Kay Sharpton - Vice President-Investor Relations Mac Schuessler - President and Chief Executive Officer Peter Smith - Chief Financial Officer.

Robert Napoli - William Blair James Schneider - Goldman Sachs Bryan Keane - Deutsche Bank Tien-Tsin Huang - JPMorgan Vasundhara Govil - Morgan Stanley George Mihalos - Cowen & Company.

Good afternoon everyone and welcome to the EVERTEC’s Second Quarter 2017 Earnings Conference Call. Today's conference call is being recorded. At this time, I would like to turn the call over to Kay Sharpton, Vice President of Investor Relations. Please go ahead..

Thank you and good afternoon. With me today are Mac Schuessler, our President and Chief Executive Officer and Peter Smith, our Chief Financial Officer. A replay of this call will be available until Tuesday, August 8.

Access information for the replay is listed in today’s financial release, which is available on our website under the Investor Relations section of evertecinc.com. For those listening to the replay, this call was held on August 1.

Please note, there is a presentation that accompanies this conference call, and it is accessible in the Investor Relations section of our website. Before we begin, I would like to remind everyone that this call may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

These forward-looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties. EVERTEC cautions that these statements are not guarantees of future performance.

All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that occur after this call.

Please refer to the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission for factors that could cause our actual results to materially differ from any forward-looking statements.

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. I’ll now hand the call over to Mac..

Thanks, Kay and good afternoon everyone. Thank you for joining us on today’s call. We are pleased with our execution in the first quarter and are excited about our acquisition of PayGroup. I’ll cover some of the quarter’s highlights and provide you with an update on recent developments. Beginning on Slide 4, we have a summary of the quarter results.

Total revenue was $104 million, an increase of 6% compared to 2016 as we continued to experience resilient transaction volumes, and executed well in a tough environment. We delivered adjusted earnings per common share of $0.44, an increase of 2% over last year.

Given our year-to-date performance, and the PayGroup acquisition, we are increasing our guidance for 2017. Peter will provide further details on our guidance change.

We also generated significant cash flow and returned approximately $11 million to our shareholders this quarter, through almost $4 million in stock buybacks and approximately $7 million in dividends. Now I'd like to give you some more specific updates for the quarter on Slide 5. First, we are pleased with the solid revenue performance in the quarter.

In Puerto Rico, overall revenue grew approximately 5%. Payment Processing transactions grew more than 9%, but this growth was partially offset by a lower average ticket, as well as merchant mix shifts.

In this regard, we again benefited from increased gas prices, increased government payments and general payments growth from the continued cash-to-card conversion on the island. Our Accuprint acquisition continues to perform well and contributed to our revenue growth.

In June, we successfully launched our ATH Movil business solution and the response has been very positive with over 5,000 businesses registering for this service today. While this will not be significant revenue driver in 2017, we believe this innovation enhances the ATH brand and provides a significant value to the ATH network members.

In Latin America, revenue growth was low double-digits. We continue to work diligently with our clients that have indicated they will be migrating to reverse their decision through improved service and performance. While we have not yet reversed a material clients’ decision, we are encouraged that most anticipate further delays in their migration.

These delays will favorably impact them financially this year and importantly give us more opportunity to win them back. Turning to Slide 6, we are pleased to have closed on the acquisition of PayGroup in early July.

PayGroup increases our geographic presence to 27 countries adding eight new ones and further strengthening our presence to five current markets. PayGroup provides electronic payments and bill processing services, as well as issuer processing and fraud monitoring solutions.

These products are delivered via proprietary software platforms which are developed and delivered by the company’s employees in Chile and Uruguay. That client list includes top-tier financial institutions, regional retailers, and payment processors across Latin America.

PayGroup has over 300 employees working for an experienced management team and we are very pleased to have them join the EVERTEC family.

With the acquisition of both PayGroup and Processa, we have meaningfully advanced our strategy of building a unique Latin American focused payments business, which we believe will best position the company for future growth opportunities as these markets mature. Now I will give you an update regarding Promesa and the Puerto Rico situation on Slide 7.

The Promesa Board has approved the 2018 fiscal budget which began on July 1. The government must generate incremental revenues and achieve significant savings in 2018 and 2019, deliver about budget by 2020 in the compliance of the Promesa long-term fiscal plan.

While the 2018 budget goals are clear, specific details are still limited in terms of the actions to be taken and the timing. As such, we remain cautious on our outlook for the second half as the austerity measures are only in the initial stages of implementation.

On a positive note, our material government contracts have been renewed and our receivable has been reduced, which is an important acknowledgment as the services we perform are critical. The Promesa Title III restructuring process is ongoing and we continue to believe that our services are necessary to functioning government.

And as such, our services will continue throughout the Title III process. We are working constructively with the government and we are focused on helping them achieve their goals. We believe we are well positioned to the system as they look to improve their IT infrastructure to achieve operating efficiencies in the future.

In summary, we are encouraged with our year-to-date progress and look forward to the integration of PayGroup and the opportunities ahead. With that, I will now turn the call over Peter. .

Thank you Mac, and good afternoon everyone. I’ll now provide a review of our second quarter 2017 results. Turning to Slide 9, you will see the second quarter 2017 revenues for the total company and our segment revenue details. Total revenue for the second quarter of 2017 was $103.5 million, up 6% compared to $97.7 million in the prior year.

Total revenue for the six months year-to-date was $204.8 million and also up 6% year-over-year. With respect to the segment mix, in the second quarter, merchant acquiring net revenue increased 1% year-over-year to approximately $23.5 million driven by growth in transactions.

This growth was partly offset by the second quarter 2016 contract change that shifted revenue from the Merchant Acquiring segment to the Payment Processing segment. Excluding the impact of this contract change, Merchant Acquiring would have increased approximately 5%.

Revenue growth was impacted positively by sales volume growth driven by the ongoing cash-to-card conversion trend, government payments and increased gas volumes and ancillary fees. We experienced a further decline in the average ticket as we believe economic uncertainty is affecting consumer spending patterns on the Island.

For the six months period, Merchant Acquiring was approximately flat year-over-year at $46 million, largely due to the contract change I referenced. Payment Processing revenue in the second quarter was $31 million, up approximately 9% as compared to last year.

Revenue growth was driven primarily by increases in our ATH debit network and card processing volume, increased point-of-sales rental revenue and the contribution of the contract change I referenced. LATAM revenue grew approximately 12% reflecting strong transaction growth and increased revenue from terminals deployment.

In the quarter, transaction growth in Puerto Rico was resilient, growing approximately 9% year-over-year. In July, transaction growth was approximately 9%. For the six months period, Payment Processing grew 10% to $61 million driven by these same reasons that I previously mentioned.

Business Solutions revenue in the second quarter was strong increasing 7% to $49 million. We benefited from the Accuprint acquisition, which contributed more than half of this growth as well as increased revenue related to core banking.

For the six months period, Business Solutions grew 7% to $98 million reflecting the growth related to these same drivers. Moving on to the next Slide Number 10, you'll find a reconciliation of our adjusted EBITDA. We incurred share-based compensation and other compensation expense of approximately $2.1 million.

Additionally we incurred approximately $0.7 million in transaction costs primarily related to the PayGroup acquisition. Adjusted EBITDA for the quarter was $50 million, an increase of 3% from $49 million in the prior year.

Adjusted EBITDA margin was 48.3% and this represents a 160 basis point decline in our adjusted EBITDA margin compared to the prior year. The margin is explained in more detail on the next slide. Year-to-date, adjusted EBITDA was $99 million, an increase of 5%. Moving to Slide 11, you will see a year-over-year adjusted EBITDA margin bridge for Q2.

Starting from the left column, the bridge begins with the adjusted EBITDA margin in the second quarter of 2016 of 50%. Moving to the right, we benefited approximately 30 basis points from operating leverage on our increased volume.

Second, we benefited from foreign currency gain of approximately $0.5 million or 50 basis points, and third, taxes, severance and other operating expense increases were approximately 180 basis points, and most significantly foreign withholding taxes negatively impacted the quarter as compared to the prior year.

Lastly, we are impacted by an increased information security and compliance expenses that drove approximately 50 basis points and we expect these costs to trend higher later in the year. The combined impact of these reference items result in an adjusted EBITDA margin for the second quarter of 48.4%.

Moving to Slide 12, adjusted net income in the first quarter was $32 million, an increase of 1%, as compared to the prior year and primarily reflects the higher adjusted EBITDA, partially offset by higher interest expense and higher depreciation, as compared to last year.

Our effective tax rate for adjusted net income in the quarter was approximately 11.3% and was slightly less than our prior year tax rate of 12.2%. Both periods included discrete items that added to the tax provision.

We now expect to be at the mid to high-end of our tax rate guidance range and have adjusted our expected range to 10% to 10.5% for the year. Second quarter adjusted earnings per common share was $0.44, an increase of 2%, reflecting the benefit of a lower diluted share count as a result of our share repurchase program.

Year-to-date, adjusted net income was $65 million, up 3% and adjusted earnings per common share was $0.89, up 6% from $0.84 in the prior year. Moving on to our year-to-date cash flow overview on Slide 13, net cash provided by operating activities was approximately $71 million or a $2 million increase as compared to the prior year.

Capital expenditures year-to-date were approximately $16 million and continue to track within our guidance.

Next, we paid approximately $10 million in principal debt payment and increased short-term borrowings by approximately $19 million in anticipation of our acquisition of PayGroup resulting in a total net debt increase of approximately $8 million.

And finally we have paid cash dividends to stockholders of approximately $14.5 million and repurchased approximately $7.7 million of common stock for a total of $22 million returned to our shareholders year-to-date.

We have approximately $72 million available for future use under the Company’s share repurchase program and we recently announced another $0.10 dividend to be paid on September 8, 2017 to shareholders of record as of August 7, 2017.

Our ending cash balance at as of June 30 was $93 million, and this was elevated to facilitate the July 3, closing of the PayGroup acquisition. Moving to Slide 14, you'll find a summary of our debt as of June 30, 2017.

Our quarter ending net debt position was approximately $580 million comprised of the $93 million of unrestricted cash and approximately $673 million of total short-term borrowings and long-term debt. Our weighted average interest rate was approximately 3.6%.

Our net debt to trailing 12-month adjusted EBITDA was 3.4 times reflecting the credit agreement which limits the cash implied in the net debt calculation to $25 million. As of June 30, total liquidity, which excludes restricted cash and includes the available borrowing capacity under our existing revolver was $141 million.

At this time, I'd like to provide you with an update on the status of our government receivables. Our government receivable at June 30 was approximately $15.8 million, which is down approximately $2.2 million from the balance at the end of 2016.

As Mac mentioned, we work collaboratively with the government to renew our material contracts in the quarter and we continue to make progress on our collections. Before I update you on our full year guidance, I’d like to give you an update on our anticipated Latin America client migrations.

Based on updated schedules provided to a set of clients in the quarter, we now anticipate client migration to impact our 2017 revenue $1 million to $3 million, down from our prior $3 million to $6 million estimate for the year.

Due to these scheduled shifts, we now expect client migrations to impact revenue of approximately $5 million to $7 million in 2018. Moving to Slide 15, I’ll provide an update on our 2017 guidance. We are increasing our revenue guidance to a range of $411 million to $417 million representing growth of 5% to 7% over the last year.

This increase reflects our stronger year-to-date performance, the timing delays in Latin American client migrations, and the impact of the PayGroup acquisition. Regarding PayGroup, our revenue guidance assumes $8 million to $10 million in revenue for the remaining six months of 2017 for an anticipated annual revenue of $20 million to $22 million.

Our assumptions regarding the deceleration in transaction volumes in the back half of the year in Puerto Rico remain unchanged as austerity measures are just now being implemented in Puerto Rico. Regarding margins, we continued to anticipate adjusted EBITDA margin to be in a range of 46% to 47%.

This range, however includes the addition of PayGroup, which operates at approximately a 20% margin and now we anticipate to be in the mid to lower half of this range.

Our adjusted earnings per common share outlook increases from our previous guidance of $1.54 to $1.67 to $1.63 to $1.71, which represents a range of negative 2% to 2% as compared to the adjusted earnings per common share in 2016 of $1.67. The impact of PayGroup on adjusted earnings is anticipated to be neutral in 2017 and modestly accretive in 2018.

In summary, we have had a solid operating performance in the first half of the year and we are encouraged by the continued resiliency of payment transactions in Puerto Rico.

While we continue to cautiously monitor the fiscal situation in Puerto Rico, we are focused on the successful integration of PayGroup and our execution in the second half of the year. We will now open the call for questions. Operator, please go ahead and open the lines..

[Operator Instructions] The first question comes from Rob Napoli of William Blair. Please go ahead. .

Thank you. Nice execution on the quarter.

Again, just the PayGroup deal, the growth rate, what type of growth rate do you expect out of PayGroup and can you bring those margins to – can you grow the margins over the next several years materially?.

Yes, Bob, this is Mac. Thanks. I’ll try and answer that and then see if Peter have got anything he want to add. So PayGroup, our intent is, we are now eight markets we were not in before. We think it’s a great opportunity they’ve got some great fraud products, some other great payment solutions.

So to cross-sell those into markets where we are today where they don’t have a presence. And then to also take our EVERTEC products and move them in to Chile and Uruguay and some of the countries they are in. So our intent, and our focus on integrating acquisition will be to come up with a strategy to make sure we accelerate the growth.

We are not giving guidance right now for 2018 and in the future, but we do believe the revenue synergies are meaningful with the acquisition and it creates a brand new company as it pertains to Latin America and our footprint, our credibility and our role with that.

They do business with some of the largest banks, some of the largest retailers in the region. So, we do believe that we can create meaningful growth by combining our businesses. As far as margins, this is really about growth, primarily but then, I see Peter has anything else to add..

Yes, I think, Mac summarized that very well. The only thing I’d add is, as a payments company, it does have the ability to scale provide a more transactions to come on its platform.

So it has the same characteristics for approximately 60% of the business, the other side of the business is a software business where we are selling fraud and issuing solutions and we are in the process of transferring that over to a processing business.

So over time, that two will be able to achieve the same sort of scale and margins that we have in our Payments business. .

What portions of PayGroup would you consider to be recurring revenue? And which buckets will we see that revenue in, I mean, between Merchant Acquiring Payment Processing business solutions, I’d imagine the revenue will fall into those same three line items?.

We are planning on having this, it’s predominantly all payments company thought, so it will be in the planning – we are planning to have it in the Payments segment. With respect to recurring, the portion that currently is not recurring is some of the software sales in that business.

But as I mentioned, over time, we are planning to create a processing business out of that and that’s our near-term objective with the company. .

Well, they are already in that process. So they’ve already started with the fraud product to create a processing capability versus just license. So they’ve rolled out their first customer and then we are looking at doing the same that some of the other type of software. .

Thank you. Just last question on the austerity side and it seems like there really hasn’t been much austerity.

The only austerity has been to reduce debt at this point, is that – I mean, would it, I mean, and what are you assuming – remind me what you were assuming as far as the revenue hit in the back half of the year from austerity?.

Yes, Bob, you are right. We have seen the austerity today really impact the economy because the measures had not been – there hasn’t been significant measures taken yet by the government. But that is inevitable and we do believe that that’s going to be something that’s particularly beyond this year impact the business, but we haven’t seen it today. .

Yes, just to add to what Mac said that, as of now, they’ve eliminated certain temporary positions that were working for the government. But over the next two years in order to fix a $3.4 billion deficit, there is a plan to eliminate approximately $2 billion of cost and the details of that at this point are unclear.

That’s their initiative, but we don’t have the details on the specific plans which they are working on and which we expect to hear more on shortly..

And I am sorry, the revenue in the back half of the year, revenue hit?.

Yes, sorry, Bob. I was just getting to that. .

Sorry. .

We’ve maintained our same projection. We had a good July as you know. However, as the austerity is jut commencing, we’ve left our guidance the same which was 3% to 6% of our transaction volumes reflecting a fall off in the back half of the year. .

Great, thank you very much. I appreciate it..

Thanks, Bob..

The next question comes from James Schneider of Goldman Sachs. Please go ahead..

Good afternoon. Thanks for taking my question. I was wondering if you could maybe give us a little bit of an update on the Payment business in Latin America, ex Puerto Rico, specifically, can you give us an update on how Processa is doing.

And I guess, just in terms of the overall competitive environment out there, given some of the delays you’ve seen in the client migrations, do you feel better about your ability to kind of maintain or potentially increase your share over the long-term outside of Puerto Rico and those markets?.

Yes, so, as we talked about, it grew double-digits this quarter. Processa continues to perform well. What I would say, with the client migration, we haven’t retained any significant counts, but we are still very, very focused on that and the longer they delay, the better for us not only as a financial impact, but the ability to work to retain those.

I think we are very well positioned as these markets open up. I think that acquisition in particular gives us products that we can approach some of the Columbian banks with now in addition to the Processa products and the EVERTEC products. So, I don’t think you are going to see these markets change.

I do think you are going to see the regulatory environment create a catalyst for banks to look for different alternatives.

And we are having – I am incredibly excited with now the talent that we have in Columbia, that we have in Chile, that we have in Uruguay, combined with our Central American folks, those primarily Costa Rica to take advantage of this opportunities as everyone that has a broad set of products, a strong regional footprint and a history with some of those things that will demonstrate that they can count on.

So it really gives us a seat at the table, I think as the market matures. .

Thanks. And maybe as a quick follow-up, you talked about improving collections on the solutions side. Kind of any more visibility there on whether you are expecting any impact on that business to the austerity or it sounds like in the past, you’ve talked about those contracts being fairly essential to the ongoing operations within Puerto Rico.

So just kind of any color there you have on the macro outlook and how that ties back to solutions will be helpful?.

Yes, this is Peter. We are very pleased to worked well and constructively with the government to renew our material contracts and we continue to make progress on collections with them.

What is unclear right now is really the new opportunities that the government will implement to achieve their efficiency goals and so we are actively working on some initiatives. But at this time, it’s unclear with respect to the timing. We do anticipate to continue the same course and speed with respect to our collections and progress.

But that’s all subject to the Title III process. But given the critical nature of our services, we feel confident that we will continue as it has this past quarter and historically..

Yes, this is Mac. I would just add, kind of to reiterate what Peter said, we have found the government very collaborative with us and not only do we say that qualitatively and kind of feel good about it, because we have the right people on the ground and we are having the right conversations.

But I think this quarter is apparent and the fact that they are paying us better than they have in the past some of these contracts has been signed. So, again, more to come..

Thank you. .

The next question comes from Bryan Keane of Deutsche Bank. Please go ahead..

Yes, hey guys. Congrats on the solid results. Wanted to ask just on the follow-up on the austerity. How would it impact or do you guys model it out for the three segments, the impact. I am just trying to think about are you guys being too conservative, too aggressive.

I just want to get the impacts by all three of your business segments?.

Hi, Bryan, it’s Peter. I think at this time, as we mentioned, it’s the actual actions that the government are taking are not clear as well as the impact on the economy.

With respect to the segment, we would anticipate a overall decline in the transaction amounts and the sales volumes on Merchant Acquiring, which would reduce revenue and then with respect to payment, we’d anticipate a decline in transactions volumes which would also reduce revenue.

As I mentioned, what’s still unclear is how we can participate in any of these initiatives that the government is going to take which could potentially improve the Business Solutions segment. So that’s how we would view the impact of austerity as we look out and we will continue to update that as we learn more. .

I guess, I was thinking maybe it’s possible that transaction volumes don’t drop as much as you guys anticipate in the second half even with the austerity measures or is it just a simple fact that the consumer spending is going to drop once the austerity measures take place?.

See, if you look, so, Bryan, the hard thing is, if the government want to go with tens of thousands of people, the ease of migrating to the U.S. they buy points I guess, and then they immediately start spending in Florida or New York.

So I think it’s very difficult to predict and which sort of unchartered territories, but the direct impact of the government business, we put the contracts as they’ve been renewed, but the economic impact when you have labor cut from the government and what that does to the economy and is that offset by economic stimulus, that’s difficult to predict.

.

I think, Mac, there is projecting out in the next couple years here. With respect to the rest of the year, I think we have been cautious. We have not experienced as of now an impact on our transactions as you know, when we talked about the July numbers, and we hope that continues. But, just given the uncertainties, we’ve left the range the same. .

Now that’s helpful.

And then just, finally, Peter, on the guidance range on the top-line, was that just the addition of PayGroup and then the push out of the Latin American migrations?.

It’s really consists of three things. So, one was just the stronger than projected first half. And the delays which combines equate to about $6 million and then we’ve added $9 million for PayGroup to total $15 million which is at the midpoint of our range. .

Okay, helpful. Thanks guys. .

Thanks, Bryan..

The next question comes from Tien-Tsin Huang from JPMorgan. Please go ahead..

Hi, thank you for the update.

Just on the migrations, is it fair to say that, I couldn’t tell from the tone, Mac is there a greater probability now that maybe to retain some of that business given some of the conversations you had? Or is this just a push out?.

Yes, at this point, it’s a push out. I mean, when we feel confident, we are keeping some of the accounts that we’re able to. We would communicate that. But these migrations take time. Some of the accounts have already begun to migrate pieces of the business, but we just haven’t seen the whole thing leave.

So the numbers that Peter gave at the beginning of the call are what we are thinking about for 2018. .

Understood. Okay, and then, just big picture pipeline question around inorganic and organic deals. I am glad you got the PayGroup deal done.

So what else is out there? What’s your appetite and how quickly can things move?.

Yes, so, from an M&A perspective, since Peter have started here that’s been a focus for both of us. And we’ve done four deals I think simply been here. We continue to look for opportunities throughout the region. What I would tell you right now, that we are very, very focused this year on integrating PayGroup and that will be our focus. .

Okay, fair enough. Thank you..

Thanks, Tien-Tsin..

The next question comes from Vasu Govil from Morgan Stanley. Please go ahead..

Hi, thanks for taking my question. I guess, just going back to your comment about guidance including sort of a 3% to 6% transaction growth in Puerto Rico for the back half.

Is there a way to sort of translate that into what impact that might have on revenue given that there is mix shift going on and average ticket sizes are coming down?.

Hi, Vasu, it’s Peter. I think it’s a bit of inexact size, but with respect to transactions as we look at it, it’s slightly more than $1 million per percent and that’s how we view it. But again, it depends on quite a lot of factors. .

Got it. And then I think the tax – there were some tax reforms that were announced as part of the budget including something on B2B and then some income tax sort of relief.

Do you see – do you foresee any impact from those on your business?.

With respect to the tax, we don’t. Those changes that we are closely monitoring, however, a broader tax reform initiative, which is underway and to the extent we think that will impact your business will make people aware. .

Understood. And then, just the last quick question I had was that, I think it’s been about a year since legislation went and did effect increase electronic payment acceptance in Puerto Rico, if I have that correct and clearly transaction growth in Puerto Rico has benefited from that over the last few quarters.

Is there a way to isolate how much acceptance growth you have seen as a result of this legislation and how that’s been contributing to transaction growth? And are they we are kind of lapping that legislation do you expect that to have an impact on softening growth rates at all?.

It’s a great question, Vasu. That’s what we are focused on. As you’ve seen, our transactions jump from essentially a 3% to 5% range up to anywhere from 8% to 10% since the legislation went into effect, it went into effect last July, but really did not kick in until August and thereafter.

So we are very focused to see as we deal assets, how much of that is sustained in pulls through versus what we would attribute to the legislation. .

But if we look, I mean, these are typically smaller merchants – returning to offset, if we look at where our biggest growth, it’s still the traditional tag or I think Peter had mentioned earlier..

Yes, and moreover there are initiatives in the budget and typical plans to create a broad capture of sales tax and so we are very interested in any initiatives around that, but again it’s the time we don’t have any concrete plans with respect to that and potentially that could help us getting along. .

Great, thank you..

Thank you. .

[Operator Instructions] The next question comes from George Mihalos of Cowen. Please go ahead. .

Hey guys, nice job on the quarter.

Just wanted to ask on the deconverting accounts can you remind us how much lead time you generally need for that deconversion to go through?.

Yes, George, this is Mac. So, it varies. It depends on the services that they are exiting. But it can be anywhere from 6 to 18 months. So it can be significant and it got to go out, because an RFP process which can take three to six months, then you’ve got to get through a negotiation process, the deconversion process.

So from the point, that they decide they want to do something till the day you see their last revenue exit, it could be multiple years. And that’s what we are experiencing with some of these customers. And that’s how, earlier in the call, the question, we know some of these are moving, because they’ve already moved into the process.

They’ve tested some of the volume, but it could be a multi-year process. .

Okay, that’s helpful.

I just wanted to ask in terms of growth in Puerto Rico, given the austerity coming on in the second half, is your expectation that growth will decelerate third quarter going into fourth quarter or is it really more of sort of 2018 event to where the austerity will kick in?.

We’ve projected a decline in the third quarter and the fourth quarter. We maintain that. However, as we noted the transactions in July has held up. We would anticipate the austerity come in gradually and increase over the next two years. So that’s going to be the profile of the initiatives that are required by the fiscal plan. .

Thank you..

Thanks, George..

And this concludes our question and answer session. I would now like to turn the conference back over to management for any closing remarks. .

This is Mac again. I want to thank everyone for joining our call today. Thank you for your support. And we look forward to talking to you in the future. Have a good evening..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day..