Good afternoon, everyone, and welcome to the EVERTEC, Inc. Third Quarter 2019 Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the conference call over to Ms. Kay Sharpton, Vice President of Investor Relations. Ma'am, you may begin..

Thank you, and good afternoon. With me today are Mac Schuessler, our President and Chief Executive Officer; and Joaquin Castrillo, our Chief Financial Officer. A replay of this call will be available until Wednesday, November 6.

Access information for the replay is listed in today's financial release, which is available on our Web site under the Investor Relations section of evertecinc.com. For those listening to the replay, this call was held October 30.

Please note there is a presentation that accompanies this conference call, and is accessible in the Investor Relations section of our Web site. Before we begin, I'd 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 SEC for factors that could cause our actual results to differ materially 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.

Reconciliation to GAAP measures and certain additional information are also included in today's earnings release and related supplemental slides. I'll now turn the call over to Mac..

Thanks, Kay and good afternoon, everyone. We are pleased with our results for the third quarter, which were at the high end of our expectations. We are executing well and we continue to benefit from Puerto Rico's economic recovery, our innovation strategies, and our Latin American focus.

Beginning on slide four, I'll cover some of the quarter's financial highlights and provide you with an update on recent developments. Total revenue was $119 million, an increase of 6% compared to 2018, as we saw growth across all segments.

We benefited from some pricing actions, our deployment of value-added solutions, new managed services and the completion of projects for Popular. Adjusted EBITDA was $55 million or 6% growth over the prior year, and adjusted earnings per share was $0.47, an increase of 4% compared to last year.

We generated significant operating cash flow and have returned approximately $39 million year-to-date to our shareholders through dividends and share repurchases.

Moving on to our progress in Latin America, beginning on slide five, first, we are pleased with our progress implementing our collection product for Citi as they now have several new clients operating on our platform and a growing pipeline.

Additionally, we continue to make progress implementing Payment Systems for Santander Chile, and continue to anticipate an early 2020 announcement of our first transaction. Regarding the recent unrest in Chile, our business remains strong and has been mostly unaffected, although we are monitoring the situation closely.

Also, we continue to see strong interest in our products, and we have recently signed a license agreement with a Brazilian company, C6 Bank for our risk product. C6 Bank is a recently launched digital bank in Brazil with over 200,000 accounts already.

This new contract validates that our products are expanding their reach from traditional clients to new and emerging digital providers in the region. Lastly, we continue to anticipate receiving approval from the Fed and closing by year-end on our pending acquisition of PlacetoPay, a Colombian-based gateway and payment service provider.

Now moving onto our progress in Puerto Rico on slide six, first, revenue growth in Puerto Rico and the Caribbean was approximately 7%, driven by organic transaction growth of approximately 5% as well as pricing actions.

In addition, we continue to benefit from contract wins now producing revenue in our Business Solutions segment as well as completed projects for Banco Popular related to the conversion of their reliable acquisition.

Regarding innovation, we have successfully completed our pilot -- pvot with restaurants and recently showcased the product at the Annual Restaurant Industry Convention in Puerto Rico, generating interest from a variety of clients and prospects. We will continue to focus on adding new features to the product based on client feedback.

From a more macro view, we benefited from the start of additional EBT relief funding in August, and expect those funds to continue for the next 12 months. We were also pleased to see that FEMA has again granted the Government of Puerto Rico the authority to validate the disbursements requested by local agencies.

Another positive note in the business environment in Puerto Rico was the recently released unemployment figure, which has declined to 7.6%, its lowest point in recent memory.

Regarding the government's financial health, the Oversight Board recently filed a debt adjustment proposal with the courts, which should modify over $35 billion in obligations, and potentially reduce bad debt to almost a third of the amount outstanding.

Although there continues to be ambiguity on the timing of further federal funds and the resolution of the debt situation, the longer-term positive impact will be contingent on these factors, as well as the continued rebuilding and structural reforms on the island. Lastly, I want to comment on recent events that reflect EVERTEC's culture and values.

While Puerto Rico was spared during the recent hurricane season, our neighbors in the Bahamas were devastated by Hurricane Dorian. We truly understand their challenges ahead and donated $100,000 to their relief efforts.

Additionally, as part of our commitment to education, this quarter we awarded 135 scholarships to outstanding students in Puerto Rico and Latin America. Our support to education, over the last five years has totaled over $500,000.

We have also recently launched an initiative to increase women applicants to our scholarship program in partnership with various female leaders from the STEM industry in Puerto Rico. EVERTEC values diversity and inclusion, and believes that supporting tomorrow's leaders will yield tremendous impact for the communities we serve.

We look forward to sharing our further progress with you as we wrap up 2019 and look ahead to 2020. With that, I will now turn the call over to Joaquin..

Thank you, Mac, and good afternoon, everyone. I'll now provide a review of our third quarter 2019 results. Turning to slide eight, you will see the consolidated third quarter results for EVERTEC. Total revenue for the third quarter was $118.8 million, up 6% compared to $112 million in the prior year.

We continue to benefit from a higher net spread, driven by pricing actions. We've also benefited from fees on ATH Movil and ATH Movil business, increased core banking transactions and increasing network services as well as $2 million related to completed projects.

Total revenue for the nine months year-to-date was $360.2 million and up 7% year-over-year. Adjusted EBITDA for the quarter was $55.5 million, an increase of 6% from $52.1 million in the prior year. Adjusted EBITDA margin was 46.7% and this represents a 20 basis point increase compared to the prior year.

The year-over-year increase in margin primarily reflects higher revenues and high margin projects completed in the quarter, partially offset by the impact of the elevated average ticket last year that drove a higher than normal margin as well as a delay in government revenue as the government turnover experienced earlier this quarter resulting in contracts, not being renewed timely while we continue to provide services.

FX also negatively impacted us by approximately $1 million this quarter. Year-to-date, adjusted EBITDA was $170.9 million, an increase of 7% from $159.8 million in the prior year.

Adjusted net income in the quarter was $34.6 million, an increase of 3% as compared to the prior year, primarily reflecting the higher adjusted EBITDA offset by increased operating depreciation and amortization. Our adjusted effective tax rate in the quarter was 13.7% reflecting a discrete foreign tax impact in this quarter.

We continue to expect our full-year effective tax rate to be close to 12%. Adjusted EPS was $0.47 for the quarter and grew 4% compared to the prior year and benefited from our share repurchases to-date. Year-to-date adjusted net income was $108.8 million up 6% and adjusted earnings per common share was $1.48, up 7% from $1.38 in the prior year.

Moving on to slide nine, I'll now cover our segment results, starting with Merchant Acquiring. In the third quarter, Merchant Acquiring net revenue increased 8% year-over-year to approximately $26.4 million.

The revenue increase was driven primarily by pricing actions impacting both our spread and our non-transactional revenue offset by approximately 1% decrease in sales volume. Average ticket declined approximately 8% versus the prior year and was in line with our expectations as spend continues to move toward more normalized levels.

Adjusted EBITDA for the segment was $11.2 million, up 2%. Adjusted EBITDA margin was 42.4%, down approximately 230 basis points as compared to last year, reflecting the impact on margin of the lower average ticket this quarter.

For the nine-month period, merchant Acquiring increased 7% to $79.2 million, primarily due to the same reasons I referenced in the quarter. Adjusted EBITDA year-to-date for the segment was $35.4 million up 3%. And adjusted EBITDA margin was 44.7%, a 190 basis point decrease as compared to last year.

On slide 10, you will see the results for the Payment Services Puerto Rico and the Caribbean segment. Revenue for this segment in the third quarter was $30.4 million up approximately 5% as compared to last year.

Transaction volumes grew approximately 5% and we continue to benefit from transaction fees on services such as ATH Movil and ATH Movil business partially offset by a delay in a government contract renewal of approximately two months. Adjusted EBITDA for the segment was $18.4 million decreasing 5% as compared to last year.

Adjusted EBITDA margin was 60.4% down approximately 600 basis points as compared to last year, primarily due to increased expenses from price that are under way this quarter and the impact of the delayed government contract renewal.

Year-to-date revenue for the segment was $92.9 million up approximately 10% as compared to last year, year-to-date adjusted EBITDA was $60 million. And adjusted EBITDA margin was 64.5%, down approximately 70 basis points as compared to last year. On slide 11, you will see the results for our Payment Services LatAm segment.

Revenue for the segment in the third quarter was $20.6 million up approximately 9% as compared to last year. This growth was driven by inter-company license and service revenue as well as organic revenue growth of approximately 1% reflecting the anticipated $400,000 of client attrition and the timing of license revenue in the previous year.

We continue to see demand for license sales in some regions as evidenced by the C6 Bank agreement in Brazil. Our focus on priority continues to be on shifting from a licensing model to a processing model which will eventually result in a more recurring and growing revenue base.

That said we're pleased with this new license agreement, which will benefit us as it is implemented in early 2020. Adjusted EBITDA for the segment was $7.6 million.

And adjusted EBITDA margin was 36.8% up approximately 220 basis points as compared to last year, driven by the inter-company services and license sales to Puerto Rico, partially offset by FX. Year-to-date revenue for the segment was $62.5 million up approximately 7% as compared to last year.

Year-to-date adjusted EBIDTA for the segment was $23.6 million and adjusted EBITDA margin was 37.8%. On slide 12, you will find the results of the Business Solutions segment.

Business Solutions revenue for the third quarter was up approximately 8% to $52.9 million, revenue growth in this segment was driven by new services as well as other projects completed in the quarter, representing revenue of $2 million primarily resulting from the integration of Banco Popular's Reliable acquisition.

For the quarter, adjusted EBITDA was $25.1 million and adjusted EBITDA margin was 47.4% up approximately 280 basis points as compared to last year. The increase in the adjusted EBITDA margin was primarily driven by the completed projects in third quarter.

Year-to-date Business Solutions revenue was $159.5 million up 9% and adjusted EBITDA for the segment was $72.4 million with a 45.4% margin. Moving on to Slide 13, you will see a summary of corporate and other.

Our third quarter adjusted EBITDA was a negative $6.8 million, an increase of 6% over prior year and 5.7% as a percentage of total revenue, which was even with the prior year. Corporate and other includes the negative impact of approximately $1.6 million related to intercompany eliminations that did not take place in the prior year.

Excluding this impact, corporate and other adjusted EBITDA would be $5.2 million, reflecting a decrease of approximately $1.2 million, largely due to higher spend in the prior year related to the timing of projects. Year-to-date, our corporate and other expense was $20.5 million or 5.7% as a percentage of total revenue.

Moving on to our year-to-date cash flow overview on slide 14, our beginning cash balance was approximately $87 million including restricted cash of approximately $17 million.

Net cash provided by operating activities was approximately $136 million an $8 million increase as compared to prior year and this includes the impact of settlement timing and other working capital differences.

On a positive note regarding our government receivables, these are continuing to improve and are now at the lowest historical level at approximately $6.5 million and we have continued to be paid on schedule. Capital expenditures year-to-date were approximately $50 million.

An update of critical technology infrastructure and development related to some of the new contracts announced were the primary drivers in our year-to-date spent. We're now anticipating our CapEx for the full-year to be at the high end of our previous range of $50 million to $55 million.

Next, we paid approximately $11 million in scheduled debt payments, $6 million in withholding taxes on share-based compensation and $1 million of other debt pay-downs resulting in a total net debt decrease of approximately $18 million.

We also paid cash dividends of approximately $11 million and we repurchased approximately $28 million of common stock for a total of $39 million return to our shareholders. We have approximately $34 million available for future use under the Company's share repurchase program through December 31, 2020.

And we recently announced another $0.05 dividend to be paid on December 6, 2019 to shareholders of record as of November 4. Our ending cash balance as of September 30th was $116 million and this included approximately $13 million of restricted cash. Moving to slide 15, you will find a summary of our debt as of September 30, 2019.

Our quarter ending net debt position was approximately $432 million comprised of the $103 million of unrestricted cash and approximately $535 million of total short-term borrowings and long-term debt. Our weighted average interest rate was approximately 5%.

Our net debt to trailing 12 month adjusted EBITDA was 2.1 times, reflecting the credit agreement terms, which limits the cash applied to the total net debt calculation to $60 million. As of September 30, total liquidity was $219 million. This balance excludes restricted cash and includes the available borrowing capacity under our revolver.

Moving to slide 16, I will now provide an update on our 2019 guidance adjusted primarily due to our Q3 result. We are increasing the lower end of our revenue range to $479 million to $482 million, representing growth of 5% to 6% over last year, compared with $477 million to $482 million previously estimated.

Regarding overall margin, we continue to anticipate that our adjusted EBITDA margin will be approximately 47% for the year. Our adjusted earnings per common share outlook have been increased on the lower end to $1.95 to $1.98, which represent a range of 6% to 8% as compared to $1.84 in 2018.

Now, turning to 2020, while we're not prepared to give guidance, I would like to comment on several considerations. First, we're pleased with our new agreements in LatAm as well as the pending PlacetoPay acquisition, which are all anticipated to contribute to our LatAm growth in 2020.

We will continue our transition from a licensing to a processing model in 2020 which will provide some unevenness in our organic revenue growth in LatAm throughout the year. Additionally, we have benefited from delays in client attrition, which will now total approximately $2 million in 2019.

We anticipate a headwind of between $4 million to $5 million in 2020. Second, in Puerto Rico, we will continue to monitor the flow of federal funds and the potential positive impact to the economy and our focus on innovation will continue to benefit us in 2020.

The CPI index for September was announced October 10 and was 1.7% and should positively impact a majority of our Business Solutions revenue. Lastly, while we are improving and investing in our relationship with Popular, we're currently negotiating in connection with a disagreement related to certain pricing terms under the MSA.

We're both actively working to find a mutually agreeable resolution and while I'm unable to give any further details as this is an ongoing discussion, I thought it was important to provide this update at this time. We look forward to updating you with our full outlook next quarter. In summary, it was a good quarter for EVERTEC.

We're executing well against our longer-term initiatives that will continue to benefit us in 2020 and beyond. I now completed one full-year of earnings calls and investor meetings, and I continue to be challenged and energized by what is ahead for EVERTEC, and as always, I look forward to updating you. We will now open the call for questions..

[Operator Instructions].Our first question today comes from Bob Napoli from William Blair. Please go ahead with your question..

Thank you, and good afternoon..

Hi, Bob..

I guess, I'm a little confused on the Popular pricing disagreement and the potential materiality of that agreement, I mean that contract has been in place for a long time, it -- you know, what is, can you give me a little help and color on what that means, or could mean?.

Yes. So from time to time, Bob, we have these types of disagreements with the bank and we've always been able to work through and resolve those. So this is not something that we haven't experienced in the past, this type of dispute.

So we're working through with the bank, we can't give a lot more color than we've given on the call, as we do every third quarter, we try and give you some of the puts and takes into -- to the following year, into 2020, so just like we can't give you more on what Citi or Santander are going to contribute.

This is not something we can give you any more detail on, but we are actively working through it with the bank to find out a resolution..

Okay.

And as we think it's the Santander, I am not -- I know you said, you can't do anything or give us any guidance for 2020, but as you think about that relationship over the long term, what type of revenue do you think is possible to generate out -- out of that, say, over five years from today?.

Yes, so I'll speak for a second, and then I'll let Joaquin speak. As we've said on previous calls, this is a processing deal. So, as soon as we're up and running and we're still targeting early next year, we will immediately book revenue with a margin, and as they grow and they continue to take share that will grow over time. We do have minimums.

So there is certainty, but if it grows beyond what we put as minimums this business will continue to grow. As we add additional products to these [indiscernible] today and as we sell those to other customers, it could become a meaningful business for our Chilean operation..

Okay, thank you.

And last question, just on the Neo banks or the relationship with the Brazilian bank, and so, is this an effort at banking as a service type of technology effort for FinTechs, is this a broad effort taken?.

So, what we're seeing, Bob, and so, in Brazil, we are seeing a lot of digital banks come up. In Mexico, we're seeing a lot of FinTech, the new FinTech law. And the point we want to make is this is a licensing deal, which we were moving to processing, but we're still selling licenses in Brazil.

The reason we want to point this out was not because of the size of the revenue opportunity, but to demonstrate that the EVERTEC of today is now being selected by some of these new FinTechs and these digital banks.

They're going to be using our risk product primarily, so that's what we want to point this out, it's not just the traditional banks, and the traditional players, but the new entrants, who are looking for the best technology are selecting us as well..

I'm sorry.

I mean, you say, it's a risk product, is it something that you expect to expand into other products and services?.

I hope I sell them a lot more products, but the risk product is the one that we -- when we bought the -- when we bought [indiscernible] the one that had a lot of traction we've discussed it. Santander Chile has it, and we're deploying it internally as well.

So, our hope would be that we can continue to sell them other products and sell this to other banks in the region..

Thank you very much, appreciate it..

Thanks, Bob..

Our next question comes from James Friedman from Susquehanna. Please go ahead with your question..

Hi, congratulations on the results. It's Jamie, Susquehanna. I just got a couple upfront, first, so you talked about the pricing actions, you can see that in increased yield, if you could talk to maybe some examples of where that is showing up, that would be helpful, that's the first one.

And then, in terms of the completion, Joaquin, of the $2 million, I think was the number you used, projects on the Business Solutions side, could you just remind us where that number has like where it is now relative to where it started from, and I think you made some comments on what to expect for next year, so that's the two, first on pricing and next on the projects.

Thank you..

So Jamie, this is Mac. I will -- thanks for the congrats, I'll hand it to Joaquin to go through that..

Hi, Jamie. So, in terms of pricing that's primarily in our Merchant Acquiring segment. We mentioned earlier in the year that as we were going to see a slowdown in sales volume given our tough compare in the previous year with all the Fed funding coming through. We were going to put some pricing actions in place.

And so, it's mainly in the Merchant Acquiring segment.

I mean, as it relates to the $2 million and it's mainly in our Business Solutions segment and that's related to as we said the completion of projects from Banco Popular mainly driven by their acquisition of Reliable and our integration of those systems and we reached a milestone during the quarter, that allowed us to recognize that portion of revenue that we mentioned..

I don't think that answers the question or if you had a follow-up as well..

Yes, I mean, so, and then in that same narrative Joaquin, you had called out, I may be confusing topics here, but with your early remarks on 2020. I thought you had said $4 million to $5 million impact to 2020 is that….

Yes. So that is, yes, so that $4 million to $5 million is related to the account attrition that we have been seeing in Latin America, we closed out those -- those accounts, a few years ago and given the time-lapse its taken those clients to roll off, we continue to see a tail and we expect that originally three to five this current year.

Those have gotten delayed which we benefited from and during the year, but now we have a tail going to 2020, which we call that will be $4 million to $5 million..

Got it..

And that number just for additional information is based on communications with the clients and their expectations as to when they expect to actually roll off..

Understood. Okay, I'll jump back into the queue. Thank you..

Thanks, Jamie..

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

Hi, thanks for taking my question. I guess, first question, there has been a fair amount of consolidation going on the island. How do you see that impacting EVERTEC in the near-term or the longer term, I mean do you see that as creating more cross-sell opportunity for you or is there a risk on pricing as these relationships get larger.

Can you talk about that a little bit?.

Yes, so right now, if you look at the deals for everybody, Oriental is taking over Scotia, and First Bank is taking over Santander, all of those are clients today and they're members of ATH and we have business with them across different segments.

So, in the short term, we don't see really any material impact because of the share that we have today and that we already have existing relationships..

Understood. And then just going back to the Popular comment, I understand you said this is something that's happened before, but I don't remember you guys ever calling out -- calling it out before. So I just wanted to understand what's different this time.

And if you could give us a little bit more history on what's typically happened in the past, what kind of pricing negotiations, you've had to do historically?.

Sure. Not necessarily specific to pricing, we've had many disputes with the bank, where we happen to sit down and negotiate and come up with some type of resolution. Our relationship this large and this complicated that's invariable and we've always been able to resolve those.

On this specific issue, we're bringing it up right now, because as we go into 2020 as Q3 call, we always try and give you the puts and takes.

And unfortunately, sometimes there's ambiguity to them like the Santander deal, the Citi deal, even the place to pay revenue and similar to this, we can't comment on the scope but just that we have these types of disagreements, we've historically resolved them and we're working on a specific one as well..

Got it. And just the very last one from me, on the government contract that you guys announced.

Can you provide any more color on the magnitude of that contract? And if you have visibility into when that might get signed?.

I'm sorry, the government contracts that we, that we mentioned, have all been already signed.

As we went into our Q2 call, we actually mentioned that we obviously given the turmoil and the turnover in the government, and we had some contracts up for renewal, that situation caused some delay that we're calling out impacted us in the payment Puerto Rico segment, on our Business Solutions segment. But we have now executed on all contracts.

So we don't expect anything additional going forward..

Understood. Thank you very much..

Thanks, Vasu..

Our next question comes from George Mihalos from Cowen. Please go ahead with your question..

Hey, good afternoon, guys. Thanks. Thanks for taking my questions.

Looking at the payment services in Puerto Rico and Caribbean, the pressure on the EBITDA margin this quarter, it sounds like there is, there are some puts and takes on one-timers over there, how should we think about that going into fourth quarter, now that you have the government contract signed, should we continue to think that there'll be elevated project expenses though as we go from 3Q to 4Q?.

So yes, I mean our expectation would be to get to a more normalized EBITDA margin as it relates to our payment Puerto Rico segment, as you mentioned, George. We did have [indiscernible] going in there.

We also had a platform going into production, where we had to incur specific expenses as part of our stabilization efforts to keep that up and running as it's a new system that's running. We still expect to see some of that kind of rolling to Q4. But we do expect to get to one up something more similar to what we saw in Q1 and Q2..

Okay, that's helpful. And then just a quick follow-up, Brazil was a geography that we haven't heard much about.

I know the strategic reasons why you haven't gone there from a processing standpoint or from an acquiring standpoint, but Mac, are there real -- are there additional opportunities there or is this kind of more of a one-off type opportunity?.

No. So what I'd tell you about Brazil. I mean it's one of the fast growing payment markets in the region, but it's highly, highly competitive, you got Stone, you got PagSeguro, you got the traditional players.

So what we found and what PayGroup had found their niche was is really providing licensed software to those businesses in Brazil given that sort of we are focused on Spanish-speaking smaller countries, where the other guys are less focused. It's not a priority for us.

We're not localizing the products, we're not building the processing model in Brazil, but where we can sell the license, where we can pick up business, we will continue to do so, we do have sort of an active pipeline, but primarily license business, license contracts..

Okay, thank you..

Yes. Thanks, George..

Our next question comes from John Davis from Raymond James. Please go with your question..

Hey, good afternoon, guys. Maybe just to start with bigger picture questions here, so as we sit through three quarters of '19, you have exceeded expectations and raised your guidance here a couple of times, despite I would say, lack of upsides on funding.

So maybe just talk about what's gone right, what exceeded your expectations so far? And then I have got a follow-up after that..

Yes, so I'll speak to that at the highest level and then let Joaquin give his thoughts as well. We said at the beginning of the year, we were very focused on innovation. We are very focused on being opportunistic as markets open. We've been very, very pleased with the opportunities that have unfolded in Latin America.

The acquisition of PayGroup has given us the Rolodex, the product set to help open up the Chilean market to help create a regional product with Citibank. And so we think the combination of our positioning and the market timing has gone very, very well this year. So we've been incredibly pleased with that.

I think, specifically in Puerto Rico, I've been very pleased with our innovation and our continued track record of rolling out functionality within ATH Movil, moving out to ATH and then we'll -- to ATH business and then the things that we're doing on the POS with pvot and some of the other innovations, where we're trying to compete more aggressively.

And the other piece of Puerto Rico, this was done well is making sure that we look at our customers, particularly in the merchant portfolio and look at make -- make sure we're pricing them appropriately and looking for opportunities to maintain our growth trajectory and our margins, by taking pricing actions, where we think that those will be effective.

So those are the things that I've been really pleased with this year. And that I think have gone well. And clearly and I'll throw that there is a Reliable conversion with the bank to I think we've had some great success with the bank.

I don't know if people know this but if you look at 2014 versus 2019, the incidents that our operational incidents with the bank have gone down 70%. If you look at the Reliable conversion, we've had one of the best conversions that we've had with the new business that they bought and this was one of the larger conversion.

So I think the execution, we've been very pleased with, and then the timing of the LatAm business opportunities.

Joaquin?.

No. I think you hit on every point. I mean, we've executed in LatAm, we've been able to find some very important contracts that show what we've been able to do with the products that we've acquired in Puerto Rico.

I would say, obviously the delaying funding continues to be, it will create uncertainty for us, but we've been able to execute through that with some of the pricing actions and executing on some of the projects that we've been able to mention as part of these calls that we've been putting into production and that are reflected in our financials..

Okay.

And then just as we kind of move to 2020 and I appreciate the color on the puts and takes, but it sounds like on the positive side, you have Santander, you have the CPI price increase and then continued innovation with pvot, ATH Movil and then potentially from on the headwind side, you have potentially whatever those pricing dispute is with the bank and what are we thinking about from a absolute level of -- what do think from an absolute level of spending in Puerto Rico, housing economies look today versus what you've got the end of the year, how do you think about it going into next year?.

I mean, it's something that we continue to monitor. And John, the unemployment rate, which we mentioned on the call is at a -- the lowest level, it's been in recent memory.

We continue to draw indicators versus pre-hurricane levels and they seem to be in a good place, obviously fed funds continue to be a significant factor in terms of what we can expect for 2020. We didn't see much of that fund flow into 2019. We are hopeful and expecting that we will see some of that start to move into 2020.

If you read the news, HUD has been looking to put somebody down in Puerto Rico or one person to controls are on the funding and hopefully that creates some traction in terms of funds flow and but -- again, we need to monitor it closely to have a better visibility and as we go into our Q4 call, we will have more details to share with you guys..

Okay. So sufficing to say, you probably feel better today about the next 12 months than you did when you sat here a year ago and gave initial color on 2019, is that fair to say..

Yes..

Okay. And then last one for me. Obviously leverage is down approaching two turns, didn't buyback much stock in the quarter.

Maybe talk a little bit on the M&A pipeline, what you guys are thinking, what the leverage comfort range is? How low, will you let leverage get and just kind of any commentary there would be helpful?.

So what I would start saying is our strategy hasn't changed. We continue to execute our strategy in terms of looking for or deploying capital for growth. And yes our leverage ratio is down, as we said in the beginning of the year. We want to be between two times and three times, so we're still kind of in that range.

We continue to be actively looking -- M&A, as I said is our, one of the main items in our strategy, and so, we continue to look and as we find opportunity that makes sense. We will execute on those. This quarter was a slower one compared to our previous quarters, but we continue to be consistent in how we plan on deploying capital..

Okay, thanks, guys..

[Operator Instructions] Our next question comes from James Faucette from Morgan Stanley. Please go ahead with your question..

Great, thank you so much. I want to follow up on that last question, you've highlighted the activity in Brazil and just the amount of investment and activity in the Latin American market. It seems to be fairly important right now.

I'm wondering, how that's impacting your ability to identify potential M&A targets or partnerships even and what the, like how -- if at any that activity is having on your view and objectives for the rest of Latin America..

So I'll kind of give you my view. And then let Joaquin, give you his. What we're finding now is given that we have the products that we're localizing and we said at the beginning of the year in the countries we're localizing them in, this is really opening up more organic opportunities.

And so, we're investing more CapEx in Latin America around those organic opportunities, which we didn't have five years ago, two reasons, one is the markets weren't opening and the second as we really didn't have the products to provide in the event that they did. So you will -- you have seen more investment in organic growth.

We are still looking actively at M&A. We're looking at PlacetoPay is a good example of a product that will help strengthen our position in Colombia and more importantly, it will help us complement the products that we don't have by giving us a nice gateway that not only we can use in South America but potentially back in Puerto Rico.

So we're still focused on those both when we look at the opportunities in the region, but I would say, our previous acquisitions have made the organic opportunities come more alive..

Well, the only thing I would add is and -- I'm not sure if you're also talking about a capital going into Brazil and so many different countries from that side. Some of the countries, we're looking at and that we're concentrating on Chile, Colombia, Uruguay, we have a presence in and we have people on the ground there.

We know that the -- the landscape. And so, we feel that that continues to give us an advantage in terms of identifying targets on what, how and where we want to deploy that capital..

Got it. That's really helpful. And then I want to ask specifically about Merchant Acquiring revenue growth, you called out some pricing benefits, but I'm wondering if that was in any particular segment of merchants, and do you expect additional pricing actions.

Just trying to think through kind of what the puts and takes and drivers of that merchant acquiring revenue growth might look like..

We haven't really broken down our pricing actions in terms of segments there..

Yes or parts of the portfolio, but what I can tell you, it's within our Merchant Acquiring segment and we've looked on both transactional fees as well as non-transactional fee and as we've said before and it's been some time since we've actually used pricing levers for -- for in terms of growth and it's something that we are very careful about doing.

We analyze our portfolios. And we look for relationships, where we think we have or we need to execute on pricing actions to make the relationship profitable and while we haven't let -- given that level of breakdown..

Yes. And sometimes as we do is just provide additional services around PCI.

So sometimes it's not just increasing pricing or changing price, I mean, Joaquin, has done a great job at reevaluating the portfolio and look at where we -- he thought we had margins that we, that -- now that we find, we need to increase, but it's also been rolling out some additional functionality and features..

Got it. Thank you. And then last question from me is you've had a few quarters of benefit -- benefit from monetizing ATH Movil.

Can you talk about where you are in those monetization efforts and how much there is to go before you kind of feel like you're at a steady state and can treat that business a bit more organically, if you will?.

Yes. So we started monetizing ATH Movil in Q3 of last year. So actually we just lapse that in this quarter and we continue to see growth on Movil -- our ATH Movil P2P app as well as our ATH Movil business app.

We're very focused on continuing to get merchants that use our P2P app for doing business into our merchant or our business side of the application and that should also continue or give us other alternatives to continue growing that that type of service, but at the same time, our focus on innovation is on looking for additional features and ways in which we continue to monetize not just the same service, what additional features within ATH Movil.

So, that's how we're looking at it into the future..

Great, thank you so much..

Ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the conference call back over to Mac Schuessler for any closing remarks..

I just want to thank everybody for joining us this evening and we look forward to seeing you as we travel on the road. Have a good evening..

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines..