Puerto Rico payments player Evertec scores 4Q20 wins

Puerto Rico-based payments services firm Evertec made some key project launches in Chile and Mexico in 4Q20, as execs hailed a 5% jump in full-year revenue to US$511mn, despite pandemic shocks in 2020. 

The company reported 4Q20 revenue up 6% year-on-year to US$134mn, reflecting growth in sales volume, driven by higher average tickets in the company’s merchant acquiring segment, increased transaction volumes from its ATH business and early income on new projects launched around the region.

The firm also marked several milestones in the fourth quarter, including the launch of its Mastercard debit card processing platform for Mercado Libre’s operations in Mexico, and saw product rollouts with a collections platforms developed for Mexico’s Citibanamex and a payments processing service at Santander Chile, with whom Evertec has been working to boost merchant acquisition and omni-channel capabilities.

Pointing to the advances outside its home sphere in the Caribbean, Evertec CEO Mac Schuessler, said, “This is testament to our growing reputation with leading banks, financial institutions, as well as technology players in Latin America,” speaking on the company’s 4Q20 results call on Monday. 

Schuessler also counted as recent wins Evertec’s renewed contracts with both Banco Itaú and Banco Estado in Chile, as well as the renewal of contracts and being "awarded the formal bid for Banco Popular in Costa Rica," adding that the contract will be finalized in the coming weeks and details announced.

REGIONAL TAILWIND

Looking ahead, Schuessler acknowledged continued difficulties with COVID-19, adding that much depends on the vaccine rollouts in the region, but said various stimulus programs, including the US stimulus reaching Puerto Rico, and the Colombian government’s relief payments have served to help improve banking penetration.

The CEO said “the dominant position of cash transactions and the low penetration of card volumes” in the region represent “a significant opportunity for growth across Puerto Rico and Latin America,” with cash continuing to represent over 50% of payments in its key regions.

As the graph below shows, even the most mature market in Latin America (Chile) has more than double the cash-use rates compared to the 15% you see in the US or the UK. 

Source: Evertec

M&A IN FOCUS 

Executives were repeatedly asked in the call to outline their M&A and inorganic strategy moving into 2021, with Evertec having emerged as both a potential target and buyer in the rapidly evolving electronic payments/financial services space in the region.

CFO Joaquin Castrillo said company capex in 2021 is expected to be approximately US$50mn and “reflect our ongoing investment in technology, localization of our products in Latin America and continued investment in transitioning our licensing model in LatAm to a processing model.”

“Our capital allocation strategy remains unchanged,” said Castrillo, adding, “We will continue to focus on growth investments internally as well as through M&A.” 

Schuessler said that they will continue to focus on M&A deals in 2021, though unable to name names at this time, but underlined, “If you look at what we announced over the last year and this quarter specifically, we've announced more deals organically in Latin America than we have in the company. And if you look at how Joaquin [Castrillo] guided for the year to get double-digit growth in LatAm, that's all organic.” 

Castrillo forecast that Evertec’s LatAm business would see see growth in the “low to mid-teens” in 2021, given the contributions from its new partnerships with Citibanamex, Santander Chile and others.

Schuessler added, “We feel pretty good about the pipeline that we've closed with and implemented,” specifically at its Mexican and Chilean partners.” 

“So I think we don't comment on deals before we sign them or close them, but we feel very good about the pipeline [in 2021],” he said.

Asked whether Evertec would look at larger acquisitions, Schuessler said, “We would be opportunistic to look at any type of transaction available.” 

“There are a couple of different types we see in the region… some are small tuck-ins like we've done in the past. And we've been pleased that we've been able to get – purchase those at a reasonable valuation and then integrate those and really leverage those products to grow the company,” said the CEO.

“There's also the monopolies and duopolies across the region, which sometimes are talked about, will those sell like Prisma sold in Argentina?” said Schuessler. “So we will look at everything, but we'll make sure that the numbers make sense and that it makes sense strategically for the company.”