EVERTEC, Inc. (EVTC) Bundle
Understanding EVERTEC, Inc. (EVTC) Revenue Streams
Understanding EVERTEC, Inc.’s Revenue Streams
The revenue analysis of EVERTEC, Inc. outlines the primary sources of revenue, growth rates, and contributions from different business segments.
Breakdown of Primary Revenue Sources
As of September 30, 2024, the company generated revenues from four main segments:
- Payment Services - Puerto Rico & Caribbean: $159,985,000
- Latin America Payments and Solutions: $224,914,000
- Merchant Acquiring: $133,855,000
- Business Solutions: $181,567,000
The total revenue for the nine months ended September 30, 2024, was $629,091,000, which represents a significant increase from $500,088,000 in the same period for 2023, marking a growth rate of 26%.
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth rates for the segments are as follows:
| Segment | 2024 Revenue ($000) | 2023 Revenue ($000) | Growth Rate (%) |
|---|---|---|---|
| Payment Services - Puerto Rico & Caribbean | 159,985 | 150,824 | 0.8% |
| Latin America Payments and Solutions | 224,914 | 120,548 | 86.2% |
| Merchant Acquiring | 133,855 | 122,152 | 9.5% |
| Business Solutions | 181,567 | 169,188 | 7.6% |
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to the overall revenue for the nine months ended September 30, 2024, is as follows:
| Segment | Revenue ($000) | Percentage of Total Revenue (%) |
|---|---|---|
| Payment Services - Puerto Rico & Caribbean | 159,985 | 25.4% |
| Latin America Payments and Solutions | 224,914 | 35.7% |
| Merchant Acquiring | 133,855 | 21.3% |
| Business Solutions | 181,567 | 28.9% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams for the nine months ended September 30, 2024, include:
- Latin America Payments and Solutions: Increased by $104,366,000 compared to 2023, primarily due to the Sinqia acquisition and organic growth.
- Merchant Acquiring: Increased by $11,703,000, attributed to growth in sales volume and improved spread.
- Business Solutions: Increased by $12,379,000, driven by completed projects, mainly for Popular.
A Deep Dive into EVERTEC, Inc. (EVTC) Profitability
A Deep Dive into EVERTEC, Inc.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, total revenues reached $629.1 million, compared to $500.1 million in the same period in 2023, marking a growth of 26%. The operating costs and expenses for the same period were $511.4 million, leading to an income from operations of $117.7 million.
| Metric | 2024 | 2023 | Growth (%) |
|---|---|---|---|
| Total Revenues | $629.1 million | $500.1 million | 26% |
| Operating Costs and Expenses | $511.4 million | $385.7 million | 33% |
| Income from Operations | $117.7 million | $114.4 million | 3% |
Trends in Profitability Over Time
Net income for the nine months ended September 30, 2024, was $74.1 million, compared to $68.1 million in 2023. The net profit margin thus stands at approximately 11.8% for 2024, showing an increase from 13.6% in the previous year due to rising operating costs.
Comparison of Profitability Ratios with Industry Averages
The adjusted EBITDA margin for the nine months ended September 30, 2024, was 39.9%, compared to the industry average of approximately 35%. This indicates a strong position relative to peers, driven by effective cost management and revenue growth across all segments.
| Metric | Company Value | Industry Average |
|---|---|---|
| Adjusted EBITDA Margin | 39.9% | 35% |
| Net Profit Margin | 11.8% | 10% |
Analysis of Operational Efficiency
The cost of revenues for the nine months ended September 30, 2024, amounted to $302.4 million, an increase of 27% from $238.1 million in 2023. Selling, general and administrative expenses rose by 29% to $107.9 million.
| Expense Type | 2024 | 2023 | Growth (%) |
|---|---|---|---|
| Cost of Revenues | $302.4 million | $238.1 million | 27% |
| SG&A Expenses | $107.9 million | $83.8 million | 29% |
| Depreciation and Amortization | $101.1 million | $63.7 million | 59% |
The adjusted EBITDA for the nine months ended September 30, 2024, was $251.6 million, reflecting a solid operational efficiency despite rising costs, attributed mainly to the Sinqia acquisition and organic growth in all segments.
Debt vs. Equity: How EVERTEC, Inc. (EVTC) Finances Its Growth
Debt vs. Equity: How EVERTEC, Inc. Finances Its Growth
Debt Levels: As of September 30, 2024, the company had total debt of $973.25 million, down from $997.55 million at December 31, 2023.
- Term A Loan: $432.31 million (variable interest rate)
- Term B Loan: $522.41 million (variable interest rate)
- Deferred Consideration: $11.42 million
- Note Payable: $7.11 million
Debt-to-Equity Ratio: The debt-to-equity ratio as of September 30, 2024, is approximately 1.93. This is compared to the industry average of around 1.50.
Recent Debt Issuances: In October 2023, the company amended its credit agreement, adding a $600 million Term Loan B facility maturing on October 30, 2030. The company prepaid $60 million of the outstanding balance on this facility in the fourth quarter of 2023.
Credit Ratings: The company maintains a credit rating of B2 from Moody’s and B+ from S&P, indicating a high level of credit risk.
Refinancing Activity: The company refinanced its existing credit facilities in 2022, which included a $415 million Term A facility and a $200 million Revolving Facility maturing in December 2027.
Balance Between Debt Financing and Equity Funding: The company balances its capital structure through a combination of debt and equity financing. For the nine months ended September 30, 2024, the company paid cash dividends of $3.27 million and repurchased shares worth $70 million.
| Debt Type | Principal Amount (in millions) | Interest Rate Type | Maturity Date |
|---|---|---|---|
| Term A Loan | $432.31 | Variable | December 1, 2027 |
| Term B Loan | $522.41 | Variable | October 30, 2030 |
| Deferred Consideration | $11.42 | 2%-12% | October 2024 - March 2027 |
| Note Payable | $7.11 | Non-interest bearing (discounted) | September 1, 2030 |
Liquidity Position: As of September 30, 2024, the company reported cash and cash equivalents of $275.4 million, with an available borrowing capacity of $194 million under the Revolving Facility.
Conclusion on Financial Strategy: The company's strategy reflects a balanced approach to leveraging debt for growth while maintaining a healthy equity base, evidenced by dividend payments and share repurchases alongside debt obligations.
Assessing EVERTEC, Inc. (EVTC) Liquidity
Assessing Liquidity and Solvency of EVERTEC, Inc. (EVTC)
Current and Quick Ratios
The liquidity position of EVERTEC, Inc. can be evaluated through its current and quick ratios. As of September 30, 2024, the current ratio is calculated as:
Current Assets: $675.4 million
Current Liabilities: $378.1 million
Current Ratio = Current Assets / Current Liabilities = 1.79
The quick ratio, which excludes inventory from current assets, is:
Quick Assets: $675.4 million - $50.0 million (inventory) = $625.4 million
Quick Ratio = Quick Assets / Current Liabilities = 1.65
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was:
Working Capital = Current Assets - Current Liabilities = $675.4 million - $378.1 million = $297.3 million
This shows a healthy amount of working capital, indicating sufficient liquidity to cover short-term obligations. The working capital trend has improved compared to the previous year, with a working capital of $260.1 million as of September 30, 2023.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, are summarized as follows:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $184,897 | $158,295 |
| Investing Activities | ($65,462) | ($105,433) |
| Financing Activities | ($130,281) | ($63,689) |
| Net Cash Flow | ($17,442) | ($111) |
The operating cash flow increased by $26.6 million, while investing cash flow decreased, indicating a more conservative investment approach. However, cash used in financing activities saw a significant increase due to share repurchases, totaling $58.7 million in 2024.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $275.4 million in cash and cash equivalents, which includes $214.0 million held in foreign subsidiaries. The available borrowing capacity on the $200.0 million Revolving Facility is $194.0 million, providing further liquidity support.
Despite the strong liquidity position, concerns may arise from the significant cash used in financing activities and the increasing interest expenses, which totaled $57.4 million for the nine-month period in 2024 compared to $16.9 million in 2023.
Is EVERTEC, Inc. (EVTC) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we examine key valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the company's diluted earnings per share (EPS) was $1.11. Given a stock price of approximately $22.50, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $22.50 / $1.11 = 20.27
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, was $7.88. Using the current stock price, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $22.50 / $7.88 = 2.86
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash. The total debt as of September 30, 2024, was $975.6 million, and cash and cash equivalents were $275.4 million.
Market Capitalization = Stock Price Shares Outstanding = $22.50 63.6 million = $1.43 billion
EV = Market Capitalization + Total Debt - Cash = $1.43 billion + $975.6 million - $275.4 million = $2.13 billion
Adjusted EBITDA for the last twelve months was $323.3 million.
EV/EBITDA Ratio = EV / Adjusted EBITDA = $2.13 billion / $323.3 million = 6.59
Stock Price Trends
Over the past 12 months, the stock price has fluctuated from a low of $18.50 to a high of $25.00. The current price of $22.50 represents a 21.6% increase from the low.
Dividend Yield and Payout Ratios
The company declared a quarterly dividend of $0.05 per share, resulting in an annual dividend of $0.20. With the current stock price of $22.50, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = $0.20 / $22.50 = 0.89%
The payout ratio based on the EPS of $1.11 is:
Payout Ratio = Annual Dividend / EPS = $0.20 / $1.11 = 18.02%
Analyst Consensus
As of the latest reports, the analyst consensus on the stock is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 20.27 |
| P/B Ratio | 2.86 |
| EV/EBITDA Ratio | 6.59 |
| Stock Price (Current) | $22.50 |
| 12-Month Low | $18.50 |
| 12-Month High | $25.00 |
| Dividend Yield | 0.89% |
| Payout Ratio | 18.02% |
Key Risks Facing EVERTEC, Inc. (EVTC)
Key Risks Facing EVERTEC, Inc. (EVTC)
Overview of Internal and External Risks
EVERTEC, Inc. faces various internal and external risks that could impact its financial health. One significant risk is industry competition, particularly from fintech companies and traditional banks expanding their digital offerings. Regulatory changes also pose a risk, especially as the company operates in multiple jurisdictions with differing compliance requirements.
Market conditions, including economic downturns or fluctuations in consumer spending, can adversely affect transaction volumes and revenues. Additionally, operational risks related to technology failures or cybersecurity threats could disrupt service delivery and harm customer trust.
Operational, Financial, or Strategic Risks
According to the latest earnings report, the company reported total revenues of $211.8 million for the three months ended September 30, 2024, up from $173.2 million in the prior year. However, the cost of revenues increased to $102.5 million, a rise of 26% year-over-year. This increase in operating costs highlights potential operational risks associated with scaling operations and maintaining cost efficiency .
Financial risks have also been highlighted, with interest expenses soaring to $18.7 million during the same period, compared to $5.7 million in the previous year, reflecting a 228% increase due to incremental debt raised for acquisitions .
Revenue Concentration
The company faces revenue concentration risk, with approximately 32% of total revenues derived from a single customer, Popular, for the quarters ended September 30, 2024, and 2023 . This dependency could pose challenges if the relationship with this customer deteriorates or if their business needs change significantly.
Mitigation Strategies
To mitigate these risks, EVERTEC has focused on diversifying its customer base and expanding service offerings across different markets. The company has also invested in cybersecurity measures to protect against potential threats and has established compliance frameworks to adapt to regulatory changes. Furthermore, maintaining a strong balance sheet with cash and cash equivalents of $275.4 million as of September 30, 2024, provides a buffer against operational disruptions .
| Risk Factor | Description | Mitigation Strategy |
|---|---|---|
| Industry Competition | Increased competition from fintech and banks. | Diversifying service offerings and enhancing customer engagement. |
| Regulatory Changes | Compliance requirements vary by jurisdiction. | Establishing robust compliance frameworks. |
| Operational Risks | Technology failures and cybersecurity threats. | Investing in cybersecurity and technology infrastructure. |
| Financial Risks | Rising interest expenses due to debt. | Maintaining a strong balance sheet with adequate liquidity. |
| Revenue Concentration | Dependency on a single customer for a significant portion of revenue. | Diversifying the customer base to reduce reliance. |
Future Growth Prospects for EVERTEC, Inc. (EVTC)
Future Growth Prospects for EVERTEC, Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers that will shape its future trajectory:
- Product Innovations: The introduction of new payment solutions and enhancements to existing platforms are expected to drive user engagement and transaction volumes.
- Market Expansions: Expansion into new geographical markets, particularly in Latin America, is anticipated to increase revenue streams significantly.
- Acquisitions: The acquisition of Sinqia and other strategic partnerships will enhance service offerings and broaden customer bases.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, total revenues are projected to reach $870 million, representing a growth rate of approximately 25% compared to the prior year. The earnings per share (EPS) is estimated to be around $1.50 for 2024, showcasing a robust growth trajectory driven by operational efficiencies and market expansions.
Strategic Initiatives or Partnerships That May Drive Future Growth
A number of strategic initiatives are underway:
- Partnership with Leading Financial Institutions: Collaborations with major banks to enhance digital payment solutions.
- Investment in Technology: Significant investments in cloud services and cybersecurity to improve service delivery.
- Expansion of ATH Movil: Continued growth in the ATH Movil platform is expected to drive transaction volumes and user adoption.
Competitive Advantages That Position the Company for Growth
The company maintains several competitive advantages:
- Established Brand Recognition: A strong reputation in the payments industry facilitates customer trust and retention.
- Diverse Service Portfolio: A broad range of services including payment processing, merchant acquiring, and business solutions enhances market competitiveness.
- Strong Financial Position: As of September 30, 2024, total assets amounted to $1.1 billion, with cash and cash equivalents at $275.4 million, providing ample liquidity for growth initiatives.
Financial Data Overview
| Metric | Q3 2024 | Q3 2023 | Variance |
|---|---|---|---|
| Total Revenue | $211.8 million | $173.2 million | +22% |
| Net Income | $24.7 million | $10.0 million | +147% |
| Adjusted EBITDA | $50.5 million | $45.0 million | +12% |
| EPS | $0.39 | $0.16 | +144% |
In conclusion, the company's growth strategy is underpinned by strong financial performance and strategic initiatives aimed at enhancing its competitive edge across various markets.
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Updated on 16 Nov 2024
Resources:
- EVERTEC, Inc. (EVTC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of EVERTEC, Inc. (EVTC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View EVERTEC, Inc. (EVTC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.