Q1 2021 Evertec Inc Earnings Call
[music].
Good day and welcome to the ever Tech incorporated first quarter 2021 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions to ask a question. Please.
Press Star then one on your Touchtone phone and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to MS. Kay Sharpton, Vice President of Investor Relations. Please go ahead. Thank.
Thank you and good afternoon with me today are unmatched as flair, our president and Chief Executive Officer, and walking because trio, our chief Financial Officer.
Before we begin I'd like to remind everyone that this call may contain forward looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC report during today's call management will provide certain information that will constitute non-GAAP financial measures under SEC rules.
Such as adjusted EBITDA, adjusted net income and adjusted earnings per common share reconciliations to GAAP measures and certain additional information are also included in today's earnings release and related supplemental slides, which are available in Investor Relations section of our company website at Www Dot at protect Inc. Dot.
Com.
I'll now hand, the call over to Mac.
Thanks, Kay and good afternoon, everyone.
We achieved strong results in the first quarter driven by consumer demand as we lapped the one year anniversary of the pandemic as well as benefit from the impact from new business contract in Latin America.
Given the Q1 results the passage of the new stimulus bill as well as our execution on our share repurchase program.
We are raising our expectations for 2021 Joaquin will provide further detail.
Beginning on slide four total revenue was $140 million from the first quarter and.
An increase of 14% compared to 2020.
<unk> EBITDA was $69 million, an increase from 22% as compared to the prior year and.
And adjusted earnings per share was <unk> 62.
An increase of 35 per cent.
We generate significant operating cash flow during the quarter $35 million and we returned approximately $80 million per shareholders through dividend and execution from share repurchases.
Additionally, our liquidity remains strong at $273 million as of March 31.
Moving on to our update.
Lifetime from Puerto Rico.
We continue to see significant transaction revenue growth as a result from the federal stimulus programs and increased consumer demand.
Example, merchant revenue growth in January and February was low double digits, and then surged in March over 46% growth as we lap the COVID-19.
Lockdown last year for a total quarterly revenue growth from 23%.
We also continued to benefit from growth in our digital payment channel related to the Ath network.
Mobile and Ath mobile business delivered 160% revenue growth.
Further we are encouraged by the adoption rate of QR codes by both consumers and businesses.
We have expanded the contactless functionality almost 4000 per approximately 13% of our merchant and <unk>.
I've added QR code payment functionality to pay at the table of restaurants.
Additionally towards the end of the quarter.
We're pleased to extend and expand our relationship with first time driven by the recent consolidation that firsthand from there.
We extended our existing agreement, which was previously through 2025 and additional five years through 2030 net.
That expanded their relationship to include the new merchant contract previously part of Santander.
Regarding other recent contracts, we are leveraging our printing capacity and signed one of the largest printing contract from the company's history the cash.
Contract is anticipated to benefit our business solutions segment from the back half of 2021 and is a testament of our ability to grow from there.
Another recent change in the business solutions segment. This is Tom I'll take that path.
Electronics sales process, which represented a small portion of our revenue we did not see this business as a core competency and this transaction closed in April.
As we consider the ecosystem in Puerto Rico. The vaccination efforts continued to progress in the government expenses at 70% of the population with both doses by the end of the summer with COVID-19 cases, and spiked up after spring break bringing back from the low capacity and other measures, but nothing close to a lockdown.
From a macroeconomic perspective, we expect to continue benefiting from the recent passage of the new stimulus support as well as expand EBIT benefits that will run through mid year.
We're also encouraged by the recently announced release of over $900 million in federal funds for the school system and the release of $8 $2 billion and hurricane recovery related funds, which will contribute to the long term recovery and mitigate future disaster revenue.
Turning to Latin America on slide six.
Regarding the environment, we continued to see different responses to the COVID-19, pandemic very levels of restriction reopening and vaccine levels.
For example, a third of the world for percentage of vaccinated population. However, there is still.
Seeing a significant rise in new cases.
While we remain cautious about the outlook throughout the region given the continuing uncertainties surrounding the virus. We are pleased to have driven double digit revenue growth in the first quarter as a result of the newly implemented payment solution in Chile debt.
And there has launched a significant marketing campaign and an already signed over 10000 margin, which is halfway to the annual goal 2021, and 20000 margin Mercado Libre has also been strong and their debit card issuing in Mexico, which we will benefit from those parts begin to be use. We're also pleased with the expansion of our price per bed E Commerce game.
And have more than 1800 active merchants on our platform and anticipate further growth throughout the region.
Lastly, I want to comment on our recently announced management changes and a couple of noteworthy items in our proxy annual report and ESG summary.
We are pleased to and Diego <unk> as Chief Operating Officer ended Inc. Sales store as Chief strategy Officer.
Bill has been with US since 2012 and is currently serving as our Chief operating officer.
Shifting him, our chief strategy Officer will help us drive alignment of product strategy and customer demand.
Diego has a wealth of experience in Latin American payments as well as strong technical expertise and we are.
Delighted to add him to the team.
We believe these changes in our leadership will further strengthen <unk> as we focus on future opportunities.
Additionally, this year in our proxy we have nominated a new Board member Kelly Barrett with her addition, we will increase our board gender diversity at over 20%.
We have continued to advance our focus on ESG and remains a tune to supporting our employees our clients and the communities that we do business day.
We are proud of our progress on these important areas corporate citizenship and hope you will review our recent annual report and 2021 ESG tear sheet on our website with that I will now turn the call over to Lucky.
Thank you, Mike and good afternoon, everyone.
Turning to slide eight you will see the consolidated first quarter results for everything.
Total revenue for the first quarter was $139 5 million up 14% compared to the prior year $121 9 million COVID-19 impacted results.
Current quarter results reflect the strong consumer demand positively impacting all our transactional revenue in Puerto Rico, while also benefiting from our double digit growth driven.
Driven by our recent implementations <unk>.
Additionally, we benefited from one time revenue related to hardware and software sales in the Dominican Republic of approximately $1 million.
Adjusted EBITDA for the quarter was $68 9 million, an increase of 22% from $56 3 million in the prior year.
Adjusted EBITDA margin was 49, 4% and this represents a 320 basis point increase compared to the prior year.
The increase in margin primarily reflects the higher payment revenue in both Puerto Rico, and Latin America, while also controlling costs.
Adjusted net income for the quarter was $45 million, an increase of 34% of compared to the prior year, primarily reflecting the higher adjusted EBITDA and lower cash interest expenses.
This was partially offset by increased operating depreciation and amortization driven by capital expenditures in the prior year of lost key projects that went into production last year.
Our adjusted effective tax rate in the quarter was 14, 7%, reflecting some discrete tax items that impacted the quarter and we now expect our tax rate for the full year to range from 13% to 14% depending on the mix of business.
Adjusted EPS was <unk> 62 for the quarter, an increase of 35% compared to the prior year.
Moving on to slide nine our low cover our segment results starting with merchant acquiring.
In the first quarter merchant acquiring net revenue increased 23% year over year to approximately $39 million driven by the impact from increased sales volume.
Results benefited from higher sales volume as well as higher spread in part driven by a higher average ticket, which was up 15%.
March results contributed almost 60% on a year over year revenue increase as we lap the full lockdown.
Last two weeks of March last year.
These results also benefited from new stimulus such as a $600 approved towards the end of the prior year that were distributed in Puerto Rico starting in February.
As well as positive impact from increased EBT funds that'll began to be distributed in launch and that will run throughout the second quarter.
We also benefited from a mix shift to higher margin businesses, such as restaurants on retail as well. So continued card mix shift from credit to debit from international to local cards.
Lastly, we also benefited from the expanded relationship with first bank for a portion of the month of March.
Adjusted EBITDA for this segment was $15 5 million up 38% adjusted EBITDA margin was 53%, although approximately 540 basis points as compared to last year, reflecting the impact from the higher average ticket and higher spread as we continue to drive higher revenues with less.
Transactions.
On Slide 10, you will see that results from the payment services, Puerto Rico on the Caribbean segment.
Revenue for this segment in the first quarter was $36 3 million bulk of approximately 21% with a similar monthly pattern of the merchant segment in the first two loans of the quarter and then over 33% growth in margin compared to last year.
The revenue growth was primarily due to higher ath mobile and Ath mobile business transactions contributing an incremental $2 $5 million in the quarter, largely driven by Ath mobile business.
We also saw growth Mpls resections, which was the first positive quarter since the pandemic started on driven by the month of March when compared to prior year, which was negatively impacted by the lockdown.
Additionally, we benefited from intersegment revenue from transactional processing and rich good morning targeting in Puerto Rico for Latin America.
Adjusted EBITDA for the segment was $20 8 million up 29% up compared to last year.
Adjusted EBITDA margin was 57, 4% up 360 basis points as compared to last year, primarily due to higher revenue and impact from the pandemic to last year's margin given the negative impact to revenues in a segment with a high percentage of fixed costs.
On Slide 11, you will see the results for our payment services Latam segment.
Revenue for the segment in the first quarter was 25 million also approximately 16% as compared to last year. This.
This increase was driven by new implementations such as non from their Chile, as well as increased revenue from placement rate.
Adjusted EBITDA for this segment was $10 million and adjusted EBITDA margin was 41% all other estimates 200 basis points as compared to last year, driven by higher revenue and the benefit of balance sheet re measurement in non functional currencies of approximately <unk> 2 million.
Nuclear low margin is currently benefiting from established minimums in the sense under contract with low transactional levels and we would expect margins to move towards mid to high Thirty's Astro spectrum increase over time.
On Slide 12, you will find the results from the mix of social segment.
Solutions revenue for the first quarter was up approximately 8% to $66 million.
The revenue increase in the quarter benefited from approximately $1 million in one time revenue for hardware and software sales in the Dominican Republic. We are also benefiting from the shift to digital channels as the higher volume of online users continues to drive growth over prior year as well as an increase in service volumes. Additionally, we benefited from new services.
<unk> begun in 'twenty, one from popular under department of obligation.
For the quarter adjusted EBITDA was $29 6 million and adjusted EBITDA margin was 48, 9% down approximately 20 basis points as compared to last year.
The adjusted EBITDA margin decrease was primarily driven by the mix of revenue, which included lower margin hardware and software sales as well as costs related to the new services.
Moving on to Slide 13, you will see a summary of corporate and other.
Our first quarter adjusted EBITDA was a negative $7 1 million, an increase of 5% compared to prior year, our adjusted EBITDA as a percentage of total revenue was five 1% on favorable by approximately 50 basis points compared to prior year, primarily due to the higher revenues in the quarter.
Moving on to our cash flow overview on slide 14, our beginning cash balance was approximately $221 million, including restricted cash of approximately $18 million.
Net cash provided by operating activities was approximately $35 million nearly $1 million increase compared to prior year.
Capital expenditures were approximately $17 million in part driven by higher oxides and spend as we accelerate from projects as well as continuous focus on innovation.
Regarding capital expenditures from a full year, we now anticipate approximately $50 million to $55 million of Capex.
We also recorded approximately $15 million for the extension and expansion of our relationship with first book, including the acquisition of the merchant contracts. We also purchased debt securities in the amount of $3 million in response to a new regulatory requirement in Costa Rica directly related to our settlement services in the country.
Require we provide these securities as collateral through the Central Bank.
We paid approximately $21 million in long term debt payments, which included approximately $17 million related to an excess cash flow feature in our trade agreement.
We also paid $9 million in withholding taxes on share based compensation and 1 million of other debt Paydowns, which resulted in a total net debt decrease of approximately $31 million.
We paid cash dividends of $4 million on repurchasing approximately 383000 shares of common stock at an average price of $37 26.
For a total of approximately $14 million.
We have approximately $86 million available for future use under the company's share repurchase program.
Lastly, we had approximately $3 million of benefit on cash in from currency, resulting in our ending cash balance as of March 31 of $175 million and it included approximately $19 million of restricted cash. Additionally, we recently announced another five cent dividend to be paid on <unk>.
June 2021.
<unk> to shareholders of record as of May 2020 loans.
Moving on to Slide 15, you will find a summary of our debt as of March 31.
2021.
Our quarter ending net debt position was approximately $323 million comprised of approximately 156 million of unrestricted cash and approximately $479 million of total short term borrowings and long term debt.
Our weighted average interest rate was four 5%.
Our net debt to trailing 12 months adjusted EBITDA was approximately one seven times.
As of March 31, total liquidity was approximately 173 million net bonds excludes restricted cash and includes the available borrowing capacity under our revolver.
Moving to slide 16, I will now provide you with an update on our 2021 outlook as well as some comments on Q2.
Given our Q1 results and additional visibility we now expect revenue to be in a range of 543 million to $552 million representing growth of 6% to 8%.
Our adjusted earnings per share outlook of $2 25 to $2 32, three percentage range of 9% to 12% compared to the adjusted earnings per share in 2020.
$2 seven.
Non-GAAP basis earnings per share is anticipated to be between $1 70 to $1 77.
We had a strong Q1 unexpected to see a similar level of revenue in Q2, given the tailwind from stimulus programs and the <unk>.
Benefits from the new contract that Mike mentioned, we're already considered in the guidance range. We previously provided.
Regarding the back half of the year, we continue to anticipate revenues to be flat to down given the strong performance in last year's second half driven by high levels of stimulus funds as.
As well as benefits from COVID-19 related services on the impact of onetime revenues saw charges if momentum allocation project and other projects that we completed in the prior year.
We don't believe adjusted EBITDA margins will be in a range of 47 to 47, 5%. We continue to expect some headwinds from debt or monetization of the average ticket on the high margin benefit of debt or permanent mitigation contract last year as well as a negative impact from foreign currency re measurement, which was favorable by over $4 million in the second.
Half of last year.
As I mentioned previously our non-GAAP effective tax rate was higher in Q1, and we now anticipate the full year rate to be in a range of 13% to 14% based on the mix of business a net discrete tax items that impacted Q1.
This guidance also includes the benefit from the share repurchases in Q1.
One other item of note related to our quarter that I want to make you aware of in addition to filing our 10-Q, we will also be filing a shelf registration our S. Three that relates to publish shares of everything while we don't have any knowledge of formulary in penta sales <unk> shares at this time, Mr day required filing under a stockholder agreement with book.
<unk>.
In summary, we are excited about the profit results in Q1, which led us to raise our guidance and we are on track with our plans for 2021.
Moving forward to hopefully seeing Inc. First on our upcoming conferences later in the year.
Finally, I want to share with you the news that Kay is retrying from AMETEK next month.
I've been working closely with Kay with about six years and can attest to the significant contributions. He has brought to this leadership team, which go well beyond <unk> reagents and a huge fan of K on everything she does and we'll miss him dearly.
Thank you for everything Kay and the best of luck in this new chapter Mac, you want to say some words.
Absolutely when I arrived at AMETEK over six years ago, the first person I call those GAAP.
We worked together global payments non euro intelligence experienced integrity and relationship skills zone.
Since arriving day has been an instrumental part of.
The leadership team.
She has provided insight and advice beyond her areas of responsibility and everyone here has become better because of the firm.
Although day is leading her official role she has given me permission to call our per business device once in a while.
And beyond that I know, we will keep in touch because we are from K I want to thank you for everything and I know you'd like to say a few words as well.
Thanks, Mac and <unk> for those kind words.
It had six interesting challenging and satisfying gears at <unk> Mac.
Mac would have appreciated and architect has been the culture. You have established one that allowed me to have a voice.
I always felt herd and value.
To the investors and analysts I have spoken with over the years. Thank you for the hard questions. I appreciate your interest and looking beyond the numbers and seeing the exciting potential.
And to my support team at ICR, I'm confident you'll get at vertex the same level of excellent excellent.
Given me over the past six years.
My colleagues. Thank you for sharing the warmth of Puerto Rico with me Despite my language shortcomings.
We provided me with an opportunity to grow to learn and appreciate this beautiful island.
It is with mixed feelings that I am, leaving but I look forward to a new chapter in my life.
Wish you well and many successes ahead.
Operator, I think we're ready to open the line for questions.
We will now begin the question and answer session.
I ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
Draw. Your question. Please press Star then two and at this time, we will pause momentarily to assemble our roster.
And the first question will come from Bob Napoli with William Blair. Please go ahead.
Pardon me Mr. Napoli Your line is open.
Yes.
Hi, Bob.
Hello can you hear me I'm, sorry, we can hear you now.
Okay Alright.
Sorry that was choked up from case states there.
Got it.
[laughter] same day.
Great working with U K debt.
I wish you the very best.
Alright.
No.
Joaquin.
The revenue growth in the back half of the year I think you said that the revenue would be down year over year in the back half I know you have a really tough comp in the third quarter.
Ah.
But if you look like.
We said flat flat to down so depending on kind of the range that we gave.
Yes, okay.
Okay now it just seems like as you get to the fourth quarter.
With all the good things that are going on here. It seems like you should have pretty pretty solid growth.
If you look at the fourth quarter versus 2019 that.
It just seems like I mean, you guys are known for being conservative and how about what was the one time gain I guess in the third quarter, how much was that.
Sure. So ill give you a little bit of color, Bob and in the third quarter of last year. We had the department of litigation and that was approximately 4 million. So that was big on that offline, but if you remember we also recognize that net so from a perspective of margin here was also very good.
Contribution to our EBITDA margin for the quarter.
And yes, I mean look if we look at kind of the cadence of what we saw last year and the quarter. After a stimulus was disbursed we did see some slowdowns in this case and as we said in the script some of the stimulus starting to flow in the month of March, whereas obviously, its still expecting a strong Q2.
But as we kind of start moving away from that stimulus and we're kind of trending in a similar way to what we saw in Q4, where there is a slowdown and as we get into Q4 or at least theres still some uncertainty and we're taking that into consideration as part of the guidance as well.
Okay I appreciate your conservative guidance as we've done historically, but Matt I think just a question on the.
The strong growth that you have from your showing right now Puerto Rico has always been in Latin America very heavy cash markets do you think this is.
Changed and I mean is there can you give a mix like of online standard.
The mix of cash or just any thoughts on whether the secular growth is permanently shifted.
To use a more electronic payments.
In your markets.
Yes, so Bob we talked about that a little bit on the last call I don't have the statistics in front of me, but it was about 50% was still cash. So we still think there's a big opportunity and we've seen a continued conversion.
Particularly with the pandemic to digital form of payment. That's why we've seen so much growth in the QR codes.
We still as we said on the last call. There is a lot of opportunities still in Puerto Rico, we're very well positioned with our relationship with popular with the extension of the relationship with first bank and with the new technology that we're deploying with Ath. If you look at Latin America, and now that those markets are opening like Chile.
The relationship we now have with Mercado Libre and then we are rolling out price to pay in Central America in both Costa Rica, and Panama as well.
We think we're going to get us ability to capture some of that debt.
Transpire from cash to electronics, and Latin America as well. So we think it's a big trend for the entire region, including Puerto Rico.
Thanks, and just last question the new contracts can you give any color on the net.
The revenue associated with the first bank.
Stanchion sounds.
Pretty attractive and then Chile, Chile product in it.
Some of the other.
And just any commentary on the new products.
Yeah.
Yes, I mean for the business.
Well so on first bank what we've done is first bank acquired center, there and so we've consolidated that business under the first bank relationship and then extended that relationship until the end of 'twenty three.
Till 2030 as it relates to the merchant business or the new products placed a day like I said earlier, we've now rolled out in Costa Rica, we've added merchants there we've now rolled it out in Panama.
And then you mentioned Santa their intended our Chile specifically.
The bank has publicly said they have already reached half of their goal within the first month or two of going into production.
So we're pretty optimistic about that as well and I will tell you after tax within the region is known for.
Being one of the Fintech companies that solely focused on Latin America, and now has the success stories in the rolodex and credentials.
To get us into more.
To more meetings and more opportunities.
Okay. Thank you appreciate it.
Thanks, Bob.
The next question will come from Korey Marcello with Deutsche Bank. Please go ahead.
Hey, guys congrats on the quarter. Thanks for taking my question.
I just wanted to touch you guys.
And obviously the stimulus benefits and how.
The growth rates are typically kind of moderated a bit as you've moved away from that stimulus is there any kind of sense that you can give us on how the volume kind of trended in April have those started to kind of die off a little bit I'm, just trying to triangulate how you get to the to the second quarter revenue growth is kind of being flat, even though the comps are a little bit easier.
I mean, I think what we said flat was similar to Q1 non necessarily similar to prior year right. We do have great. That's what I was similar to Q1.
I mean, when we go into April we are seeing strong.
Kind of volume growth in April similar to what we saw towards March.
I think when we talk about kind of moving away from the stimulus we're talking a lot more of the second half of the year.
Actually to expand a little bit more volume somebody assumptions there.
We saw very high average ticket last year, even in Q2 ongoing into Q3, driven because of the lockdown and people having only.
Places to shop, and these big kind of.
Grocery purchases.
But because of the shelter in place, which we're not necessarily seeing when we see the average ticket on the spread now in 2021, so even though we're still seeing very high spend very high.
Sales volume those are some of the puts and takes that we're also taking into consideration as we start to kind of look at the second half of the year.
And the fact that we're not necessarily at the same level of our stake it spread and also the mix shift between credit and debit is starting to normalize.
Got it that makes sense.
Any any update on business solutions.
I know you guys gave sort of debt first half second half being negative that was the guidance kind of last quarter, just given that new printing contract is there any change to the business solutions guidance from that contract.
So cory that construct we had already considered as part of our guidance again, the department of education contract that impacted us positively in Q3 is a.
A big driver of that kind of guy to NAV.
Flat.
In the second half I would say is that in addition to that as it relates to with a solution specifically.
We also benefited from from solve that COVID-19 related services that we provided both to the government and to some of our financial institutional clients that related to a negative of the government printing checks supporting their technology of unemployment platforms and in the case of some of our financial institutions continuing to support their kind of.
Work environment and again those ourselves some projects that were onetime in nature or that because they're related to COVID-19 or to the relief packages that we saw last year won't necessarily recur from a growth perspective in 'twenty one.
Got it.
Maybe a quick clarification, you mentioned on Latam the margins I know there is some margin headwind headwinds there just from moving to more processing, but you mentioned they would move from about.
Towards the mid to high <unk> over what timeframe was that I was just trying to clarify that thanks guys.
So look.
At this point right to give some more clarity on what we meant to date, we're seeing the revenue from Santander, which as we've stated in the past some minimums that is one of the things we love about this contract, but obviously as we start to drive more transactions to the platform I will start to see more cost to the extent that Santander is still below those minimums.
That will put some pressure on that margin, having said that we've announced some other wins here that are related to processing nightmare quality EBITDA like bottlenecks that overtime will offset some of that pressure, but we would still expect to see that margin kind of come down a little bit to the kind of the mid to high thirty's in terms of time.
Frame I don't know if we have a specific timeframe that we can give you we're definitely happy to see Santander continuing to post transaction of above their expectations I think thats good for them, it's very good for us.
While we will continue to align to or how does that impact the margin.
Very clear thank you very much.
The next question will come from Vasu <unk> with J P. W. Please go ahead.
Hi, Thanks for taking my question and I will go definitely want to extend my good wishes today, it's been great working with you.
I guess my first question.
Do you think about like the impact that we've had from COVID-19 do you think that were going on.
Colby just kind of behind us and businesses must be normalized as you think about active margin sort of impact on doors in the ATM business can you kind of help frame.
If we are still seeing some of the business is being impacted our debt is pretty much behind us at this point.
So I'll take a shot and then.
I mean.
Theres definitely we're back to some level of normality, we do have a lot of tourists Allen Puerto Rico in our restaurants are open but theres still a lot of places that are at lower capacity restaurants are at low capacity movie Theater cinema. So we haven't gone back to a 100% of where we were so I would say there's still opportunity for the economy to continue to be stimulated and there is also still.
A lot of money to come in from the Hurricane relief that has yet to come in.
That being said, we don't know what the future holds as far as the variance anything like that and I think no. One can predict those things, but we are definitely back to a much more closer stable interim analysis, but EBIT schools. I mean, my son is still doing school from home.
So.
We are much closer to being back to normality, but theres still a little bit of a way to go.
Got it and just I guess, a follow up on that Mac as you think about the macro environment do you blame the stimulus funding and now the financial Inc. Coming into Puerto Rico, I think the outlook, probably looks a lot better than it has in the past. So is that giving you more confidence to be able to have a longer term view of what the growth profile of the business growth.
Because I know historically, that's just been too much uncertainty on the macro trend.
Yes, so I think it gives us more certainty.
Puerto Rico I don't know that we will give long term guidance I think we will continue to to give annual guidance, but I do think the.
Relief money, you've seen come in from COVID-19 relief money, you've seen come in from the Hurricane which is just beginning and then if we see more infrastructure spending from the from the New administration, that's definitely going to benefit Puerto Rico and benefit us on top of the fact, we're still 50% cash right. So I think <unk> got some pretty good.
Dimensions of how Puerto Rico will operate over the next couple of years.
But I don't think that will give long term guidance.
And just one last one if I may just on the M&A environment. If you could talk a little bit about the M&A pipeline looks like what kind of assets Youre looking at.
Congratulations to Diego <unk> channel for their new roles, but if you could expand a little bit on what where you expect to focus on et cetera.
Yes, so I mean first.
We're excited about adding diego to the team.
Had a senior leadership job across our Mexico, Yes. He was one of the top gathered per user and then he was the CEO of <unk>.
Real time payments company in Argentina that was owned by the local banks.
And he also worked at Mastercard, he's moving to Puerto Rico, and he's of course as fluent Spanish, but we think there'll be a great addition to the team.
<unk> is actually going to work and help me and the team on strategy and also customer excellence. So make sure that we're measuring customer excellence, while making sure that we're <unk>.
The velocity of our product adoption and then helping US continue to map out our plans for further growth. When you. When you were asking about M&A I mean, it continues to be something we're very focused on.
On the.
The deals have not the type of deals we see have not dramatically changed and what we've seen since I've been here at the valuations have probably gone up a little bit People's expectations, just given where the world is and where sort of the technology spaces, but it still is important to us and is a significant reason the assets that we've purchased like place to.
Hey.
<unk> is one of the reasons, we're winning business and then pay groups.
Salaries, and we won sending their Chilean Mercado libre as well so we've been pleased with us.
Great. That's all great color. Thank you very much thanks passive.
The next question will come from Jamie Jamie Friedman with Susquehanna. Please go ahead.
Okay, Let me Echo the congratulations this is a great way to go out good numbers here.
Matt My first question is for you in your prepared remarks Mac you had.
Mitch and I thought the.
It was either the number of.
Cards or transactions or accounts on file you had some operating metric relative to Santander, Chile, you were going kind of quick there, though could you share part again.
Sure so and.
Typically we don't give this level of detail out for customers, but they've publicly given that out in their market. So this is publically available information they have their target for the year was 20000 merchants within a month or two of rolling out the product. They already have 10000 merchants. So they are incredibly happy with the pace.
Others of their sales efforts. So that was the statistic. We gave that I'll also gave a statistic of 1800 merchants. We now have up on place to pay which is R. E Commerce Gateway that was originally in Colombia.
<unk>.
<unk> and now we've rolled out in Panama.
In Costa Rica, and we're looking to localize it in Puerto Rico as well.
Yeah.
Great.
That sounds really positive.
Working you had mentioned the shareholder agreement with <unk> that youre going to file I guess soon or you already did.
What I don't see I don't remember that in the past it might just be meinke or is that something that.
Is is actually incremental.
I'll, let Jamie So let me, let me give you a little bit of context. So when we paid our shareholder agreement. We are obligated to file this registration statement as a consequence of being a well known seasoned issuer. If you look back a couple of weeks, we filed a 10-K, where we actually check the box is a well known seasoned issuer.
This filing is in accordance to the shareholder agreement requirement because of being a well known seasoned issuer, but to be clear, we're not aware of any intent by the bank to sell shares.
At this point.
Is that something that you do every year or is that.
Different.
And also I mean, the shareholder agreement has several registration rights that are available to the bank in this case.
Is an automatic type of requirement that that comes in when you are a well known seasoned issuer and given that we are a well known seasoned issuer. We are obviously going to comply with the shareholder agreement and filed the registration statement.
Okay.
Sure.
It's a three year.
Filing by the way.
Okay. So like if I look back three years ago would've seen something similar.
Non auto now Jamie.
The first time, we're filing it.
The 10-K, a the first time that we have checked.
Checked the box is a well known seasoned issuer because again, because we are a well known as an issuer vishal <unk> agreement as a requirement of an automatic registration statement because of that as.
So this is the first time that we are kind of doing these automatic registration.
Okay.
Alright, I'll jump back into queue really good numbers congratulations thanks.
Thanks Jane.
The next question will come from John Davis with Raymond James. Please go ahead.
Thanks, Good afternoon, guys and cash.
My congratulations.
No more earnings seasons must be nice.
And so.
Maybe I'll just start.
Piggyback off of one of the earlier questions about M&A, but more from a leverage perspective, I think the balance sheets in the best shape.
Public company and as you continue to grow that leverage will still go down. So how do you think about normalized leverage obviously want to keep some dry powder for M&A, but there was a reason to keep the balance sheet levered on a few times just kind of thoughts on where you are in this business all of our lines of business.
Yes, so going into the pandemic I think like everyone. We are very very conservative about making sure we understood how the change in the business environment was going to impact our business. As you saw we bought stock in the quarter, which it had been and losses, we had on that.
And so we are.
Very focused on capital allocation, we know that we have sort of the powder to do additional things, whether it's buy back stock whether through M&A and so we see that as a.
Great position to be in but like I said earlier, we are looking at M&A, we do have the repurchase program.
So we will continue to figure out what's the best use of capital.
Okay, and then just remind us how much is left on that now on the buyback.
About $86 million Asics.
Yes, we are.
In late December.
John We approved 100 million through the end of 'twenty three we purchased about $14 million in the first quarter. So we have about 86 total.
Okay, Great and then Matt I didn't know you guys have been giving some periodic ath mobile updates just curious.
Where that stands today, whether its users transactions I think you had some comments on the debt.
There remains strong, but just curious if there any stats out there that you could give us from a user base for transactions have you seen that tail off at all.
We are starting to reopen or does that remain strong.
Yes, we don't have any statistics for the call today, we did say that ath mobile and Ath mobile business had 160% revenue growth right, so pretty strong growth for the quarter.
And that is all.
Mostly new business right. So those are new transactions, but then also on top of that as we've talked about ath mobile is capturing new transaction types person to person small businesses that didn't accept cards like like a food trucks, but it is also helping us strengthen our relationship with our existing markets. Because you can now use it and.
The biggest.
Supermarkets, the fast food chains, where typically we would have had those on a piece of plastic now we're getting those on the QR codes and so we now have 4000 merchants average is about 13% of our merchant base is now accepting the ath mobile QR codes. So significant growth on both fronts. Those that are actually driving incremental revenue and those that are actually driving.
Sort of.
Increased brand awareness and increased store.
And as with our margins.
Okay, Great and then I just want to follow up you mentioned earlier that day.
Finally.
Four years later three accurately are starting to see some of the hurricane relief money.
Hit the island, just curious I think it's $8 2 billion of Hollywood Hollywood, How should we think about that or what's your best guess of how that flows through I know, it's probably a little bit volume.
And at least at this point and then remind us what else is out there and then maybe just a bigger picture.
How do you guys see the new administration.
From a Puerto Rico standpoint.
Some things that are that you see positively for the island.
With a body in White House, just just curious there any bigger picture thoughts on the on the day.
Write offs.
Hey, John So this is joaquin I mean looking at $8 2 billion.
This is positive.
But what's happening is that out of the kind of strength that were attached to a lot of these funds on our getting streamlined.
The obstacles to approval are also getting removed so the path to actually getting these through to impact the economy is clear, but there is still a processing place right. I mean, this $8 2 billion on Theres been a low.
Kind of articles around it.
It still needs to flow through a process of bidding and awarding contracts. So look I think and we said in the past.
Fortunately this is a story that has come all the way from from after the Hurricane we're encouraged by the fact that that's going on and we feel that we're going to see these and I'll start with the economy, but there is still somewhat of a lag between now and when we actually see that hip aim.
In terms of what else is there.
I mean this is the eight point because we're going to hoard their other agencies that are in kind of the same process of distributing funds aim.
Look the local government has been very proactive in how they're working with the federal government I think the federal government has been saying the right things and with the actions on this $8 2 billion or doing some of the right things that and we want to see.
Knowing that we need to see some execution also from Nevada Rico government to actually get their hands on these funding and move quickly to actually impact we have on them.
Okay. Thanks, and then Mac any bigger picture on what the new White house being reported retail more broadly if anything.
I mean, Doug.
That will probably not a lot better than you guys, but by reading, what you're reading the press and the plans I think that this administration has I mean, they seem to be pro social programs, which by the way we have a lot of in Puerto Rico. So continuing to support those we're looking at new programs could be positive I think to <unk> point, the ability to access the hurricane pounds. It funded.
Things like that this administration.
It may help us do that more quickly, but I mean, that's sort of speculation, but I do think that this.
Administration.
From a big picture could benefit our business.
Okay, Alright, thanks, guys.
The next question will come from James offsetting with Morgan Stanley. Please go ahead.
Hey, Thank you very margin.
Like everybody else just extend my thanks, and best wishes because she moves on.
All your important time over the years I wanted to ask a couple of follow up questions.
First.
You highlighted that.
Tourism is coming back, but there's still some more to go there, but also like normal day to day life is also returning.
Any any characterization you could give us like how much.
Tourism has recovered or are we back to kind of 70% to 80% of the what you would suspect as tourist related spend or just any metrics around that versus David I'm, just trying to gauge where you guys are seeing benefit right now.
Sure James look.
We can we can actually point you to some websites after this.
Kind of clear up some of the numbers book.
The inbound flights have definitely come back.
We compare against the prior year, we're still definitely below what our normal kind of.
Month or period, it looks like from Puerto Rico in terms of inbound travel pre pandemic book flights and tourism is definitely on the right when we look at wholesale and occupancy.
Some of the numbers have a lag, but the expectation I think that those are between 60% to 70% of where they were pre pandemic.
<unk>, which compared to where we were during lockdown, which went downhill.
Almost 90% of what usually is right.
It's been an improvement so look they're still in Puerto Rico. Unfortunately from the rate of engagement on the government continues to look for different ways in which to mitigate these rifles, including putting some restrictions in inbound travel now very recently that could have an effect on on these trends.
That we've been seeing about few weeks.
So again, something that we need to monitor and as Mark said before we don't have.
Real control over <unk> or how the cases continue to move but certainly encouraging to see those numbers start to improve and James I think some of the core sectors like supermarket fast food those were pretty resilient during the entire pandemic right people had to simple fit on their tables, but people going back to the office consuming fuel.
So our spending in certain categories as people reactivate get back to work go back to restaurants, so that supply chain improves that's where we're slowly I mean, it is not back to 100% like I said, even the schools are not all the schools are back.
And tourism.
As an aside is in a huge piece of our business or even the Puerto Rican economy, but that was sort of my example of things are coming back, but there is still a bit of a way to go but.
Got it got it got it really that's really helpful guys and then <unk>.
Mac just following up on your M&A commentary, you said that you know there.
A few things that youre looking at but also acknowledged that.
Debt.
Kind of prices or valuations and expectations, there maybe have risen I guess kind of debt.
The last thing to finish out the equation at least from my mind is how is your willingness to pay up or pay for acquisitions changed at all.
Has that risen along with what people are asking for or do you still think there are deals that should and could be had just trying to get a sense of how youre thinking about that final piece, which is as your thought process.
Yes, so look I mean, we bought several I mean, we bought several things as I've been here and so <unk> been at very low multiples on the higher multiples given for that state at a time, so we still look at it.
Opportunities frequently.
And so we definitely wouldn't overpay for any asset.
We still are constantly looking and most of the stuff we bought a small we've been able to tuck it in integrated into our business and to grow organically well and some of these countries James the things that may be for sale or the monopolies or the duopolies and some of those may have fundamental problems because they may lose customers over time, so it's a.
We continue to look at M&A.
We have the balance sheet to buy something if we find it attractive and we will continue to try and make the right decisions.
Great well, thanks to all of you once again.
Thanks.
Thank you.
This concludes it.
A question and answer session I would like to turn the conference back over to Mac Schuessler for any closing remarks. Please go ahead Sir.
Thank you again, thank you for joining the call and I just want to again, thank Kaye for all of her hard work and all that she has done for AMETEK over the years and we look forward to seeing you.
At least virtually for awhile it at different conferences have a good night.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yes.
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Okay.