EVERTEC, Inc. (EVTC) Delivers Resilient Growth Amid Currency Headwinds in Q1 2025

EVERTEC, Inc. (NYSE: EVTC) has emerged as a standout player in the payments and financial technology sector, with its Q1 2025 earnings underscoring both its operational resilience and strategic agility. The company reported robust financial results, driven by cross-border acquisitions, organic growth, and disciplined cost management. However, headwinds such as currency fluctuations and shifting macroeconomic conditions continue to pose challenges. Below is an in-depth analysis of the quarter’s performance and its implications for investors.

Financial Fortitude Amid Uncertainty

The quarter’s highlights paint a picture of steady progress. Total revenue rose to $228.8 million, a 11% year-over-year increase, or 15% on a constant currency basis, reflecting strong organic growth and contributions from recent acquisitions like Grandata and Nubity. Adjusted EBITDA surged 14% to $89.4 million, with margins expanding to 39.1%, a testament to effective cost controls. Perhaps most compelling is the 21% YoY jump in adjusted EPS to $0.87, fueled by reduced share count and higher profitability.

Segment Performance: Winners and Losers

The company’s segmental results highlight both opportunities and vulnerabilities:- Merchant Acquiring thrived, with revenue up 11%, driven by improved transaction spreads and volume growth.- Latin America Payments and Solutions shone, rising 13% YoY or 22% in constant currency, bolstered by the GetNet Chile partnership with Santander. This collaboration enabled Evertec to onboard merchants at scale, underscoring its value proposition in the region.- Payment Services (Puerto Rico and Caribbean) lagged, with revenue increasing only 4%, due to the loss of Mercado Libre transactions, which will impact two-thirds of Q2 revenue. This underscores the company’s reliance on key clients and the need for diversification in this segment.

Strategic Momentum and Risks

CEO Morgan Schuessler emphasized a robust M&A pipeline, signaling confidence in Evertec’s ability to scale through acquisitions. The integration of GetNet Chile and the Brazil business turnaround—aided by leadership changes and pricing renegotiations—add to this optimism. However, risks loom large:- Currency Volatility: The 3.3% drag on revenue growth in Q1, primarily from Brazil and Chile, could worsen if currencies weaken further. - Margin Pressures: While Q1 saw margin expansion, executives warned that these gains may be “lapped” in subsequent quarters, risking contraction as pricing actions and cost cuts lose their impact.- Macroeconomic Uncertainty: Export-driven economies like Brazil and Chile face tariff and trade-related risks, which could dampen transaction volumes.

Outlook and Investor Takeaways

Evertec raised its full-year guidance, projecting 6.8%–7.7% constant currency revenue growth and 4.9%–7.6% adjusted EPS growth. The company’s liquidity remains strong at $460 million, with net debt at $704 million, a manageable 2.04x net debt/EBITDA ratio. While the Mercado Libre exit is a near-term drag, the $3.2 million dividend payout in Q1 and disciplined capital allocation strategy signal a focus on shareholder returns.

Conclusion: A Story of Growth with Guardrails

EVERTEC’s Q1 results affirm its position as a payments powerhouse in Latin America. The 21% EPS growth and 14% EBITDA expansion demonstrate operational excellence, while the $85 million capital expenditure plan underscores investment in long-term infrastructure. However, investors must weigh these positives against currency risks and margin pressures.

The loss of Mercado Libre transactions—a temporary setback—is expected to stabilize by mid-2025, aligning with the company’s revised guidance. Meanwhile, the GetNet Chile partnership and M&A pipeline position Evertec to capitalize on underpenetrated markets. With a 6.7% dividend yield and a track record of execution, EVTC offers a compelling risk-reward profile for investors willing to navigate near-term volatility.

In sum, Evertec’s Q1 performance reaffirms its growth trajectory, but its success hinges on navigating currency fluctuations and maintaining margin discipline—a balancing act that will define its path in 2025 and beyond.