EVERTEC, Inc. EVTC

Key data

The business

EVERTEC runs the plumbing under money in Puerto Rico. When a Puerto Rican taps a debit card, odds are it clears across ATH, the island's home-grown network EVERTEC owns, and settles on software EVERTEC wrote and hosts for the bank. It processes card and merchant transactions, sells core banking systems, and books most of its money as recurring fees that arrive every time a transaction runs, not as one-off license sales. The old parent bank, Popular, is still the anchor: 24% of revenue in Q2 2026, down from 31% a year earlier, under a master services agreement with minimums running through September 2028. The moat is entrenchment. Ripping out a bank's payment rails is expensive, slow, and risky, so the installed base renews. Since 2023 the company has spent to bolt a second story onto that base: Latin American banking software, bought through Sinqia in Brazil in 2023, Tecnobank in October 2025, and Dimensa later in 2025.

The numbers

The top line has never been bigger and the bottom line has rarely looked worse.

Q2 2026 revenue of $274.8M grew 19.7% on the year, a record. Operating income held at $53.3M, a 19.4% margin. Then everything below the operating line went wrong at once. Other expense of $26.1M and an income tax bill of $20.3M, up from $4.1M a year earlier, cut net income to $6.9M and GAAP EPS to $0.09, from $0.62. On the adjusted numbers the Street watches, EVERTEC earned $1.05 and cleared the $0.95 estimate. That $0.96 gap between GAAP and adjusted is the whole argument.

The gap is mostly non-cash amortization of the intangibles created by Sinqia, Tecnobank and Dimensa, now 68% of total assets, plus a lumpy tax quarter. Cash tells the friendlier story: free cash flow yield is about 10%, and operating cash flow runs well above reported profit. The read that growth still leans on acquisition help held this quarter: Dimensa's first full period of consolidation drove much of the 20% jump, and the company still does not break out clean organic growth.

Revenue compounded 12.1% a year from FY2021's $589.8M to FY2025's $931.8M, the pace stepping up as each acquisition landed. Earnings are noisier: FY2022's $3.45 was flattered by a one-time gain on the Popular asset swap, and FY2023 fell to $1.21 as Sinqia debt and costs hit. Net debt sits at 3.0x EBITDA and interest is covered just 2.5x, the tightest line in the model. What the market pays about 13 times last year's GAAP earnings of $2.20 per share for is a business growing double digits with real cash conversion, carrying real leverage. It is priced as the levered Puerto Rico processor it was, not the Latin American software franchise it is trying to become. The one print that settles which is right is clean organic growth: if the Latin American book compounds on its own, the 13x is wrong.

Management

Insiders have been net buyers, unusual and worth the ink: about $2.25M bought against $1.48M sold over twelve months, led by director Vizcarrondo's $491K purchase in May 2026. Two officer sales landed in mid-August, Viglianco's $836K and Perez-Surillo's $552K. The filings do not state whether either ran under a 10b5-1 plan, so read them as discretionary until shown otherwise. Capital return is steady and reasonably price-sensitive: $69.3M of stock repurchased in FY2025 and another $20M in Q1 2026. The Popular relationship cuts both ways here too. Management agreed to a 10% discount on certain services from October 2025, the price of locking minimums through 2028.

How it fails or surprises you

Popular walks or renegotiates. One customer is 24% of revenue, roughly $260M a year, under minimums that expire September 2028 and a discount already biting since late 2025. A worse renewal, or none, removes a quarter of sales at high margin. Watch the annual MSA minimum disclosure and any amendment 8-K before 2028.

Leverage meets a currency. Net debt is 3.0x EBITDA and interest covered only 2.5x, with a growing share of cash flow now earned in Brazilian reais. A sharp real devaluation or a refinancing at higher rates squeezes coverage fast. The print that shows it first is interest coverage and net-debt-to-EBITDA over the next two quarters.

The GAAP number catches up to the cash (right tail). Adjusted EPS is near $4 and the Street sees $4.38 for FY2027 while GAAP is buried under acquisition amortization. If Latin American growth proves organic and durable, reported earnings converge toward cash and the ≈13x re-rates toward the ≈30x peers fetch. The reveal: FY2027 organic revenue growth above 8% with GAAP EPS recovering toward $3.

Closing thoughts

Organic growth in Latin America settles whether the market is right. The stock trades at 13 times because the market sees a levered processor tied to one shrinking customer, and the cash numbers say something richer is building underneath, and both readings are defensible until the company shows clean organic growth without acquisition help. Get that above high single digits and the cheapness is real; keep burying it under acquisition noise and the discount stays. An ambiguous print, low- to mid-single-digit organic growth, means wait another year and watch Popular's 2028 renewal. The left tail is Popular walking and leverage at 3x, which matters more than catching any re-rate. The right tail, if organic growth breaks through, is a re-rate from 13x to something closer to the 30x peers, supported by insider buying, a 10% cash yield, and falling customer concentration.

The bet is still that EVERTEC keeps running Puerto Rico's payment rails while its Latin American software business grows fast enough to replace what Popular gives up. What breaks it is the pair to watch every quarter: organic growth on one side, interest coverage on the other. If revenue keeps climbing while coverage keeps thinning and organic growth never shows itself clean, the market was right to pay only 13 times.