Good day, everyone, and welcome to the EVERTEC Incorporated 4th Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Luis Cabrera, Senior Vice President and Head of Investor Relations. Please go ahead, sir.
Thank you, operator. Good afternoon, everyone. Welcome to the EVERTEC Q1 and full year 2013 earnings call. I'm Luis Cabrera, Senior Vice President, Head of Investor Relations for EVERTEC. With me today is Peter Harrington, our President and Chief Executive Officer and Juan Jose Roman, Executive Vice President and Chief Financial Officer.
A replay of this call will be available until Wednesday, February 19. Access information for the replay is listed in today's financial press release, which is available on our website under the Investor Relations tab. As a reminder, this call may not be taped or otherwise reproduced without EVERTIC's prior consent. For those listening to the replay, this call was held and recorded on February 12, 2014. Before we begin, I would like to remind everyone that this call may contain forward looking statements as they are defined under the Private Securities Litigation Reform Act of 1995.
These forward looking statements about our expectations for future performance are subject to known and unknown risks and uncertainties. Evertake cautious that these statements are not guarantees of future performance. All forward looking statements made today reflect our current expectations only and we undertake no obligation to update any statements to reflect the events that occur after this call. Please refer to the company's most recent prospectus on Form 424B4 filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward looking statements. During today's call, management will provide certain information that constitute non GAAP financial measures under SEC rules, such as adjusted EBITDA, adjusted net income and adjusted net income per share.
Reconciliations to GAAP measures and certain additional information are also included in today's earnings press release. With that, we'll begin by turning the call over to Peter Harrington, our President and Chief Executive Officer. Peter? Thank you, Luis, and thanks everyone for joining us today. Our 4th quarter results cap a great first year for EVERTEC as a public company.
The results demonstrate the strength of our diversified business model and solid execution by our entire team. In 2013, we continued to advance our position as the leading transaction processor in Latin America. By successfully executing on the growth strategies we discussed with you during our IPO. I'd like to briefly recap some examples of how we've delivered on the growth plan in the past year. We continue to penetrate and gain share in our core markets across all of our products and services.
We signed 12 new payment customers in Mexico, Costa Rica, Belize, El Salvador, Honduras, the Dominican Republic, Panama, Puerto Rico and Jamaica. We signed deals to provide technology related services to the government of the U. S. Virgin Islands to the largest hospital management company in Puerto Rico. And we partnered with 1 of our large existing bank clients to increase the scope of services we provide to them in several geographies.
These are just a few examples of how we further penetrated and gained share in our core markets in 2013. We also continued to work with the major payment networks to bring more value added services to our customers And we launched brand new services like dynamic currency conversion in Costa Rica and security solutions for financial institutions through our partnership with Tyco. And finally, we continue to seek further expansion of our business through joint ventures and alliances. As I mentioned before, we're engaged in active active discussions with several potential merchant acquiring partners in Latin America and we're optimistic that we will execute one of these partnerships in the near term. In addition to our commercial achievements, we reached several financial and corporate milestones in 2013.
In April, we completed our IPO and successfully refinanced our debt, which resulted in significant annual interest expense savings. In August, we initiated a regular quarterly cash dividend of $0.10 per common share, taking advantage of our strong free cash flow generation and financial flexibility to increase total value to our shareholders. In the second half of twenty thirteen, we completed 2 secondary offerings and bought back $75,000,000 worth of our common stock, further underscoring our confidence in our long term growth prospects. In September, we added industry veteran Frank DeAngelo to our Board. As you saw in our press release this afternoon, the Board of Directors elected Frank as Chairman.
We're happy to have Frank as our Chairman and confident EVERTEC will benefit from his extensive experience in our industry. So 2013 was as I said earlier was a busy and great year for EVERTEC. Turning to our financial results. In the Q4, we again delivered strong revenue growth in our payments related businesses with merchant acquiring revenue up 9% and payment processing up 6%. Revenue growth in our payment businesses outside of Puerto Rico continues to be strong, again increasing in the double digits year over year.
We are seeing strong demand for our products and services in all of our non Puerto Rico markets with countries like Panama and Costa Rica leading the way, demonstrating not only the strong secular growth trends in these markets, but also the value we bring to our customers. We expect the solid momentum we've built in our payments businesses to continue through 2014. Our adjusted net income grew a strong 28% in the 4th quarter and adjusted earnings per diluted share increased 19% to $0.43 During the Q4, we completed a 15,200,000 share secondary offering from Apollo and Popular, which resulted in Apollo selling all of its remaining shares in EVERTEC. This offering included the repurchase of 3,700,000 shares of our common stock. As you saw this afternoon, our Board of Directors declared a regular quarterly dividend of $0.10 per common share.
We remain committed to the prudent return of capital to our shareholders and continue to dynamically evaluate the best use of our excess cash in the context of our strategic objectives. For the full year 2013, we delivered revenue of $357,000,000 and adjusted EBITDA of $178,000,000 both up 5% from the prior year. Our adjusted net income of 121,000,000 dollars was up 44% and our 2013 fully diluted earnings per share were 1.49 dollars which was at the high end of our expected range. Overall, our solid results for 2013 reflect the successful execution of our growth strategy and the continued secular growth in the payment markets in which we operate. In 2014, we will remain intensely focused on the execution of our growth initiatives.
We will continue to leverage our scale and leadership, our best in class network and our broad set of differentiated value added products and services to further penetrate and gain share in our core markets, expand in the new geographies, drive innovation, enter new verticals and create merchant acquiring alliances across Latin America. I will now turn the call over to Juan Jose, who will take you through our financial results in more detail. Juan?
Thank you, Peter, and good afternoon, everyone. As Peter mentioned, EVERTEC delivered solid financial performance in the quarter year. I will spend some time going through our 4th quarter and full year financial results in more detail and then conclude by providing our financial outlook for 2014. Beginning with our 4th quarter, on a consolidated basis, total revenues increased 3 percent to $93,300,000 up from $91,000,000 in the Q4 of last year. In the underlying segments, merchant acquired net revenue increased 9% to $19,800,000 driven mainly by increased transactions and sales volume.
Payment processing revenue for the 4th quarter increased 6% to $26,200,000 up from $24,800,000 in the prior year period. Revenue growth in the quarter was driven mainly by an increase in the ATH network and POS processing transactions and accounts on file within our car product business. Finally, business solutions revenue decreased 2% to $47,300,000 As we mentioned in the early earnings release, the year over year decrease in business solutions revenue was primarily due to the completion of certain projects in the Q4 of 2012 and to higher deferred revenue, partially offset by higher product sales. For the year, Pizza and Solution revenue grew 4%, which is in line with our previously discussed expectations. Moving to expenses.
On a GAAP basis, our 4th quarter total operating expenses were up approximately 2% compared with the prior year period. Cost of revenues excluding depreciation and amortization was 41,100,000 an increase of $700,000 or 2 percent from the corresponding 2012 period. The increase in our cost of revenues was mainly due to higher cost of sales and compensation benefits, partially offset by a reduction in other expenses and lower operating taxes. Selling, general and administrative expenses for the quarter were $8,300,000 up 1,400,000 dollars or 20 percent from the corresponding 2012 period. The increase was primarily due to a $1,100,000 of one time expenses related to a secondary offering of common stock we completed in December.
Income from operations for the Q4 was $26,600,000 an increase of 3% compared with the corresponding 2012 period. Excluding one time expenses related to the secondary offering, our income from operations increased 7% compared to the prior year. Total non operating expenses were $4,900,000 a decrease of $8,300,000 from the corresponding 20 12 period. The decrease was driven mainly by interest expense reduction of $8,700,000 resulting from our debt refinancing. We recorded an income tax expense of $1,600,000 in the 4th quarter.
On a cash basis, our income tax expense was approximately $300,000 As of December 31, 2013, we had approximately $85,000,000 of NOLs available to offset future tax payments related to our operations in Puerto Rico. Adjusted EBITDA for the Q4 was $49,100,000 a decrease of $3,000,000 or 6% from $52,100,000 in the corresponding 2012 period. This decrease was partly due to increased cost of sales resulting from higher product sales and lower dividend from equity method investment. In addition, as we mentioned in today's earnings release, the year over year adjusted EBITDA comparison for the quarter was affected by the inclusion of a pro form a adjustment in the prior year quarter related to the estimated net savings from the elimination of certain employees, temporary employees and professional services. Please note that this cost saving adjustment will not have an impact on adjusted EBITDA comparisons in future periods.
In the 4th quarter, we again delivered industry leading EBITDA margins of 52.6%. Our adjusted net income in the Q4 was 35 $400,000 up 28 percent from $27,700,000 in the prior year. This increase was mostly due to lower cash interest expense resulting from the debt refinancing we completed in April of last year. Adjusted net income per diluted share increased 19% to $0.43 from $0.36 in the prior year. Turning to a summary of financial results for the full year 2013.
Total consolidated revenue was $357,200,000 up 5% compared with 20 12 revenue. Merchant occurring revenue was $73,600,000 up 6% from the prior year, driven primarily by an increase in transactions and sales volume, partially offset by the impact in the first half of the year of certain effects of the Durbin amendment. Payment processing revenue was $99,300,000 up 5%, predominantly driven by an increase in ATH network and POS processing transactions and accounts on file. Finally, business solution revenue was $184,300,000 up 4%, driven mainly by increased demand on our network and core banking products and services. Adjusted EBITDA for the full year 2013 was $177,700,000 up 5% from 2012 driven by top line growth.
Adjusted net income was $121,300,000 up 44% from 2012 and adjusted net income per diluted share was above 49%, up 35%. Moving to our balance sheet. As of December 31, we reported $22,500,000 of our restricted cash and $735,900,000 of total short term borrowings and long term debt. During the Q4, we used approximately $25,000,000 of cash in hand and borrowed approximately $50,000,000 under our existing revolver credit facility to fund the $75,000,000 share buyback we completed in December, comparing with the secondary offering. During the quarter, we also made a mandatory repayment of approximately 4,800,000 dollars on borrowings outstanding under our Term A and Term B senior secured credit facilities and pay dividends of 8,200,000 dollars As of December 31, total liquidity, which includes unrestricted cash and available borrowing capacity under our revolver was approximately $72,000,000 We continue to generate significant levels of free cash flow.
For 2013, our free cash flow defined as adjusted EBITDA minus CapEx, cash interest expense and cash income taxes was approximately $124,600,000 up 38% from $90,400,000 in 2012. Now I will review our financial outlook for 2014. We currently expect total consolidated revenue of between $375,000,000 $382,000,000 for growth between 5% and 7% in 2014. This expectation is based on 2 factors, our success last year increasing sales to both new and existing customer and the continued strong cash to car conversion trend we're seeing in Puerto Rico and Latin America. We expect our adjusted EBITDA growth rate will be at least 100 basis points higher than our revenue growth rate.
Finally, we expect our fully diluted earnings per share to come in between 1.65 dollars and $1.71 in 2014, representing growth of 11% to 15%. Our fully diluted earnings per share outlook assumes operating depreciation and amortization of approximately $32,000,000 cash interest expense of approximately $23,000,000 cash income tax of approximately $3,000,000 and fully diluted shares of approximately 71,100,000. We expect our 2014 effective tax rate on a GAAP basis to be between 10% 12%. With that, operator, we will now open up the call for questions.
Thank you. We will take our first question from George Mihalos of Credit Suisse. Hey, guys. Thanks for taking my question. Just hoping to get an update if you could parse out revenue growth from non Puerto Rico geographies in the quarter, how that trended?
And maybe your outlook for that going into 2014 if that accelerates further? Thank
you. We saw again double digits growth in the payments revenue outside of Puerto Rico and we expect that to continue throughout 2014.
Okay. And just in terms of getting to sort of mid teens or high teens growth, is that that a 2014 event or more aspirational beyond that in 2015?
No. I think we will get I think we will get closer to the mid teens for a year over year basis. I would feel comfortable with that.
Okay, great. And then just your commentary around signing a merchant acquiring agreement in Colombia. I think you commented Peter that you're looking to do something near term. Can you elaborate on that? Is that a first quarter, first half twenty fourteen event or any color on that?
We thought we would get it done by year end. We had said that before. It is taking obviously longer than we had initially anticipated. We are still actively engaged. My hope is that we will get it done in the near term and that would probably be in the next few months.
Okay, great. And just last question for me, capital allocation priorities, acquisitions versus buybacks, debt repayments, any color you could provide there? Thank you.
Well, I think, 1st and foremost, we'll always we will always focus on using it to help grow the company. And whether that's through alliances, whether it's through transactions, whether it's through product development, that's where we will always focus first. And then I think certainly as we have in the past, we will discuss with the Board as to whether future buybacks or other mechanisms to return value to the shareholders will be contemplated. But I think as you saw in 2013, we are more than willing to find ways to return value to the shareholders.
Thank you. And we will take
our next question from Tien Tsin Huang of JP Morgan.
Thank you so much. Good afternoon. Just maybe just can we get a little bit of guidance on the three business lines and what you're expecting for growth in 2014, especially curious about Business Solutions and the outlook there?
Yes. I think we expect the payment businesses to continue to grow as they have more in line with what you saw probably in the Q4 throughout 2014. And again, as we've said in the past, we would see business solutions probably growing in give or take the low single digits.
Okay. What's the visibility look like there in Business Solutions? I know Banco Popular and their projects from a visibility standpoint, Has it better today than it was last year? Or is it worse? Any flavor there?
No. I would say it's about the same. I mean, we have a large number of projects in the queue. Some of them will take much longer to just execute on because of the size of the project. But I would say we're not expecting anything significantly different up or down from Popular in 2014.
Okay, great. Couple more questions. Just it sounds like same store growth in terms of volumes and transactions. Have you seen anything unusual in the Q4 or even in January, Peter, worth calling out? I mean, the numbers here look good on the payment side, but just wanted to make sure.
Yes. No, as I said in the last call, we track kind of the growth of year over month over month POS transactions.
Yes.
And what we saw in the Q4 allowing obviously for Christmas, but I can tell you that even in January we're seeing similar growth rate in the POS transactions year over year.
Yes. That's good to know. You guys can't blame weather like the weather we're getting up here.
No. We've gotten from what I read the other day, we've gotten a more rain here than we're used to, but we can't complain about that.
Yes, better rain than ice. I guess it does impact travel coming in. Just last one for me. Just I guess for Juan Jose, just make I wanted to make sure still flipping through the numbers here. The It is adjusted.
It's
not It is adjusted. Is that in the operating income is part of the operating income number. Okay. That's why we just exclude from the operating, but it's included already or adjusted in the adjusted net income.
So you have adjusted it out?
Yes. Just wanted
to make sure. Just wanted to clarify
in terms of 2014, just for a moment, that our fully diluted shares will be 79,100,000.
Got it. 79,100,000. Yes. Thank you, guys. Thanks so much.
And we will take our next question from Bryan
Keane of Deutsche Bank. Yes.
Hi, guys. Just want to ask on how yields are trending in the acquiring business and any competition increasing from some of the U. S. Acquirers that we hear noise about?
No. We haven't seen any real change in the competition landscape in Puerto Rico at all to be honest with you. We did have a fairly good win in the Q4, which was one of the larger supermarket chains here in Puerto Rico, where we actually competed against those guys. So it's pretty much it's been it's really not been any different than what we've seen over the last couple of years. We don't see any real increase in competition here than from what we have.
Okay. Okay. That's helpful. Then there was
a downgrade on the Puerto Rican communities. I'm just curious if that has any impact on your business?
We have certainly been following that as you can imagine. As we said before, we didn't see as you could see in the Q4, we saw no negative impact to our payment businesses. At this point, certainly we will continue to keep a very close eye on the situation. But our 2014 guidance expects us to continue to operate as we have in the past. And we don't have any real specific kind of exposure to, for example, the debt we have we're not exposed to that.
We'll have to see as to what shakes out. But at this point, we don't see any real significant impact to EVERTEC's business.
Okay. And then just last question for me. The guidance for revenue for 2014, I think, was 5% to 7%. This quarter you did 3%. So should we start to see revenue be in the 5% to 7% range starting in the Q1?
Or will it take a little while before the Business Solutions Group ramps back up to get to that 5% to 7% to the full company? Yes.
As you know, we don't provide quarterly guidance, but I think it's a good observation. We expect our payment businesses to be kind of stable throughout the year to keep growing every quarter. We might see, as you know, business solution was a little bumpy last year. We actually expect most probably that will be the layout way around in 2014. So just as a reminder, in the first half of last year, we have significant higher sales of hardware.
We're not expecting that in the first half of twenty fourteen. On the contrary, we'd most probably will see some increase in the 3rd Q4 of this year. So again, you should expect a little bit of bumpiness in the business solution, especially in the first half. Merchant and payment together, they be stable throughout the year.
Okay. Helpful. Thanks, guys. And we will take our next question from Chris Brendler of Stifel.
Hi, thanks. Good afternoon. Is there any impact or are you hearing anything from merchants with the target rates and all the headlines? Is that having any impact or any fears and creating any opportunities for you in Puerto Rico?
Yes. I mean, certainly there's been a lot of questions from our merchants to us about it. I think we advise them that they process whatever tech and not try to do it themselves.
Okay. But yes, and everything is already EMV in your country, so there's no upgrade cycle there
at this point? Sorry, I didn't get the question.
It's already EMV. There's no technology upgrade coming in Puerto Rico.
Yes, exactly. There's no technology upgrade. And again, just remember that we are predominantly, I mean, strongly predominantly a chip based, I mean, a pen based debit market.
And it's EMV.
Okay. I'm going to ask one more time on the forward looking economy. Just so I'm clear, it sounds like from your earlier comments, there wasn't any deceleration that took place during the quarter like October, November, December relatively stable all the way into January. The results as we look at it looks pretty solid. I just want to make sure there's no the headlines we're seeing don't have any impact on your business.
They haven't. I think from a daily from a consumption point of view, we haven't seen any change.
Okay. Last question for me is the deal you're trying to sign or you're looking to sign in the near term, can you give us a locale or is that still something to
be keep on I guess in
the rap, is it Colombia or any details there?
Yes, I can't give you a locale. I will tell you it's in one of our existing markets.
And outside of Puerto Rico.
Yes, and outside of Puerto Rico, obviously.
And in terms of significance, is it fairly meaningful?
Well, it depends on your definition of significance, but for us, it's significant.
Great. Thanks guys.
And we will take our next question from Bob Napoli of William Blair. Thank you. Good afternoon. Just a comment question on your guidance relative to what your long term targets are. I mean, you're somewhat below what I think you've discussed as long term targets.
Do you what does it take to get up to those long term targets? And over what time frame do you think you can get? I think 8% to 9% revenue growth, 10% to 12% EBITDA growth is something that you have been targeting.
Hi, Bob. This is Juan Jose. Yes, as we discussed in our IPO process, it's a combination of our payment businesses growing much faster than business solution. And as you saw in the quarter, we're just growing faster. So that will accelerate the growth as our payment businesses are bigger in terms of total revenues.
We will see an acceleration in the top line. Those two businesses have the most significant EBITDA margins. So as we keep growing the payment side of the house, we will see also our EBITDA margins or adjusted net income growing faster. We also considering the long term growth that we will close certain alliances throughout that midterm. As we said, for our midterm, it's 3 to 5 years.
So we do still see the opportunities, especially as we mentioned outside Puerto Rico, again as a result of faster growing merchant and payment, but as well as adding alliances or an acquisition in the process.
Okay. Colombia is a market, I think the market you've highlighted as being probably the biggest opportunity in the near term. First of all, did the bank come on board that you had signed or the financial institution, the relatively large customer that did that come on board before the end of the year? And what are what is the activity? What is your strategy right now?
Is Klaviyo still the biggest target?
Yes, yes it is. And we are actively involved in the implementation process of the customer. So this is not that we're trying to sign it. This has been signed. We're trying to put it up on the platform.
We expect that either late Q1 or Q2 is now what I would tell you our expectation is for to have it fully
kind of what is the strategy around Colombia Peter? Are you do you have more assets going at that market from a marketing perspective? And maybe what does the pipeline, what are you targeting?
Yes. In the Q4, we had an event in Colombia where we had something north of like 20 potential customers where we presented to them we are aggressively selling in the market presenting. And we have Mike Viscarando, the guy who runs our payment business will be back there, I think it's next week. So we are aggressively now talking to customers across the board. So right now, like we always have been in every market we operate in, 1st and foremost, we focus on growing the company organically by signing new customers and by expanding the relationship with those customers.
And that's true about Colombia as it is about Costa Rica and Panama.
And just broadly, you're focusing on not the largest banks in the market, correct? But you're focusing more on
Yes. Our bread and butter has been the Tier 2 and Tier 3 banks and yes that's what we're focused on.
Are you seeing more competition there? Are you seeing incremental or is it the same who are you competing against? I know it's different by market.
There we're competing against the local players that have been there for a long time. We don't see a lot of external competition in Colombia to be honest with you. What we're trying to do is take these customers away from the long term providers that have been there that have been bank owned for many, many years.
Great. Thank you. Okay. And we will take our next question from Sarah Govans with Bank of America. Hi.
This is David Ridley Lane for Sarah. How should we think about the timing of revenue recognition for the $5,600,000 of unearned income on the balance sheet. Does that come in mainly in the first half or?
Yes. We will see some of it probably late in the year, but the most significant one will start really at the end of 2015. So the most significant project actually, we will still we'll be working with it. We estimate right now that we will complete that by summer of 2015. So as soon as we deliver on that, we will start recognizing revenue.
So although there will be some of it in 2014, really it's more of a 2015 where we'll start really seeing that revenue getting into our P and L.
Got it. And then when you look at the merchant acquiring deals that are in your pipeline, are these are you approaching prospects outside of an RFP situation? Are these are some of these more of a competitive bid situation?
I would say it's probably fifty-fifty. I would say about half of them are competitive bids and half of them are just cold calling on customers and being in a 1 on 1 kind of situation to win the business.
Got it. And then just a quick numbers question. How would you
expect to utilize the full amount of
the NOLs in 2014? Or would you still have some remaining for 2015 based on your guidance?
Yes. We will use a significant amount is our expectation in 2014. However, right now we think there will be some that will go over for a couple of years based on the different buckets that you allocate the NOL. But we expect to use a meaningful amount really in 2014. So by 2015, although we still will have some benefit, it will be lower than it is expected for 2014.
Okay. Thank you very much.
Welcome. And we will
take our next question from Sameeti Sartaparomod of Morgan Stanley. Hi, there. I was wondering if you could give us the percentage of revenues that you guys generated in Puerto Rico in 2013 and what that number is expected to
be in 2014?
It is about for this year, we'll be around 86% Puerto Rico and 14% just keep in mind that we have a significant increase in hardware and software sales that were mostly in Puerto Rico. So although in total, although we grew double digits of the Puerto Rico, you will not see necessarily the impact
And
And how is that expected to change that percentage expected to change in 2014?
It probably will go down probably around 80%, or 85% depend. Obviously, we close an alliance then that will change for sure how much is Puerto Rico versus Southside Puerto Rico. So let's say assuming without an alliance, it probably will be 8416 give and take. But again, it is been on the alliance and the timing. If we close the alliance really soon and start migrating those merchants to EVERTEC, let's say, in Q2, then you will see obviously that our revenues at Puerto Rico will accelerate and it will be a bigger portion of the total revenue.
Got it. And just on the EBITDA margin growth guidance, which was I think you said 100 basis points higher than revenue growth. Given that the payment businesses which have significantly higher EBITDA margins that you alluded to earlier will be the primary driver of revenue growth next year. Why shouldn't the sort of the EBITDA margin growth higher than just 100 basis points higher than revenue growth?
Yes. There are some in our cost for next year for 2014, we're considering some of the cost of putting together Colombia, our expansion into Colombia. So there are some investments that we're making in 2014 that we will start seeing revenue later in the year in 2015. So there are some of the expenses are mitigating why we don't grow faster in terms of the EBITDA growth rate. So that's mostly really what it is in term of not growing faster in 2014.
That impact should fade away by 2015? Is that a
Yes. You're totally right. As we start especially Colombia, as we start seeing revenue from Colombia, we set up the customer, then you will see a different proportion, right, because we will have the adequate revenue or the margins will be similar to those we have today, Puerto Rico or in the other countries outside Puerto Rico. Okay. Thank you.
We will go next to Ramin Kamali of Credit Suisse.
Hi. Thanks for taking my questions. I guess a lot of my questions have been asked. I guess you referenced a couple of times around the call that Panama and Costa Rica kind of led the growth with double digit growth rates in payments. Can you comment what the actual growth rate was just in Puerto Rico during the quarter?
We don't actually we don't have that number in front of us to be honest with you. We track what we grow outside of Puerto Rico.
And then another question is around 5%. Our growth in Puerto Rico, quarter probably was a little lower because we saw a reduction in business Solution. As you know, Business Solution is mostly Puerto Rico revenue.
Got it. And then focusing a little more on Business Now it seems like a lot of the government I know you have a very small percentage of revenue and that's like coming from the government. But can you comment on a year over year basis in Q4? And for the full year, what the government related revenue was?
Yes. We have around 10% of our total revenues come from the government of Puerto Rico. As a reminder, most of that revenue is mission critical services we provide to the government and also close to 40% of the revenue we generate actually is funded by the U. S. Government.
So like EBT, there are some of the services that we provide are not necessarily 100% funded by the Puerto Rico government. So around 40% of the total revenue is really funded by the U. S.
Understood. But can you comment on what the year over year change was for
Q4? It was I would say year over year it was relatively flat. Yes. Last year it was close to 10% also, so no major changes.
And what are the expectations for 2014? Same thing relatively flat.
Yes, most of these are like EBT, they are relatively we charge them on a per case basis. We don't expect the number of cases to change dramatically in 2014. For some of the network stuff that is the mission critical services that Juan alluded to. Those contracts are relatively flat by nature because we don't expect them to dramatically grow the number of users on the network. So when you look at the government contracts, as a rule, they're relatively flat.
And are there any shifting to the repurchases for a second. Are there any limitations in your credit agreements? Any restricted payments limitations that limit your ability to continue to repurchase shares? Or I guess what's the basket?
Yes. We do have some limits in the credit agreement, but a credit agreement also allow us to build capacity over the quarters. We have not disclosed what the capacity is, but it's we're very comfortable with the amount that we have left. Okay. Thank you.
And this concludes our question and answer session for the day. I will turn the call back to Peter Harrington for closing remarks.
Thank you. All right. In summary, I am pleased with our many accomplishments over the past year and I'm proud of the entire EVERTEC team whose efforts made these achievements possible. EVERTEC is well positioned to continue to increase its share in Latin America and to deliver even stronger financial performance in 2014 and beyond. We remain focused on executing on our growth initiatives, serving our clients and driving profitability and shareholder value.
Operator, you may now end the call.
Thank you. And this does conclude today's conference call. Thank you once again for your participation and have a wonderful day.