Q3 2022 Evertec Inc Earnings Call
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Good day and welcome.
To protect third quarter 2022 earnings call.
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Oh, I would like to turn the call over to Ms.
But with Investor Relations. Please go ahead Sir.
Thank you and good afternoon with me today are <unk>, President and Chief Executive Officer, Mark Industrial our Chief Financial Officer.
As we begin I'd like to remind everyone that this call may contain forward looking statements 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 the Investor Relations section of our company website at Www Dot <unk>.
Dot com.
I'll now open over the call to Max.
Thanks, Kevin and good afternoon, everyone, our business performed well in the quarter. Despite the headwinds we faced some of which we knew about coming into the quarter and others that were unanticipated.
Our payments, Puerto Rico, and Latam revenues continue to grow very well driven by organic growth and also benefiting in part from the acquisitions that we completed during the year.
Payments, Puerto Rico, the year over year growth was driven by a combination of strong Pos transactions Ath mobile business growth and the contribution from the small acquisition completed in the second quarter.
In Latin America, we continue to see very strong results driven by organic growth across the region as well as the initial contribution from the <unk> acquisition that closed on July one.
In terms of expected headwinds the impact from the popular transaction that closed on July one was in line with our expectations as it affected year over year revenue growth and margins primarily in the business solutions.
Segments, we also experienced a modest revenue and margin impacts from hurricane Fiona over the final two weeks of the quarter, primarily in our merchant acquiring segment.
Margin and EPS were also negatively impacted by $7 $8 million noncash.
Noncash foreign currency Remeasurement loss during the quarter and while Keene will provide more details on that in a few minutes.
On today's call I'll start with the additional highlights from the quarter and will then turn it over to Joaquin who will provide further details on our third quarter results as well as an update to our 2022 outlook and high level commentary on 2023.
Beginning on slide four total revenue was $146 million for the third quarter flat when compared to the third quarter of 2021.
Adjusted EBIT was $52 million, a decrease of approximately 25% and adjusted earnings per share was <unk> 40, a decrease of approximately 35% from the prior year.
Excluding the impact from FX Remeasurement, adjusted EBIT, and adjusted EPS would have been $60 million and 53, a decrease of 14% to 15% respectively.
During the quarter, we returned approximately $41 million to our shareholders through dividends and share repurchases and our liquidity remains strong at $344 million as of September 30th.
Moving to our Puerto Rico update on slide five.
Hurricane Kiana was an unfortunate event this quarter, we're happy to say that all our employees are safe and our own operations were largely unaffected by the hurricane.
That said Fiona was a disruption to the yard and over the final two weeks of the quarter. We did see an impact to the merchant acquiring segment and to a lesser extent our payment processing segment.
Certain parts of the island, especially the western part are hit hard and are still recovering from the heavy flooding and damage.
In line with our community values, we are deeply committed to helping the island recover from tragedy like Hurricane Fiona.
And immediately after the storm, we announced that we would donate up to $250000 to help communities as well as our employees that were impacted by the storm.
We enabled to donate feature on Ath mobile to support Hurricane relief and for a two week period, we match specific donations made through the App.
Turning to business results in Puerto Rico merchant acquiring revenue was down slightly year over year, given the tough comparable period and the impact from piano payments, Puerto Rico was up 15% on a year over year basis, as we continued to benefit from Pos transaction growth and the contribution from Ath mobile business as well as a small acquisition.
We ended last quarter.
Finally, our business solutions segment was down 15% year over year that decline was expected given the onetime credit granted upon closing of the popular transaction.
Additionally, as you may recall, we sold certain assets to Tidewater that had an annual revenue run rate of roughly $30 million.
Now turning to Latin America on slide six.
Latam revenue growth was strong once again up 26% compared to the prior year.
We continue to see growth across the region with robust organic growth with existing customers and the number of countries. We also had a nice contribution from the BBA acquisition.
Im also very pleased to announce that we have expanded our relationship with Mercado Libre into Chile further positioning us as a payments leader in the region as.
As a reminder, we currently provide issuing services for Mercado Libre in Mexico, and this expansion reflects our ability to create long term partnerships with important clients in the industry as well as the strength of our regional products. Additionally.
Additionally, I am pleased to announce that we have signed group of all as a new customer for a place to pay gateway in Colombia.
Above all as one of the largest banking groups in Colombia with over 18 million banking clients. We are excited by the opportunity to partner with such an important player in the region.
Next let's turn to slide seven to cover a few additional items.
Last quarter, we discussed the highlights of the popular transaction and one of the benefits we mentioned with the requirement the popular reduce its ownership I've ever talked to under 5%, thereby freeing us from the bank holding Company Act.
We are pleased to report that this goal has been achieved and that's an obstacle being more nimble and pursuing M&A transactions has been limited.
As I already noted the two acquisitions that we have closed this year are performing well and we remain committed to finding more deals in Latin America.
Finally, I would like to turn to our people specifically our commitment to our scholarship program in Puerto Rico and Latin America. This program is now in its eighth year and we are pleased to report that this year. We awarded 186 scholarships for a total of $190000. We are proud of awarded over $1 million in scholarships over the last eight years and look forward to.
Turning to support higher education in both Puerto Rico, and Latin America with that I will now turn it over to Joaquin to provide a more in depth look at our third quarter results.
Thank you Mac and good afternoon, everyone turning.
Turning to slide nine I think its important to briefly explain how everything is impacted by fluctuations in foreign currency given that as Mac mentioned, we have a $7 8 million noncash remeasurement loss impacting our results this quarter.
What are your FX is foreign currency translation, which involved the process of bringing the financial information of our subsidiaries outside of Puerto Rico from foreign currencies to our reporting currency, which for US is the U S dollar.
Translation is break all most companies with operations are subject to this process, which doesn't result in gains or losses on results. What can have an impact on year over year growth because of currency fluctuations.
Automation is impacting our year over year growth negatively this quarter by about 900000 or approximately 3% of growth for our Latam segment.
The second type of impact it's foreign currency Remeasurement and this is a result of every fix French subsidiaries, having U S dollar balances, which need to be converted to the local currencies. This process does result in noncash gains or losses that impact our results and our gate Remeasurement is driven primarily by our Costa Rica entity, where most of our custom.
Our contracts are cash balances on intercompany transactions are in U S dollars. This quarter. The Echostar got currency had a drastic shift which led to the $7 $8 million noncash remeasurement loss that is impacting our results even though we still have the same cash receivable balance in U S dollars.
With this brief overview in mind I will now turn to slide 10, where you will see that consolidated third quarter results for everything.
Total revenue for the third quarter was $145 8 million relatively flat when compared with $145 9 million in the prior year and generally in line with our expectations. At this quarter includes the impact of significant transactions that closed during that period such of the popular transaction in Puerto Rico and <unk>.
Our acquisition in late March.
More specifically, our third quarter results in Puerto Rico reflect that increased payment transaction volume continued growth of Ath mobile business and revenue contribution from the small acquisition completed last quarter.
This was partially offset by expected declines in the business solutions segment, primarily driven by the popular transaction, which included a $6 9 million onetime credit granted to popular on the impact to revenue from the assets sold.
An additional offset was the impact from hurricane Fiona in the last few weeks of September mainly in our merchant acquiring segment.
The resulting Latin America remained quite strong, reflecting double digit organic growth and the contribution from the <unk> acquisition.
Adjusted EBITDA for the quarter was $52 4 million a decrease of 25% from $69 8 million in the prior year and excludes the $135 $6 million gain from the popular transaction.
Adjusted EBITDA margin was 35, 9%, a 12 percentage point decrease compared to the prior year.
The decline in adjusted EBITDA margin includes the expected impacts from the popular transaction I, just mentioned as well as the impact from the noncash foreign currency Remeasurement loss of approximately $7 8 million.
The popular transaction effects include the impact of the onetime credit granted to them the effect of the EBITA margin from asset sold which were at high margin on the impact from the revenue sharing agreement.
The Remeasurement loss as previously discussed is due to us to tell you. How many of these held in U S dollars in some of our foreign subsidiaries.
This case, mainly driven by Costa Rica.
Normalizing for these one time effects, specifically the onetime credit to all our net foreign currency Remeasurement loss, our adjusted EBITDA would have been approximately $67 million, a 4% decrease versus the prior year quarter on a margin would have been approximately 44% and approximately 400 basis point decrease versus the prior.
Year and in line with our expectations.
Adjusted net income for the quarter was $27 1 million.
A decrease of 40% as compared to the prior year, primarily reflecting the lower adjusted EBITDA on a higher adjusted tax rate.
Our adjusted effective tax rate in the quarter was 24, 8% higher than expected and also negatively impacted by foreign currency Remeasurement loss.
If we were to normalize for the Remeasurement loss, our adjusted effective tax rate would've been approximately 18%.
Adjusted EPS was <unk> 40 for the quarter, a decrease of 35% compared to the prior year.
Normalizing for the foreign currency Remeasurement impact EPS for the quarter would have been approximately 53 for the quarter.
Moving on to Slide 11, I will now cover our segment results starting with merchant acquiring.
In the third quarter merchant acquiring net revenue decreased 2% year over year to approximately $36 9 million.
Our year presented a tough comparable periods given the benefits from Covid related federal stimulus and then a relaxation of spending patterns. This year towards pre pandemic levels in terms of our mix of sales domestic versus international transactions and average ticket.
As Mike noted hurricane Fiona, causing disruption to spending patterns over the final two weeks of the quarter and we estimate this represented a $1 million impact to revenues.
Additionally, our overall spread was down year over year due to a decreasing the average ticket which continues to slowly normalize. We also saw a shift in the mix of volume towards lower margin verticals, such as gas stations supermarkets and utilities from higher margin verticals like retail.
This was expected given the stimulus funding in the prior year the effects of inflation higher gas prices and the effect of hurricane Fiona in the last weeks of September .
Adjusted EBITDA for the segment was $13 9 million down 28%.
Adjusted EBITDA margin was 37, 6% down approximately 14 percentage points as compared to last year.
Most of this decline was expected given the revenue sharing agreement with pulpwood or by commenced with the closing of the transaction as well as higher processing costs aligned with the lower average ticket.
Our margin was also negatively impacted by the effect of Hurricane Fiona in the last couple of weeks of the quarter.
On Slide 12, you will see the results for payment services, Puerto Rico, and the Caribbean segment.
Revenue for this segment in the third quarter was $44 6 million.
Approximately 15% driven by increased transaction volume through our Pos processing of 4% year over year continued growth of digital payments, mainly ath mobile business and continue to benefit from increases in transactional cross I think a more enduring revenue from services provided to the Latam segment.
We also benefited from a small acquisition completed in the second quarter.
Partially offsetting some of these positive drivers was the impact of the aforementioned onetime credit granted to popular as well as a small impact from hurricane Fiona on processing volumes.
Adjusted EBITDA for the segment was $25 million.
Slightly as compared to last year.
Adjusted EBITDA margin was 56, 1%, a 13 basis point decrease as compared to last year.
Normalizing for the impact of the one thing credit to all our margin for the quarter would've been 56, 6%.
On Slide 13, you will see the results for our payment services Latam segment.
Revenue for the segment in the third quarter was $33 7 million.
Approximately 26% as compared to last year.
<unk> growth with existing customers continued to be quite strong with double digit growth for the region overall, even with a foreign currency headwind of approximately $900000.
<unk> acquisition, which closed on July 1st also contributed to the year over year growth this quarter.
Normalizing for the effects of foreign currency translation, our year over year growth would have been approximately 29% in constant currency.
Adjusted EBITDA for this segment was $3 2 million and adjusted EBITDA margin was nine 5%.
The year over year decrease was mainly driven by the $7 8 million noncash foreign currency Remeasurement loss previously discussed which represent approximately 23 percentage points of margin decline as well as the recognition of a low margin hardware sales in the quarter.
Normalizing for the effect of the noncash remeasurement loss, our Latam margin for the quarter would have been approximately 33% and aligned to our expectations.
On Slide 14, you will find our results for the defense solutions segment.
We are a solutions revenue for the third quarter was down approximately 15% to $49 3 million.
Most of the decline was related to the effects of the popular transaction as Mike mentioned, we sold assets with an estimated $30 million annual run rate and as part of the new MSA with pulpwood are we provided a one bank credit amounting to $6 3 million in the business solutions segment.
There were several positive offsets to those headwinds as we completed several projects tied to the closing of the transaction began some services that are part of the new MSA and we also benefited from some smaller onetime hardware and software sales.
For the quarter adjusted EBITDA was $16 3 million.
And adjusted EBITDA margin was 33% down approximately 12 percentage points as compared to last year.
As noted with the other segment. This decline was expected given the main driver is at $6 3 million credit which flows directly to EBITDA.
Additionally, the asset sold were all higher margin contribution and this also impacted the margin in the quarter.
Normalizing for the onetime credit margin for the quarter would've been approximately 41% and aligned to our expectations.
Yes.
Moving on to Slide 15, you will see summary of corporate and other.
Our third quarter adjusted EBITDA was approximately $96 million, a decrease of 18% compared to prior year.
Adjusted EBITDA as a percentage of total revenue was four 1%, which is below prior year and slightly better than our expectations for 2022 of 5%.
Moving onto our cash flow overview on slide 16.
Our beginning cash balance was approximately 286 million, including restricted cash of approximately $20 million net.
Net cash provided by operating activities year to date was approximately $159 million.
Capital expenditures for the nine months period were approximately $45 million and we continue to anticipate approximately $60 million of Capex for the full 2022 a year as.
As noted on previous calls in the second quarter, we acquired a company in Puerto Rico and recognize a customer relationship of approximately $10 6 million.
Connection with the acquisition.
On July one we closed the <unk> acquisition for approximately $51 million, including approximately $7 1 million in certificates of deposit.
We paid approximately $10 million in long term debt payments approximately $6 million in withholding taxes on share based compensation and approximately $1 million of other debt pay downs, which resulted in a total net debt decrease of approximately $16 million.
We paid cash dividends of approximately $11 million year to date and during the third quarter, we repurchased approximately one 2 million shares of common stock for a total of approximately $37 million, including $25 million from the secondary offering and we have approximately 102 million remaining in the company's share repurchase program.
We have repurchased approximately 73 million shares through September 30.
Additionally on July one we also received approximately $4 6 million <unk> shares from popular in connection with the transaction close.
Our ending cash balance as of September 30 was $244 million and this included approximately $19 million of restricted cash.
Moving on to Slide 17, you will find a summary of our debt as of September 32019.
Our quarter ending net debt position was approximately $233 million comprised of approximately $225 million of unrestricted cash and $458 million of total short term borrowings and long term debt.
Our weighted average interest rate was approximately five 9%.
Our net debt to trailing 12 month adjusted EBITDA was approximately one four times.
As of September 30th total liquidity was approximately $344 million. This balance excludes restricted cash and includes the available borrowing capacity under our revolver.
Moving onto slide 18, I will now provide you with an update on our 2022 outlook as well as some initial comments to help you think about 2023.
We are pleased with the continued strong growth in both Puerto Rico, and Latin America, and the impact of revenue from the popular transaction has been consistent with our expectations.
We did see some impact from hurricane feeling that at the end of the quarter. While we saw transactional volumes return to normal by mid October . So we do not expect additional headwinds from the storm in Q4.
It's worth noting.
That the new MSA does provide for a CPI adjustment for the fourth quarter capped up one 5% for most MSA services and 5% for certain payment services given those factors. We continue to expect revenue to be in a range of 607 million to $615 million representing growth.
Of 3% to 4%.
Excluding the impact from foreign currency re measurement and the modest impacts from Fiona EBITDA margin for the third quarter was largely in line with our expectations, including the anticipated impact from the popular transaction at.
As discussed the currency adjustment was significant in the quarter, providing an approximately 500 basis point headwind to the third quarter alone.
We are not assuming any additional impact from currency re measurement in the fourth quarter, but when we flow through the impact from third quarter reduces our EBITDA margin expectation for the full year closer to 44%.
<unk> from our prior expectations of between 45% to 46%.
Given the tax impact noted earlier, we are now expecting our tax rate to be in a range of 17% to 18% up from our prior expectation of between 14% to 15% on our interest expense assumption continues to move higher given the rising rate environment.
We are also including the third quarter foreign currency re measurement in our updated adjusted EPS guidance for the year, which results in unexpected adjusted EPS outlook of $2 36 to.
To $2 47 per share this.
This represents a year over year decline of 14% to 10% as compared to the adjusted earnings per share in 2021 of $2 74.
This guidance also includes the benefit of the share repurchases of $73 million and the approximately $4 6 million reduction in share count that occurred on July one related to the popular transaction.
Turning to 2023 I will highlight some key considerations first while we are pleased with the completion of the popular transaction. This will create important headwinds in the first half of next year.
Segment, EBITDA margin will be impacted by the remaining share with popular unexpected to reset closer to low <unk> margin.
And the business solutions segment revenue will be impacted by the sale of assets, which as a reminder, we are a data is approximately $30 million in revenue on an annualized basis.
EBITDA margin for the business solutions segment are also expected to reset in the low to mid forties as the assets sold were up higher margin contribution.
Offsetting some of these headwinds is a CPI escalator, which under the renewed agreements as a one 5% gap for most services under the MSA and 5% for some of our payments are reset with popular.
Additionally, we will anniversary the acquisition completed in Puerto Rico during the second quarter and will also anniversary the BB RPC shown in Latin America during the third quarter.
Lastly, as we mentioned the rising rate environment will have an impact on our interest expense and we expect this will be the case in 2023.
In summary, we are pleased with our results through the first nine months of 2022 on our positioning for the future. Following the popular transaction. We look forward to hopefully seeing you in person at our Hong Kong for instance, later in the coming months.
Operator. Please go ahead and open the line for questions.
Thank you I'll begin the question and answer session.
Good question you May Press Star then one on your Touchtone phone.
There's even a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
At this time, we'll pause momentarily to assemble the roster.
First question comes from Jamie Friedman of Susquehanna. Please go ahead.
Yes.
Hi, a lot of hard work here.
And I appreciate the detail on the slides.
I want to ask.
So did you say you were going kind of quick there what the contribution was group DVR.
Could the BDO acquisition, I think you said that FX neutral it was 29% growth, but did you call out.
Wired contribution.
Hey, this is Mac.
We did not what we said it was 26% growth we lost 3% of gross growth because of FX, but we didn't call out DVR right.
Okay. Thanks for that and then.
So.
If I'm doing the math right, if youre, saying 30 million impact from Deepak on an annual basis, if I were to say seven five per quarter grounding.
My calculation is that business solutions would have been roughly flat absent.
Transaction is.
In the ballpark.
You had two impacts one is you had solid revenue and so your calculation.
Not necessarily even from quarter to quarter, but that's a good estimation, but you also had the reversal of the CPI, which was a pretty significant.
Reversal that we called out as well.
Yes, Okay. That's.
That's an additional six points.
For medium or $6 three medium to the business solutions segment, Jamie. So you have to Mike's point, the 30 million on a run rate with your calculation is right based on that and then incrementally for this quarter, specifically that that $6 $3 million back from the Woodbine correct.
Got it okay, alright, thanks for the details guys I'll drop back into queue.
Thanks, Dan.
Thank you next question will be from Mr. John Davis Raymond James. Please go ahead.
Hey, good afternoon guys.
A lot of moving pieces here.
Backlog came but if I look at it.
<unk> third quarter earnings I think if you exclude FX you said 53 cents.
Going quickly what came but did you say $1 million revenue impact from from the Hurricane I want to make sure I understood that correctly or any other color you can give on the third quarter impact from the hurricane.
That's correct John that the impact was mostly to our merchant acquiring segment, we're estimating that to be a lot of them on the top line.
And yes that does have a flow through to EBITDA.
The main impact is to your point the foreign currency re measurement loss that we detailed in the prepared remarks.
Okay. So so lots of moving pieces here.
But if I take a step back.
Look I think a couple of times you said that.
The transaction was kind of in line with your expectations, but.
If I just add back a couple of pennies for for the Hurricane It looks like <unk> was a little bit light, even excluding things with <unk> is implied to be a little bit better. So is it fair to say that kind of excluding the one time items.
Everything is kind of inline with expectations and absent interest expense.
<unk> changes from your view of earnings power as we head into 2023.
That's correct. So when you start to kind of adjust for some of the one times that we called out.
John and obviously the impact from the tax rate, which was also affected by the foreign currency Remeasurement impact.
We would have pretty much been within the earnings power that we kind of guided towards last quarter for the 22 year.
Okay.
The point you made some some good callouts for 'twenty, three but you know as.
As we think about 2023, obviously these onetime things won't repeat youre thinking similar revenue growth similar margin profile for 23 that you were thinking three months ago, maybe the only slight difference is we have a little bit higher right. So you see you have a little bit of a higher interest expense going into next year.
Fair well I'll tell you, we're not giving 'twenty three guidance about at a high level I think what we wanted to highlight more than anything journeys, we've been giving some some numbers based on what we expected.
Kind of different segments to look like from a margin perspective post transaction.
And when we start to normalize for some of the onetime impacts were very close to what we expected. So so your statement is correct.
Okay, and then last one from me Mac, just obviously you did the transaction with would be pop.
Cleaned it all clean up the story enable you to do M&A.
So maybe just comments on the M&A pipeline. Obviously, you guys were tied up for a while probably getting this be pop transaction close, but now that we're kind of three months.
Rearview mirror.
Your comments on the M&A pipeline, how you see it obviously ample capacity with leverage at one four times, but any color there would be appreciated.
Yes.
No. We don't really talk about something that we havent, but I would say, we're even more focused than we were before we've got a great balance sheet. We now don't have the regulatory requirement.
And we're actively looking at targets as we speak and we hope as you know.
The market started to rationalize as rates stay up and it will continue to.
On some attractive opportunities and then I would point you to the organic stuff I mean Mercado Libre is the most valuable invest ecommerce company in the region and we just extended from Mexico now into Chile, where those guys switch.
The second significant Testament to our brand and then also a group of all most people probably are not familiar with that bank, but they are a holding company that on some of the largest banks in Colombia, they've got about 18 million bank clients and about 60 million pensioners in the country of Columbia, So we're pretty excited about that.
Not enough already commerce gateway.
Okay.
All the color thanks, guys.
Thank you next question will be coming from Brazil Gabel. Okay. BMW. Please go ahead.
Hi, Thank you for taking my questions. I guess first question for you have been on just the guidance.
For the fourth quarter, it seems to be stood up a pretty wide range. So maybe you could help us think about the key variables that could push us through the door.
At the higher end.
Then within that I guess.
As it relates to <unk> I know, obviously, a very unfortunate event, but in the past when.
Kilometers like that has happened.
That tends to be a pick up in insurance proceeds and that sometimes drives increased spending and assuming curious like how are you thinking about those dynamics.
So taking the second part of your question first what I would say.
As it relates to Fiona.
There is no significant funding really expected as a result of the hurricane.
Most of the metropolitan areas were often running relatively quickly there are certain areas that we.
Said in their remarks are still pretty impacted so there are some funds coming in to kind of.
Do some reconstruction and help some of those businesses, but it's not to the extent or we are not expecting that type of impact that we saw or even close to that impact with Maria and so we're not expecting any real tailwind as a result of Fiona or any expected funding here into the fourth quarter in.
In terms of the range on the guidance.
I mean from the topline perspective, we've kind of maintained the range that we had last quarter and from from the high side I would say that it's mainly related to our to the spending here in Puerto Rico, obviously, given the tough compares on the prior year it is difficult from quarter over quarter to define what's really the normalized.
Baseline from which to grow.
So that's why we're keeping that kind of a wider range than usual.
Thank you that was helpful color and I guess my follow up would be on the payments processing segment in Puerto Rico.
Freeman services segment sorry.
That was pretty strong and I got the transaction growth in the Ath mobile, but maybe you could talk about what surprised you. The most of the upside and can we expect this trend to continue into the fourth quarter and then into next year.
In terms of payment Puerto Rico, we number one we have a small acquisition that we did in the second quarter that's definitely.
Helping us in terms of the top line growth year over the prior year, what I would say that two things continue to perform very well one is ath mobile business, which continues to grow and continues to be up.
Have a very good contribution per transaction. So we continue to look for ways to penetrate the cash environment in Puerto Rico, and Ath mobile business continues to be a very good product for that.
In addition to that some of the ancillary services that we have within payment services. Like for example, we do issuing for some of the health care companies here in Puerto Rico, We actually signed a few years back with them have also continued to perform healthcare companies are continuing to look for ways to electrify some of the benefits that they are giving them.
Sure.
Their customers.
We've become a pretty good source to help them do that so we've also driven I would say better than expected growth from those products and I would just reiterate the ath mobile business, we're converting PDP transactions often the business transactions.
Does that still will remain an opportunity into the future.
I will save us who as I did mention in kind of a 23 three considerations we will anniversary.
This modification we did in Q2 of next year. So I would say that there would be some moderation it once we anniversary the acquisition.
So far and then Mike if I could sneak in just one small one for you just to follow up on the M&A question before.
Valuations started to reset to a level that you think can become actionable in the near term and then specifically what type of assets are you. Most interested in is it more of the bank JV dive with staff were more technology asset sort of like regions. If you could give more color on how you are thinking.
Do you think might be.
Sure I mean, I would say, what I would say sellers haven't necessarily capitulated, but we are having some more reasonable conversations around valuations.
And.
Targets realize they have to make money on it.
So the conversations have changed and become a bit more reasonable we're still focused on Latin America, and we're still focused on the countries, Colombia, Chile, Mexico send countries that we're doing business in today, we're not focused of course on Venezuela are only focused on Argentina at this time and I would say, we love the payments businesses.
Look at a JV, we would look at a issuing or acquiring business and we also have might consider some adjacencies. We might look at an adjacency that has a technology that we would sell to the same customer type that we feel like we could scale given our network.
Super helpful. Thank you very much thank you.
Thank you next question will be from James <unk> from Morgan Stanley . Please go ahead Sir.
Hey, guys. This is Jeff Goldstein on for James just following up on one of <unk> questions. I know, it's hard to have a crystal ball on these things, but if we're thinking about the Puerto Rico economy as a whole and you take some of the macro driver is the issues around the hurricane and then just what youre seeing in your own business. How are you feeling about the outlook for Puerto Rico today, maybe compared to <unk>.
Three months ago.
I mean compared to three months ago.
It isn't a very long timeframe, what I would say is.
Puerto Rico still slated to receive.
Reconstruction funding from our yacht, which which we've discussed in the past, it's quite significant but it's over a significant period of time.
And that is still to come so I would say that Puerto Rico is shielded from the general macroeconomic environment that we're seeing I mean from an inflation perspective from an interest rate perspective, having said that.
Puerto Rico, because of everything that happened with the hurricane and Colgate stimulus, which on a per capita basis what was.
More meaningful there are certain economic factors that seems that seem to be any any.
Longer blades and they have been before and that for US is encouraging in terms of continuing to have kind of a banner.
Macroeconomic backdrop with which to work on but it's something that we need to continue to definitely monitor.
I think continues to grow.
Yes.
Look theres still.
Funding for Maria that needs to come in right to rebuild some of the infrastructure and some of the housing and Theres also the infrastructure Bill that Congress passed so we still.
On a relatively small economy has some nice tailwind.
For the short term.
Got it.
Okay, and then just on the expansion of the Mercado Libre relationship into Chile is there anything you can talk about related to the economic contribution from that and then you mentioned, obviously, having a relationship with Mercado Libre in Mexico, right now, but how should we think about additional geographic expansion possibilities for that relationship.
So we haven't broken out the financial impact, but I would tell you that both countries now.
Libre, we're very specific we only announced those deals or in production. So we are in product we have been in production in Mexico for a while and it's exceeded our expectations and we are now in production in Chile, where a group of all we've just signed the contract. So we've got to bring that up which is the E Commerce gateway.
It's prepaid and debit in both countries.
For taking my question can you talk a little bit about the acceleration of your Latin America business I think he's had multiple quarters of accelerating growth.
Just kind of talk about what's driving that if you can.
Yeah, I mean, I just running in Vermont.
High level, we've localized are placed on a platform now in the mountains over seven countries. So we're seeing that volume coming through as I talked about Mercado Libra is exceeding expectations. So.
Some nice pieces of business that we won over the last year or two.
Look continued localization of the products that we purchased through M&A.
A lot of a couple of more points. One I think we've mentioned Angola crossover do any of these that we've been able to close.
Last couple of years that again have started small and have now got into one point, where their contribution is is impacting normal segment of it more the same goes for some of that Mexico relationships, but we've announced mcgowan ebay and Mexico, Oklahoma with or make any Mexico, both we cannot.
Announced those wins, maybe a year or a year and a half ago and they have now got into a point, where they've gotten traction on their contributing any more meaningful way. So I think to the extent that we continue to put some of these pieces together and they start to grow over time.
That's been the expectations. These are markets that are expected to grow out the space and we're trying to put ourselves in those positions with some of these timelines I.
Chris what ultimately this is Don was we built distribution channels known each of these countries and now that we have products, where we have our own IP.
Like walking said, we can cross selling upsell and overtime great leverage so we're pretty excited.
Yep.
Fantastic I appreciate that and then just a small one can you give us the current revenue contribution from a th mobile business and.
They are a th mobile.
Initiative you have.
We have broken that Chris.
Okay understood. Thank you thank.
Thank you.
Thank you that concludes our question and answer session not like preparing to call back over Mr. <unk> for closing remarks.
Thank you I want to thank everyone again for joining a call and we look forward to seeing it upcoming conferences.
Goodnight.
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