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Good afternoon, everyone, and welcome to EVERTEC's First Quarter 2024 Earnings Conference Call. Today's conference call is being recorded. [Operator Instructions] I would now like to turn the conference over to Beatriz Brown-Saenz of Investor Relations. Please go ahead.

Thank you, and good afternoon. With me today are Mac 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 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.evertecinc.com. I will now hand the call over to Mac.

[Operator Instructions] The first question comes from Chris Kennedy with William Blair.

And let me add a little color. So I mean, we're still incredibly excited about Sinqia. I mean what we're very focused on right now is discipline around execution. So we're focused on -- now that we've had the leadership change, now Claudio is running the company. He has self-focused, reporting directly to him. So we're very focused on selling more and converting the sales through implementations into revenue faster. We've also now built a plan on -- in the past, they are very focused on buying other companies and trying to absorb those. Now we're focused on investing in those platforms, so we can continue to sell more features, more customizations, that type of thing. And then finally, we are looking long term at how do we make this a faster growing, more accretive deal is by also looking at pricing, how do we price better, because they've accumulated all these companies, but now they have the opportunity to go back and look at how do they price each of the contracts better. So that's what we're really focused on, Chris, is how do they execute better, because the past 2 years, they've been focused on absorbing companies, going through the sales process. We now have a CEO in place, who is focused on the company and not personal issues and is focused on executing the companies that he's bought. So we're still very bullish.

The next question comes from Nate Svensson with Deutsche Bank.

The next question comes from John Davis with Raymond James.

Mac, I appreciate the comments so far on Sinqia. I think last quarter, you noted that revenue growth has decelerated a little bit. It sounds like that hasn't probably changed given kind of the tone on investing and kind of working on execution, integration, but how do you think about this business longer term? Do you think you can reaccelerate it back into kind of that low double-digit growth on an organic basis? Or just any other color there on kind of how you think the longer-term trajectory of that business looks?

Sure. So I mean I think I said it on the last call and even since then, I spent a lot of time with clients. And the thing that's exciting about Sinqia is local software companies that abide by the local regulations to provide the capabilities they need to compete. We're one of the largest providers and the most dependable providers. So the demand from customers and the desire to do business with Sinqia is obvious when I spend time with them. What has happened over time is they've acquired these companies, they tried to understand it themselves, absorb them, figure out how to operate them together. And then they moved into an M&A process with us. So in my viewpoint, they were a bit distracted with, again, trying to absorb these companies, figure out what the structure should look like and then selling the company to EVERTEC. Today, it's a very different culture and environment, because Bernardo had to step aside for personal reasons. I would say we anticipated that he would probably leave in a year or 2. That got accelerated given some things you needed to focus on. And then we put Claudio in his place now, who has clear objectives for each of the team members to ensure that the sales people are spending more times with clients, make sure that we're tracking the pipeline. They we're resolving operational issues so they want to buy more from us. So there's -- we're much, much closer to the clients, starting with me, but actually, the organization at Sinqia is better organized and better managed from a client perspective. Also once a deal is sold, is making sure the implementation teams can convert that to revenue, get the new system in, get the new customization, so that they can actually book the revenue. So the discipline around executing and operating the current organization, there's a much more significant focus on that from an organizational perspective and from a goal perspective. The other thing is clients want us to keep investing in these platforms. We can't keep buying just new platforms. We actually have to make sure the ones we bought that were great when we bought them. They were keeping those current, they were keeping those updated so they can push more volume through it, that they'll continue to add features. So we've come up with a plan that gives our clients comfort that we're going to invest in this platform. And we prioritize those where we think we can get the most return in the shortest period of time. But we're coming up with a multiyear plan to make sure we invest within these great companies that we thought. And then the other piece that I've talked about is pricing. Like we are going through all of the contracts seeing who's not as profitable as others and how do we better manage the pricing initiatives to get the margin where we want it to be. So what I would say, John, is that we're trying to take the operational sort of excellence that we believe we have at EVERTEC and apply that now to Sinqia. If you look at our historical deals, this is what we did with PayGroup, right? So we bought PayGroup, because we need a platform and technology. And that is now the platform that we've rolled throughout the region. We brought up some of the biggest names in the region, but it took EVERTEC working with PayGroup to accomplish that, because we used our expertise in a processing business and applied it to their [indiscernible] business and rolled it out across Latin America. Same thing we did with Place2Pay, right? Place2Pay was a small gateway operating in 2 countries. Now it operates in over 9 and some of our biggest customers are running on it. So that's what we see at Sinqia is when you do a deal, you always have surprises, right? The great surprises. It's a very important franchise in Brazil, and people want to do more business because they rely. And they even look now that it's part of EVERTEC. The strength we have around information security, the strength we have around compliance, because we operate for big banks in the U.S. It's making the value proposition even stronger in Brazil to do business with us. But the operational excellence, making sure you're staying close to customers, making sure you have stable operations, making sure you're continuing to investing in products. That discipline is what we're now applying to the business. And I feel very confident that Claudio is the right person to lead us through that. And I mean, the team will tell you, I'm spending a lot of time there myself to help accomplish that as well.

Let me just add to that, John, is as Joaquin said, the margin declines, you've seen in the overall company, have been strategic decisions, right? The Popular deal and the Sinqia deal. If you look at -- so it hasn't been a lack of operational focus and leverage, it's been strategic decisions to continue to change and evolve the company. If you look at when we have bought other companies, like the PayGroup, like Place2Pay and we tuck those into LATAM. Over time, we do increase the margin as we operate it. But the margins, as Joaquin said, the step downs we've taken have been a strategy to continue to grow the company.

The next question comes from Vasu Govil with KBW.

Mac, 2 quick ones for you on Sinqia first. I got your comments about the debt modernization and investment in the platform. Just wanted to understand if you think that's going to be a prerequisite for you to be able to take the pricing changes that you're hoping in that business? Or could pricing changes happen? I'm just trying to get a sense for whether pricing can be an upside driver relative to expectations for this year or is it more of a longer-term upside driver? And then a quick follow-up on that is just the tech spending and demand environment in Brazil from a macro perspective. If you could give us some color on that?

Vasu that's an incredibly insightful question. So we are deliberately going through all of the repricing, and we're looking at all of the contracts. I would say the combination. We have some immediate opportunities to reprice contracts, and we are -- some of the repricing could be predicated on some improvements that we need to make in investments. So -- but some of those investments we can make very, very quickly, and they're already in the plan for 2024. I mean what we're going to do around -- that's in the guide today is it impacts this year, but it will be both. This is something we can do immediately. Some will require investment. And some may require longer-term investments. So it's going to be a blend. But there is definitely an opportunity to increase the margins of the business and to do more with our customers as we make these investments. Technology spend in Brazil, I think was your second question. I mean, look, this is one of the most dynamic markets in the world as it relates to technology. I had met with the President of the Justice System. They're actually using artificial intelligence now to make judicial decisions. I mean to make case decisions, but with judicial oversight. Then you've got techs and open AI and what's going on in banking. So there's so much change going on in financial services and such a need for financial institutions to keep up and with those changes, the technology providers like Sinqia are incredibly important to the market. And that I feel that and I hear that from our customers. They want us to be able to help keep up with them as the market changes and as they are putting new products in the market. So I think it's a great opportunity for EVERTEC and Sinqia.

The next question comes from Jamie Friedman with Susquehanna.

Congratulations on the results. Mac, I wanted to go back to some of your prepared comments about the macro environment, which is so helpful in Puerto Rico, in particular, you referenced here that unemployment had a very low 5.7%, the employment rate, the highest since 2009 and travels up. I'm just wondering, I know it's hard to tell, but what's your confidence level that we wind up staying here? And is that macro tailwind embedded in the guidance?

I mean the thing I would add is that there's a lot of ambiguity about what's going on with the economy today anyway, right? If you look at the current labor numbers in the U.S., what are people going to do with interest rates. It's hard to predict what next year is going to look like at the next year, depending on who you talk to. Keep in mind, Puerto Rico is a little bit different. So a big part of our economy are still federal subsidies for people that are on welfare. We still have money to come in from the hurricane. So we do have an underlying sort of economic stimulus that's a little bit more sheltered than you might find in the U.S. But it is -- look, I mean we can't predict the Puerto Rico economy into '25 and '26 any more than people can in the U.S., but you do have some stimulus here that is unique and helpful.

And then for my follow-up, Mac, I'm just curious now that you're 6 months in with Sinqia, and you're spending so much time in Brazil. And I realize Brazil is one of the most dynamic markets you said it earlier. But at a very high level, how does it feel to be like instead of the big fish in a small pond, normal fish in a big ocean?

It's a great question. So I mean, I would say on a personal level, I mean, look, I ran the Global Payments International business. I did business in China, did business in Russia and India. So I mean that's a dynamic that on a personal level, I've seen before and managed through. What I would tell you, though, and this is one of the reasons Sinqia was so attractive is it is one of the larger technology companies in Brazil. So Brazil is an incredibly exciting market. It's an incredibly evolving market. But the reason Sinqia such a great asset is because it is one of the larger technology companies. And that's why we had the confidence to move into Brazil with a specific purchase versus going in with a much smaller company that didn't have the credibility, they didn't have the leadership team and they didn't have the track record and the industrial strength products already proven. So it is similar to me in EVERTEC and that people in Puerto Rico wanted to do business with EVERTEC because of our -- the products that we have, because of the presence we have, because of the commitment we have to the island. There's a similar affinity for Sinqia as well in Brazil. It does remind me a little bit of EVERTEC and that we need to focus on operational excellence and delivery in Brazil with our -- with Sinqia, but it is a very relevant player in the market. When I meet with executives and leaders and financial services, even bank, even CEOs of banks in other countries, they were aware who Sinqia is. They know the legacy and the history and they have an understanding of we're capable of. So there are some similarities of the strength of EVERTEC in Puerto Rico with the strength of Sinqia in Brazil.

The next question comes from James Faucette with Morgan Stanley.

Yes, I would say that -- I mean, the big thing is that's more expensive So that's now something you look at more than you would have looked at in the past, the potential to pay down. Like Joaquin said, we're still focused on M&A, more tuck-in deals like we used to do in the past, and we now have a bigger operation within which we can tuck those in. So we have a very healthy pipeline within Brazil and outside of Brazil and that's still a focus of the team.

This concludes our question-and-answer session. I would like to turn the conference back over to Mac Schuessler for any closing remarks.

I want to thank everybody for joining the call. Joaquin, I look forward to seeing you over the coming quarter at different conferences and events. And thanks, and have a good night.