Good day everyone, welcome to the EVERTEC First Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I'd 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 EVERTEC First Quarter 2013 Earnings Call. I'm Luis Cabrera, Senior Vice President, Treasurer, and Head of Investor Relations for EVERTEC. With me today is Peter Harrington, our President and Chief Executive Officer, and Juan José Román, Executive Vice President and Chief Financial Officer. A replay of this call will be available until Monday, May 13, 2013. 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 EVERTEC's prior consent. For those listening to a replay, this call was held and recorded on May 6, 2013. 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. EVERTEC cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only. We undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the final prospectus form of our initial public offering filed with the Securities and Exchange Commission for factors that could cause our actual results to differ materially from any forward-looking statement. During today's call, management will provide certain information that will constitute non-GAAP financial measures under the 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 good afternoon, everyone. Thank you for joining us for our first quarter 2013 earnings conference call and our first release following our initial public offering. The first quarter of 2013 was a great start to the year, with EVERTEC delivering another quarter of strong operating performance. As you are aware, we successfully completed our initial public offering on April 17th, and I want to thank the entire EVERTEC team for their hard work and dedication throughout that process. I also want to thank and welcome our new shareholders. Now I am delighted to provide you with our business highlights for the first quarter and talk about some recent events that we are particularly proud of. First, we reported Adjusted Net Income of $27.5 million, reflecting growth of 37% as compared to our corresponding 2012 period.
Second, we reported Adjusted EBIT growth of 8% and a 110 basis point improvement in our Adjusted EBIT margins, highlighting our significant operating leverage and effective cost control initiatives. Third, we continued to grow revenues in our payment processing businesses outside of Puerto Rico in the double digits. EVERTEC's total revenues increased 6% on a year-over-year basis, driven primarily by our payment processing and business solution segments. Subsequent to the quarter end, we have had two important corporate developments that I'd like to talk about. First, the successful completion of our initial public offering, and as well, the closing of our debt financing transaction that extended our debt maturity profile, increased our liquidity, and importantly, reduced our annual interest expense by approximately $30 million per year. Juan José Román, our Chief Financial Officer, will review these results in greater detail later in the discussion.
Before turning the call over to Juan, I thought since this is our first quarterly earnings call with public equity investors, it would be helpful to provide a brief overview of EVERTEC and our strategy for long-term profitable growth. EVERTEC is the leading transaction processor in Latin America with a strategic presence in 19 countries. We provide services today through three business lines. First, we provide merchant acquiring services to merchants of all sizes that enable them to accept all types of electronic payments. We are the leader in this business in Central America and the Caribbean, and we are the sixth largest in all of Latin America. Second, we provide payment processing services such as card issuing processing and POS processing to financial institutions. We also own the ATH Network, which is the leading ATM and PIN debit network in the region.
Third, we provide a range of mission-critical outsourced technology solutions to a broad range of financial institutions, corporations, and government customers. We believe this diversified business model is one of our key competitive advantages. Rather than just provide a single service such as merchant acquiring or payment processing, we offer end-to-end technology solutions and have the ability to provide our customers with a more complete suite of services as compared to anyone else in the region. Accordingly, our business model enables us to penetrate customers from a number of entry points, realize significant cross-sell opportunities, enter new markets, and importantly, help our customers differentiate their products and services in their markets. How do we grow our business currently, and how do we plan to drive continued solid, profitable growth in the future?
First, we are benefiting from being at the intersection of two powerful secular trends, emerging markets and electronic payments. These powerful forces have and will continue to positively impact our business regardless of the broader economic environment. We like to call this growth by breathing. Second, we will continue to penetrate and gain share in our core business, which includes signing new customers, cross-selling products to existing customers, and entering and expanding into new verticals. Third, we will continue to expand in a thoughtful way in the new geographies, like we did in Colombia in 2012. We will also partner with current customers as they expand into new markets by providing them a consistent product offering across the markets they operate in. Fourth, we will leverage our assets and capabilities to drive innovation, develop new products, and push for their adoption.
Finally, we will execute on a variety of corporate development initiatives. For example, in merchant acquiring, we are actively developing alliances and pursuing joint ventures. We will also continue to selectively pursue strategic acquisitions that enable us to enter new markets and expand our current distribution channels. In summary, we are very excited by the breadth of opportunities that our diversified business model and best-in-class technology platform provide us. To allow us to further expand in Latin America and continue to drive long-term shareholder value creation. Now I'll turn the call over to Juan, who will discuss our financial results in greater detail.
Thank you, Peter, and good afternoon, everyone. As Peter described earlier, EVERTEC generated strong financial and operating results in the first quarter that ended March 31st, 2013. Now, starting with our revenues, on a consolidated basis, total revenues for the quarter increased $4.9 million or 6% to $87.3 million, compared to $82.5 million in the first quarter of 2012. Looking at the underlying segment, our merchant acquiring business net revenues declined modestly by 1% to $17.5 million, in line with our expectations. When normalized for the one-time impact of Durbin, our merchant acquiring segment revenues in Q1 2013 grew at 8% as compared to the prior year period. The payment processing segment revenues increased by 5% to $24.1 million. Revenue growth was driven primarily by growth in transactions processed and accounts on file. Finally, the business solutions segment revenues increased by 9% to $45.8 million.
Revenue growth in the business solutions segment was driven primarily by an increase in demand for our network and core banking products and services. Now, moving to the expense side of our income statement, our cost of revenues, excluding depreciation and amortization, were $40.5 million for the first quarter, representing an increase of $2.8 million as compared to the corresponding 2012 period. The growth in our cost of revenue was primarily due to a $2.4 million impact from higher product sales within our business solutions segment. Total selling, general, and administrative expenses were $8.9 million for the quarter, representing a decrease of approximately $100,000 as compared to the corresponding 2012 period. The decline in our selling, general, and administrative expense was primarily due to the effectiveness of our cost control initiatives.
Total non-operating expenses for the quarter were $14.9 million, representing an increase of $1.6 million or 12% as compared to the corresponding 2012 period. The increase was primarily due to a $4.1 million increase in interest expense related to the issuance of additional debt in May 2012 in connection with our shareholder dividend, partially offset by a decrease in other expenses of $2.3 million. Other expenses during the first quarter of 2012 included a $2.2 million non-recurring employee severance payment. Income tax expense was approximately $50,000 for the quarter ended March 31st, 2013, compared to approximately $1.1 million in the corresponding 2012 period. The lower income tax expense in 2013 as compared to 2012 primarily reflects the impact of the tax grant received by EVERTEC during the fourth quarter of 2012.
Adjusted EBITDA for the quarter ended March 31st, 2013, was $41.8 million, an increase of $3.2 million or 8% as compared to $38.5 million in the corresponding 2012 period. The increase in Adjusted EBITDA was primarily driven by the aforementioned growth in revenues and significant operating leverage in our business. Adjusted EBITDA margin improved by approximately 110 basis points to 47.8% from 46.7% in the corresponding 2012 period. Adjusted Net Income was $27.5 million, or $0.36 per diluted share for the quarter ended March 31st, 2013, representing an increase of $7.4 million or 37% from $20.1 million in the corresponding 2012 period. Increase in Adjusted Net Income was primarily driven by the same factors impacting Adjusted EBITDA and lower pro forma cash interest expense as a result of the refinancing we completed in April.
Please note that for comparability purposes, the Adjusted Net Income and Adjusted Net Income per diluted share calculation assume that on a pro forma basis, the company completed the aforementioned debt refinancing on January 1st, 2013. Please reference the reconciliation tables provided in today's earnings release for additional information. EVERTEC continues to enjoy a strong balance sheet. As of March 31st, 2013, we reported $34.1 million of unrestricted cash and $743.4 million of total short-term borrowings and long-term debt, which represents total net debt of $709.3 million. During the quarter, we repaid approximately $14 million of borrowings outstanding under our revolver credit facility. As of March 31st, 2013, our revolver was undrawn with $50 million in available capacity. Our total liquidity as of March 31st, 2013, which includes unrestricted cash and available borrowing capacity under our revolver, was approximately $84.1 million.
As Peter mentioned, we successfully completed our initial public offering of 28.8 million shares in April. The offering was comprised of approximately 6.3 million primary shares and 22.5 million secondary shares sold by certain stockholders. As part of the offering, we received net primary proceeds of $117.4 million, which were used to deleverage our balance sheet and pay transaction-related fees and expenses. Concurrently with our IPO, we also successfully completed the refinancing of our debt capital structure that closed on April 17th. In connection with this refinancing, we entered into $800 million senior secured credit facilities comprised of a $100 million revolving credit facility, which was undrawn at close, a $300 million Term Loan A, and a $400 million Term Loan B. At the end of April, our net debt was approximately $685 million, and our total liquidity was approximately $120 million.
Going forward, it is important to note the two significant impacts this refinancing has on our business and financials. First, we will benefit from a significant reduction in our interest expense. On a pro forma basis, our annualized interest expense will be approximately $23 million, which represents a reduction of approximately $30 million or 55% as compared to our capital structure as of March 31st, 2013. Second, we will benefit from an increase in liquidity via the increase in the size of our revolving credit facility from $50 million to $100 million. This incremental financial flexibility supports our ability to further capitalize on both organic and inorganic investment opportunities as we continue to grow our business in Latin America.
Additionally, as a consequence of the improvement in our credit metrics over the last several years and the leveraging in connection with our initial public offering, we also received a recent upgrade of our credit ratings from both Standard & Poor's and Moody's. Our current corporate family ratings are now BB- from S&P and Ba1 from Moody's. Before turning to our medium-term outlook, I would like to briefly review our tax structure and benefits of the 15-year tax grant we received from the government of Puerto Rico in Q4 2012. Among other benefits, the tax grant provides for a preferential income tax rate of 4% on our data processing activities in Puerto Rico, which represented approximately 75% of our taxable income for the fiscal year 2012.
Consequently, we expect our medium-term blended tax rate to be approximately 10%, and we are excited by the structural enhancement to our free cash flow profile that this tax grant provides. Going forward, we expect our results to remain strong. Over the last three years, our revenue has grown at a compounded annual rate of approximately 7%. Over the medium term, we expect revenue growth to improve as we continue to expand into Latin America and benefit from the increasing contribution of our fast-growing payment business. For 2013, revenue is expected to grow between 6%-7%, which reflects baseline normalized growth consistent with our medium-term expectation of 8%-9%, offset by the comparative growth impact of the Durbin Amendment in our Merchant Acquiring segment that we mentioned earlier on the call.
Over the medium term, we expect Adjusted EBITDA growth will continue to exceed our revenue growth and growth in the double digits. Similarly, as a result of the aforementioned one-time Durbin Amendment impact in our Merchant Acquiring segment, we expect Adjusted EBITDA growth in 2013 of approximately 8%-10%.
Over the medium term, we expect Adjusted Net Income to grow at a faster rate than Adjusted EBITDA in the mid-teen as we continue to benefit from the deleveraging balance sheet, modest capital investment requirements and a favorable tax position. Operator, we will now open up the call for questions.
Thank you. If you are like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone today, please make sure your mute function is turned off to allow your signal to reach us. Again, that is star one to ask a question, and we will pause a brief moment. Take our first question from Tien-Tsin Huang with JPMorgan.
Great, thanks. Welcome to the public earnings call circuit. I guess I will start by asking just in merchant acquiring, maybe can you just remind us or discuss how you calculate the 8% growth adjusting for Durbin? What is the methodology there to arrive at that?
Sure. Sure, Tien-Tsin. Just as a reminder, the comparison we are doing is from first quarter of 2013 over 2012. As you probably remember, the Durbin went into effect in the fourth quarter of 2011. In connection with that, we benefited from an increase in our net margin or spread as a result of the reduction in the interchange fees. This extraordinary benefit was reflected obviously in our Q1 2012 revenues. As we have talked about to the investors on the roadshow, over the course of 2012, we made a strategic decision to pass some of that increased benefit onto our merchants in return for long-term contracts, and we did that. Certainly on top of that, there was some Durbin-related volume effects as well.
When you normalize the extraordinary events that we had in 2012, and we subtract that from 2013, that's how we get to the 8% growth. On top of that, you got to remember that in 2013, we had one less day than we did in 2012 because of the leap year, and you can see that as almost a 1% difference year-over-year.
Got it. That makes sense. Good to know. It's consistent with what we had modeled as well. Just on the same thing with merchant acquiring, Oriental BBVA conversion, can you update us on that too? Where do we stand? Any surprises?
No. As we expected, we're making progress. They are going through the transition of BBVA into Oriental. They expect to finish that in the fourth quarter. I think we will start to see some of the volume specifically from new merchants signed between now and then. We don't expect the transition of the current business until probably the fourth quarter.
Understood. Okay. Last one, just in business solutions, good growth there. Any sort of unusual projects to call out that may have influenced the first quarter result? Thanks.
Yes. No, no problem. As we've said, there are parts of the business solution business that is not cyclical. It's kind of project related or one time related. Yes, certainly we were able to finish a project in the first quarter of 2012 that we had not expected until later in the year. That's why you're seeing the growth in the first quarter. We expect the growth of the business solutions to be consistent with what we thought, which is somewhere in the low to mid single digits on a yearly basis.
Understood. Thanks for that.
It's really just more timing. Yep.
Understood. Thank you.
Next we'll move to Roman Leal with Goldman Sachs.
Hi. Congrats on the recent IPO, everyone.
Thank you.
I guess I'm going to start with merchant services as well. Is it possible to give us a little more granularity on the drivers or at least how should we think about even the pricing as you pay some tougher comps? Was it mostly the fact that transaction growth was just not enough to offset the tougher pricing comps? Was it the pricing maybe came down somewhat as you gave some pricing notes for longer contracts?
I think it's more that we made the decision when we got this kind of extraordinary benefit in 2012 that we thought it was in our best interest to pass some of that along to our merchants in return for long-term contracts. That's probably the way you should look at it. To get to the next question, we expect this to finish up in the second quarter of 2013 and then to go on this kind of a normal growth scenario after that.
That's helpful. As we think about the expansion outside of Puerto Rico, can you maybe give us a range of how pricing tends to look in these other countries that you're expanding into? I guess the opportunity in Colombia looks pretty clean as well. How would pricing, for example, in Colombia and other parts of Latin America compare to what you get in Puerto Rico?
Very comparative. Certainly I would say that the pricing that we see in Latin America in general is much more favorable than you would see in the more mature markets. I'll be honest, there's not a lot of difference between how we price in Puerto Rico and what we see in the other Latin American countries. There's a little variation, but not much. For the most part, it's similar pricing across all the markets.
One last one for us. On business solutions, maybe it'll be helpful for all of us if you maybe give us an example on how you think this fits well into your expansion strategy. How can you use the fact that you have all three segments, specifically business solutions, because maybe that's a little bit less clear to us. How can you use that as a competitive advantage as you try to expand outside of Puerto Rico?
Thanks. Well, yes. As we've demonstrated for a number of years here in Puerto Rico, the customers that we deal with are predominantly kind of tier 2 and tier 3 financial institutions. They're looking for a number of solutions. Where we differentiate ourselves from our competitors is our ability to bring to the table more than just the payment product, whether it be POS or ATM, but we'll actually run the network for them. What we've seen in a lot of the markets is that they're looking for this kind of value-added service that we can provide by bringing to them, say, running the network as well as doing the processing. Maybe there's a lot of interest today, for an example, in cloud computing and how we can bring cloud computing and hosting to the table as well as the payment-related businesses.
Thank you.
Next, we'll move to George Mihalos with Credit Suisse.
Hi, this is Alison in for George. I know you mentioned earlier that you were able to grow revenues outside of Puerto Rico by double digits. Can you give us a little more detail on the growth rate sourced from Puerto Rico compared to the other geographies you are in?
Well, I would just say we're not going to give you the specific numbers. I would just say that we're certainly growing in the double digits and not just in one market. Like I said before, we're growing across all of the markets. We're seeing steady growth driven primarily by the cash to card conversion. As we see more electronic payments grow in these markets, we're benefiting from that. I would just tell you that the growth in the double digits we're seeing in all of the core markets we operate in today.
Great. Thanks. Then just maybe one more. You spoke about the pricing you were seeing in Colombia, can you give us an update about the general progress you're making there and maybe when you think it will be a meaningful contributor to overall revenues?
Yep. We signed our first customer there as we've said. We expect to begin to see revenue by year-end. I would say 2014 is when it will make a significant contribution from a revenue perspective.
Great. Thank you.
We'll move to Suzanne Stein with Morgan Stanley.
Hi. I guess back to the question of the business outside of Puerto Rico. Are you going to provide us with the percentage of revenue on a going forward basis? I mean, just to keep us posted on the progress that you're making there. I think back to the last question, I think that double digits is kind of a wide range. It would be helpful for us to be able to narrow that down somehow.
Yeah. To be honest with you, we're still looking at a number of things that we'll provide on an ongoing basis. That is certainly one of them. I would say, as we go through that process, that is certainly one of the ones we're looking at providing more specific information on an ongoing basis. We're not prepared today to do that.
Okay. You mentioned looking at strategic acquisitions. I know this hasn't been a big push for you in the past, what is it specifically that you think you'd be looking for? Is it product? Is it distribution, is there something else? I guess on a going forward basis, do you anticipate this will be a bigger part of your strategy?
It certainly will be a part of the strategy as we go forward. Again, what I want you to take away is what we're first and foremost looking at is how do we continue to grow organically in the markets that we're in. We think there's still plenty, more than enough opportunity for us to do that. When we look at acquisitions, we look at it in kind of three ways. First and foremost, we're very focused on the merchant acquiring business and looking at both alliances and in joint ventures to get into the merchant acquiring businesses in the markets we're already in, and being able to leverage those relationships that we've built over the years. That's kind of first. Outside of that, we look for two things.
If there was an acquisition that would help us gain a bigger footprint or a faster footprint in a brand new market, then we certainly would look at that. Finally, we look at it from a distribution channel perspective. Again, because of the wide range of products and services that we offer, what would be most interesting to us is an opportunity that provided a considerable distribution channel that we could then leverage to sell our products and services through. That's kind of how we focus on it.
Okay, great. Thank you.
Next, I'll move to Sara Gubins with Bank of America.
Hi, thank you. Your cost of revenue was up as a % of revenue. I know that you talked about that being related to business solutions. As that growth rate slows for the rest of the year, would you expect to see some leverage in that line item?
Yes. Hi, this is Juan José . Yes, this quarter is mostly related to the increase in the business solution product sales. Going forward for this year, we're still seeing the benefit of the cost-saving initiative we implemented in 2012. 2013 really reflect that benefit, the effectiveness of our cost. Going forward, for this year, it will be kind of very low digits for this year.
Okay. I'm sorry, low digit improvement or?
The increase, I'm sorry. The increase in the cost, total cost is really low digits. Again, we will see this year specifically. Basically to be flat out of total cost. Because of the cost-saving initiative implemented last year.
Got it. Okay. Could you give us any details on margin trends by segment, and will you plan to provide those going forward?
No. We don't report by segment. We do provide the information overall, consolidated.
Okay. Anything worth highlighting then in margins by segment?
No. Well, our margins, we do expect them to continue to improve, to grow, as has been in the past. As we mentioned, partially as a result of our continued increase in our payment businesses and our growth outside Puerto Rico. As we mentioned, we have significant benefits from our infrastructure.
Okay. Thank you.
Next, I have Bryan Keane with Deutsche Bank.
Hi, this is Ashish Sabadra calling on behalf of Bryan Keane. Congratulations on the IPO. A quick question on the operational metrics, volume and merchant acquiring and transactions. I was wondering if you were planning to provide those numbers and or if you could provide color on how did they come compared to your plans.
I'll take the second part. It was very much in line with our expectations for the first quarter. As I said before, we are looking at a number of things for what we may report in the future. At this time, we're not providing those types of KPIs. Much like the growth rates outside of Puerto Rico in the payments business, that's one of the things we're certainly looking at to be able to report on in the future.
Okay. A quick question on the prospect pipeline. I was just wondering if you would provide some color on the prospect pipelines in terms of the sales initiatives that you're working on, how those are panning out.
Yeah. We're very happy with the pipeline we have today. That's why we're very comfortable with the guidance that Juan gave you for 2013. Again, you got to keep in mind that in a lot of these, especially in the payments businesses, we're basically selling at this point for next year because of the implementation timeframe that you're probably familiar with.
We're very happy about where we are in that pipeline, more so probably for 2014 than 2013.
Yeah. A couple of quick modeling question. Just share count by quarters going forward. Tax rate, I understand your tax rate also, you have some NOLs that you can take benefit on fiscal year 2013. The expected tax rate for fiscal year 2013 and share count by quarter, if you can provide that.
Yes. Total shares as of May will be 79,716,000. Regarding our tax rate, as I mentioned, the effective tax rate will be around 10%, 10%, 11%. For 2013 specifically, as you mentioned, we do have NOLs, so you should expect that we will not pay taxes in Puerto Rico, only taxes outside Puerto Rico. That will be between $2 million to $3 million. So the NOL will cover any tax expense in Puerto Rico, so no cash tax in Puerto Rico, only $2 million to $3 million in Costa Rica.
Okay. Thanks for that color.
Next, I'll move to Bob Napoli with William Blair.
Thank you. Peter, I was wondering if you could maybe lay out a target for over the next few years for the mix of revenue you'd like to have in Puerto Rico versus outside of Puerto Rico, if you have a target or to lay out just generally where you would hope to get to over the next few years.
Well, as we've said, the fastest-growing businesses we have are the payment businesses, and the fastest-growing of those is clearly the payment business outside of Puerto Rico. I think you can expect that the mix of revenue will move to predominantly payment over the business solution side of the house. That will continue to accelerate as we grow outside of Puerto Rico. Long-term, I would love to get to something that looks more like 40% outside of Puerto Rico and 60% inside of Puerto Rico. Kind of the three- to five-year goal would be in that range to move to that direction.
Okay. I guess just a question on CapEx. What is your expectation for CapEx in 2013? I don't know if you could break it out between maintenance CapEx and growth CapEx, or I guess, not sure how else you look at it.
Yeah. We see about a $25 million per year CapEx expenditure. We see that again in those two areas. About $20 million of it is what we call maintenance, that is to upgrade the technology on an ongoing basis, to continue to invest in the infrastructure that we operate. Then the other $5 million a year would be growth. Think of that as directly related to a new revenue stream, whether that's the development of a new product that will drive new revenue or whether that's implementation for customers that will drive revenue from that customer. It's related specifically to revenue streams.
Okay. The $20 million, are there any specific projects that you're working on of note to call out?
No. Every year we go through a process. Last year we upgraded the mainframe of technology and infrastructure. There is usually one big project a year, but it's not that it takes up half of the CapEx. It's just larger than any other. Think of it more as that we just will continue to spend on an ongoing basis to upgrade, whether it's the POS devices, whether it's the server environment, whether it's the mainframe or the mid-range environment. We'll continue to upgrade so that we are using the latest technology to provide our services.
Great. Just on the, Juan, on the G&A in the quarter, $8.9 million. Is there anything in the first quarter? Is that a run rate or are there payroll taxes or anything unusual that number is in that number, that $8.9?
There are some costs related to the one-time transactions that occur as part of this reorganization and going public and the refinance in Q1, that actually we adjusted. When you look at our Adjusted EBITDA at the end of today's press release, you will see that we adjusted back. Yeah, it includes some one-time costs for this quarter. On a going forward basis, it will be less. Just to give you the specific, in this quarter, we're adjusting EBITDA close to $1.8 million related to those transaction fees, which is mostly professional fees.
Okay. Thank you. Last question. You had a very good signing year last year of new business, I wondered how that flows into the 2013 numbers. Have we started to see that in the first quarter? I know the implementation takes a few quarters, I was wondering if you could talk about how that's going to flow into 2013.
Yeah. It doesn't flow in even. It's evenly though, right? It all depends on not only the signing of it last year, but obviously the implementation timeframe. Sometimes it takes a little longer and sometimes it takes a little shorter, so it won't be even. I would say that you're going to see more of that revenue in the later part of 2013 than the earlier part.
Thank you very much.
Just a reminder to everyone is star one if you do have a question or comment. We'll move to John Williams with UBS.
Hi. Good evening, guys. Congratulations.
Thanks.
Just had a couple of quick questions. I wanted to confirm on the share count. That's the fully diluted number, right? The 80 million you mentioned, Juan?
Yes.
Okay. That's a little lower than the 85. That includes everything, it sounds like.
Yes. We have fully diluted will be around 84 million shares.
84 million. Okay. That's the 5 million incremental that you had talked about a couple of weeks back.
Yes.
Okay. That's helpful. Thanks. Just in terms of your expectations, it seems like on the business solution side, that's the business you have the highest expectations for near term, just based on your commentary. What gets you more constructive on the other two? It sounds like a little bit of easing on Durbin in the acquiring side, what on the transaction processing side, just philosophically makes you feel better about that business and the growth?
On the transaction processing. I think because of the continued growth we're seeing outside of Puerto Rico, with, again, as mentioned earlier, with the signings we had last year, those were almost all in the payment-related businesses. Based on what we got accomplished last year, we feel very comfortable that that business will continue to outperform, say, the business solution side of the business from a revenue perspective. We're very comfortable with the guidance that Juan gave you because the payments businesses have and will continue to grow faster.
Okay, just one other one, if I can. On the transaction fees and refi costs, you guys had talked about a much bigger number. I think it was like $60 million-$65 million that you expected to be in both the GAAP and come back out of the adjusted numbers. Obviously, that seems to have slipped. Should we expect that number to have moved into Q2, that roughly $60 million or $65 million number?
Yeah, it will be in Q2 because the transaction happened, yes, in Q2. The make-whole premium was around $40 million. It will be actually $42 million, have to do with the make-whole premium that we paid as part of the refinancing, and yes, you will see that in Q2.
On a GAAP basis, as we think about where that'll hit, that'll hit the other income expense line.
Yes
Obviously come out in your adjustments. Okay.
Yes.
$42 million, you said? Okay. Thank you. That's helpful. I appreciate it.
$42, also the breakup of the contract with our sponsors also. The termination of the consulting agreement also will be in Q2. That was $16.7 million.
That gets you pretty much back towards that $60 million number that you talked about.
Yes.
Okay. Thanks for the answers, guys. I appreciate it.
Thank you.
Everyone, that does conclude our question and answer session and our conference call for today. Thank you all for your participation.