EVERTEC’s third quarter saw revenue and adjusted profit surpass Wall Street expectations, yet the market responded negatively, reflecting concerns highlighted by management around margin compression and one-time costs. CEO Morgan Schuessler pointed to strong organic growth across all segments, particularly in Latin America, and noted the rapid recovery from a cybersecurity incident in Brazil. However, operating margin declined year-over-year, with CFO Karla Cruz-Jusino attributing this to higher processing costs and the impact of prior-year one-time revenue. Management emphasized that these factors, including increased tax rates and a shift in transaction mix, weighed on profitability, even as top-line trends remained positive.
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EVERTEC (EVTC) Q3 CY2025 Highlights:
- Revenue: $228.6 million vs analyst estimates of $224.1 million (7.9% year-on-year growth, 2% beat)
- Adjusted EPS: $0.92 vs analyst estimates of $0.89 (3.5% beat)
- Adjusted EBITDA: $92.61 million vs analyst estimates of $92.27 million (40.5% margin, in line)
- Adjusted EPS guidance for the full year is $3.59 at the midpoint, beating analyst estimates by 3%
- Operating Margin: 16.5%, down from 19.6% in the same quarter last year
- Market Capitalization: $1.87 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From EVERTEC’s Q3 Earnings Call
- James Friedman (Susquehanna): Asked about the durability of LatAm growth and product resonance in the region. CEO Morgan Schuessler responded that scalable platforms and recent wins validate their strategic approach and provide a foundation for further expansion.
- James Friedman (Susquehanna): Inquired about the contribution of cost-of-living (CPI) contract adjustments. CFO Karla Cruz-Jusino explained current caps and described how future escalators will allow for modest increases, but remain limited compared to actual inflation.
- Mark Feldman (William Blair): Sought clarity on cross-sell opportunities between Tecnobank and Sinqia. Schuessler said cross-selling is a key synergy, allowing financial institution clients to access a broader suite of products across both entities.
- Mark Feldman (William Blair): Asked about potential impacts from a U.S. government shutdown on Puerto Rico operations. COO Joaquin Castrillo said no current effect, but noted ongoing monitoring due to the territory’s reliance on federal funds for welfare programs.
- John Davis (Raymond James): Questioned if the Brazilian cybersecurity incident impacted business momentum. Schuessler replied that no commercial impact had been observed and that enhanced security could become a competitive advantage.
Catalysts in Upcoming Quarters
In the quarters ahead, our team will be tracking (1) the pace and profitability of new Latin America client ramp-ups, especially in Brazil, Chile, and Peru; (2) the ability to offset margin pressures from Puerto Rico pricing adjustments and contract escalators; and (3) signs that recent management changes translate into stable execution. Progress on integrating Tecnobank and achieving meaningful cross-sell will also be key to evaluating EVERTEC’s growth trajectory.
EVERTEC currently trades at $29.20, up from $28.10 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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