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Good afternoon, everyone, and welcome to the EVERTEC’s Third 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.

Thanks, Beatriz. I'm pleased to report strong third quarter results with revenue growth across all segments and margins that were once again above our expectations. Growth remains strong in Puerto Rico while LATAM continues to deliver strong organic growth as well as the contribution from the Sinqia acquisition. I am also pleased to announce that we have closed on the acquisition of Grandata in Latin America. On today's call, I will start with some highlights from the quarter followed by a discussion of our Puerto Rico segments, concluding with an update on Latin America. I will then turn it over to Joaquin who will provide further details on our third quarter results, an update to our expectations for the remainder of the year and some important items to consider for 2025. Beginning on Slide 4, total revenue was approximately $212 million for the third quarter, an increase of approximately 22% compared to the third quarter of 2023. Adjusted EBITDA was approximately $87 million, an increase of approximately 11% when compared with the prior year. Adjusted EBITDA margin was 41.3%, approximately 420 basis points below last year's level but above our expectations and guidance. Adjusted earnings per share was $0.86, an increase of 8% from the prior year adjusted EPS of $0.80. Year-to-date, we have generated operating cash flow of $185 million and have returned approximately $92 million to our shareholders through dividends and share repurchases, including $12 million in repurchases this quarter. Additionally, our liquidity remains strong at approximately $469 million as of September 30th. Moving on to our business update on Slide 5; in Puerto Rico, we experienced growth across all of our segments. Merchant Acquiring was quite strong with revenue up approximately 12% year-over-year driven by higher sales volume and a higher spread. Payments Puerto Rico was up approximately 2% driven by growth in ATH Mobile and POS transactions, partially offset by comparison against a strong prior year quarter. Our Business Solutions segment revenue was up approximately 8% as projects with Popular that have gone into production have started to contribute more meaningfully. Turning to the macro environment in Puerto Rico, the overall backdrop remains stable. The overall level of employment has continued its upward trend and was up 1.9% year-over-year for the most recent briefing in August, with the unemployment rate ticking down to 5.7%, still near the lowest levels in decades. Travel and tourism trends continue to be a bright spot, as arrivals to the international airport in San Juan accelerated during the third quarter and are up approximately 19% year-over-year for the first nine months of the year. Non-resident hotel registrations remain up over 4% year-to-date through September. In sum, we continue to view the macroeconomic environment as supportive. Before leaving Puerto Rico, I want to call out some items to consider as you think about next year. As part of the renegotiation with Popular in 2022, please recall that our MSA extension agreement provided for a 10% discount on certain MSA services beginning in October of 2025. We recognize that this discount will have an impact on our top line and margin for the fourth quarter of 2025 and full year 2026 and as such we have already started executing on cost efficiency initiatives that we expect will more than offset the effect of the discount on our EBITDA. Some of these initiatives have already started to take place and are part of the reasons we delivered better margins this quarter. We expect the totality of these initiatives to be in place by the end of 2025 with a full effect in 2026. From a business perspective, this discount will enable us to become even more competitive in terms of pricing with our largest client and we hope to use this advantage to drive more business over the coming years. Joaquin will provide more details on these efforts later in the call. Moving to Latin America on slide six, revenue was up 65% year-over-year. The acquisition of Sinqia was once again the major contributor in terms of year-over-year growth. We also recognized a one-time revenue from GetNet Chile of $1.8 million given better than expected volumes from this relationship, but this compared to the $6.3 million recognized from GetNet in the prior year quarter. Currency was also a headwind impacting the segment's growth by approximately 10 percentage points. If we remove the impacts of Sinqia, GetNet and currency, lifetime growth would have been in the low-double-digits on a year-over-year basis, consistent with our long-term goal for the segment. Turning to Sinqia, it's been a year since the acquisition and we continue to be extremely excited about the long-term opportunity in this business. I want to now update you on three of the five areas of focus that we have previously discussed. First, on product modernization; we continue to make progress on the key platforms which we have been focused on updating. As an example, we implemented a new version of our GRC platform and are already seeing results as we recently signed an important client to the newer version. A number of other banks have also expressed interest and we expect to see additional new wins in the coming quarters. Second, on revenue synergies; we've identified a number of opportunities to re-price contracts on more favorable terms and we did in fact see progress on that front in the third quarter, having re-priced contracts representing 51 clients so far. And finally, from the margin optimization perspective, we are already executing on a plan to increase our margins for next year. Therefore, based on the ongoing modernization, re-pricing and margin optimization efforts, we are confident that Sinqia will experience higher revenue growth rates and margins in 2025. Moving on to Slide 7, we are also pleased to announce that we have closed the acquisition of Grandata, a data analytics company operating in Latin America that specializes in leveraging behavioral data to provide credit risk insights with a focus on underbanked populations. This acquisition enhances our proprietary product offering as well as extends our relationship with two of the most important fintechs in the region, including Mercado Libre and one of the largest digital banks. This product is a natural extension to our issuing platform, positioning us as the preferred partner throughout Latin America. We are also encouraged by the organic client pipeline that we have for Latin America, the best pipeline we have had in the last couple of years and we expect to sign new contracts as we exit this year and in the next year that should begin to impact revenues in 2026. Finally, I would like to highlight our commitment to our people and community. In October we hosted the winners of our Chairman's Award in New York City, including a trip to the New York Stock Exchange. The Chairman's Award is the highest recognition that our collaborators at EVERTEC can achieve and I would like to personally thank this year's winners for their contributions. I would also like to highlight a commitment to our scholarship program in Puerto Rico and Latin America. The program is now in its 10th year having awarded approximately $1.4 million in scholarships over the 10 year life of the program and we remain committed to supporting higher education in both Puerto Rico and LATAM as we go forward. In sum, this was another strong quarter for EVERTEC. We continue to deliver organic growth across all our segments while producing upside to our margin expectations. We're executing our acquisition strategy integrating Sinqia while also closing deals like Grandata that further expand our product offering and presence in LATAM. I want to thank the teams that worked so hard this past quarter to deliver these results. We remain excited about our long-term growth prospects in both LATAM and Puerto Rico and our ability to deliver attractive margins over time. With that, I'll now turn it over to Joaquin to provide a more in depth look at our third quarter results, our increased EPS outlook for 2024 and some items to consider for 2025.

Thank you, Mac, and good afternoon, everyone. Turn to Slide 9, you will see the consolidated third quarter results for EVERTEC. Total revenue for the third quarter was 211.8 million, up approximately 22% compared to 173.2 million in the prior year. Revenue growth was primarily driven by the Sinqia acquisition in the LATAM segment as well as organic growth across all of our segments, driven mainly by higher volumes, higher spreads and revenue from projects that have gone into production in the past couple of quarters. Revenue growth was negatively impacted by foreign currency, which represented a headwind of approximately 2.6 percentage points for the quarter. Adjusted EBITDA for the quarter was 87.4 million, an increase of approximately 8.7 million or 11% when compared to the prior year quarter. Adjusted EBITDA margin was approximately 41.3%, a decrease of approximately 420 basis points compared to prior year, but above the 39% we have been targeting for the year. The upside in margin was due to higher than expected revenue, proactive management of expenses including cost initiatives mentioned by Mac, partially offset by the impact in the prior year of the 6.3 million one-time from GetNet Chile, which was highly accretive to margin compared to only 1.8 million in the current quarter. Adjusted net income for the quarter was 55.4 million, an increase of 6% compared to 52.4 million in the prior year. The increase was driven by higher adjusted EBITDA, a decrease in non-GAAP tax expense partially offset by higher operating depreciation and amortization and higher cash interest expense due to the incremental debt raised for the Sinqia acquisition. Our adjusted effective tax rate in the quarter was approximately 2%. Adjusted EPS was $0.86 for the quarter, an increase of approximately 8% compared to the prior year. Moving on to Slide 10, I'll now cover our segment results starting with Merchant Acquiring. In the third quarter, Merchant Acquiring net revenue increased approximately 12% year-over-year to approximately 45.4 million. Consistent with prior quarters, this increase was driven by a combination of higher sales volumes and higher spreads, resulting in part from pricing initiatives. We have been calling out in previous quarters these pricing initiatives result from re-pricing existing relationships, reevaluating non-transactional fees and managing brand costs. As a reminder, most of these will anniversary during the fourth quarter. Adjusted EBITDA for the segment was 18.2 million, up approximately 19% and adjusted EBITDA margin was 40.1%, an increase of 240 basis points from the prior year quarter. The margin benefited from the higher revenues, partially offset by higher processing costs from the Payment Services Puerto Rico and Caribbean segment, given the increase in transactions and an increase in the revenue sharing agreements driven by the higher revenues. On Slide 11 you will see the results for the Payment Services Puerto Rico and the Caribbean segment. Revenue for the segment in the third quarter was 52.8 million, up approximately 2% from the prior year. POS transactions were up 4% for the prior year and ATH Mobile revenue growth continues to be double digits driven by ATH business sales volumes. These positive impacts were partially offset by lower issuing services revenue, mainly driven by lower active accounts. Adjusted EBITDA for the segment was 28.4 million, a decline of approximately 7% as compared to last year. Adjusted EBITDA margin was 53.7%, down approximately 510 basis points as compared to last year. The margin decline was mainly impacted by the positive impact to prior year's margin from the recovery of previously recorded operational losses and the impact from a lower number of transactions being charged to the Latin America segment. On Slide 12 you will see the results for our LATAM Payment and Solutions segment. Revenue for the segment in the third quarter was 76 million, up approximately 65% as compared to last year. The Sinqia acquisition continues to be the major driver of growth in the quarter. As Mac noted, we also faced a headwind from the one-time revenue from GetNet Chile in the prior year of 6.3 million compared to a much smaller 1.8 million recognition this quarter. Note that we do not expect any further effects of this nature from GetNet moving forward. We continue to see solid organic growth in the region and growth excluding the Sinqia acquisition, GetNet adjustments and currency would have remained in the low double-digits range. This quarter, currency represented a 10% headwind to growth or an impact of approximately 4.5 million, mainly due to the devaluation of the Brazilian Real and to a lesser extent the Chilean currency, which both have negatively impacted Brazil revenues including the revenue from Sinqia as well as Chilean revenues. Adjusted EBITDA for the segment was 20.7 million and adjusted EBITDA margin was 27.3%, down approximately 11 percentage points compared to last year. The reduced margin was due primarily to the addition of Sinqia, which has lower margins than the segment average and the effect from the lower GetNet one-time revenue, which was almost 100% accretive to margin. On Slide 13 you'll find the results for the Business Solutions segment. Business Solutions revenue for the third quarter was up approximately 8% to 61.1 million, primarily driven by the impact from projects with Popular that have now gone into production and are having a more meaningful impact. Adjusted EBITDA was 25.5 million and adjusted EBITDA margin was 41.7%, up approximately 430 basis points as compared to the third quarter last year. The adjusted EBITDA margin increase was mainly driven by the higher revenues in the quarter, partially offset by higher programming and equipment expenses. Moving on to Slide 14 you will see a summary of corporate and other. Our third quarter adjusted EBITDA was a negative 5.4 million, a decrease of approximately 3% compared to prior year. Our adjusted EBITDA as a percentage of total revenue was 2.6% below the 3.2% a year ago. Moving on to our cash flow overview on Slide 15, our beginning cash balance was approximately 319 million including restricted cash of approximately 23 million. Net cash provided by operating activities year-to-date was approximately 185 million, an increase of approximately 26.6 million compared to prior year, as we continue to effectively manage working capital. Capital expenditures were approximately 70 million and we continue to expect 85 million as our CapEx for the full year. We made net debt payments of 28.4 million and 9.9 million in withholding taxes on share-based compensation, which resulted in a total net debt decrease of approximately 38.3 million. We paid cash dividends of 9.7 million and we repurchased approximately 2.4 million shares of common stock for a total of approximately 82.3 million year-to-date, including the ASR that we completed in the third quarter. We currently have approximately 138 million available for future use under the company's share repurchase program through December 31, 2025. We also announced another $0.05 dividend to be paid on December 6, 2024 to shareholders of record as of October 28, 2024. Our ending cash balance as of September 30 was 301 million and this included approximately 25.7 million of restricted cash. Moving to Slide 16 you will find a summary of our debt as of September 30. Our quarter ending net debt was approximately 712 million comprised of approximately 275 million of unrestricted cash and approximately 987 million of total short-term borrowings and long-term debt. Our weighted average interest rate was 6.7% and, as a reminder, about 50% of our total debt is fixed through interest rate swaps. Our net debt to trailing 12 month adjusted EBITDA was approximately 2.2 times. As of September 30th, total liquidity was approximately 469 million. This balance excludes restricted cash and includes the available borrowing capacity under our revolver. Now I'll turn to Slide 17 for commentary on our 2024 outlook as well as some initial comments to help you think about 2025. As mentioned previously, we saw an unfavorable impact from foreign currency movements that resulted in a headwind to growth of approximately 2.4% in our Q3 results and we expect that headwind to continue into the fourth quarter. Considering the FX impact to Q3 and the expected continuation into Q4, we now expect our revenue range to be 840.5 million to 846.5 million or a growth of approximately 21% to 22% year-over-year. In terms of margin, we now expect our adjusted EBITDA margin to range from 39.5% to 40% with a higher expectation due to both the positive margin in our Q3 results and our focus on margin optimization and cost efficiencies. Adjusted earnings per common share are now expected in a range of $3.09 to $3.15 or 10% to 12%, as we benefit from a lower effective tax rate and higher than expected margin. This updated range considers our year-to-date results and an overall adjusted tax rate of a approximately 5% for the full year. In terms of the segments, we now expect our Merchant Acquiring segment to be in the high single to low double digits and we still expect our Payments Puerto Rico segment to be in the mid single digit growth range. For Payments Latin America, we now expect growth in the low 60s, as a result of the foreign currency impact to our Q3 results and our expectation for a similar headwind in the fourth quarter. We expect Business Solutions revenue growth in the mid-single digits for the full year. All of our ranges for the remainder of the year include the impact of the two month contribution from the Grandata acquisition. Turning now to 2025, as we have done historically, I will now provide a list of key items for you to consider when thinking about your financial models. Beginning with Puerto Rico, recall that as part of the negotiation with Popular in 2022, we have provided for a 10% discount on certain MSA services and a change to the annual CPI escalator that is to begin on October of 2025. We estimate the impact of this discount will represent a headwind of approximately 18 million on an annualized basis, once affected. You will see the impact of this discount to revenue beginning in October 2025 with full impact in 2026, mostly in our Business Solutions segment revenue and to a lesser extent our Payments Puerto Rico segment. In order to offset the impact of the discount, as Mac mentioned, we have committed to executing on cost efficiencies across our business lines that will offset any impact to EBITDA from this reduced revenue. These efforts are already underway and some have already started to have an impact on our overall margin, but most of these initiatives will have more of an impact in the second half of 2025 and into 2026 when the Popular discount takes effect. With this, you should expect to see some positive upward trend in margins as 2025 progresses, then step back down in the fourth quarter when the discount is applied. This effort has identified efficiencies above and beyond the Popular discount, which gives us comfort that even as we execute on our organic growth strategy in LATAM, we believe we can maintain margins in a similar range to 2024 for the coming years. Lastly, the CPI index for September was announced earlier this month and was 2.4%. As a reminder, our MSA with Banco Popular caps our annual increase to 1.5% and our ATH processing agreement caps our annual increase to 5%. The mechanics of the CPI escalator change again in October 2025, allowing for an increase of CPI above 2% up to a maximum of 2%. Moving on to our LATAM Payments and Solutions segment. Revenue in 2025 will benefit from the contribution of the acquisition we just closed and we're happy to say that we are beginning to see progress in Sinqia that should lead to an acceleration in top line growth and margin expansion in Brazil. However, we are expecting headwinds in LATAM related to client attrition, some of which was known like Mercado Libre, as we now expect their credit migration to finalize early in 2025 as well as other attrition now expected to come from clients that we have not previously discussed. We expect this client churn will be mostly offset by the contribution from the M&A transaction. So at a high level and considering the multiple factors at work, on a constant currency basis, we are optimistic that our LATAM segment can grow low double digits for 2025, including the effect of M&A. In summary, we're pleased with our results thus far in 2024 and we believe EVERTEC is well positioned for growth in 2025 and beyond. We continue to be excited by the long-term opportunity in both Brazil and the rest of LATAM and remain focused on maximizing margins while also growing the business. We look forward to updating you on our progress in early 2025 and hope to see some of your conferences over the next few months. Operator, please go ahead and open the line for questions.

We will now begin the question and answer session. [Operator Instructions] The first question comes from Nate Stevenson with Deutsche Bank. Please go ahead. .

Hi guys. Thanks for the question. I wanted to start with acquiring -- growth was obviously really strong in the quarter at 12% and I know you called out sort of higher volumes and spreads in addition to pricing initiatives driving that. So, maybe a two parter here, so first on pricing. I know you talked about some of those pricing initiatives starting in 3Q and we'll lap them in 4Q but just wondering how those conversations have gone and kind of how we should think about pricing power you have across that business moving forward. And then the second part, we've heard some other players in the payments ecosystem point out a bit of an acceleration in volumes in October, so hoping you could give an update on the trends you've seen quarter-to-date, both in acquiring and maybe across the rest of your business and how that plays into your outlook for the rest of the year.

Sure thing. This is Joaquin, so I'll start with the last part of the question in terms of trends in October. From our perspective, we're seeing volumes consistent with what we saw in the previous quarter, we aren't really seeing that type of acceleration. From a pricing perspective, look, these are pricing initiatives that, as we said on the call, some have had to do with, let's say, specific contracts that are coming up that have been, let's say, a couple of years contracted under a certain price and that has given us the ability to improve pricing on a go-forward basis. In other cases, it's been more pervasive in terms of a specific segment and that's something that we kind of do strategically every so often; we're continuously looking at this. But given that these were, let's say, impacting a vast portion of the portfolio, we're calling out that some of these will certainly anniversary as we get into Q4, so we won't have the same type of tailwind that we've had the last couple of quarters.

Got it. Understood. And then for a follow up, maybe a couple things on LATAM, as we look into next year. So I guess maybe first a little more color on the Grandata acquisition. So maybe how'd that deal come about? So what products or services do they offer and how do you see that fitting in with your existing solutions? And I know you mentioned sort of a benefit to revenue in 2025 and an offset to client attrition, so some more color there would be helpful. And then I guess the second part on LATAM, I think it's probably the second call now, I think Mac last quarter had talked about an acceleration in Sinqia and then Joaquin, you just mentioned that in your prepared remarks as well. So maybe more color on what you're seeing under the hood at Sinqia that gives you confidence that we're going to see an acceleration in that portion of the business, leaving aside any of the FX impacts that you had called out.

Sure. Hey, this is Mac. So first a little bit about Grandata. So as you know, we brought in Alberto about a year and a half ago and he's been very active in building up the pipeline for LATAM. Grandata is one of those opportunities that he identified and they look at behavioral data from the telcos to help some of the big fintechs make credit decisions when they issue cards. So they're big in Mexico, right now they're moving into Brazil. And as we said earlier, Mercado Libre, one of the biggest neobanks in the region, is a significant customer. So we're incredibly excited about the customers that they have, but we're also incredibly excited they're moving into Brazil and we can roll that out across our other customers, particularly on the issuing side. It complements our issuing platform and our product set. As it relates to Sinqia, we talked about again in the prepared remarks, three things we've really focused on. One is re-pricing some of the contracts, so we're using some of the same discipline that we've done here with the Puerto Rican business MAB that we talked about a little bit earlier and taking a look at how we can re-price some of the Sinqia contracts. So we have some legacy contracts from acquisitions that we're making more contemporary. We're bringing them more to market. We're actually making them more variable so that as volumes grow, we grow with the volumes. The second thing is we're modernizing the platforms. So as we modernize those platforms, we're able to charge new pricing and increase the pricing because of those new features, those new capabilities. And then the third is on the margin piece. I mean, we do want to increase margins. We talked about some cost cutting that we're doing in order to offset the Popular discount, we also have an initiative within Sinqia to increase those margins as well. So when you look at all of these efforts across the acquisition, the work we've done with Sinqia and in the organic business, we feel good about low-double-digit growth in LATAM next year.

I appreciate the color, Mac. Thanks.

Sure.

The next question comes from Cris Kennedy with William Blair. Please go ahead.

Good afternoon. Could you just give a little bit more color on some of the cost initiatives that you're undergoing to offset the MSA contract change?

Yeah, so this is Mac, Chris. So as you know, when we cut the deal in 2022, part of the extensions we were extending three contracts, right. And one of those was the MSA that's primarily the Business Solutions segment. In order to do that, that would have expired at the end of 2025. To get the three year extension, we committed to a 10% discount that would take effect Q4 of next year. So in anticipation of that, we've gone through a very vigorous exercise to identify where we can cut costs to more than offset that. So this will offset that, which is about $18 million, which will still impact top line revenue. So you'll get a quarter of that next year and then you'll get a full year in 2026, but we're going to offset the EBITDA impact; more than offset it, so that not only can we cover it, but so that we can guarantee our margins into the foreseeable future, even as we grow LATAM. We're not being specific on what those are because they may be cuts to vendors, they may be cuts that we are not ready to announce, but we have identified exactly what they are, we have calendarized those, and we have a high confidence level in our ability to execute those.

Okay, great. Thank you for that. And I know you're not breaking out Sinqia anymore, but you talked about revenue accelerating next year. Is there any way to frame the type of acceleration? Thanks for taking the questions.

Sure. Yeah. So, I mean, as with every acquisition, we don't break it out. I mean, we manage that as a segment in LATAM. As you know, it decelerated as we closed on the transaction and as we moved into this year, we've been very focused. You know, Claudio is now managing that business. We talked about that a couple of quarters ago, and we put these initiatives in place just to execute better and to deliver on some key initiatives that will grow the company. We're not breaking that out again separately, but we are confident that revenue will accelerate and that margins will expand as well.

Great, thanks for taking the questions.

Thanks.

The next question comes from Vasu Govil with KBW. Please go ahead.

Hi, thanks for taking my question. Just following up on the Sinqia question, Mac; clearly, I like the three initiatives that you'd laid out are having positive effects on Sinqia. Just curious, compared to what you had planned for at the beginning of the year, do you think things are trending better or worse even though they're improving? Just trying to get a sense for if there's upside to what you had sort of planned for the year.

You mean for 2025 or for 2024?

For 2024 and 2025, you would basically laid out a plan and then you were expecting to get some benefits in 2024 and then potentially more in 2025. Just curious if things are going better than expected or in line with expected.

Yes. What I would say, I mean, two pieces to that question. One is, I would say the original piece is the acquisition, we're incredibly excited about, right. We're in the most important market in Latin America with a great asset that's installed at 7 of the 10 biggest banks and many of the financial institutions, and they want to do more business with us if we can modernize our products, continue to deliver new services. You know, we're one of the largest software providers in that space. As we moved in, as we acquired the company, we knew that we would want to operate it a bit differently so that we could manage pricing like we do at EVERTEC, so that we could make investments on delivering and modernizing the platforms like we've done here and we are also very, very focused on margin. So we are seeing the effects of that now, Vasu. We plan to see that in Q4 and we think that will have meaningful impact next year. So we're very excited about the impact of the progress of these initiatives and the impact we're making. We talked earlier about GRC is one of the platforms that we upgraded. The key client that we worked with to develop that new solution has signed a multi-year contract to extend using the new solution. And we have a pipeline of other customers that actually want to move to the new platform as well. So we're now prioritizing other platforms that we need to make investments in so that we can continue to grow the rolodex of customers that use our platforms but also increase pricing on the existing customers.

That's helpful color and then I think Joaquin, you called out lower issuing services as sort of a drag in the Payment Services Puerto Rico business. Can you elaborate a little bit on that? And was that a one-time or is that something that sort of stays with us here in the near term and into early next year?

Good thing, Vasu. So as we said in the past we have some of the healthcare providers issuing cards to their healthcare customers and that's a way for them to distribute benefits. Every so often they kind of go back and look at some of the inactive cards and do sort of a cleanup. So we're seeing the effects of that, let's say, purge. This isn't something that they do necessarily every quarter, but obviously now they have to kind of rebuild into the same type of volume, so we will see some headwind right as they kind of build that back up, at least when we compare it against the previous year.

Thank you very much.

Thanks, Vasu.

The next question comes from Jamie Friedman with Susquehanna. Please go ahead.

Hey guys, nice job with the quarter and especially the margins. I wanted to ask with regard to the MSA for next year that you're calling out, is that - because my understanding was that was a multi-year agreement and if that's the case, was this evolution embedded in the previous agreement or is this something new?

Hey, this is Mac, I'll start and then I'll hand it to Joaquin. So, yeah, as part of -- so again, there were three agreements that we extended in 2022; one was relating primarily to ATH, the other is to MAB, the acquiring business with a bank, and then the third was Business Solutions or the MSA, which has core banking printing, everything else that we do for the bank. So when we did the contract -- those were all going to end at the end of 2025, right. And as we extended each of them, we looked at individual terms to make it a more competitive offering with the bank and looked at them individually. In order to get the one that impacts Business Solutions, MSA extended, we committed to at the end of 2025, which is when the original contract would expire for the three year extension to give them a 10% discount. So that was part of the deal that we did in 2022. As we said earlier, we now have a cost initiative that's already identified, calendarized and underway to more than offset the EBITDA impact of that. So you will still see the revenue impact, which is about 18 million. You'll see about a fourth of that next year in the last quarter and then you'll see it fully annualized in 2026, but we have cost efficiencies in place or that we're executing that will more than offset that. So, Jamie, that will eliminate that $18 million impact, but we're actually cutting more so that we can ensure that we have about 40% margins for the foreseeable future, even as we grow outside of LATAM, because -- I mean outside of Puerto Rico, because as you know, LATAM has lower margins, so we're trying to take measures so that we can maintain that margin even as we have the organic growth in LATAM.

Yep. Okay, that makes sense. And then in terms of the objective Mac, to start to accelerate Sinqia and expand the margins, what is the pricing opportunity within Sinqia? Is the intention for the company to set price, meaning like raise prices?

Yeah. So Jamie, it's a couple of things. One is some of the contracts are very old and they were not contemporary in their pricing, so the pricing was outdated. Even when those contracts would extend from year to year to year, they hadn't gone in and renegotiated those, as they had added new features as the market had changed for those products. So given that some of these contracts are old, there's just a natural opportunity to increase pricing. Secondly, as you modernize the platform, which is a big initiative for that business, there are newer platforms with better features where we'll use that as an opportunity to increase pricing as well. And then the third piece is, as we do these new contracts and new pricing arrangements, we're creating an ability for us to grow with the volume like we do with Merchant Acquiring and some of our other businesses. So we're really looking at, across all of the businesses and all the contracts, how can we have more contemporary contracts that grow as the volumes grow.

Got it. Makes sense. Thank you, Mac.

Thanks, Jamie.

The next question comes from John Davis with Raymond James. Please go ahead.

Good afternoon, guys. Joaquin, just wanted to circle back on the rev guide. Appreciate you have FX headwinds, but just curious, is the change in the guide just the FX headwinds netting off some benefit from Grandata and any color you can provide on the Grandata contribution for both revenue and earnings in the fourth quarter?

Yeah, I mean, most of the impact to the guide, to your point, John, is foreign currency. So that's certainly the biggest change. And it does incorporate the two months of Grandata, as we said in the prepared remarks, which obviously are not going to be very significant. This is a talking deal and those are really the two moving pieces.

And John, what I would say is if you look at the data, most of the Latin American markets, their currencies have devalued against the US Dollar, part of it is people are moving to the dollar, right. So the Brazilian real over the last year is down about 13%, but the Mexican peso is down about 12%, Chile is down about 10% and Colombia is down about 9%. So you see everybody's moving the US dollar, so it's putting pressure on currencies across the globe, particularly in Latin America, which is creating a bit of a headwind for us. To be clear, right, the way we constructed that guide was we have the impact that's flowing through our actual numbers, which we called out as part of the call, but we've also assumed that that's going to persist into Q4 and so we've kind of impacted Q4 for the same effect or similar effect that we had in Q3.

Okay, so that's another way, on an organic kind of FX adjusted basis, there's no change to the revenue guide. It's just what's going on with currency offset a little bit by some small contribution from Grandata. I guess I'm just trying to figure out if there's anything else [Multiple Speakers].

That is correct. You're right on.

Okay, perfect. And then, Mac, I think you called out a little bit of client churn in the LATAM business that was new. I mean, not Mercado Libre, but just can you expand on that a little bit? What's going on? Is it older products that or just like, what's driving that attrition and what potentially can you do to help minimize it?

Yeah, look, I mean, attrition has been a focus for the company for the last decade since I've been here. We've had some anomalies this year. When we called out at the beginning of the year with Mercado Libre, we have some others. One is an example of a Costa Rican regulators taking over one of our customers. So we think these are anomalies. We don't think it persists in the future, but it is something that will create a headwind going into next year. But the good news is with Sinqia reaccelerating and with the Grandata acquisition, that segment should still grow double digit -- low double digit next year.

Okay, and one last quick one, if I can, just on capital allocation. Joaquin, I think you said you had $138 million left on the buyback that expires at the end of 2025. Should we expect that you kind of use that rapidly over the course, or is there a chance that gets extended and you don't use it all by then? Honestly, what you guys have done year-to-date from a buyback perspective, and historically, what you've done that seemed like it would imply a bigger buyback over the next five quarters than you historically don't. Just any color there on how you think about leverage, buyback, M&A in the context of what you have left on the buyback.

I think it's consistent with what we've done in the past, John. I mean, we've been opportunistic. We bought 12 million this quarter because we think the price was attractive. We'll certainly continue to look at repurchasing stock. And it's certainly one of the things that we focus on from our capital deployment strategy when we're not doing M&A. We're in a great place in terms of our leverage on our balance sheet. So it's certainly something that we're continuously thinking about, but we'll continue to be opportunistic. We're not going to necessarily go into specific, let's say, buyback commitment or anything at this point.

Okay, fair enough. Thanks, guys.

Thanks, John.

The next question comes from James Faucette with Morgan Stanley. Please go ahead.

Hi, thank you for taking my question. This is Shefali Tamaskar on for James. You Mentioned last quarter that you were seeing some softness in the software market in Brazil. I was wondering if you could give any update on that trend from what you've seen this quarter and through October.

Hi, this is Joaquin. So, no real change, we do continue to see some softness in the market. I think that the fact that [Indiscernible] have is where it's at. [Indiscernible] is another factor as to why that, let's say, underlying softness is there from some of the big players that we're spending in technology. So I think this is something that we need to continue to monitor. But I think the main point is even though that's the case, we continue to see Sinqia re-accelerating top line. And as we said, we're comfortable that next year we're going to get to low-double digits for the LATAM segment.

Okay, great. And actually kind of similar on that point. Wanted to see -- great to hear the confidence on reaccelerating growth in Sinqia and wanted to see how much visibility you have into this in terms of what metrics you might be tracking, like pipeline of clients, anything else that's sort of driving this confidence into next year.

I can give you some color. I mean, I think Mac specifically has mentioned this initiative since the beginning of the year in our Q4 call. So these are very specific projects that we've now been working on for over six months. We have a team that's managing this, PMO-ing the different initiatives with our clients. We have tracking lists, we have steering committees. So these are very strategic initiatives that we're very confident, given the visibility that we have today, as to where they're going to be that are going to be, they are going to be a contributor into next year.

Yeah. And what I would say is. It's exactly what you said. We're tracking this pattern, right. We are tracking their pipeline very closely. We know when we're getting contracts signed. We know what we need to do to get contracts signed. We know what we need to do for specific clients to increase pricing. So there's a significant level of discipline that Claudio has put in place to ensure he gets the results that he's trying to push the organization towards.

Okay, great. Thank you.

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

Again, I want to thank everyone for joining us on the call tonight and thank you for your investment in EVERTEC. I also want to thank my colleagues for all their hard work and for the accomplishments of this quarter. We look forward to seeing you at conferences in the future. Good night.