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Good afternoon, everyone, and welcome to the Evertec Second Quarter 2024 earnings conference call. At this time, I would like to turn the conference over to Ms. Beatriz Brown-Saenz of Investor Relations. Please go ahead, ma'am.

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] And first question will come from Jamie Friedman with Susquehanna.

Yes, this is Mac. To be clear, we're not breaking out Sinqia and LATAM because we don't manage the business that way. But to Joaquin's point, the legacy business is growing at the same rate it has historically in the most recent quarters, and that's outperformed in this quarter as well.

The next question will come from Vasu Govil with KBW.

I guess, I wanted to start off with Sinqia little bit, Mac. I heard you mentioned some softness in the software market in Brazil. Just can you provide an update on sort of what type of growth you were expecting in that asset? And how meaningful of an impact you're seeing in the market and if there are things that you can do to offset that in the near term? And I know Joaquin gave us some LATAM guidance for the third quarter as well, which seemed a little bit softer. So, is that because of the software weakness? Or is it all facts related?

So, the [indiscernible]. Let me walk you through a little bit about what we're seeing in the industry. So, when we look at public companies that are in this sector, and we also look at private companies, both through our CVC and through our M&A pipeline, we have seen a slowdown in their growth rates. And it's really attributed to sort of the political situation as it relates to the Lula administration and sort of concerns around populism and increasing fiscal spending without being sort of -- in raising the deficit. And that's what you've seen in the impact in the Real. You've also seen the impact in inflation and then you've seen impact in corporate spending. So, when you look at our service lines within Sinqia is where we've seen that the most pronounced. People are sort of buckling up and holding -- they're spending down to see what's going to happen. We are optimistic that Lula realizes he can't have the Real depreciate as much as it's done and that he can't have inflation go up. He's even -- his administration has made commitments for '24 and '25. I mean for '24 and then going into 25 to cut, I think next year, like BRL 26 billion in expenses to try and get the budget balance. So, we have seen that, like I said, in other companies, both private and public, and that has slowed down in spending with some of our customers. That being said, we also, as we said on the previous call, are very focused on executing well and making sure that we can reaccelerate the growth rate based on our own initiatives. So, we spend a lot of time with customers, making sure we're staying close to customers, resolving issues quickly so that we can cross-sell them new business, also modernizing our platforms and moving them to the newer versions. And what I would say is it's early, but we are seeing very promising signs that customers are willing to do more with us. If we modernize the platforms, if we solve their problems on the existing platforms and SLAs, and we think this is one of the best assets in the country, it would be very difficult to replicate. The stability of the services they provide, the strength of the software across different lines within a bank or a financial institution. So, we're very focused on making sure we have operational excellence as we've done with the rest of Evertec.

The next question will come from Cris Kennedy with William Blair.

Mac, is there any way to give a time line on the modernization efforts at Sinqia? When do you think you'll have the platform ready?

Yes. So, look, I would say we're seeing the immediate benefit of the investments we're making now. I mean, I've had some calls with custom customers this week, and they already see a difference in our ability to deliver and our ability to provide better services and our ability potentially to displace some of our competitors with some of our products. The modernization is going to be a multiyear project, but we're already in the process of modernizing our receivables platform, our funds platforms and delivering this year to some of our biggest customers. So, it's already in progress. We're just prioritizing those that have the best financial impact and are the most meaningful to our most important customers. So, we get to those first. Secondly, we're also looking at pricing. Like some of these contracts with these customers are very old. So just like we've done with the merchant business that we talked about earlier, like is there a better way to price some of these contracts as we've added new features. So, there's a lot of different things that we're doing, just like we've done at Evertec to make sure we deliver on the modernization with good business cases and time the most important ones sooner. But we're also looking at margin optimization and other revenue synergies, whether it's pricing or -- again, we're already in the process of finding some new payments opportunities now that we have the Sinqia Rolodex, but looking in selling other payment products into the existing Sinqia customers. So, it's a broad range of things that we're very focused on, not just the modernization, but we have a plan that should impact next year -- the back half of this year and next year and into the future.

And then just for the follow-up. Can you talk about the M&A pipeline for Sinqia? Is that kind of on hold? Is that on hold or is that you still moving forward with that?

So, what I would say is we have -- we're very optimistic about the M&A pipeline. We look at the pipeline across the entire geography, not just singularly Brazil. We're focused on where we can pick up potentially new products, where we can expand the depth in some other markets even outside of Brazil, and where we think we can get the best growth rate and the best return. So, we do have a good pipeline, but we're not just focused on Brazil. We're focused on the other markets as well.

Your next question will come from Nate Stevenson with Deutsche Bank.

The next question will come from John Davis with Raymond James.

And then, Mac, just taking a step back with Sinqia. I think results have been a little bit softer than you probably expected when you acquired it. And I'm just curious if you could help us think about what's macro? I know you talked about softness amongst peers and kind of software spending, with the government and everything else that's going on in Brazil versus some micro issues. I think you've called out some of the integration and stuff initially didn't go quite as you had hoped. So just help us think, if we just take a step back, we're 6 months or so or a little bit more into this deal. I guess, at this point, help us just kind of parse out like without necessarily numbers, think about how -- what's macro versus micro with Sinqia? And kind of how you think about that changing as we go forward into the back half of this year into the '25?

I think there's -- the macro has an impact, obviously, and it has an impact across the peer group. But we do have the opportunity regardless even if the macro remains challenged. Again, we're optimistic that IT spending will return. But even without that, we think there's an opportunity going into the back half of this year and into next year to accelerate growth. What we have done and going to repeat a little bit of what I said earlier is the time that I've spent with the customers and the team is spending with customers, we are one of the most reliable software companies in Brazil. There's a lot of localization required because of regulation, because of taxation. And we are one of the largest software companies there, and we're even more reliable because [indiscernible] Evertec, right? We go -- we service U.S. banks, which gives a certain level of comfort. We have a strong information security capability. So, the conversations we're having about, okay, we need to improve some of our SLAs and the current things that we do. We need to modernize these platforms. And when we do that, we should be able to charge them more and eliminate costs as we consolidate some of these platforms. But they're also interested in, okay, as you do these things, and they've already -- some clients have expressed to me, they've already seen a noticeable difference in our level of execution, then they're interested in us potentially doing other things, right, because we have the other platforms that we can provide to them to potentially they're using a competitor. So, I do believe it would be helpful, right, to have the macro as a tailwind. But even barring that, I believe we can reaccelerate growth into the back half of this year and then really into next year for the business. It is -- like I said, it is a very unique asset. We do business with the largest institutions in the country, and we're still incredibly optimistic.

Your next question will come from James Faucette with Morgan Stanley.

Asking a question on behalf of James. So, it was good to hear you mentioned that you're already seeing the immediate benefits from Sinqia and hearing positive feedback from customers, while also mentioning some Brazil softness. So, I wanted to understand how the competitive landscape and intensity may differ in Brazil relative to Puerto Rico? And if that might change your go-to-market strategy at all with the bigger presence in LATAM?

So, what I would tell you is Brazil is a complicated market. And one of the reasons we made a big acquisition in Brazil is because we wanted to have a management team that had depth and breadth. We wanted to have a Rolodex of committed customers with a lot of experience, and we wanted to buy a portfolio of products where we actually own intellectual property. It was already operational. And when you look at the competitive landscape, as I said a little bit earlier, a lot of several of our customers that we're talking to are interested in doing business with us on the other platforms as they see us improve on the current platforms that they're running on. So, I would say it's similar to Puerto Rico. Puerto Rico, we have more of a U.S. presence with some of the ISOs coming in here. But again, because they don't have the local capability and scale that we have in Puerto Rico, we're able to win and grow market share here. It's a very similar phenomenon there. We have a very unique asset that has scale, that has presence, that has IP, that has experienced management team and software on the ground, that is unique to the Brazilian market. And so, it's similar in that way. They're both unique assets that have competitive advantages in their own markets.

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

Thank you. Again, I want to thank everyone for joining the call today, and we look forward to seeing you at conferences over the coming months. Good night.