Q2 2022 Evertec Inc Earnings Call
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Good afternoon, everyone, and welcome to the Ebertech second quarter 2022 earnings conference call. Today's conference call is being recorded. At this time, I will now turn the call over to Mr. Kevin Hunt of Investor Relations. Please go ahead. Kevin Hunt, Good afternoon, everyone, and welcome to the Ebertech second quarter 2022 earnings call.
Thank you and good afternoon. With me today are Max Schuessler, our President and Chief Executive Officer, and Joaquin Castrillo, our Chief Financial Officer.
Before we begin, I would 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 a 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 event, adjusted income and adjusted earnings for common share.
Reconciliation to Gatmeasures in certain additional information are also included in today's earnings release and related supplemental slides which are available in the Investor Relations section of our company website at www.EverTechSync.com.
I will now hand over the call to Mac.
Thanks Kevin and good afternoon everyone.
We are pleased with our second quarter results in both Puerto Rico and LATAM, driven by strong revenue growth.
Puerto Rico benefited from increased transaction volumes and one time revenue, while Latin can use 10 used to benefit for organic transactional growth.
We were also able to close both the popular transaction and the BBR acquisition on July 1st, in line with our previously announced expected timing. And I want to thank the whole team who worked tirelessly to get these transactions to completion.
On today's call, I will start with some highlights from the quarter, and then we'll turn it over to Joaquin, who will provide further details on our second quarter results. As far as I've said, I'll start with the first, and then we'll turn it over to Joaquin, who will provide further details on our second quarter results.
A review of the impact from the popular transaction.
and an update to our outlook.
Beginning on slide four, total revenue was $161 million for the second quarter, an increase of approximately 8% compared to the second quarter of 2021.
adjusted the EBITDA with 73 million dollars.
A decrease of approximately 9%.
and adjusted earnings per share with 65 cents, the decrease of approximately 17% from the prior quarter.
During the quarter, we returned approximately $18 million to our shareholders through dividends and sharing purchases.
An increase of $14 million when compared with a prior year.
Additionally, our liquidity remains strong at $404 million as of June 30.
Moving to our Puerto Rico update on Slide 5.
Merchant acquiring revenue increased slightly when compared with a year ago and in line with our expectations.
Last year's second quarter was heavily impacted by COVID stimulus that did not repeat in the current period, resulting in lower cell volume during the quarter.
However, we were able to offset the headwoo with select pricing actions.
Payments Puerto Rico benefited from increased POS transaction volumes.
Up 6% year over year.
as well as continued strong growth from ATH Mobile and ATH Business.
and an increased initialing services for Medicare, healthcare providers in Puerto Rico. For Medicare, healthcare providers in Puerto Rico.
The segment also benefited from a small-tuck-in acquisition completed at the beginning of the quarter that allows us to process payments for government services in Puerto Rico.
We expect these will continue to grow as the government continues to modernize its services and shifts towards digital payments.
This further demonstrates, I commend it, to use our balance sheet for growth through acquisitions and our willingness to execute when opportunities arise. And our willingness to execute when opportunities arise.
Our business solutions segment revenue increased approximately 7% year-over-year.
Revenue in the quarter benefited from the Pranning contract discussed on prior calls, as well as contribution from one time software sales in the Dominican Republic.
We also benefited from higher volumes in certain services to PopulAR and the 5% CPI clause in our MSA with PopulAR, which will be credited in the third quarter now that the transaction is closed.
Finally, a few comments on the macro environment in Puerto Rico.
The unemployment rate has dropped to 6.6% in 2022.
Now from 8.1% to 2021. And this is the lowest unemployment rate in Puerto Rico in over 60 years.
The overall economic activity index continues to trend higher, a 3.5% year-over-year in the month of April , to a 6-year high.
And finally, travel and tourism continues to recover with average hotel occupancy rate at 61%. Not from 54% in 2021.
So even though we are not shielded from broader macroeconomic challenges, we expect that we will benefit from the continued strengthening of the Puerto Rico economic environment.
Turning now to Latin America on slide to sales.
Latte Hammer Avenue was up nearly 19% compared to the prior year.
We continue to experience strong organic growth from our existing customer base with a healthy pipeline of new opportunities.
We continue to grow in countries where we have had a presence for many years like Costa Rica, while accelerating growth in countries where we have entered into more aggressively in the past few years, with the British Chilean Mexico.
Mexico is worth calling out with very high double digit growth in the quarter, albeit of a smaller base compared to some of our other Latin countries.
Next, let's turn to slide seven to cover a few additional items.
We are very pleased to have closed the popular transaction on July 1st.
We worked hard to strengthen our relationship with popularity years.
We are excited that Popular will remain a strategic customer for Avertech for many years into the future and we look forward to growing our business with the bank.
Recall that we extended our merchant acquiring contract with a bank through 2035.
We've extended our ATH network agreement through 2030.
And our Master Service Agreement was modified and extended through 2028.
We also sold certain assets back to popular that are solely used by them and aligned to their customer experience initiatives and that don't conform to our long-term strategy.
The completion of this transaction resets our relationship with Popular, creates a partnership with them to grow our payments business.
and allow us to focus our resources on other high growth products and segments.
Joaquin will revisit some of the impacts from that transaction on our Puerto Rico segments in a few minutes.
We look forward to the increased flexibility we will have once we are no longer deemed to be a subsidiary of Populara for purposes of the Bank Company Holding Act.
allowing us to grow other aspects of our business, particularly in Latin America.
On that front, we are also pleased that close the VBR acquisition on July 1st, which expands our capabilities in Chile, as well as provides an entry for EverTech into Peru. We look forward to the contribution from VBR in the second half of 2022. In the second half of 2022.
In connection with the closing of these transactions, we have made some organizational changes that will better align with our long-term growth strategy, strengthening different areas of our organization and leveraging our executive team's strengths.
With that, I will now turn it over to Joaquin to provide a more in-depth look at our second quarter results.
Thank you, Max, and good afternoon, everyone. Turning to slide nine, you will see the consolidated second quarter results for every second. The second quarter results for every second.
Total revenue for the second quarter was 160.6 million, up approximately 8%, compared to 149.1 million in the prior year.
Second quarter results in Puerto Rico reflected increased payment transaction volume, as well as the continued growth of ATH Mobile and ATH Business, and the contribution from the talking acquisitions completed this quarter.
We also benefited from the printing contract that was signed in June 2021. One-time software sales might noted and the effects of the 5% CPI escalator in our popular MSA which has now been amended with the close of the transaction on July 1st.
We continue to experience the old-digit growth in Latin America, mainly due to organic growth, and we continue to grow existing relationships as well as expand our presence in certain countries. While we continue to grow existing relationships, we continue to develop new seeking research in certain countries.
Adjusted EVDAC for the quarter was 73.4 million, a decrease of approximately 9% from 80.3 million in the prior year.
adjusted TVDOT margin was 45.7%
and approximately 810 basis point degrees compared to a priori.
The declining margin is ruined by the 4.1 million in permit loss recorded in the quarter for a multi-year software development. Current currency exchange losses of approximately 200,000 in the quarter, compared with gains of approximately 1.4 million in the prior year quarter.
Increased provisions for expected losses as well as changes in the mix of business and higher operating expenses in part due to inflationary impacts.
Adjust the net income for the quarter was 47 million, a decrease of approximately 18% as compared to the prior year, primarily reflecting the lower adjusted EVDA as well as a higher tax rate and higher operating depreciation and amortization.
Our adjusted effective tax rate in the quarter was higher than expected at approximately 18% as we continue to grow in Lahtam and experience higher rates in these jurisdictions and is shaped in the mix of business in Puerto Rico.
As a result, we now expect the tax rate for the full year to range from 14 to 15% compared to our prior expectation of 13 to 14%.
Adjust the EBS by 65 cents for the quarter, a decrease of approximately 17% compared to the prior year.
Moving on to slide 10, I'll now cover our second result starting with merchant acquiring.
In the second quarter, Marchal Aquarium Red Revenue increased likely year-to-percently 38.5 million, as the prior year presents a top comparable period given the benefits from COVID-related stimulus of positively impacted last year results. The positive impact has left your results.
Sales volume was down year-over-year by approximately 1.5%, and our average ticket declined 2.8%, which are directly aligned with our expectations.
Our overall spread was also down year over year, driven by changes in our portfolio mix. As we experienced lower sales volume in higher spread verticals, such as retailers, and higher volumes in lower margin verticals, such as gas stations and utilities.
We were able to mitigate these headwinds through the implementation of certain pricing initiatives that began earlier in the year.
I just said EDIDA for the segment. It was 17.5 meters.
Download approximately 15%.
And just that EB Damargin was 45.5%.
down approximately 810 basis points as compared to last year, reflecting higher operating expenses, mainly processing costs driven by higher volume of transactions.
On slide 11, you will see the results for payment services for the RICO and the Caribbean segment.
Revenue for the segments in the second quarter was 46.1 mm.
Both approximately 19%, driven primarily by increased transaction volumes for POS processing, which grew 6% year over year, and Atteache Mobile, which grew 16%, mainly driven by ATH business, as sales volumes continue to grow.
We also benefited from increased transaction volumes and project revenues from our issuing services for healthcare companies in Puerto Rico, and continued to benefit from increases in transaction processing and monitoring services provided to the payment services for the Latino Marigast segment.
As Mike highlighted, we completed a small acquisition during the quarter that contributed to the year-over-year growth of the segment as well, and gives us further inroads to address cash payments in the island, which as we have stated in the past, are estimated to be close to 50% of all payments.
Adjusted ev-duff for the segment was 23.8 million, of likely as compared to last year.
adjusted TVDAR margin was 51.8%, down approximately 950 basis points as compared to last year, primarily due to the software impairment charge I referred to earlier as well as higher operating expenses.
On slide 12, you will see the results for our payment services lab-am segment.
Revenue for the segment in the second quarter was 30.8 million, of approximately 19% as compared to last year.
Organic growth with existing customers was the primary driver of the score. Of their revenue growth, over 40% was attributable to our existing customer base in Costa Rica. While Mexican Chile contributed over 30%, as the customer wins that we have announced in these countries are begun to contribute in a more significant matter.
Mexico in particular has delivered strong growth, increasing approximately 50% from the prior year.
We are very pleased with the growth we are seeing in these countries as it provides further evidence that our growth strategies are paying off.
I just said evd for the segment was 9.6 million. And I just said evd on margin was 31.1%. Down approximately 11% of points have compared to last year.
The decreasing margin is written by lower FX remissionment benefit of approximately 1.6 million, as the prior year reflected a benefit of approximately 1.4 million versus a slight loss of approximately 200,000 in the current period. There were also higher personal costs and high provisions for expected losses.
On slide 13, you will find the results for the business solutions segment.
Business solutions revenue for the second quarter was of approximately 7% 64.7 million as we benefited from the 5% CPIS Calader in our MSA with popular increased volumes in core banking services. The printing contract that began in June last year and we also benefited from one-band software sales in the Dominican Republic, amounting to approximately one million. As a reminder, our MSA with popular was amended with the close of the popular transaction on July 1st.
which results in a credit that will effectively reverse the accumulated impact of the CPIS calendar we have recognized since October of 2021. This credit will occur now in the third quarter.
For the quarter, adjusted EBDA was 29.8 million, and adjusted EBDA margin was 46.1%. Downed approximately 430 basis points at compared to last year.
The adjusted TBT margin decrease was a result of higher printing-related costs driven by inflationary effects. Increase in provisions for expected losses.
and an increasing cost of sales directly related to the mix of business.
Moving on to slide 14, you will see a summary of corporate and other.
Our second quarter adjusted EVDA was approximately negative 7.4 million and our adjusted EVDA as a percentage of total revenue was 4.6 percent.
Higher than prior year, but in line with our expectations for 2022.
According to our cash flow overview on slide 15, our reading cash buttons was approximately 286 million, including a restricted cash of approximately 20 million.
Net cash provided by operating activities year to date was approximately $130 million, a nearly $18 million increase compared to prior year.
Capital expenditures for the six-month period were approximately $29 million and we continue to anticipate approximately $60 million of coverage for the full 2022 year.
We recognize the customer relationship cost of approximately 10.6 million in connection with the Puerto Rico administration previously mentioned and purchase certificates of deposit for approximately 7.3 million which were part of a contractual requirement to close the VBR trial section. We recognize the VBR trial section.
These certificates of deposit were transferred to the sellers upon close on July 1st.
We paid approximately $10 million in long-term debt payments.
6 million withholding taxes on share-based compensation and 1 million of other debt paydowns which resulted in a total net debt decrease of approximately 17 million. 6 million withholding taxes on share-based compensation
We paid cash dividends of $7 million and repurchased approximately 879,000 shares of common stock for a total of approximately $35 million.
We have approximately $115 million available for future use under the company's Shared Purchase Program.
I would also highlight that on July 1st, we received approximately 4.6 million shares of our cost stock from popular in connection with the Mobulers transaction cost. And this will reduce our share count beginning in the third quarter.
Our ending cash balance, as of June 30, was 311 million. And this included approximately 23 million over a street that cash.
Moving to slide 16.
summary of our debt of June 30, 2022.
Our quarter ending net debt position was approximately $173 million comprised of approximately $285 million of unrestricted cash and approximately $458 million of total short-term borrowings and long-term debt.
Our weighted average interest rate was approximately 5.3%.
Our net debt to 12 months adjusted EBDA was approximately 1.4 times.
As of June 30, total liquidity was approximately 404 million.
This balance excludes restricted cash and includes the available barring capacity under a revolver.
Turning to slide 17, I will revisit some of the highlights and financial effects from the popular transaction that closed on July 1, 2022, making all contract extensions effective on that day.
As a reminder, we have extended our ISO agreement with Popular through 2035, an incorporated a revenue share provision that will better align our interests as we focus on innovation and work together to expand our share of payments in Puerto Rico and the Caribbean. It's an event with the State of ?
This revenue share will begin in the month of July and will represent an incremental expense to our merchant acquiring segment that will reset our margin for the segment in the low to mid 40s range going forward.
We have also extended our ATH agreement with Popular through 2030, strengthening the number one form of payment in Puerto Rico with its largest issuer, and amended and extended our MSA with Popular through 2028.
As part of the extension, we have conceded the 5% CPI for the 2021-2022 period that commenced on October 1, 2021, and will be retroactively crediting the cumulative impact of CPI now in 2003, which amounts to approximately 7 million, mostly impacting the visa solution segment.
Additionally, we have reduced the CPI cap from 5% to 1.5% to 2025 on the METAGE services and introduced minimums to 2028, aligning both of our interests in working together in the future.
We also sold certain assets back to Popular that generate approximately 30 million in revenues on an analyzed basis and will represent a negative year-over-year impact to revenue and margins starting in Q3 that will reset our business solutions margin to the low 40s on a normalized basis going forward. All of these impacts we expect will result in an overall consolidated normalized margin in the low to mid 40s range on a go-forward basis.
Moving to slide 18, I will now provide you with an update on our 2022 outlook.
While we are pleased with the strong revenue in the second quarter, a portion of the upside came from the CPI impact, which will be reversed, strength from some popular businesses that have now been sold, and some one-time software sales that are not expected to repeat in the second half.
That said, we are encouraged by the solid volume trends in Puerto Rico and progress within Latin America and this allows for increasing our revenue target.
For 2022, we now expect revenue to be in a range of $607 million to $615 million, representing growth of 3 to 4%. This is up from our prior target range of $597 million to $605 million.
Despite some of the charges that impact the second quarter results, we still expect EBDA margin for the full year to be between 45 to 46%.
As noted earlier, we are now expecting a slightly higher top trade of 14-15% and giving the rating rate a moment we are also expecting higher interest expense.
Please be mindful that these two trends might accelerate into 2023.
We are maintaining our adjusted earnings pressure outlook of $2.52 to $2.60 for the full year.
This represents a year-over-year decline of 5% to 8% as compared to the adjusted earnings per share in 2021 of $2.74. In consideration the impact on the Bobura Transaction mention about.
On a GAAP basis, earnings per share is anticipated to be between $1.81 to $1.90.
Regarding the back half of the year, we are assuming contributions from both the BBR acquisition in our LATAM segment and the Puerto Rico acquisition we discussed earlier in our payment Puerto Rico segment, as well as the impacts from the popular transactions highlighted above.
For our full year segment outlook, we continue to expect our merchant acquiring segment to grow low to mid-single digits as we continue to see some headwinds from tough comparables in the prior year.
Mr. High Single Digital in Payments Puerto Rico and the Caribbean high teams to load 20s in Payments Latin America on a net high single digital reset in business solutions.
Finally, this guidance also includes the benefit from the share repurchases in the first half and the approximately $4.6 million reduction in share count that occurred on July 1st related to the popular transaction.
In summary, we are pleased with the results in the first half of 2022 and are delighted to have closed both the popular transactions and the VR acquisition.
We look forward to hopefully seeing you in person at upcoming conferences later in the coming months.
Operator, please go ahead and open the line for questions.
We will now begin the question and answer session. To ask questions, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
To withdraw your question, please press star and 2. At this time, we'll pause momentarily to assemble our roster.
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All right, first question comes from Bob Napoli of William Blair. Please go home.
Thank you. A lot going on there. So the BPOP transaction being so we'll have a full effect of that in the second quarter and your low to mid 40s EVA down margin is what you're talking about it's a corporate EVA down margin over the long term we would expect that to be in the second quarter there were a number of I think one-offs in this quarter maybe that had some effect.
Hey, well, this is what I think you mean the second half? And the second quarter, those are not many of the... In the third quarter. Yeah, in the third quarter. So the third quarter.
So let me start from the back. The 40% margin, the low 40 to mid 40s margin is on a go forward basis taking into consideration the different effects of the transaction. As we mentioned though, the third quarter will have this credit related to CPI that will be a one time impact because it is a retroactive amount.
Okay, what is the CPR credit? What is the amount?
One more, 30 thumb illusion.
7 million? Yes. And that's built into your guidance for the full year? It is built into our guidance for the full year, that's correct. Because that's a CPI uplift from the very end of last year and the first half of this year, they get a credit back for that. So you won't see that until Q3 given that we closed at the end of, you know, we closed during the quarter of Q3. It's very beginning. Thank you, Mark.
Thanks, Joaquin. With your balance sheet and the strength, at Banco Popular, I said on their call, they're looking to sell down their position. I think their agreement is to take it from 10% to 5% ownership. With your balance sheet in such great shape, why wouldn't you just buy the shares from anybody...
from Banco Popular.
So I think with the consistent ball of our capital elevation strategy, it's always to extend out we don't have.
M&A and growth in front of us, we'll certainly consider repurchases. And so it's something that we'll consider based on market conditions.
Yeah, so by this and Mac, I mean, we will definitely consider, you know, depending on the pricing, participating in their sell-down. We do want to make sure that we have the appropriate capability, though, to continue to pursue M&A because part of the thesis of this transaction was to free us up from the Bank Company Holding Act, but we will definitely look at their sell-down as an opportunity to deploy capital as well.
So the left question was in that long, given the reduction of restrictions, Latin America seems to be doing what's maybe just some commentary or interest in what you're seeing in opportunities to add to Latin America and where you're seeing in particular strength. And we called out Mexico. I was chilly doing.
Yeah, so the business is performing well both Mexico and Chile have performed well. We've exceeded our expectations. You know, for the quarter, we grew in New percent Latin America, which I'm gonna first get in the job. You really should be hard. I gotta get to double digit. And we are, and we're pleased with that. We are still focused on M&A. We're seeing throughout the region. You know, we announced on the field not only the closing of the polar transaction, but also the closing of BBR, which is the deal in Chile. And a small touch Puerto Rico as well that compliments our payments here.
Thank you, appreciate it. Thank you, Bob.
Our next question comes back to you, Goodwill. JVW, please go.
Hi, thanks for my questions. The first one for you, Mack, big M&E announcement related to one of your editors in India. Does that change competitive dynamics for you in the region, through any high level dots in that? In the region, through any high level dots in that. In the region, through any high level dots in that.
A great question. I mean, look at companies. I know those organizations that have the leaders in both. What I'd say is look, regardless range in the environment, whether it's a hurricane or a pandemic or change on the competitive landscape, we feel like that we've also focused very intently on our customers and been able to perform well regardless of the change around us. So we still, we have a very competitive value proposition for these local wants to be a Latin mayor. And we think that this doesn't change that.
That's helpful. And then quick modeling one for working first the higher interest expense. Any color on how we can collaborate that higher interest for next year. Thank you.
I mean what I would tell it to, look at our...
At our capital structure, we do have a swap that helps us mitigate the abortion of the interest list, about slightly about 50% of our total outstanding debt. So that kind of gave you a little bit more color as to how much our capital structure is subject to those increases going forward. On our capital structure is subject to those increases going forward.
Got it. And then just on the pricing initiatives we talked about, I think the first we heard about that last quarter, if I'm not mistaken, so do we expect them to lap in the fourth quarter or do we see them benefit from those next year as well?
As we said before, I think this is something that we do continuously. I think in some cases they might be a little bit more impactful than others, but we've been very strategic and very detail-oriented in terms of how we evaluate the portfolio and where and when we want to execute those pricing initiatives. We thought that given some of the things that we saw because of the tough costs last year, that some of these pricing initiatives were prudent, and that's how we were going to evaluate those forward.
Thank you.
Thank you very much.
Thanks, Mr. Chairman. Our next question is from Don Davis at Raymond James. Please go ahead. Hey, good afternoon, guys. Well, Keith, I wanted to touch on the margins for a second. Obviously, a lot of moving pieces with the BPOC transaction, but you've seen all your larger peers in the U.S. talk down margins on wage inflation and other pressures. So just curious, you said low to mid 40s and post transaction. Has those expectations come down at all a little bit? You know, obviously, even within the range.
Are you seeing the similar inflation pressures on wages and other security concerns there?
I mean, I would say that from which perspective, yes. And I think there's specific pockets where we're doing that a little bit more than others. I can tell you that in America specifically, and when we're talking about technology resources, we are seeing wage inflation and we have reacted to some of that competence through gene growth. What I would say is, and we've said this in the past, and we are very much margin focused. We've been able to maintain margins, even though we're going in Latin America, among people who have issues with thousands of local influencing the families in bulk roughly here, right? Friendly attitude, engaging and reading, taking interest to some extent so much of America's value is going. T One of the most advisrative, the mainstream demand I can actually allow is because Georgia's communicate with us chainsiksemakers, that we are withkersemakers, for China. It would be, We also need players momento where verr<|hu|><|translate|> advantage for that. And another question, Frances, Bogdan, Thank you.
brought down because the businesses that we sold, and then the share that we're giving them on MAB. As you look at items for the year, I mean, have seen pressure on discrete items as it relates to inflation, like paper costs for our printing business, but that's not huge. And also have seen in the market, particularly outside of Puerto Rico, we've been very focused on ensuring that we can retain our key talent and develop these products. We have our own online property and we think are in the region.
and to work with new programmers because the pipeline of development is critical to our group. So we've been fortunate that those are low cost markets to begin with. So the increase that we've made, we've been able to offset another way. And it really had upset our expectations for the year. That's why, you know, in a significant way and that's what the guy that says where it is.
Okay, and then, you know, just a follow up on one of Bob's questions earlier. You know, obviously the Bob Transaction Clothes, you know, about a month ago. Has there been any significant impact or increase in your A pipeline? Parties that are willing to talk to you now because they're a little less worried about, you know, kind of bank holding company aspect or just curious, like, obviously you guys did this for a reason. You know, a pipeline got bigger. Any comments there? Obviously the value of cheating great too.
Yeah, I mean, I do think this is going to open up the universe of the type of markets that we can go after. It is an unusual time right now in both credit and equity markets, right, as far as what sellers are willing to take. So I think the year's got to worry some more what are fair valuations. But we are very focused on M&A, and we do think that this is creating opportunities for us.
Okay, all right, appreciate the color. Thank you.
Next question comes from James Fawcett, Morgan Stanley , please go ahead.
Hey, guys, this is actually Jeff Goldstein on for James. Just thinking about your guidance for the second half here, how should we think about the upside case specifically on the top line? Is that tourism coming back faster in Puerto Rico? Is it more kind of federal funding making its way through, more partnerships in the pipeline maybe closed? Just how should we think about what kind of upsides to your forecast at this point if you had to rank order them? So I would certainly say that it would be more than anything meant in Puerto Rico. If we look at...
It's a few more pieces really, and this specific order has three.
Slatish, right merchant acquiring segment, but we still have very good transaction on the store at H&N, an H&N mobile that exceeded we had originally infected for Q2. So as we left, we took you three to the extent that we could see the strong growth from our transaction perspective. And we still see some shifts in our merchant segment. And looked.
The reason I say that is we continue to see lower average tickets. We continue out of more point than David Volume or putting pressure on our spread. So if we're actually continuing to see good transaction volume in our work and then some of those trends in merchandising start to move R.A. That could push us to the higher end of that guidance range.
But those two need to combine at this point if you look at our merchandise right now what we've set for that for a year are expecting a low-itimate single digit growth in the merchandise acquiring segment which puts a a little digit growth on the second half right
Got it. Follow-up question on e-commerce. I know e-commerce is a fairly low percentage of your business, but how do you think a long-term opportunity there can can that approve early over the next four to five years or is that just much much less of a focus for you than let's say supplying some of your core products in in new geography?
We say, it's important to us. We acquired a company called Play2Play back in 2020. We've now made a way, our market product on the markets where we have our presence. We just launched it in Puerto Rico and we've seen almost immediate reactions from our clients. They didn't have access to such a good product from an e-commerce perspective. So I would say that's starting to define our clients and our product importance. We look in to selling pledge to humanity. God bless!,
This is a gateway is helping us do that and then also bringing in incremental growth that we think will continue into the future. Yeah, let me just agree. I mean, I agree. We think it's a big part of the future. That's one of the reasons we bought place to pay our money. And to why comments, we've localized them now in several markets that we do business. And most recently Puerto Rico. And the anchor we've had in the markets where it's been around for months, we're actually seeing an uplift and the numbers from us that are coming to our decommers.
last. So it will be a focus for us going forward.
Great, all very helpful. Thank you. Thank you. Thank you.
Reminder if you have a question, please press star and one.
Next question will come from Jamie Freeman, Susannah, please help.
You You
Hi Mack, hi Joaquin. Hey!
In your prepared remarks, you mentioned the Puerto Rican unemployment rate is down 6%. How do we interpret that as the implications for the Bisson, if so, which segments?
Yeah, so I mean, we think when we think about Puerto Rico this year and into the future, you know, use specific fonds coming in from Maria and some increment dollars coming in from the panda. So helping to stimulate the economy, putting people work, making sure that they have discretionary funds, just using our ATH network, spending at our rents, and actually, you know, continuing to have activity at our largest customer popular, is very good to our business.
Having an economy that has nice terms with the federal funding and a good unemployment rate by historical standards, is good for our business. A lot of it is driven on consumer interest spending.
Yep, make sense. And then I just had one kind of housekeeping. And then I just had one kind of housekeeping.
Payments and services, Puerto Rico and Korean. It was a point I think you were making around the software, impairment charge. What was that about?
Now we took out the grid with this quarter that impacted the mind for that specific segment. Let's say a multi year.
So the project that we have here, we've done significant optimization to it and as a result of the evaluation of the asset we had to infer.
Is anyone worried about it?
business? No, we were not expected. This is a one-time item. We're not expecting this to have any any free impact.
Okay. I'll drop back into queue.
Thank you.
Please find a reminder of okay with question and like pre-s? vs. then
At this time, we have no further question. This includes our question and answer session.
Alex, turn the conference. Give her Mr. Max Schoofer and close remarks. Good.
Thank you operator. I want to thank each of you for joining us on the call tonight and we look forward to seeing you in the future at conferences. Thank you.
Conference is clear. Thank you for tonight's presentation. Thank you mountain m?s.
Let's find out!
And.