8-K
EVERTEC, Inc. (EVTC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 26, 2023
EVERTEC, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
| Puerto Rico | 66-0783622 | |
|---|---|---|
| (State or other jurisdiction of<br>incorporation or organization) | (I.R.S. employer<br>identification number) | |
| Cupey Center Building, | Road 176, Kilometer 1.3, | |
| San Juan, | Puerto Rico | 00926 |
| (Address of principal executive offices) | (Zip Code) |
(787) 759-9999
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
COMMISSION FILE NUMBER 001-35872
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value per share | EVTC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On April 26, 2023 the Company issued a press release announcing its preliminary results for the first quarter ended March 31, 2023. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Note: The information contained in this Item 2.02 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d)Exhibits.
| Number | Exhibit |
|---|---|
| 99.1 | Press Release re: First quarter earnings issued by EVERTEC, Inc. dated April 26, 2023 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| EVERTEC, Inc. | ||
|---|---|---|
| (Registrant) | ||
| Date: April 26, 2023 | By: | /s/ Joaquin A. Castrillo-Salgado |
| Name: Joaquin A. Castrillo-Salgado | ||
| Title: Chief Financial Officer |
EXHIBIT INDEX
| Number | Exhibit |
|---|---|
| 99.1 | Press Release re: First quarter earnings issued by EVERTEC, Inc. dated April 26, 2023 |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Document
Exhibit 99.1
EVERTEC REPORTS FIRST QUARTER 2023 RESULTS
Raises annual guidance
SAN JUAN, PUERTO RICO - April 26, 2023 - EVERTEC, Inc. (NYSE: EVTC) (“Evertec”, the “Company”, “we” or “our”) today announced results for the first quarter ended March 31, 2023.
First Quarter 2023 Highlights
•Revenue increased 6% to $159.8 million
•GAAP Net Income attributable to common shareholders decreased 23% to $30.1 million and decreased 13% to $0.46 per diluted share
•Adjusted EBITDA decreased 8% to $67.1 million and Adjusted earnings per common share increased 5% to $0.69
•Share repurchases totaled $6.3 million
Mac Schuessler, President and Chief Executive Officer stated, “We are encouraged by the strong results in the first quarter, which demonstrate the strength of our business model in both Puerto Rico and Latin America, therefore, we are pleased to raise our guidance for the year."
First Quarter 2023 Results
Revenue. Total revenue for the quarter ended March 31, 2023 was $159.8 million, an increase of 6% compared with $150.2 million in the prior year quarter. The revenue increase was driven by merchant acquiring and payment processing Puerto Rico, which both benefited from increased transactions. Merchant acquiring revenue also reflected a higher spread per transaction and continues to benefit from pricing initiatives. Payments Puerto Rico continues to benefit from growth in ATH Movil revenues, primarily ATH Business, as we continue to experience higher transaction volumes as well as higher sales volume. Revenues also reflect the contribution from organic growth in our Payments LATAM segment, the positive impact from the tuck-in acquisition in Puerto Rico completed in the second quarter of 2022 and the revenue contribution from the BBR and paySmart acquisitions in LATAM completed in the third quarter of 2022 and first quarter of 2023, respectively. These increases were partially offset by the impact 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 March 31, 2023, GAAP Net Income attributable to common shareholders was $30.1 million, or $0.46 per diluted share, a decrease of $8.8 million or $0.07 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 new revenue sharing agreement with Banco Popular, as well as an increase in personnel costs, primarily attributable to increased headcount in Latin America including the added headcount from the BBR and paySmart acquisitions, provisions for operational losses, printing supplies and cloud services. Selling, general and administrative expenses increased mainly due to an increase in personnel costs. Additionally, the current quarter reflects an unrealized loss on foreign currency remeasurement of $4.9 million compared with an unrealized gain of $2.7 million in the prior year quarter.
Adjusted EBITDA and Adjusted EBITDA Margin. For the quarter ended March 31, 2023, Adjusted EBITDA was $67.1 million, a decrease of $5.6 million when compared to the prior year quarter. 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 will better present 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 EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 42.0%, a decrease of approximately 640 basis points from the prior year. The decrease in Adjusted EBITDA and Adjusted EBITDA margin reflects the impact of the increased expenses, as discussed above, 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 March 31, 2023, Adjusted Net Income was $45.6 million, a decrease of $2.4 million compared with $48.0 million, as recast, in the prior year. Adjusted earnings per common share was $0.69, an increase of $0.03 per diluted share compared to $0.66, as recast, in the prior year. Similar to Adjusted EBITDA, the Company has recast prior periods to conform with the modified definitions of Adjusted Net Income and Adjusted earnings per common share. The increase was driven by the lower share count, which reflects the impact from the share repurchases completed in 2022 and the shares received as part of the Popular Transaction, and a lower adjusted tax rate in the quarter driven by certain jurisdictions in LATAM.
Share Repurchase
During the three months ended March 31, 2023, the Company repurchased 187,976 shares of its common stock at an average price of $33.35 per share for a total of $6.3 million. As of March 31, 2023, a total of approximately $72 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 $644 million and $652 million representing growth of approximately 4.1% to 5.4% growth, compared with $638 to $647 million previously estimated.
•Adjusted earnings per common share between $2.59 to $2.68 representing approximately 2.4% to 6% growth as compared to $2.53 in 2022, as recast,, compared with $2.53 to $2.64 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 first 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 2928324. The replay will be available through Wednesday, May 3, 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.
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.
Investor Contact
Beatriz Brown-Sáenz
(787) 773-5442
IR@evertecinc.com
EVERTEC, Inc.
Schedule 1: Unaudited Condensed Consolidated Statements of Income and Comprehensive Income
| Three months ended March 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | |||
| (Dollar amounts in thousands, except share data) | ||||
| Revenues | $ | 159,814 | $ | 150,248 |
| Operating costs and expenses | ||||
| Cost of revenues, exclusive of depreciation and amortization | 76,417 | 64,659 | ||
| Selling, general and administrative expenses | 23,875 | 20,384 | ||
| Depreciation and amortization | 19,432 | 19,160 | ||
| Total operating costs and expenses | 119,724 | 104,203 | ||
| Income from operations | 40,090 | 46,045 | ||
| Non-operating income (expenses) | ||||
| Interest income | 1,133 | 667 | ||
| Interest expense | (5,643) | (5,547) | ||
| (Loss) gain on foreign currency remeasurement | (4,864) | 2,669 | ||
| Earnings of equity method investment | 1,155 | 570 | ||
| Other income, net | 1,010 | 637 | ||
| Total non-operating expenses | (7,209) | (1,004) | ||
| Income before income taxes | 32,881 | 45,041 | ||
| Income tax expense | 2,818 | 6,175 | ||
| Net income | 30,063 | 38,866 | ||
| Less: Net income (loss) attributable to non-controlling interest | 11 | (32) | ||
| Net income attributable to EVERTEC, Inc.’s common stockholders | 30,052 | 38,898 | ||
| Other comprehensive (loss) income, net of tax | ||||
| Foreign currency translation adjustments | 17,605 | 2,214 | ||
| (Loss) gain on cash flow hedges | (1,545) | 9,725 | ||
| Unrealized loss on change in fair value of debt securities available-for-sale | $ | (20) | $ | (27) |
| Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders | $ | 46,092 | $ | 50,810 |
| Net income per common share: | ||||
| Basic | $ | 0.46 | $ | 0.54 |
| Diluted | $ | 0.46 | $ | 0.53 |
| Shares used in computing net income per common share: | ||||
| Basic | 64,968,298 | 71,965,664 | ||
| Diluted | 65,608,618 | 72,853,216 |
EVERTEC, Inc.
Schedule 2: Unaudited Condensed Consolidated Balance Sheets
| (In thousands) | March 31, 2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Assets | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ | 173,662 | $ | 197,229 |
| Restricted cash | 19,015 | 18,428 | ||
| Accounts receivable, net | 127,876 | 131,080 | ||
| Prepaid expenses and other assets | 47,944 | 42,392 | ||
| Total current assets | 368,497 | 389,129 | ||
| Debt securities available-for-sale, at fair value | 2,179 | 2,203 | ||
| Investment in equity investee | 15,703 | 14,661 | ||
| Property and equipment, net | 56,858 | 56,387 | ||
| Operating lease right-of-use asset | 15,627 | 15,918 | ||
| Goodwill | 434,340 | 423,392 | ||
| Other intangible assets, net | 213,706 | 200,320 | ||
| Deferred tax asset | 7,926 | 5,701 | ||
| Derivative asset | 5,768 | 7,440 | ||
| Net investment in leases | — | 14 | ||
| Other long-term assets | 16,589 | 16,578 | ||
| Total assets | $ | 1,137,193 | $ | 1,131,743 |
| Liabilities and stockholders’ equity | ||||
| Current Liabilities: | ||||
| Accrued liabilities | $ | 80,064 | $ | 90,341 |
| Accounts payable | 47,647 | 46,751 | ||
| Contract liability | 19,737 | 15,226 | ||
| Income tax payable | 9,239 | 9,406 | ||
| Current portion of long-term debt | 20,750 | 20,750 | ||
| Short-term borrowings | — | 20,000 | ||
| Current portion of operating lease liability | 5,796 | 5,936 | ||
| Total current liabilities | 183,233 | 208,410 | ||
| Long-term debt | 384,550 | 389,498 | ||
| Deferred tax liability | 10,162 | 10,111 | ||
| Contract liability - long term | 33,284 | 34,068 | ||
| Operating lease liability - long-term | 10,592 | 10,788 | ||
| Other long-term liabilities | 4,231 | 4,120 | ||
| Total liabilities | 626,052 | 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; 65,078,462 shares issued and outstanding as of March 31, 2023 (December 31, 2022 - 64,847,233) | 651 | 648 | ||
| Additional paid-in capital | — | — | ||
| Accumulated earnings | 507,563 | 487,349 | ||
| Accumulated other comprehensive loss, net of tax | (446) | (16,486) | ||
| Total EVERTEC, Inc. stockholders’ equity | 507,768 | 471,511 | ||
| Non-controlling interest | 3,373 | 3,237 | ||
| Total equity | 511,141 | 474,748 | ||
| Total liabilities and equity | $ | 1,137,193 | $ | 1,131,743 |
EVERTEC, Inc.
Schedule 3: Unaudited Condensed Consolidated Statements of Cash Flows
| Three months ended March 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | |||
| Cash flows from operating activities | ||||
| Net income | $ | 30,063 | $ | 38,866 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 19,432 | 19,160 | ||
| Amortization of debt issue costs and accretion of discount | 396 | 404 | ||
| Operating lease amortization | 1,626 | 1,450 | ||
| Provision for expected credit losses and sundry losses | 2,371 | 59 | ||
| Deferred tax benefit | (2,208) | (702) | ||
| Share-based compensation | 5,557 | 4,279 | ||
| Loss on disposition of property and equipment | 159 | 91 | ||
| Earnings of equity method investment | (1,155) | (570) | ||
| Loss (gain) on foreign currency remeasurement | 4,864 | (2,669) | ||
| Decrease (increase) in assets: | ||||
| Accounts receivable, net | 10,044 | 7,060 | ||
| Prepaid expenses and other assets | (5,388) | (5,573) | ||
| Other long-term assets | (261) | (3,319) | ||
| (Decrease) increase in liabilities: | ||||
| Accrued liabilities and accounts payable | (13,417) | 1,773 | ||
| Income tax payable | (639) | 2,248 | ||
| Contract liability | 3,089 | 4,387 | ||
| Operating lease liabilities | 310 | 23 | ||
| Other long-term liabilities | (332) | 714 | ||
| Total adjustments | 24,448 | 28,815 | ||
| Net cash provided by operating activities | 54,511 | 67,681 | ||
| Cash flows from investing activities | ||||
| Additions to software | (9,257) | (8,669) | ||
| Property and equipment acquired | (4,063) | (5,621) | ||
| Acquisitions, net of cash acquired | (23,317) | — | ||
| Net cash used in investing activities | (36,637) | (14,290) | ||
| Cash flows from financing activities | ||||
| Withholding taxes paid on share-based compensation | (5,874) | (5,648) | ||
| Net decrease in short-term borrowings | (20,000) | — | ||
| Repayment of short-term borrowings for purchase of equipment and software | — | (806) | ||
| Dividends paid | (3,249) | (3,598) | ||
| Repurchase of common stock | (6,269) | (21,179) | ||
| Repayment of long-term debt | (5,187) | (4,938) | ||
| Net cash used in financing activities | (40,579) | (36,169) | ||
| Effect of foreign exchange rate on cash, cash equivalents and restricted cash | (275) | 766 | ||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (22,980) | 17,988 | ||
| Cash, cash equivalents and restricted cash at beginning of the period | 215,657 | 285,917 | ||
| Cash, cash equivalents and restricted cash at end of the period | $ | 192,677 | $ | 303,905 |
| Reconciliation of cash, cash equivalents and restricted cash | ||||
| Cash and cash equivalents | $ | 173,662 | $ | 283,610 |
| Restricted cash | 19,015 | 20,295 | ||
| Cash, cash equivalents and restricted cash | $ | 192,677 | $ | 303,905 |
EVERTEC, Inc.
Schedule 4: Unaudited Segment Information
| Three months ended March 31, 2023 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) | Payment<br>Services - <br>Puerto Rico & Caribbean | Payment<br>Services - <br>Latin America | Merchant<br>Acquiring, net | Business<br>Solutions | Corporate and Other (1) | Total | ||||||
| Revenues | $ | 48,429 | $ | 35,317 | $ | 40,347 | $ | 55,695 | $ | (19,974) | $ | 159,814 |
| Operating costs and expenses | 27,722 | 29,312 | 26,689 | 38,913 | (2,912) | 119,724 | ||||||
| Depreciation and amortization | 5,888 | 2,711 | 1,129 | 4,488 | 5,216 | 19,432 | ||||||
| Non-operating income (expenses) | 365 | (3,785) | 307 | 532 | (118) | (2,699) | ||||||
| EBITDA | 26,960 | 4,931 | 15,094 | 21,802 | (11,964) | 56,823 | ||||||
| Compensation and benefits (2) | 528 | 652 | 532 | 565 | 3,568 | 5,845 | ||||||
| Transaction, refinancing and other fees (3) | 292 | — | — | — | (689) | (397) | ||||||
| Loss (gain) on foreign currency remeasurement (4) | 95 | 4,772 | — | — | (3) | 4,864 | ||||||
| Adjusted EBITDA | $ | 27,875 | $ | 10,355 | $ | 15,626 | $ | 22,367 | $ | (9,088) | $ | 67,135 |
(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $13.0 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $4.0 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $2.9 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, 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 March 31, 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) | Payment<br>Services - <br>Puerto Rico & Caribbean | Payment<br>Services - <br>Latin America | Merchant<br>Acquiring, net | Business<br>Solutions | Corporate and Other (1) | Total | ||||||
| Revenues | $ | 40,008 | $ | 28,783 | $ | 35,629 | $ | 62,624 | $ | (16,796) | $ | 150,248 |
| Operating costs and expenses | 21,280 | 23,587 | 20,204 | 38,928 | 204 | 104,203 | ||||||
| Depreciation and amortization | 4,480 | 2,812 | 1,019 | 4,763 | 6,086 | 19,160 | ||||||
| Non-operating income (expenses) | 236 | 3,606 | 300 | 700 | (966) | 3,876 | ||||||
| EBITDA | 23,444 | 11,614 | 16,744 | 29,159 | (11,880) | 69,081 | ||||||
| Compensation and benefits (2) | 337 | 813 | 340 | 445 | 2,344 | 4,279 | ||||||
| Transaction, refinancing and other fees (3) | — | — | — | — | 2,025 | 2,025 | ||||||
| Loss (gain) on foreign currency remeasurement (4) | 126 | (2,795) | — | — | — | (2,669) | ||||||
| Adjusted EBITDA | $ | 23,907 | $ | 9,632 | $ | 17,084 | $ | 29,604 | $ | (7,511) | $ | 72,716 |
(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $10.9 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $3.3 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $2.6 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 March 31, | ||||
|---|---|---|---|---|
| (Dollar amounts in thousands, except share data) | 2023 | 2022 | ||
| Net income | $ | 30,063 | $ | 38,866 |
| Income tax expense | 2,818 | 6,175 | ||
| Interest expense, net | 4,510 | 4,880 | ||
| Depreciation and amortization | 19,432 | 19,160 | ||
| EBITDA | 56,823 | 69,081 | ||
| Equity income (1) | (1,155) | (570) | ||
| Compensation and benefits (2) | 5,845 | 4,279 | ||
| Transaction, refinancing and other fees (3) | 758 | 2,595 | ||
| Loss (gain) on foreign currency remeasurement (4) | 4,864 | (2,669) | ||
| Adjusted EBITDA | 67,135 | 72,716 | ||
| Operating depreciation and amortization (5) | (12,369) | (11,252) | ||
| Cash interest expense, net (6) | (4,363) | (4,629) | ||
| Income tax expense (7) | (4,782) | (8,809) | ||
| Non-controlling interest (8) | (34) | 10 | ||
| Adjusted net income | $ | 45,587 | $ | 48,036 |
| Net income per common share (GAAP): | ||||
| Diluted | $ | 0.46 | $ | 0.53 |
| Adjusted Earnings per common share (Non-GAAP): | ||||
| Diluted | $ | 0.69 | $ | 0.66 |
| Shares used in computing adjusted earnings per common share: | ||||
| Diluted | 65,608,618 | 72,853,216 |
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 (M&A) 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 | $ | 644 | to | $ | 652 | $ | 618 |
| Earnings per Share (EPS) (GAAP) | $ | 1.80 | to | $ | 1.90 | $ | 3.45 |
| Per share adjustment to reconcile GAAP EPS to Non-GAAP Adjusted EPS: | |||||||
| Share-based comp, non-cash equity earnings and other (1) | 0.39 | 0.39 | (1.42) | ||||
| Merger and acquisition related depreciation and amortization (2) | 0.46 | 0.46 | 0.49 | ||||
| Non-cash interest expense (3) | 0.02 | 0.02 | 0.01 | ||||
| Tax effect of Non-GAAP adjustments (4) | (0.15) | (0.16) | (0.10) | ||||
| Loss (gain) on foreign currency remeasurement (5) | 0.07 | 0.07 | 0.10 | ||||
| Total adjustments | 0.79 | 0.78 | (0.92) | ||||
| Adjusted EPS (Non-GAAP) | $ | 2.59 | to | $ | 2.68 | $ | 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, 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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