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EVERTEC Reports Second Quarter 2023 Results

Raises annual guidance

EVERTEC, Inc. (NYSE: EVTC) (“Evertec”, the “Company”, “we” or “our”) today announced results for the second quarter ended June 30, 2023.

Second Quarter 2023 Highlights

  • Revenue increased 4% to $167.1 million
  • GAAP Net Income attributable to common shareholders decreased 16% to $28.2 million and decreased 9% to $0.43 per diluted share
  • Adjusted EBITDA increased to $74.5 million and Adjusted earnings per common share increased 6% to $0.71
  • Share repurchases totaled $9.5 million for the quarter
  • Announced Sinqia acquisition
  • Increased and extended share repurchase program

Mac Schuessler, President and Chief Executive Officer stated, “We delivered a strong second quarter in both Puerto Rico and Latin America, while concurrently executing on our strategic growth plan through M&A. Given our strong quarter, we are once again raising our guidance for the year."

Second Quarter 2023 Results

Revenue. Total revenue for the quarter ended June 30, 2023 was $167.1 million, an increase of 4% compared with $160.6 million in the prior year quarter, driven by growth in our payment segments, both in Puerto Rico and Latin America. Merchant acquiring revenue growth was a result of increased spread per transaction, in part due to the continued benefit from pricing initiatives and card mix, and an increase in sales volumes. Payment processing growth in Puerto Rico was driven by increased transaction volumes as well as continued growth in ATH Movil revenues, primarily ATH Business. Payment processing LATAM revenue growth reflected the impact from the BBR and paySmart acquisitions completed in the third quarter of 2022 and first quarter of 2023, respectively, and organic growth. These increases were partially offset by the impact to business solutions from the assets sold as part of the Popular Transaction in the third quarter of 2022.

Net Income attributable to common shareholders. For the quarter ended June 30, 2023, GAAP Net Income attributable to common shareholders was $28.2 million, or $0.43 per diluted share, a decrease of $5.4 million or $0.04 per diluted share as compared to the prior year. The decrease was primarily driven by an increase in costs of revenues, primarily due to the revenue sharing agreement with Banco Popular, as well as an increase in personnel costs, primarily attributable to increased headcount in Latin America resulting from the BBR and paySmart acquisitions, and an increase in professional fees and cloud services, partially offset by the impact in the prior year of a $4.1 million impairment loss on a multi-year software development. Selling, general and administrative expenses increased mainly due to an increase in personnel costs as well as an increase in professional fees mainly related to corporate development initiatives. Additionally, the current quarter reflects a non-cash unrealized gain on foreign currency remeasurement of $0.3 million compared with a non-cash unrealized loss of $1.7 million in the prior year quarter.

Adjusted EBITDA and Adjusted EBITDA Margin. For the quarter ended June 30, 2023, Adjusted EBITDA was $74 million, a decrease of $0.4 million when compared to the prior year quarter. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 44.6%, a decrease of approximately 160 basis points from the prior year. The decrease in Adjusted EBITDA and Adjusted EBITDA margin reflects the impact of the revenue sharing agreement with Banco Popular which increased expenses year over year, and the impact from the sale of assets to Popular as part of the Popular Transaction, which were of higher margin.

Adjusted Net Income and Adjusted earnings per common share. For the quarter ended June 30, 2023, Adjusted Net Income was $46.6 million, a decrease of $1.3 million compared to $96.0 million in the prior year. The decrease was driven by lower adjusted EBITDA, higher operating depreciation and amortization and higher non-GAAP tax expense partially offset by lower interest expense, net. Adjusted earnings per common share was $0.71, an increase of $0.04 per diluted share compared to $0.67, in the prior year due to a lower share count that reflects the impact from the share repurchases completed in 2022 and the shares received as part of the Popular Transaction.

Share Repurchase

During the three months ended June 30, 2023, the Company repurchased 268,398 shares of its common stock at an average price of $35.64 per share for a total of $9.5 million. As of June 30, 2023, a total of approximately $63 million remained available for future use under the Company’s share repurchase program. On July 20, 2023, the Company announced that its Board of Directors approved an increase to the share repurchase authorization to an aggregate $150 million and an extension of the expiration date to December 31, 2024.

2023 Outlook

The Company is revising its financial outlook for 2023 as follows:

  • Total consolidated revenue is now anticipated to be between $652 million and $658 million representing growth of approximately 5% to 6% growth, compared with $644 to $652 million previously estimated.
  • Adjusted earnings per common share between $2.75 to $2.83 representing approximately 9% to 12% growth as compared to $2.53 in 2022, as recast, compared with $2.59 to $2.68 previously estimated.
  • We continue to expect capital expenditures to be approximately $70 million.
  • We continue to expect an effective tax rate of approximately 16% to 17%.

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss its second quarter 2023 financial results today at 4:30 p.m. ET. Hosting the call will be Mac Schuessler, President and Chief Executive Officer, and Joaquin Castrillo, Chief Financial Officer. The conference call can be accessed live over the phone by dialing (888) 338-7153 or for international callers by dialing (412) 317-5117. A replay will be available one hour after the end of the conference call and can be accessed by dialing (877) 344-7529 or (412) 317-0088 for international callers; the pin number is 1769798. The replay will be available through Wednesday, August 2, 2023. The call will be webcast live from the Company’s website at www.evertecinc.com under the Investor Relations section or directly at http://ir.evertecinc.com. A supplemental slide presentation that accompanies this call and webcast will be available prior to the call on the investor relations website at ir.evertecinc.com and will remain available after the call.

About Evertec

EVERTEC, Inc. (NYSE: EVTC) is a leading full-service transaction processing business in Puerto Rico, the Caribbean and Latin America, providing a broad range of merchant acquiring, payment services and business process management services. Evertec owns and operates the ATH® network, one of the leading personal identification number (“PIN”) debit networks in Latin America. In addition, the Company processes over six billion transactions annually and manages a system of electronic payment networks in Puerto Rico and Latin America and offers a comprehensive suite of services for core banking, cash processing, and fulfillment in Puerto Rico. Additionally, the Company offers technology outsourcing and payment transactions fraud monitoring to all the regions it serves. Based in Puerto Rico, the Company operates in 26 Latin American countries and serves a diversified customer base of leading financial institutions, merchants, corporations and government agencies with “mission-critical” technology solutions. For more information, visit www.evertecinc.com.

Use of Non-GAAP Financial Information

The non-GAAP measures referenced in this earnings release are supplemental measures of the Company’s performance and are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America (“GAAP”). They are not measurements of the Company’s financial performance under GAAP and should not be considered as alternatives to total revenue, net income or any other performance measures derived in accordance with GAAP or as alternatives to cash flows from operating activities, as indicators of operating performance or as measures of the Company’s liquidity. In addition to GAAP measures, management uses these non-GAAP measures to focus on the factors the Company believes are pertinent to the daily management of the Company’s operations and believes that they are also frequently used by analysts, investors and other stakeholders to evaluate companies in our industry. These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented herein, limiting their usefulness as comparative measures.

Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included at the end of this earnings release. These non-GAAP measures include EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, each as defined below. Effective for the quarter ended March 31, 2023, the Company modified the manner in which it calculates Adjusted EBITDA, Adjusted Net Income and Adjusted earnings per common share to exclude the impact of unrealized gains and losses from foreign currency remeasurement for assets and liabilities denominated in non-functional currencies. These non-cash unrealized gains and losses are non-operational in nature and we believe that excluding these better presents the overall financial performance of our core business, and help facilitate comparison with industry peers. The Company has recast prior periods to conform with the modified definition of Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash items and unusual expenses such as: share-based compensation, restructuring related expenses, fees and expenses from corporate transactions such as M&A activity and financing, equity investment income net of dividends received, and the impact from unrealized gains and losses on foreign currency remeasurement for assets and liabilities in non-functional currency. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, Adjusted EBITDA, as it relates to the Company's segments, is presented in conformity with Accounting Standards Codification 280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's Regulation G and Item 10(e) of Regulation S-K. The Company's presentation of Adjusted EBITDA is substantially consistent with the equivalent measurements that are contained in the secured credit facilities in testing EVERTEC Group’s compliance with covenants therein such as the secured leverage ratio.

Adjusted Net Income is defined as Adjusted EBITDA less: operating depreciation and amortization expense, defined as GAAP Depreciation and amortization less amortization of intangibles related to acquisitions such as customer relationships, trademarks; cash interest expense defined as GAAP interest expense, less GAAP interest income adjusted to exclude non-cash amortization of debt issue costs, premium and accretion of discount; income tax expense which is calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for uncertain tax position releases, tax true-ups, windfall from share-based compensation, unrealized gains and losses from foreign currency remeasurement, among others; and non-controlling interest which is the 35% non-controlling equity interest in Evertec Colombia, net of amortization for intangibles created as part of the purchase.

Adjusted Earnings per common share is defined as Adjusted Net Income divided by diluted shares outstanding.

The Company uses Adjusted Net Income to measure the Company's overall profitability because the Company believes it better reflects the comparable operating performance by excluding the impact of the non-cash amortization and depreciation that was created as a result of merger and acquisition activity. In addition, in evaluating EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, you should be aware that in the future the Company may incur expenses such as those excluded in calculating them.

Forward-Looking Statements

Certain statements in this earnings release constitute “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our ability to meet our guidance expectations for revenue, earnings per share, Adjusted earnings per common share, capital expenditures and effective tax rate, including for fiscal year 2023, are forward looking statements. Words such as “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” and “plans” and similar expressions of future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts.

Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: the Company’s reliance on its relationship with Popular, Inc. (“Popular”) for a significant portion of its revenues pursuant to the Company’s second amended and restated Master Services Agreement ("MSA") with them, and to grow the Company’s merchant acquiring business; the Company’s ability to renew its client contracts on terms favorable to the Company, including but not limited to the current term and any extension of the MSA with Popular; the Company’s dependence on its processing systems, technology infrastructure, security systems and fraudulent payment detection systems, as well as on the Company’s personnel and certain third parties with whom it does business, and the risks to the Company’s business if its systems are hacked or otherwise compromised; the Company’s ability to develop, install and adopt new software, technology and computing systems; a decreased client base due to consolidations and failures in the financial services industry; the credit risk of the Company’s merchant clients, for which it may also be liable; the continuing market position of the ATH network; a reduction in consumer confidence, whether as a result of a global economic downturn or otherwise, which leads to a decrease in consumer spending; the Company’s dependence on credit card associations, including any adverse changes in credit card association or network rules or fees; changes in the regulatory environment and changes in international, legal, tax, political, administrative or economic conditions; the geographical concentration of the Company’s business in Puerto Rico, including its business with the government of Puerto Rico and its instrumentalities, which are facing severe political and fiscal challenges; additional adverse changes in the general economic conditions in Puerto Rico, whether as a result of the government’s debt crisis or otherwise, including the continued migration of Puerto Ricans to the U.S. mainland, which could negatively affect the Company’s customer base, general consumer spending, the Company’s cost of operations and the Company’s ability to hire and retain qualified employees; operating an international business in Latin America and the Caribbean, in jurisdictions with potential political and economic instability; the impact of foreign exchange rates on operations; the Company’s ability to protect its intellectual property rights against infringement and to defend itself against claims of infringement brought by third parties; the Company’s ability to comply with U.S. federal, state, local and foreign regulatory requirements; evolving industry standards and adverse changes in global economic, political and other conditions; the Company’s level of indebtedness and restrictions contained in the Company’s debt agreements, including the secured credit facilities, as well as debt that could be incurred in the future; the Company’s ability to prevent a cybersecurity attack or breach to its information security; the possibility that the Company could lose its preferential tax rate in Puerto Rico; the possibility of future catastrophic hurricanes, earthquakes and other potential natural disasters affecting the Company’s main markets in Latin America and the Caribbean; and uncertainty related to the effect of the discontinuation of the London Interbank Offered Rate; the elimination of Popular's ownership of the Company's common stock; and the other factors set forth under "Part 1, Item 1A. Risk Factors," in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission (the "SEC") on February 24, 2023, as any such factors may be updated from time to time in the Company’s filings with the SEC. The Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless it is required to do so by law.

EVERTEC, Inc.

Schedule 1: Unaudited Condensed Consolidated Statements of Income and Comprehensive Income

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2023

 

2022

 

2023

 

2022

(Dollar amounts in thousands, except share data)

 

 

 

 

 

 

 

 

Revenues

 

$

167,076

 

 

$

160,571

 

 

$

326,890

 

 

$

310,819

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

Cost of revenues, exclusive of depreciation and amortization

 

 

80,452

 

 

 

74,313

 

 

 

156,869

 

 

 

138,972

 

Selling, general and administrative expenses

 

 

29,522

 

 

 

20,051

 

 

 

53,397

 

 

 

40,435

 

Depreciation and amortization

 

 

22,329

 

 

 

19,560

 

 

 

41,761

 

 

 

38,720

 

Total operating costs and expenses

 

 

132,303

 

 

 

113,924

 

 

 

252,027

 

 

 

218,127

 

Income from operations

 

 

34,773

 

 

 

46,647

 

 

 

74,863

 

 

 

92,692

 

Non-operating income (expenses)

 

 

 

 

 

 

 

 

Interest income

 

 

2,103

 

 

 

805

 

 

 

3,236

 

 

 

1,472

 

Interest expense

 

 

(5,640

)

 

 

(5,932

)

 

 

(11,283

)

 

 

(11,479

)

Gain (loss) on foreign currency remeasurement

 

 

333

 

 

 

(1,747

)

 

 

(4,531

)

 

 

921

 

Earnings of equity method investment

 

 

1,476

 

 

 

862

 

 

 

2,631

 

 

 

1,432

 

Other income, net

 

 

1,591

 

 

 

609

 

 

 

2,601

 

 

 

1,247

 

Total non-operating expenses

 

 

(137

)

 

 

(5,403

)

 

 

(7,346

)

 

 

(6,407

)

Income before income taxes

 

 

34,636

 

 

 

41,244

 

 

 

67,517

 

 

 

86,285

 

Income tax expense

 

 

6,586

 

 

 

7,688

 

 

 

9,404

 

 

 

13,863

 

Net income

 

 

28,050

 

 

 

33,556

 

 

 

58,113

 

 

 

72,422

 

Less: Net (loss) attributable to non-controlling interest

 

 

(105

)

 

 

(33

)

 

 

(94

)

 

 

(65

)

Net income attributable to EVERTEC, Inc.’s common stockholders

 

 

28,155

 

 

 

33,589

 

 

 

58,207

 

 

 

72,487

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

3,153

 

 

 

(6,549

)

 

 

20,758

 

 

 

(4,335

)

Gain on cash flow hedges

 

 

1,816

 

 

 

3,337

 

 

 

271

 

 

 

13,062

 

Unrealized loss on change in fair value of debt securities available-for-sale

 

 

 

 

$

(29

)

 

$

(20

)

 

$

(56

)

Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders

 

$

33,124

 

 

$

30,348

 

 

$

79,216

 

 

$

81,158

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.43

 

 

$

0.47

 

 

$

0.90

 

 

$

1.01

 

Diluted

 

$

0.43

 

 

$

0.47

 

 

$

0.89

 

 

$

1.00

 

Shares used in computing net income per common share:

 

 

 

 

 

 

 

 

Basic

 

 

65,046,328

 

 

 

71,476,850

 

 

 

65,007,528

 

 

 

71,714,876

 

Diluted

 

 

65,510,091

 

 

 

72,149,949

 

 

 

65,571,453

 

 

 

72,558,565

 

 

EVERTEC, Inc.

Schedule 2: Unaudited Condensed Consolidated Balance Sheets

 

(In thousands)

 

June 30, 2023

 

December 31, 2022

Assets

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

191,620

 

$

185,274

 

Restricted cash

 

 

19,485

 

 

18,428

 

Accounts receivable, net

 

 

109,421

 

 

111,493

 

Settlement assets

 

 

30,014

 

 

31,542

 

Prepaid expenses and other assets

 

 

43,348

 

 

42,392

 

Total current assets

 

 

393,888

 

 

389,129

 

Debt securities available-for-sale, at fair value

 

 

2,175

 

 

2,203

 

Investment in equity investee

 

 

17,136

 

 

14,661

 

Property and equipment, net

 

 

57,761

 

 

56,387

 

Operating lease right-of-use asset

 

 

14,035

 

 

15,918

 

Goodwill

 

 

438,256

 

 

423,392

 

Other intangible assets, net

 

 

213,779

 

 

200,320

 

Deferred tax asset

 

 

8,264

 

 

5,701

 

Derivative asset

 

 

7,733

 

 

7,440

 

Net investment in leases

 

 

 

 

14

 

Other long-term assets

 

 

18,606

 

 

16,578

 

Total assets

 

$

1,171,633

 

$

1,131,743

 

Liabilities and stockholders’ equity

 

 

 

 

Current Liabilities:

 

 

 

 

Accrued liabilities

 

$

79,749

 

$

80,666

 

Accounts payable

 

 

50,147

 

 

29,730

 

Contract liability

 

 

17,821

 

 

15,226

 

Income tax payable

 

 

171

 

 

9,406

 

Current portion of long-term debt

 

 

20,750

 

 

20,750

 

Short-term borrowings

 

 

 

 

20,000

 

Current portion of operating lease liability

 

 

6,189

 

 

5,936

 

Settlement liabilities

 

 

24,103

 

 

26,696

 

Total current liabilities

 

 

198,930

 

 

208,410

 

Long-term debt

 

 

379,602

 

 

389,498

 

Deferred tax liability

 

 

9,407

 

 

10,111

 

Contract liability - long term

 

 

33,345

 

 

34,068

 

Operating lease liability - long-term

 

 

8,579

 

 

10,788

 

Other long-term liabilities

 

 

3,628

 

 

4,120

 

Total liabilities

 

 

633,491

 

 

656,995

 

Stockholders’ equity

 

 

 

 

Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued

 

 

 

 

 

Common stock, par value $0.01; 206,000,000 shares authorized; 64,839,109 shares issued and outstanding as of June 30, 2023 (December 31, 2022 - 64,847,233)

 

 

648

 

 

648

 

Additional paid-in capital

 

 

 

 

 

Accumulated earnings

 

 

529,364

 

 

487,349

 

Accumulated other comprehensive loss, net of tax

 

 

4,523

 

 

(16,486

)

Total EVERTEC, Inc. stockholders’ equity

 

 

534,535

 

 

471,511

 

Non-controlling interest

 

 

3,607

 

 

3,237

 

Total equity

 

 

538,142

 

 

474,748

 

Total liabilities and equity

 

$

1,171,633

 

$

1,131,743

 

 

EVERTEC, Inc.

Schedule 3: Unaudited Condensed Consolidated Statements of Cash Flows

 

 

 

Six months ended June 30,

 

 

2023

 

2022

Cash flows from operating activities

 

 

 

 

Net income

 

 

58,113

 

 

$

72,422

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

41,761

 

 

 

38,720

 

Amortization of debt issue costs and accretion of discount

 

 

791

 

 

 

805

 

Operating lease amortization

 

 

3,103

 

 

 

3,056

 

Provision for expected credit losses and sundry losses

 

 

3,752

 

 

 

1,795

 

Deferred tax benefit

 

 

(3,290

)

 

 

(1,210

)

Share-based compensation

 

 

12,056

 

 

 

9,444

 

Loss on disposition of property and equipment

 

 

372

 

 

 

4,370

 

Earnings of equity method investment

 

 

(2,631

)

 

 

(1,432

)

Loss (gain) on foreign currency remeasurement

 

 

4,531

 

 

 

(921

)

Decrease (increase) in assets:

 

 

 

 

Accounts receivable, net

 

 

1,261

 

 

 

2,759

 

Prepaid expenses and other assets

 

 

(628

)

 

 

(1,972

)

Other long-term assets

 

 

(2,282

)

 

 

(3,965

)

(Decrease) increase in liabilities:

 

 

 

 

Accrued liabilities and accounts payable

 

 

21,802

 

 

 

7,397

 

Income tax payable

 

 

(10,027

)

 

 

(3,862

)

Contract liability

 

 

1,181

 

 

 

1,025

 

Operating lease liabilities

 

 

(3,035

)

 

 

(1,605

)

Other long-term liabilities

 

 

(592

)

 

 

1,109

 

Total adjustments

 

 

68,125

 

 

 

55,513

 

Net cash provided by operating activities

 

 

126,238

 

 

 

127,935

 

Cash flows from investing activities

 

 

 

 

Additions to software

 

 

(24,151

)

 

 

(18,918

)

Acquisition of customer relationship

 

 

 

 

 

(10,607

)

Property and equipment acquired

 

 

(11,327

)

 

 

(10,051

)

Proceeds from sales of property and equipment

 

 

22

 

 

 

76

 

Purchase of certificates of deposit

 

 

 

 

 

(7,264

)

Proceeds from maturities of available-for-sale debt securities

 

 

 

 

 

572

 

Acquisitions, net of cash acquired

 

 

(22,915

)

 

 

 

Net cash used in investing activities

 

 

(58,371

)

 

 

(46,192

)

Cash flows from financing activities

 

 

 

 

Withholding taxes paid on share-based compensation

 

 

(5,955

)

 

 

(5,676

)

Net decrease in short-term borrowings

 

 

(20,000

)

 

 

 

Repayment of short-term borrowings for purchase of equipment and software

 

 

 

 

 

(853

)

Dividends paid

 

 

(6,503

)

 

 

(7,177

)

Repurchase of common stock

 

 

(15,790

)

 

 

(35,215

)

Repayment of long-term debt

 

 

(10,375

)

 

 

(9,875

)

Net cash used in financing activities

 

 

(58,623

)

 

 

(58,796

)

Effect of foreign exchange rate on cash, cash equivalents and restricted cash

 

 

(1,841

)

 

 

1,776

 

Net increase in cash, cash equivalents and restricted cash

 

 

7,403

 

 

 

24,723

 

Cash, cash equivalents and restricted cash at beginning of the period

 

 

203,702

 

 

 

277,707

 

Cash, cash equivalents and restricted cash at end of the period

 

$

211,105

 

 

$

302,430

 

Cash and cash equivalents included in Settlement Assets

 

 

17,542

 

 

 

8,210

 

Total cash and cash equivalents on the consolidated statement of cash flows

 

$

228,647

 

 

$

310,640

 

Reconciliation of cash, cash equivalents and restricted cash

 

 

 

 

Cash and cash equivalents

 

$

191,620

 

 

$

279,854

 

Restricted cash

 

 

19,485

 

 

 

22,576

 

Cash and cash equivalents included in Settlement Assets

 

 

17,542

 

 

 

8,210

 

Cash, cash equivalents and restricted cash

 

$

228,647

 

 

$

310,640

 

 

EVERTEC, Inc.

Schedule 4: Unaudited Segment Information

 

 

Three months ended June 30, 2023

(In thousands)

Payment

Services -

Puerto Rico &

Caribbean

 

Payment

Services -

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other (1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

50,795

 

 

$

39,076

 

 

$

41,248

 

$

56,971

 

$

(21,014

)

 

$

167,076

 

Operating costs and expenses

 

28,895

 

 

 

33,666

 

 

 

27,616

 

 

39,097

 

 

3,029

 

 

 

132,303

 

Depreciation and amortization

 

6,087

 

 

 

5,393

 

 

 

1,150

 

 

4,469

 

 

5,230

 

 

 

22,329

 

Non-operating income (expenses)

 

115

 

 

 

2,290

 

 

 

1

 

 

66

 

 

928

 

 

 

3,400

 

EBITDA

 

28,102

 

 

 

13,093

 

 

 

14,783

 

 

22,409

 

 

(17,885

)

 

 

60,502

 

Compensation and benefits (2)

 

842

 

 

 

999

 

 

 

860

 

 

965

 

 

5,035

 

 

 

8,701

 

Transaction, refinancing and other fees (3)

 

288

 

 

 

253

 

 

 

 

 

 

 

5,068

 

 

 

5,609

 

Loss (gain) on foreign currency remeasurement (4)

 

(49

)

 

 

(285

)

 

 

 

 

 

 

1

 

 

 

(333

)

Adjusted EBITDA

$

29,183

 

 

$

14,060

 

 

$

15,643

 

$

23,374

 

$

(7,781

)

 

$

74,479

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $13.4 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $4.4 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $3.3 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)

Primarily represents share-based compensation and severance payments.

(3)

Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.

(4)

Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

 

Three months ended June 30, 2022

(In thousands)

Payment

Services -

Puerto Rico &

Caribbean

 

Payment

Services -

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other (1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

46,078

 

$

30,784

 

$

38,539

 

$

64,690

 

 

$

(19,520

)

 

$

160,571

 

Operating costs and expenses

 

28,680

 

 

25,032

 

 

22,823

 

 

40,297

 

 

 

(2,908

)

 

 

113,924

 

Depreciation and amortization

 

5,466

 

 

2,712

 

 

1,040

 

 

4,279

 

 

 

6,063

 

 

 

19,560

 

Non-operating income (expenses)

 

309

 

 

123

 

 

332

 

 

624

 

 

 

(1,664

)

 

 

(276

)

EBITDA

 

23,173

 

 

8,587

 

 

17,088

 

 

29,296

 

 

 

(12,213

)

 

 

65,931

 

Compensation and benefits (2)

 

675

 

 

973

 

 

446

 

 

555

 

 

 

2,756

 

 

 

5,405

 

Transaction, refinancing and other fees (3)

 

 

 

 

 

 

(16

)

 

 

1,009

 

 

 

993

 

Loss (gain) on foreign currency remeasurement (4)

 

27

 

 

674

 

 

 

 

 

 

 

1,046

 

 

 

1,747

 

Adjusted EBITDA

$

23,875

 

$

10,234

 

$

17,534

 

$

29,835

 

 

$

(7,402

)

 

$

74,076

 

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $13.3 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $3.7 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $2.5 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)

Primarily represents share-based compensation.

(3)

Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.

(4)

Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

 

Six months ended June 30, 2023

(In thousands)

Payment

Services -

Puerto Rico &

Caribbean

 

Payment

Services -

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other (1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

99,224

 

$

74,393

 

 

$

81,595

 

$

112,666

 

$

(40,988

)

 

$

326,890

Operating costs and expenses

 

56,617

 

 

62,978

 

 

 

54,305

 

 

78,010

 

 

117

 

 

 

252,027

Depreciation and amortization

 

11,975

 

 

8,104

 

 

 

2,279

 

 

8,957

 

 

10,446

 

 

 

41,761

Non-operating income (expenses)

 

480

 

 

(1,495

)

 

 

308

 

 

598

 

 

810

 

 

 

701

EBITDA

 

55,062

 

 

18,024

 

 

 

29,877

 

 

44,211

 

 

(29,849

)

 

 

117,325

Compensation and benefits (2)

 

1,370

 

 

1,651

 

 

 

1,392

 

 

1,530

 

 

8,603

 

 

 

14,546

Transaction, refinancing and other fees (3)

 

580

 

 

253

 

 

 

 

 

 

 

4,379

 

 

 

5,212

Loss (gain) on foreign currency remeasurement (4)

 

46

 

 

4,487

 

 

 

 

 

 

 

(2

)

 

 

4,531

Adjusted EBITDA

$

57,058

 

$

24,415

 

 

$

31,269

 

$

45,741

 

$

(16,869

)

 

$

141,614

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $26.4 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $8.4 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $6.2 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)

Primarily represents share-based compensation and severance payments.

(3)

Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.

(4)

Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

 

Six months ended June 30, 2022

(In thousands)

Payment

Services -

Puerto Rico &

Caribbean

 

Payment

Services -

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other (1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

86,086

 

$

59,567

 

 

$

74,168

 

$

127,314

 

 

$

(36,316

)

 

$

310,819

 

Operating costs and expenses

 

49,960

 

 

48,619

 

 

 

43,027

 

 

79,225

 

 

 

(2,704

)

 

 

218,127

 

Depreciation and amortization

 

9,946

 

 

5,524

 

 

 

2,059

 

 

9,042

 

 

 

12,149

 

 

 

38,720

 

Non-operating income (expenses)

 

544

 

 

3,729

 

 

 

632

 

 

1,324

 

 

 

(2,629

)

 

 

3,600

 

EBITDA

 

46,616

 

 

20,201

 

 

 

33,832

 

 

58,455

 

 

 

(24,092

)

 

 

135,012

 

Compensation and benefits (2)

 

1,012

 

 

1,786

 

 

 

786

 

 

1,000

 

 

 

5,100

 

 

 

9,684

 

Transaction, refinancing and other fees (3)

 

 

 

 

 

 

 

 

(16

)

 

 

3,034

 

 

 

3,018

 

Loss (gain) on foreign currency remeasurement (4)

 

162

 

 

(2,129

)

 

 

 

 

 

 

 

1,046

 

 

 

(921

)

Adjusted EBITDA

$

47,790

 

$

19,858

 

 

$

34,618

 

$

59,439

 

 

$

(14,912

)

 

$

146,793

 

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $24.2 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $7.0 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $5.1 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)

Primarily represents share-based compensation.

(3)

Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.

(4)

Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

 

EVERTEC, Inc.

Schedule 5: Reconciliation of GAAP to Non-GAAP Operating Results

 

 

 

Three months ended June 30,

 

Six months ended June 30,

(Dollar amounts in thousands, except share data)

 

2023

 

2022

 

2023

 

2022

Net income

 

 

28,050

 

 

 

33,556

 

 

 

58,113

 

 

 

72,422

 

Income tax expense

 

 

6,586

 

 

 

7,688

 

 

 

9,404

 

 

 

13,863

 

Interest expense, net

 

 

3,537

 

 

 

5,127

 

 

 

8,047

 

 

 

10,007

 

Depreciation and amortization

 

 

22,329

 

 

 

19,560

 

 

 

41,761

 

 

 

38,720

 

EBITDA

 

 

60,502

 

 

 

65,931

 

 

 

117,325

 

 

 

135,012

 

Equity income (1)

 

 

(1,476

)

 

 

(862

)

 

 

(2,631

)

 

 

(1,432

)

Compensation and benefits (2)

 

 

8,701

 

 

 

5,405

 

 

 

14,546

 

 

 

9,684

 

Transaction, refinancing and other fees (3)

 

 

7,085

 

 

 

1,855

 

 

 

7,843

 

 

 

4,450

 

(Gain) loss on foreign currency remeasurement (4)

 

 

(333

)

 

 

1,747

 

 

 

4,531

 

 

 

(921

)

Adjusted EBITDA

 

 

74,479

 

 

 

74,076

 

 

 

141,614

 

 

 

146,793

 

Operating depreciation and amortization (5)

 

 

(12,835

)

 

 

(11,156

)

 

 

(25,204

)

 

 

(22,408

)

Cash interest expense, net (6)

 

 

(3,457

)

 

 

(4,858

)

 

 

(7,820

)

 

 

(9,487

)

Income tax expense (7)

 

 

(11,626

)

 

 

(10,075

)

 

 

(16,408

)

 

 

(18,884

)

Non-controlling interest (8)

 

 

80

 

 

 

1

 

 

 

46

 

 

 

11

 

Adjusted net income

 

$

46,641

 

 

$

47,988

 

 

$

92,228

 

 

$

96,025

 

Net income per common share (GAAP):

 

 

 

 

 

 

 

 

Diluted

 

$

0.43

 

 

$

0.47

 

 

$

0.89

 

 

$

1.00

 

Adjusted Earnings per common share (Non-GAAP):

 

 

 

 

 

 

 

 

Diluted

 

$

0.71

 

 

$

0.67

 

 

$

1.41

 

 

$

1.32

 

Shares used in computing adjusted earnings per common share:

 

 

 

 

 

 

 

 

Diluted

 

 

65,510,091

 

 

 

72,149,949

 

 

 

65,571,453

 

 

 

72,558,565

1)

Represents the elimination of non-cash equity earnings from our 19.99% equity investment in Dominican Republic, Consorcio de Tarjetas Dominicanas S.A. ("CONTADO"), net of dividends received.

2)

Primarily represents share-based compensation and severance payments.

3)

Represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, recorded as part of selling, general and administrative expenses.

4)

Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

5)

Represents operating depreciation and amortization expense, which excludes amounts generated as a result of merger and acquisition activity.

6)

Represents interest expense, less interest income, as they appear on the condensed consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount.

7)

Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discrete items.

8)

Represents the 35% non-controlling equity interest in Evertec Colombia, net of amortization for intangibles created as part of the purchase.

 

EVERTEC, Inc.

Schedule 6: Outlook Summary and Reconciliation to Non-GAAP Adjusted Earnings per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

Outlook 2023

 

(As recast)

(Dollar amounts in millions, except per share data)

 

Low

 

 

 

High

 

 

Revenues

 

$

652

 

 

to

 

$

658

 

 

$

618

 

Earnings per Share (EPS) (GAAP)

 

$

1.82

 

 

to

 

$

1.91

 

 

$

3.45

 

Per share adjustment to reconcile GAAP EPS to Non-GAAP Adjusted EPS:

 

 

 

 

 

 

 

 

Share-based comp, non-cash equity earnings and other (1)

 

 

0.56

 

 

 

 

 

0.56

 

 

 

(1.42

)

Merger and acquisition related depreciation and amortization (2)

 

 

0.47

 

 

 

 

 

0.47

 

 

 

0.49

 

Non-cash interest expense (3)

 

 

0.01

 

 

 

 

 

0.01

 

 

 

0.01

 

Tax effect of Non-GAAP adjustments (4)

 

 

(0.18

)

 

 

 

 

(0.19

)

 

 

(0.10

)

Loss (gain) on foreign currency remeasurement (5)

 

 

0.07

 

 

 

 

 

0.07

 

 

 

0.10

 

Total adjustments

 

 

0.93

 

 

 

 

 

0.92

 

 

 

(0.92

)

Adjusted EPS (Non-GAAP)

 

$

2.75

 

 

to

 

$

2.83

 

 

$

2.53

 

Shares used in computing adjusted earnings per common share

 

 

 

 

 

 

65.5

 

 

 

69.3

 

(1)

Represents share-based compensation, the elimination of non-cash equity earnings from the Company's 19.99% equity investment in CONTADO, severance and other adjustments to reconcile GAAP EPS to Non-GAAP EPS.

(2)

Represents depreciation and amortization expenses amounts generated as a result of M&A activity.

(3)

Represents non-cash amortization of the debt issue costs, premium and accretion of discount.

(4)

Represents income tax expense on non-GAAP adjustments using the applicable GAAP tax rate (anticipated at approximately 16% to 17%).

(5)

Represents non-cash unrealized gains (losses) on foreign currency remeasurement for assets and liabilities denominated in non-functional currencies.

 

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