EVERTEC Reports Third Quarter 2023 Results

Raises annual guidance

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

Third Quarter 2023 Highlights

  • Revenue increased 19% to $173.2 million
  • GAAP Net Income attributable to common shareholders decreased 93% to $10.0 million and decreased 93% to $0.15 per diluted share, as the prior year included the gain from the Popular Transaction and the current year includes the loss on foreign currency swap
  • Adjusted EBITDA increased 31% to $78.7 million and Adjusted earnings per common share increased 51% to $0.80
  • Acquired 4.8 million shares of Sinqia for $26.5 million
  • Entered into a foreign currency swap to fix the Sinqia acquisition purchase price in US dollars

Mac Schuessler, President and Chief Executive Officer stated, “We are pleased with the revenue growth across all of our segments. We continue to work diligently to close the Sinqia acquisition in the fourth quarter of 2023, and as we begin to look towards 2024, we are focused on collaborating across the Company to continue to cross sell our products across all of our regions."

Third Quarter 2023 Results

Revenue. Total revenue for the quarter ended September 30, 2023 was $173.2 million, an increase of 19% compared with $145.8 million in the prior year quarter, reflecting growth across all of the Company's segments. Merchant acquiring revenue growth was a result of an increase in sales volume and spread, and the continued benefit from pricing initiatives. Payment processing revenues in Puerto Rico continue to reflect an increase in transaction volumes as well as continued growth in ATH Movil revenues, primarily ATH Business. Payment processing LATAM revenue benefited from a catch-up adjustment related to our processing contract with Getnet Chile of $6.3 million as we now estimate that minimums on the contract will be exceeded. LATAM revenues also benefited from continued organic growth across regions and the contribution from the paySmart acquisition completed in the first quarter of 2023. Business solutions revenue increased mainly due to the impact in the prior year of the $6.9 million one-time credit granted to Popular upon closing of the Popular Transaction in the third quarter of 2022 as well as an increase in hardware and software sales.

Net Income attributable to common shareholders. For the quarter ended September 30, 2023, GAAP Net Income attributable to common shareholders was $10.0 million, or $0.15 per diluted share, a decrease of $127.8 million or $1.91 per diluted share as compared to the prior year. The decrease was primarily driven by the impact in the prior year of the gain recognized in connection with closing the Popular Transaction of $135.6 million and the loss on foreign currency swap to fix the price of the Sinqia acquisition of $29.2 million in the current year. Partially offsetting these negative impacts was the increase in revenues discussed above and an income tax benefit in the quarter of $4.9 million, primarily driven by the foreign currency hedge loss, compared with an income tax expense in the prior year quarter of $9.0 million, driven by the gain from the Popular transaction. Costs of revenues increased primarily due to an increase in personnel costs, and an increase in professional fees and cloud services, partially offset by recoveries of previously recorded operational losses. 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 loss on foreign currency remeasurement of $2.8 million compared with a non-cash unrealized loss of $7.8 million in the prior year quarter.

Adjusted EBITDA and Adjusted EBITDA Margin. For the quarter ended September 30, 2023, Adjusted EBITDA was $78.7 million, an increase of $18.5 million when compared to the prior year quarter. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 45.4%, an increase of approximately 420 basis points from the prior year. The increase in Adjusted EBITDA and Adjusted EBITDA margin reflect the increase in revenues, including the impact of the revenue recognized from Getnet Chile discussed above that had no associated incremental cost of revenues, partially offset by the increase in expenses discussed above.

Adjusted Net Income and Adjusted earnings per common share. For the quarter ended September 30, 2023, Adjusted Net Income was $52.4 million, an increase of $16.8 million compared to $35.6 million in the prior year. The increase was driven by the higher adjusted EBITDA, lower non-gaap tax expense and lower interest expense, partially offset by higher operating depreciation and amortization. Adjusted earnings per common share was $0.80, an increase of $0.27 per diluted share compared to $0.53, in the prior year driven by the increase in adjusted net income and 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 September 30, 2023, the Company repurchased 208,564 shares of its common stock at an average price of $37.44 per share for a total of $7.8 million. As of September 30, 2023, a total of approximately $150 million remained available for future use under the Company’s share repurchase program.

2023 Outlook

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

  • Total consolidated revenue is now anticipated to be between $663 million and $667 million representing growth of approximately 7% to 8% growth, compared with $652 to $658 million previously estimated.
  • Adjusted earnings per common share between $2.81 to $2.86 representing approximately 11% to 13% growth as compared to $2.53 in 2022, as recast, and compared with $2.75 to $2.83 previously estimated.
  • We continue to expect capital expenditures to be approximately $70 million.
  • The effective tax rate is now anticipated to be approximately 16%, compared with 16% to 17% previously estimated.

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss its third 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 4266400. The replay will be available through Thursday, November 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: our reliance on our relationship with Popular, Inc. (“Popular”) for a significant portion of our revenues pursuant to our second amended and restated Master Services Agreement (“MSA”) with them, and as it may impact our ability to grow our business; our ability to renew our client contracts on terms favorable to us, including but not limited to the current term and any extension of the MSA with Popular; our dependence on our processing systems, technology infrastructure, security systems and fraudulent payment detection systems, as well as on our personnel and certain third parties with whom we do business, and the risks to our business if our systems are hacked or otherwise compromised; our ability to develop, install and adopt new software, technology and computing systems; a decreased client base due to consolidations and/or failures in the financial services industry; the credit risk of our merchant clients, for which we 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; our 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 macroeconomic, market, international, legal, tax, political, or administrative conditions, including inflation or the risk of recession; the geographical concentration of our business in Puerto Rico, including our 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 our customer base, general consumer spending, our cost of operations and our 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; our ability to protect our intellectual property rights against infringement and to defend ourselves against claims of infringement brought by third parties; our 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; our level of indebtedness and the impact of rising interest rates, restrictions contained in our debt agreements, including the secured credit facilities, as well as debt that could be incurred in the future; our ability to prevent a cybersecurity attack or breach to our information security; the possibility that we could lose our preferential tax rate in Puerto Rico; failure to satisfy one or more conditions to closing of the Sinqia Transaction (as defined below); our inability to integrate Sinqia (as defined below) successfully into the Company or to achieve expected accretion to our earnings per common share; any loss of personnel or customers in connection with the Transaction; any cost and other terms of new debt financing incurred in connection with the Transaction; and any possibility of future catastrophic hurricanes, earthquakes and other potential natural disasters affecting our main markets in Latin America and the Caribbean; 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 September 30,

 

Nine months ended September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

(Dollar amounts in thousands, except share data)

 

 

 

 

 

 

 

 

Revenues

 

$

173,198

 

 

$

145,803

 

 

$

500,088

 

 

$

456,622

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

Cost of revenues, exclusive of depreciation and amortization

 

 

81,280

 

 

 

76,272

 

 

 

238,149

 

 

 

215,244

 

Selling, general and administrative expenses

 

 

30,437

 

 

 

26,001

 

 

 

83,834

 

 

 

66,436

 

Depreciation and amortization

 

 

21,919

 

 

 

19,712

 

 

 

63,680

 

 

 

58,432

 

Total operating costs and expenses

 

 

133,636

 

 

 

121,985

 

 

 

385,663

 

 

 

340,112

 

Income from operations

 

 

39,562

 

 

 

23,818

 

 

 

114,425

 

 

 

116,510

 

Non-operating income (expenses)

 

 

 

 

 

 

 

 

Interest income

 

 

1,926

 

 

 

807

 

 

 

5,162

 

 

 

2,279

 

Interest expense

 

 

(5,709

)

 

 

(6,763

)

 

 

(16,992

)

 

 

(18,242

)

Loss on foreign currency remeasurement

 

 

(2,806

)

 

 

(7,779

)

 

 

(7,337

)

 

 

(6,858

)

Loss on foreign currency swap

 

 

(29,225

)

 

 

 

 

 

(29,225

)

 

 

 

Earnings of equity method investment

 

 

1,197

 

 

 

688

 

 

 

3,828

 

 

 

2,120

 

Gain on sale of business

 

 

 

 

 

135,642

 

 

 

 

 

 

135,642

 

Other income, net

 

 

153

 

 

 

374

 

 

 

2,754

 

 

 

1,621

 

Total non-operating (expenses) income

 

 

(34,464

)

 

 

122,969

 

 

 

(41,810

)

 

 

116,562

 

Income before income taxes

 

 

5,098

 

 

 

146,787

 

 

 

72,615

 

 

 

233,072

 

Income tax (benefit) expense

 

 

(4,858

)

 

 

9,048

 

 

 

4,546

 

 

 

22,911

 

Net income

 

 

9,956

 

 

 

137,739

 

 

 

68,069

 

 

 

210,161

 

Less: Net loss attributable to non-controlling interest

 

 

(80

)

 

 

(75

)

 

 

(174

)

 

 

(140

)

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

 

 

10,036

 

 

 

137,814

 

 

 

68,243

 

 

 

210,301

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(11,332

)

 

 

4,125

 

 

 

9,426

 

 

 

(210

)

Gain on cash flow hedges

 

 

3,468

 

 

 

5,762

 

 

 

3,739

 

 

 

18,824

 

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

 

 

(11

)

 

$

(21

)

 

$

(31

)

 

$

(77

)

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

 

$

2,161

 

 

$

147,680

 

 

$

81,377

 

 

$

228,838

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

2.08

 

 

$

1.05

 

 

$

3.01

 

Diluted

 

$

0.15

 

 

$

2.06

 

 

$

1.04

 

 

$

2.98

 

Shares used in computing net income per common share:

 

 

 

 

 

 

 

 

Basic

 

 

64,648,542

 

 

 

66,398,547

 

 

 

64,886,551

 

 

 

69,906,483

 

Diluted

 

 

65,779,259

 

 

 

67,045,809

 

 

 

65,705,596

 

 

 

70,588,915

 

EVERTEC, Inc.

Schedule 2: Unaudited Condensed Consolidated Balance Sheets

(In thousands)

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

177,821

 

 

$

185,274

 

Restricted cash

 

 

20,607

 

 

 

18,428

 

Accounts receivable, net

 

 

115,779

 

 

 

111,493

 

Settlement assets

 

 

34,771

 

 

 

31,542

 

Prepaid expenses and other assets

 

 

53,373

 

 

 

42,392

 

Total current assets

 

 

402,351

 

 

 

389,129

 

Debt securities available-for-sale, at fair value

 

 

2,079

 

 

 

2,203

 

Equity securities, at fair value

 

 

25,992

 

 

 

 

Investment in equity investee

 

 

20,011

 

 

 

14,661

 

Property and equipment, net

 

 

56,957

 

 

 

56,387

 

Operating lease right-of-use asset

 

 

12,523

 

 

 

15,918

 

Goodwill

 

 

434,496

 

 

 

423,392

 

Other intangible assets, net

 

 

220,240

 

 

 

200,320

 

Deferred tax asset

 

 

18,280

 

 

 

5,701

 

Derivative asset

 

 

11,492

 

 

 

7,440

 

Net investment in leases

 

 

 

 

 

14

 

Other long-term assets

 

 

17,039

 

 

 

16,578

 

Total assets

 

$

1,221,460

 

 

$

1,131,743

 

Liabilities and stockholders’ equity

 

 

 

 

Current Liabilities:

 

 

 

 

Accrued liabilities

 

$

91,310

 

 

$

80,666

 

Accounts payable

 

 

52,403

 

 

 

29,730

 

Contract liability

 

 

14,428

 

 

 

15,226

 

Income tax payable

 

 

958

 

 

 

9,406

 

Current portion of long-term debt

 

 

20,750

 

 

 

20,750

 

Short-term borrowings

 

 

6,000

 

 

 

20,000

 

Current portion of operating lease liability

 

 

5,979

 

 

 

5,936

 

Settlement liabilities

 

 

27,684

 

 

 

26,696

 

Foreign currency swap liability

 

 

29,225

 

 

 

 

Total current liabilities

 

 

248,737

 

 

 

208,410

 

Long-term debt

 

 

374,656

 

 

 

389,498

 

Deferred tax liability

 

 

10,828

 

 

 

10,111

 

Contract liability - long term

 

 

34,062

 

 

 

34,068

 

Operating lease liability - long-term

 

 

7,045

 

 

 

10,788

 

Other long-term liabilities

 

 

9,783

 

 

 

4,120

 

Total liabilities

 

 

685,111

 

 

 

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; 64,630,922 shares issued and outstanding as of September 30, 2023 (December 31, 2022 - 64,847,233)

 

 

646

 

 

 

648

 

Additional paid-in capital

 

 

4,403

 

 

 

 

Accumulated earnings

 

 

530,714

 

 

 

487,349

 

Accumulated other comprehensive loss, net of tax

 

 

(3,352

)

 

 

(16,486

)

Total EVERTEC, Inc. stockholders’ equity

 

 

532,411

 

 

 

471,511

 

Non-controlling interest

 

 

3,938

 

 

 

3,237

 

Total equity

 

 

536,349

 

 

 

474,748

 

Total liabilities and equity

 

$

1,221,460

 

 

$

1,131,743

 

EVERTEC, Inc.

Schedule 3: Unaudited Condensed Consolidated Statements of Cash Flows

 

 

Nine months ended September 30,

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities

 

 

 

 

Net income

 

 

68,069

 

 

$

210,161

 

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

 

 

 

 

Depreciation and amortization

 

 

63,680

 

 

 

58,432

 

Amortization of debt issue costs and accretion of discount

 

 

1,795

 

 

 

1,187

 

Operating lease amortization

 

 

4,619

 

 

 

4,576

 

Unrealized loss on foreign currency hedge

 

 

29,225

 

 

 

 

Unrealized gain on change in fair value of equity securities

 

 

(104

)

 

 

 

(Release) provision for expected credit losses and sundry losses

 

 

(305

)

 

 

3,363

 

Deferred tax benefit

 

 

(16,491

)

 

 

(1,699

)

Share-based compensation

 

 

18,812

 

 

 

14,740

 

Gain on sale of a business

 

 

 

 

 

(135,642

)

Loss on disposition of property and equipment

 

 

789

 

 

 

4,691

 

Earnings of equity method investment

 

 

(3,828

)

 

 

(2,120

)

Dividend received from equity method investment

 

 

3,497

 

 

 

2,053

 

Loss on foreign currency remeasurement

 

 

7,337

 

 

 

6,858

 

Decrease (increase) in assets:

 

 

 

 

Accounts receivable, net

 

 

(4,590

)

 

 

3,503

 

Prepaid expenses and other assets

 

 

(11,181

)

 

 

(3,417

)

Other long-term assets

 

 

(1,013

)

 

 

(4,389

)

(Decrease) increase in liabilities:

 

 

 

 

Accrued liabilities and accounts payable

 

 

17,387

 

 

 

468

 

Income tax payable

 

 

(9,108

)

 

 

2,921

 

Contract liability

 

 

(1,146

)

 

 

1,344

 

Operating lease liabilities

 

 

(3,739

)

 

 

(4,450

)

Other long-term liabilities

 

 

(247

)

 

 

(3,571

)

Total adjustments

 

 

95,389

 

 

 

(51,152

)

Net cash provided by operating activities

 

 

163,458

 

 

 

159,009

 

Cash flows from investing activities

 

 

 

 

Additions to software

 

 

(34,193

)

 

 

(28,287

)

Acquisition of customer relationship

 

 

 

 

 

(10,607

)

Property and equipment acquired

 

 

(16,429

)

 

 

(16,313

)

Proceeds from sales of property and equipment

 

 

23

 

 

 

77

 

Acquisition of available-for-sale debt securities

 

 

(962

)

 

 

(254

)

Purchase of equity securities

 

 

(26,505

)

 

 

 

Investment in equity investee

 

 

(5,500

)

 

 

 

Purchase of certificates of deposit

 

 

 

 

 

(7,264

)

Proceeds from maturities of available-for-sale debt securities

 

 

1,048

 

 

 

1,015

 

Acquisitions, net of cash acquired

 

 

(22,915

)

 

 

(44,369

)

Net cash used in investing activities

 

 

(105,433

)

 

 

(106,002

)

Cash flows from financing activities

 

 

 

 

Withholding taxes paid on share-based compensation

 

 

(5,956

)

 

 

(5,685

)

Net decrease in short-term borrowings

 

 

(14,000

)

 

 

 

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

 

 

 

 

 

(901

)

Dividends paid

 

 

(9,735

)

 

 

(10,515

)

Repurchase of common stock

 

 

(23,598

)

 

 

(72,532

)

Repayment of long-term debt

 

 

(15,563

)

 

 

(9,875

)

Net cash used in financing activities

 

 

(68,852

)

 

 

(99,508

)

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

 

 

10,716

 

 

 

4,260

 

Net increase in cash, cash equivalents and restricted cash

 

 

(111

)

 

 

(42,241

)

Cash, cash equivalents, restricted cash and cash included in settlement assets at beginning of the period

 

 

215,657

 

 

 

285,917

 

Cash, cash equivalents, restricted cash, and cash included in settlement assets at end of the period

 

$

215,546

 

 

$

243,676

 

Reconciliation of cash, cash equivalents and restricted cash

 

 

 

 

Cash and cash equivalents

 

$

177,821

 

 

$

216,357

 

Restricted cash

 

 

20,607

 

 

 

18,705

 

Cash and cash equivalents included in settlement assets

 

 

17,118

 

 

 

8,614

 

Cash, cash equivalents, restricted cash and cash settlement assets

 

$

215,546

 

 

$

243,676

 

EVERTEC, Inc.

Schedule 4: Unaudited Segment Information

 

Three Months Ended September 30, 2023

(In thousands)

Payment

Services -

Puerto Rico &

Caribbean

 

Payment

Services -

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other
(1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

51,600

 

 

$

46,155

 

 

$

40,557

 

$

56,522

 

$

(21,636

)

 

$

173,198

 

Operating costs and expenses

 

28,402

 

 

 

38,608

 

 

 

26,997

 

 

40,643

 

 

(1,014

)

 

 

133,636

 

Depreciation and amortization

 

6,203

 

 

 

4,898

 

 

 

1,078

 

 

4,478

 

 

5,262

 

 

 

21,919

 

Non-operating income (expenses)

 

110

 

 

 

(2,148

)

 

 

 

 

69

 

 

(28,712

)

 

 

(30,681

)

EBITDA

 

29,511

 

 

 

10,297

 

 

 

14,638

 

 

20,426

 

 

(44,072

)

 

 

30,800

 

Compensation and benefits (2)

 

663

 

 

 

859

 

 

 

662

 

 

696

 

 

4,090

 

 

 

6,970

 

Transaction, refinancing and other fees (3)

 

269

 

 

 

3,451

 

 

 

 

 

 

 

34,363

 

 

 

38,083

 

(Gain) loss on foreign currency remeasurement (4)

 

(87

)

 

 

2,885

 

 

 

 

 

 

 

8

 

 

 

2,806

 

Adjusted EBITDA

$

30,356

 

 

$

17,492

 

 

$

15,300

 

$

21,122

 

$

(5,611

)

 

$

78,659

 

_________________________________

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $13.5 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 $3.7 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, the foreign currency swap loss and the elimination of unrealized equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of dividends received.

(4)

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

 

Three Months Ended September 30, 2022

(In thousands)

Payment

Services -

Puerto Rico &

Caribbean

 

Payment

Services -

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other
(1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

44,592

 

$

33,741

 

 

$

36,911

 

$

49,306

 

 

$

(18,747

)

 

$

145,803

 

Operating costs and expenses

 

26,960

 

 

28,513

 

 

 

25,261

 

 

38,522

 

 

 

2,729

 

 

 

121,985

 

Depreciation and amortization

 

5,116

 

 

4,104

 

 

 

1,045

 

 

3,745

 

 

 

5,702

 

 

 

19,712

 

Non-operating income (expenses)

 

385

 

 

(7,094

)

 

 

348

 

 

136,218

 

 

 

(932

)

 

 

128,925

 

EBITDA

 

23,133

 

 

2,238

 

 

 

13,043

 

 

150,747

 

 

 

(16,706

)

 

 

172,455

 

Compensation and benefits (2)

 

1,557

 

 

972

 

 

 

498

 

 

503

 

 

 

2,141

 

 

 

5,671

 

Transaction, refinancing and other fees (3)

 

330

 

 

 

 

325

 

 

(134,974

)

 

 

8,581

 

 

 

(125,738

)

Loss (gain) on foreign currency remeasurement (4)

 

68

 

 

7,725

 

 

 

 

 

 

 

 

(14

)

 

 

7,779

 

Adjusted EBITDA

$

25,088

 

$

10,935

 

 

$

13,866

 

$

16,276

 

 

$

(5,998

)

 

$

60,167

 

_________________________________

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $12.3 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 $2.8 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, the gain from the Popular transaction and the elimination of unrealized equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of dividends received.

(4)

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

 

Nine months ended September 30, 2023

(In thousands)

Payment

Services -

Puerto Rico &

Caribbean

 

Payment

Services -

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other
(1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

150,824

 

 

$

120,548

 

 

$

122,152

 

$

169,188

 

$

(62,624

)

 

$

500,088

 

Operating costs and expenses

 

85,019

 

 

 

101,586

 

 

 

81,302

 

 

118,653

 

 

(897

)

 

 

385,663

 

Depreciation and amortization

 

18,178

 

 

 

13,002

 

 

 

3,357

 

 

13,436

 

 

15,707

 

 

 

63,680

 

Non-operating income (expenses)

 

590

 

 

 

(3,643

)

 

 

308

 

 

667

 

 

(27,902

)

 

 

(29,980

)

EBITDA

 

84,573

 

 

 

28,321

 

 

 

44,515

 

 

64,638

 

 

(73,922

)

 

 

148,125

 

Compensation and benefits (2)

 

2,033

 

 

 

2,510

 

 

 

2,054

 

 

2,226

 

 

12,693

 

 

 

21,516

 

Transaction, refinancing and other fees (3)

 

850

 

 

 

3,704

 

 

 

 

 

 

 

38,741

 

 

 

43,295

 

(Gain) loss on foreign currency remeasurement (4)

 

(41

)

 

 

7,372

 

 

 

 

 

 

 

6

 

 

 

7,337

 

Adjusted EBITDA

$

87,415

 

 

$

41,907

 

 

$

46,569

 

$

66,864

 

$

(22,482

)

 

$

220,273

 

_________________________________

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $39.9 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $12.8 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $9.9 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, the foreign currency swap loss and the elimination of unrealized equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of dividends received.

(4)

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

 

Nine months ended September 30, 2022

(In thousands)

Payment

Services -

Puerto Rico &

Caribbean

 

Payment

Services -

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other
(1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

130,678

 

$

93,308

 

 

$

111,079

 

$

176,620

 

 

$

(55,063

)

 

$

456,622

 

Operating costs and expenses

 

76,920

 

 

77,132

 

 

 

68,288

 

 

117,747

 

 

 

25

 

 

 

340,112

 

Depreciation and amortization

 

15,062

 

 

9,628

 

 

 

3,104

 

 

12,787

 

 

 

17,851

 

 

 

58,432

 

Non-operating income (expenses)

 

928

 

 

(3,365

)

 

 

980

 

 

137,542

 

 

 

(3,560

)

 

 

132,525

 

EBITDA

 

69,748

 

 

22,439

 

 

 

46,875

 

 

209,202

 

 

 

(40,797

)

 

 

307,467

 

Compensation and benefits (2)

 

2,569

 

 

2,758

 

 

 

1,284

 

 

1,503

 

 

 

7,241

 

 

 

15,355

 

Transaction, refinancing and other fees (3)

 

330

 

 

 

 

 

325

 

 

(134,990

)

 

 

11,615

 

 

 

(122,720

)

Loss on foreign currency remeasurement (4)

 

230

 

 

5,596

 

 

 

 

 

 

 

 

1,032

 

 

 

6,858

 

Adjusted EBITDA

$

72,877

 

$

30,793

 

 

$

48,484

 

$

75,715

 

 

$

(20,909

)

 

$

206,960

 

_________________________________

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $36.5 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $10.7 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $7.9 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, the gain from the Popular transaction and the elimination of unrealized equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of dividends received.

(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 September 30,

 

Nine months ended September 30,

(Dollar amounts in thousands, except share data)

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income

 

 

9,956

 

 

 

137,739

 

 

 

68,069

 

 

 

210,161

 

Income tax (benefit) expense

 

 

(4,858

)

 

 

9,048

 

 

 

4,546

 

 

 

22,911

 

Interest expense, net

 

 

3,783

 

 

 

5,956

 

 

 

11,830

 

 

 

15,963

 

Depreciation and amortization

 

 

21,919

 

 

 

19,712

 

 

 

63,680

 

 

 

58,432

 

EBITDA

 

 

30,800

 

 

 

172,455

 

 

 

148,125

 

 

 

307,467

 

Equity income (1)

 

 

1,834

 

 

 

1,159

 

 

 

(797

)

 

 

(273

)

Compensation and benefits (2)

 

 

6,970

 

 

 

5,671

 

 

 

21,516

 

 

 

15,355

 

Transaction, refinancing and other fees (3)

 

 

36,249

 

 

 

(126,897

)

 

 

44,092

 

 

 

(122,447

)

Loss on foreign currency remeasurement (4)

 

 

2,806

 

 

 

7,779

 

 

 

7,337

 

 

 

6,858

 

Adjusted EBITDA

 

 

78,659

 

 

 

60,167

 

 

 

220,273

 

 

 

206,960

 

Operating depreciation and amortization (5)

 

 

(13,061

)

 

 

(10,748

)

 

 

(38,265

)

 

 

(33,156

)

Cash interest expense, net (6)

 

 

(3,755

)

 

 

(5,645

)

 

 

(11,575

)

 

 

(15,132

)

Income tax expense (7)

 

 

(9,447

)

 

 

(8,184

)

 

 

(25,855

)

 

 

(27,067

)

Non-controlling interest (8)

 

 

50

 

 

 

47

 

 

 

96

 

 

 

58

 

Adjusted net income

 

$

52,446

 

 

$

35,637

 

 

$

144,674

 

 

$

131,663

 

Net income per common share (GAAP):

 

 

 

 

 

 

 

 

Diluted

 

$

0.15

 

 

$

2.06

 

 

$

1.04

 

 

$

2.98

 

Adjusted Earnings per common share (Non-GAAP):

 

 

 

 

 

 

 

 

Diluted

 

$

0.80

 

 

$

0.53

 

 

$

2.20

 

 

$

1.87

 

Shares used in computing adjusted earnings per common share:

 

 

 

 

 

 

 

 

Diluted

 

 

65,779,259

 

 

 

67,045,809

 

 

 

65,705,596

 

 

 

70,588,915

 

_________________________________

(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, the gain from the Popular Transaction and the foreign currency swap loss.

(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

 

$

663

 

 

to

 

$

667

 

 

$

618

 

Earnings per Share (EPS) (GAAP)

 

$

1.69

 

 

to

 

$

1.75

 

 

$

3.45

 

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

 

 

 

 

 

 

 

 

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

 

 

0.72

 

 

 

 

 

0.72

 

 

 

(1.42

)

Merger and acquisition related depreciation and amortization (2)

 

 

0.49

 

 

 

 

 

0.49

 

 

 

0.49

 

Non-cash interest expense (3)

 

 

0.01

 

 

 

 

 

0.01

 

 

 

0.01

 

Tax effect of Non-GAAP adjustments (4)

 

 

(0.21

)

 

 

 

 

(0.22

)

 

 

(0.10

)

Loss (gain) on foreign currency remeasurement (5)

 

 

0.11

 

 

 

 

 

0.11

 

 

 

0.10

 

Total adjustments

 

 

1.12

 

 

 

 

 

1.11

 

 

 

(0.92

)

Adjusted EPS (Non-GAAP)

 

$

2.81

 

 

to

 

$

2.86

 

 

$

2.53

 

Shares used in computing adjusted earnings per common share

 

 

 

 

 

 

65.7

 

 

 

69.3

 

_________________________________
(1)

Represents share-based compensation, the elimination of non-cash equity earnings from the Company's 19.99% equity investment in CONTADO, the foreign currency hedge loss 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%).

(5)

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

 

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