Good day, and welcome to the EVERTEC Third Quarter 2022 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. Please note that this event is being recorded. Now, I would like to turn the call over to Mr. Kevin Hunt of Investor Relations.

Please go ahead, sir..

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'd 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'll now hand over the call to Mac..

Thanks, Kevin, and good afternoon, everyone. Our business performed well in the quarter despite the headwinds we faced. Some of which we knew about coming into the quarter and others that were unanticipated.

Our payments in Puerto Rico and LatAm revenues continue to grow very well driven by organic growth and also benefiting in part from the acquisitions that we completed during the year. In payments Puerto Rico, the year-over-year growth was driven by a combination of strong POS transactions.

In DTH mobile business growth and the contribution from the small acquisition completed in the second quarter. In Latin America, we continue to see very strong results driven by organic growth across the region, as well as the initial contribution from the BBR acquisition that closed on July 1st.

In terms of expected headwinds, the input add from the popular transaction that closed on July 1st was in line with our expectations as it affected year-over-year revenue growth and margins primarily in the Business Solutions and MAB segments.

We also experienced a modest revenue and margin impacts from Hurricane Fiona over the final two weeks of the quarter, primarily in our Merchant Acquiring segment. Margin and EPS were also negatively impacted by $7.8 million non-cash foreign currency remeasurement loss during the quarter and Joaquin will provide more details on that in a few minutes.

On today's call, I will start with the additional highlights from the quarter and I'll then turn it over to Joaquin who will provide further details on our third quarter results as well as an update to our 2022 outlook and high-level commentary on 2023.

Beginning on slide four, total revenue was $146 million for the third quarter, flat when compared to the third quarter of 2021. Adjusted EBITDA was $52 million, a decrease of approximately 25% and adjusted earnings per share was $0.40, a decrease of approximately 35% from the prior year.

Excluding the impact from FX remeasurement, adjusted EBITDA and adjusted EPS would have been $60 million and $0.53, a decrease of 14% and 15% respectively. During the quarter, we returned approximately $41 million to our shareholders through dividends and share repurchases and our liquidity remained strong at $344 million as of September 30th.

Moving to our Puerto Rico update on slide five. Hurricane Fiona was an unfortunate event this quarter, we are happy to say that all our employees are safe and our own operations were largely unaffected by the hurricane.

That said, Fiona was a disruption to the island and over the final two weeks of the quarter, we did see an impact to the Merchant Acquiring segment and to a lesser extent our Payment Processing segment. Certain parts of the island especially the Western part were hit hard and are still recovering from the heavy flooding and damage.

In line with our community values, we are deeply committed to helping the island to recover from tragedies like hurricane Fiona. To that end, immediately after the storm, we announced that we would donate up to $250,000 to help communities, as well as our employees that were impacted by the storm.

We enabled the donate feature on ATH Mobile to support hurricane relief and for a two-week period, we match specific donations made through the app. Turning to business results in Puerto Rico, Merchant Acquiring revenue was down slightly year-over-year given the tough comparable period and the impact from Fiona.

Payments Puerto Rico was up 15% on a year-over-year basis as we continue to benefit from POS transaction growth and the contribution from AGH mobile business as well as a small acquisition completed last quarter. Finally, our Business Solutions segment was down 15% year-over-year.

That decline was expected given the one-time credit granted upon closing of the Popular transaction. Additionally, as you may recall, we sold certain assets to [indiscernible] that has an annual revenue run rate of roughly $30 million. Now turning to Latin America on slide six.

LatAm revenue growth was strong once again, up 26% compared to the prior year. We continue to see growth across the region with robust organic growth with existing customers and a number of countries. We also had a nice contribution from the BBR acquisition.

I'm also very pleased to announce that we've expanded our relationship with MercadoLibre into Chile. Further positioning us as a Payment leader in the region.

As a reminder, we currently provide issuing services for MercadoLibre in Mexico and this expansion reflects our ability to create long-term partnerships with important clients in the industry, as well as the strength of our regional products.

Additionally, I am pleased to announce that we have signed Grupo Aval as a new customer for our place-to-pay gateway in Colombia. Grupo Aval is one of the largest banking groups in Colombia with over 18 million banking clients. We are excited by the opportunity to partner with such an important player in the region.

Next, let's turn to slide seven to cover a few additional items. Last quarter, we discussed the highlights of the Popular transaction and one of the benefits we mentioned with the requirement the Popular reduce its ownership of EVERTEC to under 5%, thereby freeing us from the bank holding company act.

We are pleased to report that this goal has been achieved and that's an obstacle being pursuing M&A transactions has been removed. As I already noted, the two acquisitions that we have closed this year are performing well and we remain committed to finding more deals in Latin America. Finally, I would like to turn to our people.

Specifically, our commitment to our scholarship program in Puerto Rico and Latin America. This program is now in its 8th year and we are pleased to report that this year we awarded 186 scholarships for a total of $190,000.

We are proud of awarded over $1 million in scholarships over the last eight years and look forward to continuing to support higher education in Puerto Rico and Latin America. With that, I will now turn it over to Joaquin to provide a more in-depth look at our third-quarter results..

Thank you, Mac, and good afternoon, everyone. Turning to slide nine. I think it's important to briefly explain how EVERTEC is impacted by fluctuations in foreign currency, given that as Mac mentioned we have a $7.8 million non-cash remeasurement loss impacting our results this quarter.

What are the effects is foreign currency translation? Which involves the process of bringing the financial information of our subsidiaries outside of Puerto Rico from foreign currencies to the reporting currency, which for us is the U.S. dollar.

Translation is very common and most companies we [indiscernible] are subject to this process, which doesn't result in gains or losses on results, but can have an impact on year-over-year growth because of currency fluctuations.

Translation is impacting our year-over-year growth negatively this quarter by about $900,000 or approximately 3% of growth for our LatAm segment. The second type of impact, it's foreign currency remeasurement and this is a result of EVERTEC's French subsidiaries having U.S. dollar balances which need to be converted to the local currencies.

This process does result in non-cash gains or losses that impacted our results. In our case, remeasurement is driven primarily by our Costa Rica entity where most of our customer contracts, our cash balances, and intercompany transactions are in U.S. dollars.

This quarter the Costa Rica currency had a drastic shift, which led to the $7.8 million non-cash remeasurement loss that is impacting our results, even though we still have the same cash and receivable balance in U.S. dollars.

With this brief overview in mind, I will now turn to slide 10, where you will see the consolidated third-quarter results for EVERTEC. Total revenue for the third quarter was $145.8 million, relatively flat when compared with $145.9 million in the prior year and generally in line with our expectations.

This quarter includes the impact of significant transactions that closed during that period, such as the Popular transaction in Puerto Rico and the BBR acquisition in LatAm.

More specifically, our third quarter results in Puerto Rico reflect an increased payment transaction volumes, continued growth of ATH mobile business, and revenue contribution from the small acquisition completed last quarter.

This was partially offset by expected declines in the Business Solutions segment, primarily driven by the Popular transaction, which included the $6.9 million one-time credit granted to Popular and the impact to revenue from the assets sold.

An additional offset was the impact from Hurricane Fiona in the last few weeks of September mainly in our Merchant Acquiring segment. Results in Latin America remain quite strong reflecting double-digit organic growth on the contribution from the BBR acquisition.

Adjusted EBITDA for the quarter was $52.4 million, a decrease of 25% from $69.8 million in the prior year and excludes the $135.6 million gain from the Popular transaction. Adjusted EBITDA margin was 35.9%, a 12% point decrease compared to the prior year.

The decline in adjusted EBITDA margin includes the expected impact from the Popular transaction I just mentioned, as well as the impact from the non-cash foreign currency remeasurement loss of approximately $7.8 million. The Popular transaction effects include the impact of the one-time credit granted to them.

The effect on the EBITDA margin from assets sold, which were at higher margin and the impact from the revenue-sharing agreement. The remeasurement loss, as previously discussed, is due to assets or liabilities held in U.S. dollars in some of our foreign subsidiaries. And in this case, mainly driven by Costa Rica.

Normalizing for these one-time effects, specifically, the one-time credit to Popular and the franc currency remeasurement loss, our adjusted EBITDA would have been approximately $67 million, a 4% decrease versus the prior-year quarter on a margin would have been approximately 44%, and approximately 400 basis point decrease versus the prior year and in line with our expectations.

Adjusted net income for the quarter was $27.1 million, a decrease of 40% as compared to the prior year, primarily reflecting the lower adjusted EBITDA on a higher adjusted tax rate.

Our adjusted effective tax rate in the quarter was 24.8% higher than expected and also negatively impacted by the foreign currency remeasurement loss, if we were to normalize for the remeasurement loss, our adjusted effective tax rate would have been approximately 18%.

Adjusted EPS was $0.40 for the quarter, a decrease of 35% compared to the prior year. Normalizing for the foreign currency remeasurement impact, EPS for the quarter would have been approximately $0.53 for the quarter. Moving on to slide 11, I will now cover our segment results, starting with Merchant Acquiring.

In the third quarter, Merchant Acquiring net revenue decreased 2% year-over-year to approximately $36.9 million as the prior year presents a tough comparable period, given the benefits from COVID-related federal stimulus and the normalization of spending patterns this year toward pre-pandemic levels in terms of our mix of sales, domestic versus international transactions, and average ticket.

As Mac noted, Hurricane Fiona caused a disruption to spending patterns over the final two weeks of the quarter and we estimate this represented a $1 million impact to MAB revenues. Additionally, our overall spread was down year-over-year due to a decrease in the average ticket which continues to slowly normalize.

We also saw a shift in the mix of volume towards lower margin verticals such as gas stations, supermarkets, and utilities from higher margin verticals like retail. This was expected given the stimulus funding in the prior year, the effects of inflation, higher gas prices, and the effect of hurricane Fiona in the last weeks of September.

Adjusted EBITDA for the segment was $13.9 million, down 28%. Adjusted EBITDA margin was 37.6%, down approximately 14% points as compared to last year.

Most of this decline was expected given the revenue-sharing agreement with Popular that commenced with the closing of the transaction, as well as higher processing costs aligned with the lower average ticket. Our margin was also negatively impacted by the effect of hurricane Fiona in the last couple of weeks of the quarter.

On slide 12, you will see the results for Payment Services Puerto Rico and the Caribbean segment.

Revenue for the segment in the third quarter was $44.6 million, up approximately 15% driven by increased transaction volumes for POS processing of 4% year-over-year, continued growth of digital payments mainly ATH mobile business, and continued benefit from increases in transaction processing and monitoring revenue from services provided to the LatAm segment.

We also benefited from a small acquisition completed in the second quarter. Partially offsetting some of these positive drivers was the impact of the aforementioned one-time credit granted to Popular as well as a small impact from Hurricane Fiona on processing volumes.

Adjusted EBITDA for the segment was $25 million, up slightly as compared to last year. Adjusted EBITDA margin was 56.1%, a 13 basis point decrease as compared to last year. Normalizing for the impact of the one-time credit to Popular, margin for the quarter would have been 56.6%.

On slide 13, you will see the results for our Payment Services LatAm segment. Revenue for the segment in the third quarter was $33.7 million, up approximately 26% as compared to last year.

Organic growth with existing customers continued to be quite strong with double-digit growth for the region overall, even with a foreign currency headwind of approximately $900,000. The BBR acquisition, which closed on July 1st also contributed to the year-over-year growth this quarter.

Normalizing for the effects of foreign currency translation, our year-over-year growth would have been approximately 29% in constant currency. Adjusted EBITDA for this segment was $3.2 million and adjusted EBITDA margin was 9.5%.

The year-over-year decrease was mainly driven by the $7.8 million non-cash foreign currency remeasurement loss previously discussed, which represented approximately 23% points of margin decline as well as the recognition of a low margin hardware sales in the quarter.

Normalizing for the effect of the non-cash remeasurement loss, our LatAm margin for the quarter would have been approximately 33% and aligned to our expectations. On slide 14, you will find the results for the Business Solutions segment. Business Solutions revenue for the third quarter was down approximately 15% to $49.3 million.

Most of the decline was related to the effects of the Popular transaction. As Mac mentioned, we sold assets with an estimated $30 million annual run rate. And as part of the new MSA with Popular, we provided a one-time credit amounting to $6.3 million in the Business Solutions segment.

There were several positive offsets to those headwinds as we completed several projects tied to the closing of the transaction. And some services that are part of the new MSA and we also benefited from some smaller one-time hardware and software sales.

For the quarter, adjusted EBITDA was $16.3 million and adjusted EBITDA margin was 33%, down approximately 12% points as compared to last year. As noted, with the other segments, this decline was expected given the main driver is a $6.3 million credit which flowed directly to EBITDA.

Additionally, the assets sold were higher margin contributions and this also impacted the margin in the quarter. Normalizing for the one-time credit, margin for the quarter would have been approximately 41% and aligned to our expectations. Moving on to slide 15. You will see a summary of Corporate and Other.

Our third-quarter adjusted EBITDA was approximately negative $6 million, a decrease of 18% compared to prior year. Our adjusted EBITDA as a percentage of total revenue was 4.1% which is below prior year and slightly better than our expectations for 2022 of 5%. Moving on to our cash flow overview on slide 16.

Our beginning cash balance was approximately $286 million including restricted cash of approximately $20 million.

Net cash provided by operating activities year-to-date was approximately $159 million, capital expenditures for the 9-month period were approximately $45 million and we continue to anticipate approximately $60 million of CapEx for the full 2023-year.

As noted on previous calls, in the second quarter, we acquired a company in Puerto Rico and recognized the customer relationship of approximately $10.6 million in connection with the acquisition. On July 1st, we closed the BBR acquisition for approximately $51 million, including approximately $7.1 million in certificates of deposits.

We've made approximately $10 million in long-term debt payments, approximately $6 million in withholding taxes on share-based compensation, and approximately $1 million of other debt pay downs which resulted in a total net debt decrease of approximately $16 million. We paid cash dividends of approximately $11 million year-to-date.

And during the third quarter, we repurchased approximately 1.2 million shares of common stock for a total of approximately $37 million, including $25 million from the secondary offering and we have approximately $102 million remaining in the company's share repurchase program.

We have repurchased approximately $73 million in shares through September 30th. Additionally, on July 1st, we also received approximately $4.6 million EVERTEC shares from Popular in connection with the transaction closed. Our ending cash balance as of September 30th was $244 million and this included approximately $19 million of restricted cash.

Moving on to slide 17, you will find a summary of our debt as of September 30th, 2022. Our quarter-ending net debt position was approximately $233 million comprised of approximately $225 million of unrestricted cash and $458 million of total short-term borrowings and long-term debt.

Our weighted average interest rate was approximately 5.9%, our net debt to trailing 12-month adjusted EBITDA was approximately 1.4 times. As of September 30th, total liquidity was approximately $344 million, this balance excludes restricted cash and includes the available borrowing capacity under our revolver.

Moving on to slide 18, I will now provide you with an update on our 2022 outlook as well as some initial comments to help you think about 2023. We are pleased with the continued strong growth in both Puerto Rico and Latin America and the impact to revenue from the Popular transaction has been consistent with our expectations.

We did see some impact from Hurricane Fiona at the end of the quarter, but we saw transaction volumes return to normal by mid-October. So we do not expect additional headwinds from the storm in Q4.

It's worth noting that the new MSA does provide for a CPI adjustment for the fourth quarter capped up 1.5% for most MSA services and 5% for short-term payment services. Given those factors, we continue to expect revenue to be in a range of $607 million to $615 million, representing growth of 3% to 4%.

Excluding the impact from foreign currency remeasurement and the modest impacts from Fiona, EBITDA margin for the third quarter was largely in line with our expectations including the anticipated impacts from the Popular transaction.

As discussed, the currency adjustment was significant in the quarter, providing an approximately 500 basis point headwind to the third quarter alone.

We are not assuming any additional impact from currency remeasurement in the fourth quarter, but when we flow through the impact from the third quarter, this reduces our EBITDA margin expectation for the full year closer to 44%, down from our prior expectation of between 45% to 46%.

Given the tax impact noted earlier, we are now expecting our tax rate to be in a range of 17% to 18%, up from our prior expectation of between 14% to 15%, and our interest expense assumptions continues to move higher given the rising rate environment.

We are also including in the third quarter foreign currency remeasurement in our updated adjusted EPS guidance for the year, which results in unexpected adjusted EPS outlook of $2.36 to $2.47 per share. This represents a year-over-year decline of 14% to 10% as compared to the adjusted earnings per share in 2021 of $2.74.

This guidance also includes the benefits of the share repurchases of $73 million and the approximately $4.6 million reduction in share account that occurred on July 1st related to the Popular transaction. Turning to 2023, I will highlight some key configurations.

First, while we are pleased with the completion of the Popular transaction, this will create important headwinds in the first half of next year. The MAB segment EBITDA margin will be impacted by the revenue share with Popular unexpected to reset closer to low 40s margin.

And the Business Solutions segment revenue will be impacted by the sale of assets, which as a reminder, we have stated is approximately $30 million in revenue on an annualized basis. EBITDA margin for the Business Solutions segment are also expected to reset in the low to mid-40s as the assets sold were of higher margin contribution.

Offsetting some of these headwinds is the CPI escalator which under the renewed agreement has a 1.5% cap for most services under the MSA and 5% for some of our Payment Services with Popular.

Additionally, we will anniversary the acquisition completed in Puerto Rico during the second quarter and will also anniversary the BBR acquisition in Latin America during the third quarter. Lastly, as we mentioned, the rising rate environment will have an impact on our interest expense and we expect this will be the case into 2023.

In summary, we are pleased with our results through the first nine months of 2022 on our positioning for the future following the Popular transaction. We look forward to hopefully seeing you in person at our conferences later in the coming months. Operator, please go ahead and open the line for questions..

Thank you. I'll now begin the question-and-answer session. [Operator Instructions] First question comes from Jamie Friedman of Susquehanna. Please go ahead..

Hi, lot of hard work here and appreciate the detail in the slides. I wanted to ask, so did you say you were going kind of quick there what the contribution was for BBR, for the BBR acquisition? I think you said that FX-neutral was 29% growth.

But did you call out the acquired contribution?.

Hey, this is Mac, Jamie. We did not.

What we said it was 26% growth, we lost 3% of growth because of FX, but we didn't call out BBR, right?.

Okay, thanks for that, Mac. And then so if I'm doing the math right, if you're seeing $30 million impact from beef up on an annual basis.

If I were to say $7.5 million per quarter rounding, my calculation is that Business Solutions would have been roughly flat, absent, and transaction is, is that in the ballpark?.

We had two impacts. One is you had sold revenue and so your calculation, I mean, not necessarily even from quarter to quarter but that's a good estimation, but you also had the reversal of the CPI, which was a pretty significant reversal that we called out as well..

Yeah. Okay..

That's an additional $6.4 million or $6.3 million to the Business Solutions segment, Jamie, so you have to Mac's point the $30 million annual run rate which your calculation is right based on that, and then incrementally for this quarter, specifically that $6.3 million impact from the one-time credit..

Got it. Okay, all right. Thanks for the details, guys. I'll drop back in the queue..

No problem..

Thanks, Jamie..

Thank you. Next question will be from Mr. John Davis from Raymond James. Please go ahead..

Hey, good afternoon, guys.

A lot of moving pieces here, Mac, but if I look at third-quarter earnings, I think if you exclude FX, you said $0.53, are you going quickly working, but did you say a $1 million revenue impact from the hurricane? Just want to make sure I understood that correctly or any other color you can give on the third quarter impact from the hurricane?.

That's correct, John. The impact was mostly to our Merchant Acquiring segment, we're estimating that to be about to $1 million on the top line. And yeah, those have a flow through to EBITDA. But the main impact is to your point different currency remeasurement losses that we detailed in the prepared remarks..

Okay. So lots of moving pieces here but if I take a step back as we look, and I think a couple of times you said that the transaction was kind of in line with your expectations, but if I just add back a couple of pennies for the hurricane, it looks like 3Q was a little bit light even excluding things but 4Q is implied to be a little bit better.

So is it fair to say that kind of excluding the one-time items, everything is kind of in line with expectations and absent interest expense, nothing changes from your view of earnings power as we head into 2023?.

That's correct. So when you start to just for some of the one-time that we called out, John, and obviously the impact from the tax rate, which was also affected by the foreign currency remeasurement impact. We would have pretty much been within the earnings part that we kind of guided towards last quarter for this 2022 year..

Okay. So I guess the point, you made some good call for '23. But as we think about 2023 obviously these onetime things won't repeat your thinking, similar revenue growth, similar margin profile for '23 that you were thinking three months ago, maybe the only slight difference, as we have a little bit higher rates.

So you have a little bit of a higher interest expense going into next year?.

That's fair. Obviously, we're not giving '23 guidance but at a high level, I think what we wanted to highlight more than anything, John, is we've been giving some numbers based on what we expected. It kind of different segments to look like from a margin perspective, post transaction and when we start to normalize for some of the onetime impacts.

We're very close to what we expected. So your statement is correct..

Okay.

And then last one for me, Mac, just obviously you did this transaction with BPOP to clean it up, clean up the story and enable you to do M&A, so maybe just comments on the M&A pipeline, obviously you guys were tied up for a while probably getting this BPOP transaction closed, but now that we're kind of three months in the rear-view mirror, any comments on the M&A pipeline, how you see it obviously ample capacity with levered at 1.4 times, but any color there would be appreciated?.

Yeah, I mean, as you know, we don't really talk about something that we hadn't, but I'd say we're even more focused than we were before.

We've got a great balance sheet, we now don't have the regulatory requirements and we're actively looking at targets as we speak, and we hope is markets start to rationalize as rates stay up, that will continue to find some attractive opportunities and then I would point you to the organic stuff, I mean MercadoLibre is the most valuable and best e-commerce company in the region and we just extended from Mexico, now into Chile with those gaps, which is a significant testament to our brand.

And then also Grupo Aval, most people probably are not familiar with that bank, but they're the holding company, some of the largest banks in Colombia, they've got about 18 million bank clients and about 60 million pensioners in the country of Colombia. So we're pretty excited about those guests on FRE's e-commerce gateway..

Okay. Appreciate the color. Thanks, guys..

Thank you. Next question will be come from Vasu Govil of KBW. Please go ahead..

Hi, thank you for taking my questions. I guess the first question for you, hopefully, in the guidance, for the fourth quarter, it seems to be still a pretty wide range, so maybe you could help us think about the key variables that could push us to the lower-end versus the higher-end.

And then within that, I guess as it relates to hurricane Fiona, I know obviously a very unfortunate event. But in the past when calamities like that have happened, you've seen a pickup, there tends to be a pickup in insurance proceeds, and that sometimes drive increased spending in ensuming period.

So like how are you thinking about those dynamics playing out?.

Hey, Vasu. So, taking the second part of your question first. What I would say as it relates to Fiona, I mean there is no significant funding really expected as a result of the hurricane. Most of the metropolitan areas we're up and running relatively quickly. There are certain areas that and we said this in the remarks are still pretty impacted.

So there are some funds coming into kind of do some reconstruction and help some of those businesses, but it's not to the extent or we are not expecting that type of impact that we saw or even close to that impact with Maria. So we're not expecting any real tailwind as a result of Fiona or any expected funding here into the fourth quarter.

In terms of the range and the guidance, I mean from a topline perspective, we've kind of maintained the range that we had last quarter from that high side, I would say that it's mainly related to our -- to the spending here in Puerto Rico.

Obviously, given the good tough compares of the prior year, it is difficult from quarter-over-quarter to define what's really the normalized baseline from which to grow and so that's why we're keeping that kind of a wider range than usual..

Thank you. That was the helpful color. And I guess my follow-up would be on the Payments Processing sort of segment in Puerto Rico and the Caribbean, that was Payment Services segment. Sorry, that was pretty strong.

And I got the transaction growth in the ATH mobile, but maybe you could talk about what surprised you the most of the upside and can we expect this trend to continue into the fourth quarter and then into next year?.

In terms of payment in Puerto Rico, number one, we have a small acquisition that we did in the second quarter that's definitely helping us in terms of the topline growth here over the prior year. But I would say that two things continue to perform very well.

One is ATH mobile business, which continues to grow and continues to be, have a very good contribution per transaction. So we continue to look for ways to penetrate the cash environment in Puerto Rico and ATH mobile business continues to be a very good product for that.

And in addition to that, some of the ancillary services that we have within Payment Services, like for example we do issuing for some of the healthcare companies in Puerto Rico, we actually signed a few years back with them have also continued to perform healthcare companies in Puerto Rico continuing to look for ways to electronify some of the benefits that they are giving their customers.

We've become a pretty good source to help them do that. So we've also driven, I would say better than expected growth from those products..

And I would just reiterate the ATH mobile business. We're converting P2P transactions often to business transactions, that still remains an opportunity into the future. I will say Vasu as I did mentioned in kind of the 2023 configurations. We will anniversary the small acquisition we did in Q2 of next year.

So I would say that there will be some moderation once we anniversary the acquisition..

So fair, and then Mac, if I could sneak in just one small one for you, just to follow up on the M&A question before, have valuations started to reset to a level that you think again become actionable in the near term.

And then, specifically, what type of assets are you most interested in, is it more of the bank JV type of staff or more technology assets sort of what regions if you could give more color on how you're thinking, what you think might make more sense?.

Sure. I mean I would say what -- I would say, sellers haven't necessarily capitulated but we are having some more reasonable conversations around valuations and target realize they have to make money and it so the conversations have changed and become a bit more reasonable.

We're still focused on Latin America and we're still focused on the countries Colombia, Chile, Mexico, same countries that we're doing business in today. We're not focused of course on Venezuela or mainly focused on Argentina at this time. And I would say we love the payments businesses. We would look at a JV.

We would look at a issuing or acquiring business and we also might consider some adjacencies. So we might look at an adjacency that is a technology that we would sell to the same customer type, that we feel like we could scale given our network..

Super helpful. Thank you very much..

Thank you..

Thank you. Next question will be from James Faucette of Morgan Stanley. Please go ahead, sir..

Hey, guys. This is Jeff Goldstein on for James. Just following up on one of that the Vasu's questions. I know it's hard to have a crystal ball on these things, but if we're thinking about the Puerto Rico economy as a whole and it takes some of the macro drivers, the issues around the hurricane, and then just what you're seeing in your own business.

How are you feeling about the outlook for Puerto Rico today, may be compared to three months ago?.

I mean, compared to three months ago is in a very long time frame. What I would say is the Puerto Rico still slated to receive reconstruction funding from Maria which we've discussed in the past. It's quite significant but it's over a significant period of time. And that is still to come.

So I would say that Puerto Rico is shielded from the general macroeconomic environment that we're seeing, I mean from an inflation perspective, from an interest rate perspective. Having said that, Puerto Rico because of everything that happened with the hurricanes and COVID stimulus which on a per capita basis was more meaningful.

There are certain economic factors that seems to be in a stronger place than they have been before and that for us is encouraging in terms of continuing to have kind of a better macroeconomic backdrop with which we need to work on. But it's something that we need to continue to definitely monitor and that continues to grow..

Yeah, I mean, I would just add. Look there still funding from Maria that needs to come in right to rebuild some of the infrastructure and some of the housing and there's also the infrastructure bill that Congress passed. So we still on a relatively small economy, have some nice tailwinds for the short term..

Got it. Okay and then just on the expansion of the MercadoLibre relationship into Chile.

Is there anything you can talk about related to the economic contribution from that and then you mentioned obviously having a relationship with MercadoLibre in Mexico right now, but how should we think about additional geographic expansion possibilities for that relationship?.

So, we haven't broken out the financial impact. What I would tell you is both countries now in MercadoLibre we're very specific, we only announce those deals are in production. So we are in product, we have been in production in Mexico for a while and it's exceeded our expectations.

And then we are now in production in Chile where a group of all we've just signed the contract. So we've got to bring that up, which is our e-commerce gateway. It's prepaid and debit in both countries.

And like I said, we're not breaking it out the numbers, but I will tell you we've exceeded our expectations in Mexico, which is contributing to the strong organic growth and we now have implemented it in Chile. It will take a while to ramp. But it should have an impact on us over the long term as well..

The only thing I'll add is to my last point there, I mean this is a ramp-up around raising production what they are, starting this business in Chile, it is unlike we're migrating a portfolio of cards that's going to give us immediate contribution to our top line growth.

Having said that, it's a great relationship to Mac's point exceeded expectations in Mexico. So over time, we're expecting this to ramp up and start contributing in a more meaningful way..

All right. I appreciate the color..

Thank you..

Thank you. [Operator Instructions] Actually we will have a question. Next question will come from Chris Kennedy of William Blair. Please go ahead..

Hey, good afternoon, and thanks for all the detail a thanks for taking the question. Can you talk a little bit about the acceleration of your Latin America business? I think you've had multiple quarters of accelerating growth.

Just kind of talk about what's driving that, if you can?.

Yeah, I mean I'll just running from a high level, we've localized our place-to-pay platform now, it's now over seven countries, so we're seeing that volume come through, as I talked about MercadoLibre is exceeding expectations.

So it's been some nice pieces of business that we've won over the last year or two and it's the look continued localization of the products that we purchased through M&A..

I'll add a couple of more points. One, I think we've mentioned like couple goal of cross-selling opportunities that we've been able to close in Nebraska, a couple of years that again have started small and have now gotten to a point where the contribution is impacting the overall segment a little bit more.

The same goes for some of the Mexico relationships that we've announced MercadoLibre in Mexico, and [indiscernible] in Mexico. We kind of announce those wins maybe a year or year and a half ago, and they have now gotten to a point where they've gotten traction and they are contributing in a more meaningful way.

So, I think to the extent that we continue to put some of these pieces together and they start to grow over time. This has been the expectation, these are markets that are expected to grow at this space and we're trying to put ourselves in that--in those positions with some of these client wins..

I mean, Chris, what ultimately this has done is we've built distribution channels now in each of these countries. And now that we have products where we have our own IP, like Joaquin said we can cross-sell and up-sell and over time, create leverage. So we're pretty excited..

Yeah. Fantastic. I appreciate that.

And then just a small one, can you give the current revenue contribution from ATH mobile business and the other ATH mobile initiative you have?.

We haven't broken that out, Chris..

Okay, understood. Thank you..

Thank you..

Thank you. That concludes our question-and-answer session. Now I'd like to turn the call back over to Mr. Mac Schuessler for closing remarks..

Thank you. I want to thank everyone again for joining our call and we look forward to seeing at upcoming conferences. Good night..