Good afternoon, everyone, and welcome to the Evertec, Inc. third quarter 2019 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone telephones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Ms. Kay Sharpton, Vice President of Investor Relations. Ma'am, you may begin.
Thank you, and good afternoon. With me today are Morgan Schuessler, our President and Chief Executive Officer, and Joaquin Castrillo, our Chief Financial Officer. A replay of this call will be available until Wednesday, November 6th. Access information for the replay is listed in today's financial release, which is available on our website under the Investor Relations section of evertecinc.com. For those listening to the replay, this call was held October 30th. Please note there is a presentation that accompanies this conference call, and it's accessible in the Investor Relations section of our website. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements as 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, 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 annual report on Form 10-K filed with the SEC 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 will constitute non-GAAP financial measures under SEC rules such as adjusted EBITDA, adjusted net income and adjusted earnings per common share. Reconciliations to GAAP measures and certain additional information are also included in today's earnings release and related supplemental files. I'll now turn the call over to Mac.
Thanks, Kay, and good afternoon, everyone. We are pleased with our results for the third quarter, which were at the high end of our expectations. We are executing well, and we continue to benefit from Puerto Rico's economic recovery, our innovation strategies, and our Latin American focus. Beginning on slide four, I'll cover some of the quarter's financial highlights and provide you with an update on recent developments. Total revenue was $119 million, an increase of 6% compared to 2018, as we saw growth across all segments. We benefited from some pricing actions, our deployment of value-added solutions, new managed services, and the completion of projects for Popular. Adjusted EBITDA was $55 million, or 6% growth over the prior year, and adjusted earnings per share was $0.47, an increase of 4% compared to last year.
We generated significant operating cash flow and have returned approximately $39 million year to date to our shareholders through dividends and share repurchases. Moving on to our progress in Latin America, beginning on slide five. We are pleased with our progress implementing our collection product for Citi, as they now have several new clients operating on our platform and a growing pipeline. We continue to make progress implementing payment systems for Santander Chile, and continue to anticipate an early 2020 announcement of our first transaction. Regarding the recent unrest in Chile, our business remains strong and has been mostly unaffected, although we are monitoring the situation closely. We continue to see strong interest in our products, and we have recently signed a license agreement with a Brazilian company, C6 Bank, for our risk product.
C6 Bank is a recently launched digital bank in Brazil with over 200,000 accounts already. This new contract validates that our products are expanding their reach from traditional clients to new and emerging digital providers in the region. Lastly, we continue to anticipate receiving approval from The Fed and closing by year-end on our pending acquisition of PlacetoPay, a Colombian-based gateway and payment service provider. Now moving on to our progress in Puerto Rico on slide six. First, revenue growth in Puerto Rico and the Caribbean was approximately 7%, driven by organic transaction growth of approximately 5% as well as pricing actions. In addition, we continue to benefit from contract wins now producing revenue in our business solution segment, as well as completed projects for Banco Popular related to the conversion of their Reliable acquisition.
Regarding innovation, we have successfully completed our pilot of Pivot with restaurants and recently showcased the product at the annual restaurant industry convention in Puerto Rico, generating interest from a variety of clients and prospects. We will continue to focus on adding new features to the product based on client feedback. From a more macro view, we benefited from the start of additional EBT relief funding in August and expect those funds to continue for the next 12 months. We were also pleased to see that FEMA has again granted the government of Puerto Rico the authority to validate the disbursements requested by local agencies. Another positive note in the business environment in Puerto Rico was the recently released unemployment figure, which has declined to 7.6%, its lowest point in recent memory.
Regarding the government's financial health, the oversight board recently filed a debt adjustment proposal with the courts, which would modify over $35 billion in obligations and potentially reduce that debt to almost a third of the amount outstanding. Although there continues to be ambiguity on the timing of further federal funds and the resolution of the debt situation, the longer-term positive impact will be contingent on these factors, as well as the continued rebuilding and structural reforms on the island. Lastly, I want to comment on recent events that reflect Evertec's culture and values. While Puerto Rico was spared during the recent hurricane season, our neighbors in the Bahamas were devastated by Hurricane Dorian. We truly understand their challenges ahead and donated $100,000 to their relief efforts. Additionally, as part of our commitment to education, this quarter, we awarded 135 scholarships to outstanding students in Puerto Rico and Latin America.
Our support to education over the last five years has totaled over $500,000. We've also recently launched an initiative to increase women applicants to our scholarship program in partnership with various female leaders from the STEM industry in Puerto Rico. EVERTEC values diversity and inclusion and believes that supporting tomorrow's leaders will yield tremendous impact for the communities we serve. We look forward to sharing our further progress with you as we wrap up 2019 and look ahead to 2020. With that, I will now turn the call over to Joaquin.
Thank you, Max, good afternoon, everyone. I'll now provide a review of our third quarter 2019 results. Turning to slide eight, you will see the consolidated third quarter results for EVERTEC. Total revenue for the third quarter was $118.8 million, up 6% compared to $112 million in the prior year. We continued to benefit from a higher net spread driven by pricing actions. We also benefited from fees on ATH Móvil and ATH Móvil Business, increased core banking transactions, and increasing network services, as well as $2 million related to completed projects. Total revenue for the nine months year-to-date was $360.2 million and up 7% year-over-year. Adjusted EBITDA for the quarter was $55.5 million, an increase of 6% from $52.1 million in the prior year. Adjusted EBITDA margin was 46.7%, this represents a 20 basis point increase compared to the prior year.
The year-over-year increase in margin primarily reflects higher revenues and high-margin projects completed in the quarter, partially offset by the impact of the elevated average ticket last year that drove a higher than normal margin, as well as a delay in government revenue, as the government turnover experienced earlier this quarter resulted in contracts not being renewed timely while we continued to provide services. FX also negatively impacted us by approximately $1 million this quarter. Year-to-date adjusted EBITDA was $170.9 million, an increase of 7% from $159.8 million in the prior year. Adjusted net income in the quarter was $34.6 million, an increase of 3% as compared to the prior year, primarily reflecting the higher adjusted EBITDA offset by increased operating depreciation and amortization. Our adjusted effective tax rate in the quarter was 13.7%, reflecting a discrete foreign tax impact in the quarter.
We continue to expect our full year effective tax rate to be close to 12%. Adjusted EPS was $0.47 for the quarter and grew 4% compared to the prior year and benefited from our share repurchases to date. Year-to-date adjusted net income was $108.8 million, up 6%, and adjusted earnings per common share was $1.48, up 7% from $1.38 in the prior year. Moving on to slide nine, I'll now cover our segment results, starting with merchant acquiring. In the third quarter, merchant acquiring net revenue increased 8% year-over-year to approximately $26.4 million. The revenue increase was driven primarily by pricing actions impacting both our spread and our non-transactional revenue, offset by approximately a 1% decrease in sales volume. Average ticket declined approximately 8% versus the prior year and was in line with our expectations as spend continues to move towards more normalized levels.
Adjusted EBITDA for the segment was $11.2 million, up 2%. Adjusted EBITDA margin was 42.4%, down approximately 230 basis points as compared to last year, reflecting the impact on margin of the lower average ticket this quarter. For the nine-month period, merchant acquiring increased 7% to $79.2 million, primarily due to the same reasons I referenced in the quarter. Adjusted EBITDA year-to-date for the segment was $35.4 million, up 3%. Adjusted EBITDA margin was 44.7%, a 190 basis point decrease as compared to last year. On slide 10, you will see the results for the Payment Services Puerto Rico and the Caribbean segment. Revenue for the segment in the third quarter was $30.4 million, up approximately 5% as compared to last year.
Transaction volumes grew approximately 5%, and we continued to benefit from transaction fees on services such as ATH Móvil and ATH Móvil Business, partially offset by a delay in a government contract renewal of approximately two months. Adjusted EBITDA for the segment was $18.4 million, decreasing 5% as compared to last year. Adjusted EBITDA margin was 60.4%, down approximately 600 basis points as compared to last year, primarily due to increased expenses from projects that are underway this quarter and the impact of the delayed government contract renewal. Year-to-date revenue for the segment was $92.9 million, up approximately 10% as compared to last year. Year-to-date adjusted EBITDA was $60 million, and adjusted EBITDA margin was 64.5%, down approximately 70 basis points as compared to last year. On slide 11, you will see the results for our Payment Services Latam segment.
Revenue for the segment in the third quarter was $20.6 million, up approximately 9% as compared to last year. This growth was driven by intercompany license and service revenue, as well as organic revenue growth of approximately 1%, reflecting the anticipated $400,000 of client attrition and the timing of licensed revenue in the previous year. We continue to see a demand for license sales in some regions, as evidenced by the C6 Bank agreement in Brazil. Our focus and priority continues to be on shifting from a licensing model to a processing model, which will eventually result in a more recurring and growing revenue base. That said, we're pleased with this new license agreement, which will benefit us as it is implemented in early 2020.
Adjusted EBITDA for the segment was $7.6 million, and adjusted EBITDA margin was 36.8%, up approximately 220 basis points as compared to last year, driven by the intercompany services and license sales to Puerto Rico, partially offset by FX. Year-to-date revenue for the segment was $62.5 million, up approximately 7% as compared to last year. Year-to-date adjusted EBITDA for the segment was $23.6 million, and adjusted EBITDA margin was 37.8%. On slide 12, you will find the results of the Business Solutions segment. Business Solutions revenue for the third quarter was up approximately 8% to $52.9 million. Revenue growth in the segment was driven by new services as well as other projects completed in the quarter, representing revenue of $2 million, primarily resulting from the integration of Banco Popular's Reliable acquisition.
For the quarter, adjusted EBITDA was $25.1 million, and adjusted EBITDA margin was 47.4%, up approximately 280 basis points as compared to last year. The increase in the adjusted EBITDA margin was primarily driven by the completed projects in the quarter. Year-to-date, Business Solutions revenue was $159.5 million, up 9%, and adjusted EBITDA for the segment was $72.4 million, with a 45.4% margin. Moving on to slide 13, you will see a summary of Corporate and Other. Our third quarter adjusted EBITDA was a negative $6.8 million, an increase of 6% over prior year, and 5.7% as a percentage of total revenue, which was even with the prior year. Corporate and Other includes the negative impact of approximately $1.6 million related to intercompany eliminations that did not take place in the prior years.
Excluding this impact, Corporate and Other adjusted EBITDA would be $5.2 million, reflecting a decrease of approximately $1.2 million, largely due to higher spend in the prior year related to the timing of projects. Year to date, our Corporate and Other expense was $20.5 million, or 5.7% as a percentage of total revenue. Moving on to our year-to-date cash flow overview on slide 14. Our beginning cash balance was approximately $87 million, including restricted cash of approximately $17 million. Net cash provided by operating activities was approximately $136 million, an $8 million increase as compared to prior year. This includes the impact of settlement timing and other working capital differences. On a positive note regarding our government receivables, these have continued to improve and are now at the lowest historical level at approximately $6.5 million. We have continued to be paid on schedule.
Capital expenditures year to date were approximately $50 million. An update of critical technology infrastructure and development related to some of the new contracts announced were the primary drivers in our year-to-date spend. We're now anticipating our CapEx for the full year to be at the high end of our previous range of $50 million-$55 million. Next, we paid approximately $11 million in scheduled debt payments, $6 million in withholding taxes on share-based compensation, and $1 million of other debt paydowns, resulting in a total net debt decrease of approximately $18 million. We also paid cash dividends of approximately $11 million, and we repurchased approximately $28 million of common stock, for a total of $39 million returned to our shareholders.
We have approximately $34 million available for future use under the company share repurchase program through December 31st, 2020. We recently announced another $0.05 dividend to be paid on December 6, 2019, to shareholders of record as of November 4. Our ending cash balance as of September 30th was $116 million. This included approximately $13 million of restricted cash. Moving to slide 15, you will find a summary of our debt as of September 30th, 2019. Our quarter-ending net debt position was approximately $432 million, comprised of the $103 million of unrestricted cash and approximately $535 million of total short-term borrowings and long-term debt. Our weighted average interest rate was approximately 5%. Our net debt to trailing 12-month adjusted EBITDA was 2.1 times, reflecting the credit agreement terms, which limits the cash applied to a total net debt calculation to $60 million.
As of September 30th, total liquidity was $219 million. This balance excludes restricted cash and includes the available borrowing capacity under our revolver. Moving to slide 16, I will now provide an update on our 2019 guidance, adjusted primarily due to our Q3 results. We are increasing the lower end of our revenue range to $479 million-$482 million, representing growth of 5%-6% over last year, compared with $477 million-$482 million previously estimated. Regarding overall margin, we continue to anticipate that our adjusted EBITDA margin will be approximately 47% for the year. Our adjusted earnings per common share outlook has been increased on the lower end to $1.95-$1.98, which represents a range of 6%-8% as compared to $1.84 in 2018. Now turning to 2020. While we're not prepared to give guidance, I would like to comment on several considerations.
First, we're pleased with our new agreements in LATAM, as well as the pending PlacetoPay acquisition, which are all anticipated to contribute to our LATAM growth in 2020. We will continue our transition from a licensing to a processing model in 2020, which will provide some unevenness in organic revenue growth in LATAM throughout the year. Additionally, we have benefited from delays in client attrition, which will now total approximately $2 million in 2019. We anticipate a headwind of between $4 million-$5 million in 2020. Second, in Puerto Rico, we will continue to monitor the flow of federal funds and the potential positive impact to the economy. Our focus on innovation will continue to benefit us in 2020. The CPI index for September was announced October 10th and was 1.7%, and should positively impact a majority of our business solutions revenue.
Lastly, while we are improving and investing in our relationship with Popular, we're currently negotiating in connection with a disagreement related to certain pricing terms under the MSA. We're both actively working to find a mutually agreeable resolution. While I'm unable to give any further details, as this is an ongoing discussion, I felt it was important to provide this update at this time. We look forward to updating you with our full outlook next quarter. In summary, it was a good quarter for EVERTEC. We're executing well against our longer-term initiatives that will continue to benefit us in 2020 and beyond. I've now completed one full year of earnings calls and investor meetings, and I continue to be challenged and energized by what is ahead for EVERTEC, and as always, I look forward to updating you. We will now open the call for questions.
Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the numbers to ensure the best sound quality. To withdraw yourself from the question queue, you may press star and two. Once again, that is star and then one to ask a question. Our first question today comes from Bob Napoli from William Blair. Please go ahead with your question.
Thank you. Good afternoon.
Hey, Bob.
Joaquin. I guess I was a little confused on the Popular pricing disagreement and the potential materiality of that agreement. That contract's been in place for a long time. Can you give me a little help and color on what that means or could mean?
From time to time, Bob, we have these types of disagreements with the bank, and we've always been able to work through and resolve those. This is not something that we haven't experienced in the past, this type of dispute. We're working through it with the bank. We can't give a lot more color than we've given on the call. As we do every third quarter, we try and give you some of the puts and takes into the following year, into 2020. Just like we can't give you more on what Citi or Santander are going to contribute, this is not something we can give you any more detail on. We are actively working through it with the bank to find a resolution.
Okay. As we think of the Santander, I know you said you can't do anything or give us any guidance for 2020. As you think about that relationship over the long term, what type of revenue do you think is possible to generate out of that, say, over five years from today?
Yeah. I'll speak for a second, then I'll let Joaquin speak. As we've said on previous calls, this is a processing deal. As soon as we're up and running, and we're still targeting early next year, we'll immediately book revenue with a margin. As they grow and they continue to take share, that'll grow over time. We do have minimums, so there is certainty. If it grows beyond what we put as the minimums, this business will continue to grow. As we add additional products, because they use RiskCenter 360 today, and as we sell this to other customers, it could become a meaningful business for our Chilean operation.
Okay. Thank you. Last question, just on the neobanks or the relationship with the Brazilian bank. Is this an effort at banking as a service type of technology effort for FinTechs? Is this a broad effort? Or is it?
What we're seeing, Bob, so in Brazil, we're seeing a lot of digital banks come up. In Mexico, we're seeing a lot of Fintechs.
Right
with the new Fintech Law. The point we want to make is this is a licensing deal, which we're moving to processing. We're still selling licenses in Brazil. The reason we wanted to point this out was not because of the size of the revenue opportunity, but to demonstrate that the Evertec of today is now being selected by some of these new FinTechs and these digital banks. They're going to be using our Risk product primarily. That's why we want to point this out. It's not just the traditional banks and the traditional players, but the new entrants who are looking for the best technology are selecting us as well.
I'm sorry. You say it's a risk product. Is it something that you expect to expand into other products and services?
I hope I sell them a lot more products. The risk product is the one that when we bought PayGroup was the one that had a lot of traction. We've discussed it. Banco Santander-Chile has it. We're deploying it internally as well. Our hope would be that we can continue to sell them other products and sell this to other banks in the region.
Great. Thank you very much. Appreciate it.
Thanks, Bob.
Our next question comes from James Friedman from Susquehanna. Please go ahead with your question.
Hi, congratulations on the results. It's Jamie at Susquehanna. I just get a couple upfront. First, you talked about the pricing actions. You can see that in the increased yield. If you could talk to maybe some examples of where that is showing up that would be helpful. That's the first one. In terms of the completion, Joaquin, of the 2 million, I think, was the number you used projects on the business solution side. Could you just remind us where that number where it is now relative to where it started from? I think you made some comments on what to expect for next year. That's the two. First on pricing and next on the projects. Thank you.
Jamie, this is Mac. Thanks for the congrats. I'll hand it to Joaquin to go through that.
Hey, Jamie. In terms of pricing, that's primarily in our merchant acquiring segment. We mentioned earlier in the year that as we were going to see a slowdown in sales volume, given our tough compare in the previous year with all the Fed funding coming through, we were going to put some pricing actions in place. It's mainly in the merchant acquiring segment. As it relates to the $2 million, it's mainly in our business solutions segment, and that's related to, as we said, the completion of projects from Banco Popular, mainly driven by their acquisition of Reliable and our integration of those systems. We reached a milestone during the quarter that allowed us to recognize that portion of revenue that we mentioned. I don't know if that answers the question or if you had a follow-up as well.
Then in that same narrative, Joaquin, you had called out, I may be confusing topics here, but with your early remarks on 2020, I thought you had said $4 million-$5 million impact to 2020. Is that what you're assuming?
Okay. Yes. That $4 million-$5 million is related to the account attrition that we have been seeing in Latin America. We called out those accounts a few years ago, and given the time lapse it's taken those clients to roll off, we continue to see a tail, and we expected originally $3 million-$5 million this current year. Those have gotten delayed, which we benefited from during the year. Now we have a tail going to 2020, which we called out will be $4 million-$5 million.
Got it.
That number, just for additional information, is based on communications with the clients and their expectations as to when they expect to actually roll off.
Understood. Okay, I'll drop back into the queue. Thank you.
Thanks, Jamie.
Our next question comes from Vasu Gaba from KBW. Please go ahead with your question.
Hi. Thanks for taking my question. I guess first question, there's been a fair amount of consolidation going on on the island. How do you see that impacting EVERTEC in the near term or the longer term? Do you see that as creating more cross-sell opportunity for you, or is there a risk on pricing as these relationships get larger? Can you talk about that a little bit?
Yeah. Right now, if you look at the deals for everybody, Oriental Bank is taking over Scotiabank and FirstBank is taking over Santander. All of those are clients today. They're members of ATH. We have business with them across different segments. In the short term, we don't see really any material impact because of the share that we have today and that we already have existing relationships.
Understood. Just going back to the Popular comment. I understand you said this is something that's happened before, but I don't remember you guys ever calling it out before. Just wanted to understand what's different this time. If you could give us a little bit more history on what's typically happened in the past, what kind of pricing negotiations you've had to do historically.
Sure. Not necessarily specific to pricing. We've had many disputes with the bank where we have had to sit down and negotiate and come up with some type of resolution. A relationship this large and this complicated, that's invariable, and we've always been able to resolve those. On this specific issue, we're bringing it up right now because as we go into 2020, this Q3 call, we always try and give you the puts and takes. Unfortunately, sometimes there's ambiguity to them, like the Santander deal, the Citi deal, even the PlacetoPay revenue. Similar to this, we can't comment on the scope, but just that we have these types of disagreements. We've historically resolved them, and we're working on this specific one as well.
Got it. Just the very last one from me. On the government contract that you guys announced, can you provide any more color on the magnitude of that contract and if you have visibility into when that might get signed?
I'm sorry. The government contracts that we mentioned have all been already signed. As we went into our Q2 call, we actually mentioned that we obviously given the turmoil and the turnover in the government, and we had some contracts up for renewal. That situation caused some delays that we're calling out impacted us in the payment Puerto Rico segment and our business solutions segment. We have now executed on all contracts, so we don't expect anything additional going forward.
Understood. Thank you very much.
Thanks, Vasu.
Our next question comes from George Mihalos from Cowen. Please go ahead with your question.
Hey, good afternoon, guys. Thanks for taking my questions. Looking at the payment services in Puerto Rico and Caribbean, the pressure on the EBITDA margin this quarter, it sounds like there is some puts and takes, some one-timers over there. How should we think about that going into fourth quarter now that you have the government contract signed? Should we continue to think that there'll be elevated project expenses, though, as we go from three Q to four Q?
Yes. Our expectation would be to get to a more normalized EBITDA margin as it relates to our Payment Puerto Rico segment. As you mentioned, George, we did have some puts and takes going in there. We also had a platform going into production where we had to incur specific expenses as part of our stabilization efforts to keep that up and running as it's a new system that's running. We still expect to see some of that roll into Q4, but we do expect to get to something more similar to what we saw in Q1 and Q2.
Okay. That's helpful. Just a quick follow-up. Brazil is a geography that we haven't heard much about. I know there's strategic reasons why you haven't gone there from a processing standpoint or from an acquiring standpoint. Mac, are there additional opportunities there or is this more of a one-off type opportunity?
No. What I'd say about Brazil, it's one of the fastest growing payment markets in the region, but it's highly competitive. You've got StoneCo, you've got PagSeguro, you've got the traditional players. What we found and what PayGroup had found their niche is really providing licensed software to those businesses in Brazil. Given that we're focused on Spanish-speaking smaller countries where the other guys are less focused, it's not a priority for us. We're not localizing the products. We're not building the processing model in Brazil. Where we can sell a license, where we can pick up business, we will continue to do so. We do have an active pipeline, but primarily licensed business, licensed contracts.
Okay. Thank you.
Yep. Thanks, George.
Our next question comes from John Davis from Raymond James. Please go ahead with your question.
Hey, good afternoon, guys. Maybe just start with bigger picture questions here. As we sit through three quarters of 2019, you've exceeded expectations and raised your guidance here a couple of times despite, I would say, lack of upside from funding. Maybe just talk about what's gone right, what's exceeded your expectations so far, and I have a couple follow-ups after that.
Yes, I'll speak to that at the highest level and then let Joaquin give his thoughts as well. We said at the beginning of the year we were very focused on innovation. We were very focused on being opportunistic as markets open. We've been very, very pleased with the opportunities that have unfolded in Latin America. The acquisition of PayGroup has given us the Rolodex, the product set to help open up the Chilean market, to help create a regional product with Citibank. We think the combination of our positioning and the market timing has gone very, very well this year. We've been incredibly pleased with that. I'd say specifically in Puerto Rico, I've been very pleased with our innovation and our continued track record of rolling out functionality within ATH Móvil, moving out to ATH Business.
The things that we're doing on the POS with Pivot and some of the other innovations where we're trying to compete more aggressively. The other piece of Puerto Rico I think we've done well is making sure that we look at our customers, particularly in the merchant portfolio, and make sure we're pricing them appropriately and looking for opportunities to maintain our growth trajectory and our margins by taking pricing actions where we think that those will be effective. Those are the things that I've been really pleased with this year and that I think have gone well, including, and I'll throw out there the Reliable conversion with the bank too. I think we've had some great success with the bank. I don't know if people know this, but if you look at 2014 versus 2019, our operational incidents with the bank have gone down 70%.
If you look at the Reliable conversion, we've had one of the best conversions that we've had with any business that they've bought. This was one of the larger conversions. I think execution we've been very pleased with and then the timing of the LatAm business opportunities. Joaquin?
I think you hit on every point. We've executed in LatAm. We've been able to sign some very important contracts that show what we've been able to do with the products that we've acquired. In Puerto Rico, I would say, obviously, the delay in funding continues to be or create uncertainty for us, but we've been able to execute through that with some of the pricing actions and executing on some of the projects that we've been able to mention as part of these calls that we've been putting into production and that are reflected in our financials.
Okay. Just as we move to 2020 and appreciate the color on the puts and takes, but it sounds like on the positive side, you have Santander, you have the CPI price increase, and then continued innovation with Pivot, ATH Móvil, and then potentially from on the headwind side, you have potentially whatever this pricing dispute is with the bank. What are we thinking about from an absolute level of spending in Puerto Rico, how does the economy look today versus what you thought at the end of the year? How do you think about it going into next year?
It's something that we continue to monitor. John, the unemployment rate, which we mentioned on the call, is at the lowest level it's been in recent memory. We continue to track indicators versus pre-hurricane levels, and they seem to be in a good place. Obviously, Fed funds continue to be a significant factor in terms of what we can expect for 2020. We didn't see much of that fund flow into 2019. We are hopeful and expecting that we will see some of that start to move into 2020. If you read the news, HUD has been looking to put somebody down in Puerto Rico or one person to put controls around that funding, and hopefully that creates some traction in terms of funds flow. Again, we need to monitor it closely to have a better visibility.
As we go into our Q4 call, we'll have more details to share with you guys.
Okay. Suffices to say you probably feel better today about the next 12 months than you did when you sat here a year ago and gave initial color on 2019. Is that fair to say?
Yeah.
Okay. Last one from me. Obviously, leverage is down. Approaching two turns. Didn't buy back much stock in the quarter. Maybe talk a little bit about the M&A pipeline, what you guys are thinking, what the leverage comfort range is. How low will you let leverage get? Just any commentary there would be helpful.
What I would start saying is our strategy hasn't changed. We continue to execute our strategy in terms of looking for or deploying capital for growth. And yes, our leverage ratio is down. As we said in the beginning of the year, we want to be between 2 and 3 times. So we're still kind of in that range. We continue to be actively looking. M&A, as I said, is one of the main items in our strategy. We continue to look, and as we find opportunities that make sense, we will execute on those. This quarter was a slow one compared to our previous quarters, but we continue to be consistent in how we plan on deploying capital.
Okay, thanks guys.
Once again, if you would like to ask a question, please press star and then one. Our next question comes from James Faucette from Morgan Stanley. Please go ahead with your question.
Great. Thank you so much. I want to follow up on that last question. You've highlighted the activity in Brazil and just the amount of investment and activity in the Latin American market seems to be fairly important right now. I'm wondering how that's impacting your ability to identify potential M&A targets or partnerships even and if at any that activity is having on your view and objectives for the rest of Latin America.
I'll kind of give you my view and then let Joaquin give you his. What we're finding now is given that we have the products that we're localizing and we said at the beginning of the year in the countries we're localizing them in, this is really opening up more organic opportunities. We're investing more CapEx in Latin America around those organic opportunities which we didn't have five years ago. Two reasons. One is the markets weren't opening and the second is we really didn't have the products to provide in the event that they did. You have seen more investment in organic growth. We are still looking actively at M&A.
We're looking at PlacetoPay is a good example of a product that'll help strengthen our position in Colombia and more importantly, it'll help us complement the products that we now have by giving us a nice gateway that not only we can use in South America, but potentially back in Puerto Rico. We're still focused on those both when we look at the opportunities in the region. I would say our previous acquisitions have made the organic opportunities come more alive.
No, the only thing I would add is, and I'm not sure if you're also talking about capital going into Brazil and some of the different countries from the outside. Some of the countries we're looking at and that we're concentrating on, Chile, Colombia, Uruguay, we have a presence in and we have people on the ground there. We know the landscape. We feel that that continues to give us an advantage in terms of identifying targets and how and where we want to deploy that capital.
Got it. That is really helpful. Then I want to ask specifically about merchant acquiring revenue growth. You called out some pricing benefits, but I am wondering if that was in any particular segment of merchants and do you expect additional pricing actions? Just trying to think through kind of what the puts and takes and drivers of that merchant acquiring revenue growth might look like.
We haven't really broken down our pricing actions in terms of segments or parts of the portfolio. What I can tell you, it's within our merchant acquiring segment and we've looked at both transactional fees as well as non-transactional fees. As we've said before, it's been some time since we've actually used pricing levers in terms of growth. It's something that we are very careful about doing. We analyze our portfolios and we look for relationships where we think we have or we need to execute on pricing actions to make the relationship profitable. We haven't given that level of breakdown.
Yeah. Sometimes if we do it is to provide the additional services around PCI. Sometimes it's not just increasing pricing or changing price. Joaquin has done a great job at reevaluating the portfolio and look at where we thought we had margins that now that we found that we need to increase, but it's also been rolling out some additional functionality and features.
Got it. Thank you. Last question from me is you've had a few quarters of benefit from monetizing ATH Móvil. Can you talk about where you are in those monetization efforts and how much there is to go before you kind of feel like you're at a steady state and can treat that business a bit more organically, if you will?
Yeah. We started monetizing ATH Móvil in Q3 of last year. Actually, we just lapsed that in this quarter. We continue to see growth on both our ATH Móvil P2P app as well as our ATH Móvil Business app. We're very focused on continuing to get merchants that use our P2P app for doing business into our merchant or our business side of the application and that should also continue or gives opportunities to continue growing that type of service. At the same time, our focus on innovation is on looking for additional features and ways in which we continue to monetize not just the same service but additional features within ATH Móvil. That's how we're looking at it into the future.
Great. Thank you so much.
Ladies and gentlemen, at this time and showing no additional questions, I'd like to turn the conference call back over to Morgan Schuessler for any closing remarks.
I just want to thank everybody for joining us this evening and we look forward to seeing you as we travel on the road. Have a good evening.
Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.