $921 million and $927 million, representing growth of 8.9% to 9.6%. On a constant currency basis, growth is expected to be 10% to 11% year-over-year.
Adjusted EPS: Adjusted EPS is projected to grow between 8.5% and 10.4% from the $3.28 reported for 2024, higher than the previous assumption of 4.8% to 7% growth.
Adjusted EBITDA Margin: The adjusted EBITDA margin is expected to be approximately 40% for the full year 2025.
Merchant Acquiring Segment: Mid-single-digit growth is anticipated for 2025, with Q4 performance expected to align with Q3 results.
Payments Puerto Rico and Caribbean Segment: Mid-single-digit growth is expected, driven by ATH Móvil momentum, partially offset by lower processing services to the LatAm segment and the impact of a 10% discount to Popular starting in October.
Latin America Payments and Solutions Segment: High teens growth is projected, driven by strong organic momentum and the Tecnobank acquisition. On a constant currency basis, growth is expected to be in the low 20s.
Business Solutions Segment: Low single-digit revenue growth is expected, reflecting the 10% discount to Popular, which impacts approximately $18 million annually, with $4 million in Q4.
2026 Preliminary Outlook: The 10% discount to Popular represents a $14 million headwind in 2026, mostly impacting the Business Solutions segment. Merchant Acquiring growth is expected to normalize, with continued strength in ATH Móvil and POS transactions in Puerto Rico. Latin America is expected to maintain momentum through organic growth and M&A, including Tecnobank. Margins will be managed through cost efficiency initiatives.
Dividends Paid: $9.6 million in dividends were returned to shareholders in the first 9 months of 2025.
Share Repurchases: $3.7 million in share repurchases were conducted in the first 9 months of 2025.
The earnings call reflects a positive sentiment with strong revenue growth in Latin America, increased adjusted EPS, and robust liquidity. Although there was a slight decline in margins, it was attributed to a one-time event. The company has also announced a $150 million share repurchase program, which is a positive indicator for shareholders. The Q&A section highlights successful integration of acquisitions and optimism for continued growth, particularly in LatAm. Overall, despite some uncertainties, the company's strong fundamentals and strategic initiatives suggest a positive stock price movement.
The earnings call indicates strong financial performance with revenue and EBITDA growth, positive guidance, and a focus on cost initiatives. The Q&A reveals optimism in tech modernization, repricing, and M&A opportunities, with management expressing confidence in the pipeline and expansion in Mexico. Despite some avoidance of specifics, the overall sentiment is positive, supported by strong growth in ATH Móvil and raised full-year guidance. Given the company's market cap, a positive stock price reaction (2% to 8%) is anticipated over the next two weeks.
The earnings call reveals strong financial performance with an 11.4% revenue increase and 14% adjusted EBITDA growth. Positive guidance and a focus on organic growth and margin optimization further support a positive sentiment. Although there are concerns like client attrition and currency headwinds, the robust performance and optimistic outlook for LATAM, especially Brazil, are promising. The Q&A session reinforces confidence in the company's strategy, with outperformance in key segments and a strong M&A pipeline. Given the company's market cap, a positive stock price movement of 2% to 8% is anticipated.
The earnings call presents mixed signals. Positive factors include strong financial performance in 2024, robust pipeline development in LATAM, and shareholder returns. However, risks such as client attrition, regulatory issues, and supply chain challenges, along with a modest 2025 revenue growth guidance, offset these positives. The Q&A session highlighted some uncertainties, particularly regarding the performance of Sinqia and the Merchant segment. Given the market cap, the stock is likely to remain stable, resulting in a neutral sentiment prediction.
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