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 29, 2021
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 29, 2021 the Company issued a press release announcing its preliminary results for the first quarter ended March 31, 2021. 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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(b) On April 29, 2021, Evertec, Inc. (the “Company”) announced that Philip E. Steurer, the Company’s Executive Vice President and Chief Operating Officer since 2012, will no longer serve in that capacity as of the Effective Date (as the term is defined below). On the Effective Date, Mr. Steurer will transition to a new role as Senior Vice President and Chief Strategy Officer of the Company with a focus on product strategy, customer excellence and market opportunity. Mr. Steurer’s transition to a new role did not involve any disagreement with the Company with regard to its operations, policies or practices.
(c) On April 22, 2021, the Company appointed Diego Viglianco, as the Company’s Executive Vice President and Chief Operating Officer effective upon the finalization of U.S. work visa formalities which is expected to occur during the month of May (the “Effective Date”).
Mr. Viglianco, age 51, has served as Chief Executive Officer Officer of Interbanking S.A., a digital financial ACH/Real Time payments company headquartered in Argentina, from July 2019 to March 2021. Prior to this role, from 2017 to 2019, Mr. Viglianco served as CEO of the Processing Division for Prisma Medios de Pago S.A. (“Prisma”). Prior to joining Prisma, Mr. Viglianco held operational and commercial roles of increasing responsibility at Mastercard in Argentina and Miami, USA from 2000 to 2017, which included General Manager for the Spanish Speaking Caribbean, Customer Delivery Head, Vice President of Operations in Argentina, and Director of Operations in Argentina. Prior to joining Mastercard, Viglianco spent six years in México, where he worked as Systems Development Director at PROSA, Customer Service Director for NCR Corporation, and as a consultant for InterSoft Mexico. Prior to his time in Mexico, he worked as a consultant and systems development coordinator for various companies in Argentina.
Mr. Viglianco holds a master’s in business administration from Instituto Universitario ESEADE in Argentina, and a bachelor’s degree from the Universidad del Salvador, also in Argentina.
As part of Mr. Viglianco’s future employment with EVERTEC Group, LLC, the Company’s principal operating subsidiary (“Evertec Group”), Mr. Viglianco will receive an annual base salary of $330,000, which amount is subject to annual review by the Board or a committee thereof. Mr. Viglianco is eligible for annual cash incentive awards of up to 75% of his base salary under the Company’s Annual Performance Incentive Guidelines pro-rated for partial calendar years. Within thirty (30) business days of the Effective Date, Mr. Viglianco will receive two separate grants of restricted stock units (“RSUs”) as follows: (i) a recruitment grant of time-based RSUs valued at $250,000 as of the day before the date of grant (the “Recruitment Grant”), which will vest on the third anniversary of the date of grant, provided that Mr. Viglianco is employed Evertec Group on the vesting date and subject to the terms and conditions of the Recruitment RSU Grant award agreement and the Company’s Severance Policy; and (ii) a grant as part of the Company’s long-term incentive plan of 5,861 time-based RSUs and 7,841 performance-based RSUs (the “2021 LTIP Grant”; the Recruitment Grant and the 2021 LTIP Grant, collectively, the “Viglianco RSU Grants”), subject to terms and conditions of the 2021 LTIP Grant agreement and the Company’s Severance Policy.
Mr. Viglianco, like most of our executives, will be a party to the Company’s Severance Policy; therefore, upon termination of his employment without Cause or by Mr. Viglianco for Good Reason (as the terms are defined in the Company’s Severance Policy) prior to the vesting dates of the respective Viglianco RSU Grants, (a) the unvested time-based RSUs shall vest on a pro-rata basis as of the termination date (and the termination date shall be deemed the vesting date for said RSUs), and (b) the unvested performance-based RSUs shall vest and be settled following the end of the performance period based on actual performance determined at the end of the performance period on a pro-rata basis. In both instances, subject to the execution by Mr. Viglianco of a separation agreement and general release of all claims against the Company and its affiliates (a “Separation and Release Agreement”) by Mr. Viglianco. In the event Mr. Viglianco’s employment is terminated prior to the vesting date of the Viglianco RSU Grants pursuant to a Qualifying Termination within twenty-four months following a Change in Control (as
the terms are defined in the Company’s Severance Policy) then, subject to the execution by Mr. Viglianco of a Separation and Release Agreement, (a) the time-based RSUs shall become fully vested as of the termination date, and (b) unvested performance-based RSUs shall become fully vested as of the termination date based (x) on the actual level of performance to the extent the performance period was completed as of the Change of Control date or (y) at the target level of performance to the extent the performance period with respect to the relevant goal was not complete as of the Change of Control date.
As part of his employment, Mr. Viglianco shall be entitled to participate in the employee benefit plans, policies, practices and arrangements generally made available to our other executives as well as certain specified levels of health insurance, life insurance, short-term disability insurance and long-term disability insurance benefits, and twenty (20) days of paid vacation annually.
Mr. Viglianco shall be reimbursed for reasonable costs related to his relocation to Puerto Rico, including travel in connection with finding a residence, conduct his immigration process, any reasonable incidental expenses and up to three months of temporary housing not to exceed $30,000 related to his relocation to Puerto Rico.
As previously discussed, Mr. Viglianco will be a party to the Company’s Severance Policy. In the event Mr. Viglianco’s employment with Evertec Group is terminated by us without Cause or by Mr. Viglianco for Good Reason, Mr. Viglianco may be entitled to the severance benefits described in the Severance Policy, subject to the execution by Mr. Viglianco of a Separation and Release Agreement. The Severance Policy contains certain non-competition and non-solicitation covenants for the benefit of the Company and its affiliates during Mr. Viglianco’s employment and for one year following the termination of his employment, certain covenants relating to the protection of the Company’s confidential information, and a mutual non-disparagement covenant.
On March 15, 2021, Mr. Viglianco and the Company executed a professional services agreement, whereby Mr. Viglianco provides the Company consulting services prior to the Effective Date (the “Consulting Agreement”). Pursuant to the Consulting Agreement, Mr. Viglianco receives a consulting fee of USD $25,000 per month. The Consulting Agreement will terminate on the Effective Date.
There are no family relationships between Mr. Viglianco and any director or executive officer of the Company, and Mr. Viglianco is not a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
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 29, 2021 |
| 99.2 | Press release re:Management changes issued by EVERTEC, Inc dated April 29, 2021 |
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 29, 2021 | 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 29, 2021 |
| 99.2 | Press release re: Management changes issued by EVERTEC, Inc dated April 29, 2021 |
Document
Exhibit 99.1
EVERTEC REPORTS FIRST QUARTER 2021 RESULTS
INCREASES ANNUAL GUIDANCE
SAN JUAN, PUERTO RICO - April 29, 2021 - EVERTEC, Inc. (NYSE: EVTC) (“Evertec” or the “Company”) today announced results for the first quarter ended March 31, 2021.
First Quarter 2021 Highlights
•Revenue increased 14% to $139.5 million
•GAAP Net Income attributable to common shareholders was $35.5 million or $0.49 per diluted share
•Adjusted EBITDA increased 22% to $68.9 million
•Adjusted earnings per common share was $0.62, an increase of 35%
•Share repurchases totaled $14.3 million
Mac Schuessler, President and Chief Executive Officer stated, “In the first quarter, we delivered strong results as we lapped the one-year anniversary of the pandemic. We benefited from volume growth and continued increase of our digital solutions in Puerto Rico as well as the new client contracts in Latin America. Additionally, as a result of the strong first quarter, the incremental federal stimulus package, as well as the execution against our share repurchase program, we are increasing our outlook for 2021 results."
First Quarter 2021 Results
Revenue. Total revenue for the quarter ended March 31, 2021 was $139.5 million, an increase of 14% compared with $121.9 million in the prior year. Revenue increase in the quarter reflected sales volume growth with a high average ticket, as well as continued growth in our digital solutions in Puerto Rico. Additionally, revenue growth in Latin America was driven by new client contracts. Revenue growth also includes approximately $1 million in one-time hardware and software sales.
Net Income attributable to common shareholders. For the quarter ended March 31, 2021, GAAP Net Income attributable to common shareholders was $35.5 million, or $0.49 per diluted share, an increase of $13.3 million or $0.19 per diluted share as compared to the prior year.
Adjusted EBITDA. For the quarter ended March 31, 2021, Adjusted EBITDA was $68.9 million, an increase of 22% compared to the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 49.4%, an increase of approximately 320 basis points from the prior year. The year over year increase in margin primarily reflects the benefit of higher payment revenues in both Puerto Rico and Latin America while at the same time controlling costs.
Adjusted Net Income. For the quarter ended March 31, 2021, Adjusted Net Income was $45.0 million, an increase of 34% compared with $33.5 million in the prior year. Adjusted earnings per common share was $0.62, an increase of 35% compared to $0.46 in the prior year.
Share Repurchase
During the three months ended March 31, 2021, the Company repurchased 382,974 shares of its common stock at an average price of $37.26 per share for a total of $14.3 million. As of March 31, 2021, a total of approximately $86 million remained available for future use under the Company’s share repurchase program.
2021 Outlook
The Company is increasing its financial outlook for 2021 as follows:
•Total consolidated revenue is now anticipated between $543 million and $552 million representing growth of 6% to 8%, compared with $533 million to $544 million previously estimated
•Adjusted earnings per common share between $2.25 to $2.32 representing a growth range of 9% to 12% from $2.07 in 2020, compared with $2.15 to $2.23 previously estimated
•Capital expenditures are now anticipated to be between $50 and $55 million
•Effective tax rate of approximately 13% to 14%.
Earnings Conference Call and Audio Webcast
The Company will host a conference call to discuss its first quarter 2021 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 10154680. The replay will be available through Thursday, May 6, 2021. 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 can be found 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 manages a system of electronic payment networks and offers a comprehensive suite of services for core banking, cash processing and fulfillment in Puerto Rico, that process approximately three billion transactions annually. The Company also offers technology outsourcing in 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 release material 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 interested parties to evaluate companies in the industry. Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release. These non-GAAP measures include EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share and are defined below.
EBITDA is defined as earnings before interest, taxes, depreciation and amortization.
Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments. 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 net income adjusted to exclude unusual items and other adjustments.
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. Further, the Company's presentation of these measures should not be construed as an inference that the Company's future operating results will not be affected by unusual or nonrecurring items.
Forward-Looking Statements
Certain statements in this press release constitute “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of EVERTEC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by, or that otherwise include the words “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. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.
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 revenue pursuant to the Master Services Agreement (MSA) with Popular and to grow the Company's merchant acquiring business; as a regulated institution, the likelihood the Company will be required to obtain regulatory approval before engaging in certain new activities or businesses, whether organically or by acquisition, and the Company’s potential inability to obtain such approval on a timely basis or at all, which may make transactions more expensive or impossible to complete, or make the Company less attractive to potential sellers; the Company's ability to renew its client contracts on terms favorable to the Company, including the Company's contract with Popular, and any significant concessions the Company may have to grant to Popular with respect to pricing or other key terms in anticipation of the negotiation of the extension of the MSA, both in respect of the current term and any extension of the MSA; dependence on the Company's 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 the Company does business and the risks to the Company's business if 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 in the financial-services industry; the credit risk of the Company’s merchant clients, for which the Company 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 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 Company’s ability to execute its geographic expansion and acquisition strategies, including challenges in successfully acquiring new businesses and integrating and growing acquired businesses; the Company’s ability to protect the Company’s intellectual property rights against infringement and to defend the Company 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 senior 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 in the Company’s 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 our main markets in Latin America and the Caribbean; uncertainty related to the effect of the discontinuation of the London Interbank Offered Rate at the end of 2021; the nature, timing and amount of any restatement; and the continued impact of COVID-19 pandemic and measures taken in response to the outbreak, on our resources, net income and liquidity due to current and future disruptions in operations as well as the macroeconomic instability caused by the pandemic.
Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings “Forward-Looking Statements” and “Risk Factors” in the reports the Company files with the SEC from time to time, in connection with considering any forward-looking statements that may be made by the Company and its businesses generally. 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 the Company is required to do so by law.
Investor Contact
Kay Sharpton
(787) 773-5442
IR@evertecinc.com
EVERTEC, Inc.
Schedule 1: Unaudited Condensed Consolidated Statements of Income and Comprehensive Income
| Three months ended March 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| (Dollar amounts in thousands, except share data) | ||||
| Revenues | $ | 139,528 | $ | 121,942 |
| Operating costs and expenses | ||||
| Cost of revenues, exclusive of depreciation and amortization | 59,804 | 54,067 | ||
| Selling, general and administrative expenses | 16,102 | 17,317 | ||
| Depreciation and amortization | 18,623 | 17,795 | ||
| Total operating costs and expenses | 94,529 | 89,179 | ||
| Income from operations | 44,999 | 32,763 | ||
| Non-operating income (expenses) | ||||
| Interest income | 389 | 363 | ||
| Interest expense | (5,906) | (6,779) | ||
| Earnings of equity method investment | 502 | 338 | ||
| Other income | 328 | 108 | ||
| Total non-operating expenses | (4,687) | (5,970) | ||
| Income before income taxes | 40,312 | 26,793 | ||
| Income tax expense | 4,708 | 4,518 | ||
| Net income | 35,604 | 22,275 | ||
| Less: Net income attributable to non-controlling interest | 101 | 64 | ||
| Net income attributable to EVERTEC, Inc.’s common stockholders | 35,503 | 22,211 | ||
| Other comprehensive (loss) income, net of tax | ||||
| Foreign currency translation adjustments | (2,613) | (8,305) | ||
| Gain (loss) on cash flow hedges | 4,189 | (11,859) | ||
| Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders | $ | 37,079 | $ | 2,047 |
| Net income per common share: | ||||
| Basic | $ | 0.49 | $ | 0.31 |
| Diluted | $ | 0.49 | $ | 0.30 |
| Shares used in computing net income per common share: | ||||
| Basic | 72,150,529 | 72,012,648 | ||
| Diluted | 72,949,401 | 73,293,005 |
EVERTEC, Inc.
Schedule 2: Unaudited Condensed Consolidated Balance Sheets
| (In thousands) | March 31, 2021 | December 31, 2020 | ||
|---|---|---|---|---|
| Assets | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ | 156,363 | $ | 202,649 |
| Restricted cash | 19,059 | 18,456 | ||
| Accounts receivable, net | 99,737 | 95,727 | ||
| Prepaid expenses and other assets | 44,573 | 42,214 | ||
| Total current assets | 319,732 | 359,046 | ||
| Debt securities available-for-sale, at fair value | 2,968 | — | ||
| Investment in equity investee | 12,867 | 12,835 | ||
| Property and equipment, net | 42,146 | 43,538 | ||
| Operating lease right-of-use asset | 25,604 | 27,538 | ||
| Goodwill | 396,298 | 397,670 | ||
| Other intangible assets, net | 229,972 | 219,909 | ||
| Deferred tax asset | 5,671 | 5,730 | ||
| Net investment in leases | 255 | 301 | ||
| Other long-term assets | 5,136 | 6,012 | ||
| Total assets | $ | 1,040,649 | $ | 1,072,579 |
| Liabilities and stockholders’ equity | ||||
| Current Liabilities: | ||||
| Accrued liabilities | $ | 56,600 | $ | 58,033 |
| Accounts payable | 26,998 | 43,348 | ||
| Contract liability | 25,319 | 24,958 | ||
| Income tax payable | 6,547 | 6,573 | ||
| Current portion of long-term debt | 15,625 | 14,250 | ||
| Operating lease payable | 5,491 | 5,830 | ||
| Total current liabilities | 136,580 | 152,992 | ||
| Long-term debt | 458,738 | 481,041 | ||
| Deferred tax liability | 2,151 | 2,748 | ||
| Contract liability - long term | 31,798 | 31,336 | ||
| Operating lease liability - long-term | 20,884 | 22,402 | ||
| Derivative liability | 21,012 | 25,578 | ||
| Other long-term liabilities | 13,479 | 14,053 | ||
| Total liabilities | 684,642 | 730,150 | ||
| 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; 72,166,443 shares issued and outstanding as of March 31, 2021 (December 31, 2020 - 72,137,678) | 721 | 721 | ||
| Additional paid-in capital | — | 5,340 | ||
| Accumulated earnings | 397,556 | 379,934 | ||
| Accumulated other comprehensive loss, net of tax | (46,678) | (48,254) | ||
| Total EVERTEC, Inc. stockholders’ equity | 351,599 | 337,741 | ||
| Non-controlling interest | 4,408 | 4,688 | ||
| Total equity | 356,007 | 342,429 | ||
| Total liabilities and equity | $ | 1,040,649 | $ | 1,072,579 |
EVERTEC, Inc.
Schedule 3: Unaudited Condensed Consolidated Statements of Cash Flows
| Three months ended March 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Cash flows from operating activities | ||||
| Net income | $ | 35,604 | $ | 22,275 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 18,623 | 17,795 | ||
| Amortization of debt issue costs and accretion of discount | 569 | 621 | ||
| Operating lease amortization | 1,492 | 1,173 | ||
| (Release) provision for expected credit losses and sundry losses | (184) | 104 | ||
| Deferred tax benefit | (890) | (1,080) | ||
| Share-based compensation | 3,380 | 3,483 | ||
| Loss on disposition of property and equipment and impairment of intangible | 1,042 | 81 | ||
| Earnings of equity method investment | (502) | (338) | ||
| Decrease (increase) in assets: | ||||
| Accounts receivable, net | (4,048) | 11,729 | ||
| Prepaid expenses and other assets | (2,539) | (1,836) | ||
| Other long-term assets | 833 | (2,477) | ||
| (Decrease) increase in liabilities: | ||||
| Accrued liabilities and accounts payable | (18,457) | (20,662) | ||
| Income tax payable | 82 | 3,307 | ||
| Contract liability | 1,185 | 1,075 | ||
| Operating lease liabilities | (1,611) | (1,409) | ||
| Other long-term liabilities | 167 | 84 | ||
| Total adjustments | (858) | 11,650 | ||
| Net cash provided by operating activities | 34,746 | 33,925 | ||
| Cash flows from investing activities | ||||
| Additions to software | (11,971) | (6,055) | ||
| Acquisition of customer relationship | (14,750) | — | ||
| Property and equipment acquired | (4,724) | (3,357) | ||
| Acquisition of available-for-sale debt securities | (2,968) | — | ||
| Net cash used in investing activities | (34,413) | (9,412) | ||
| Cash flows from financing activities | ||||
| Statutory withholding taxes paid on share-based compensation | (8,728) | (2,706) | ||
| Repayment of short-term borrowings for purchase of equipment and software | (758) | (792) | ||
| Dividends paid | (3,605) | — | ||
| Repurchase of common stock | (14,268) | (7,300) | ||
| Repayment of long-term debt | (21,357) | (20,560) | ||
| Net cash used in financing activities | (48,716) | (31,358) | ||
| Effect of foreign exchange rate on cash, cash equivalents and restricted cash | 2,700 | 828 | ||
| Net decrease in cash, cash equivalents and restricted cash | (45,683) | (6,017) | ||
| Cash, cash equivalents and restricted cash at beginning of the period | 221,105 | 131,121 | ||
| Cash, cash equivalents and restricted cash at end of the period | $ | 175,422 | $ | 125,104 |
| Reconciliation of cash, cash equivalents and restricted cash | ||||
| Cash and cash equivalents | $ | 156,363 | $ | 103,521 |
| Restricted cash | 19,059 | 21,583 | ||
| Cash, cash equivalents and restricted cash | $ | 175,422 | $ | 125,104 |
EVERTEC, Inc.
Schedule 4: Unaudited Segment Information
| Three months ended March 31, 2021 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (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 | $ | 36,264 | $ | 25,014 | $ | 30,867 | $ | 60,611 | $ | (13,228) | $ | 139,528 |
| Operating costs and expenses | 20,489 | 19,846 | 16,466 | 36,689 | 1,039 | 94,529 | ||||||
| Depreciation and amortization | 3,942 | 2,934 | 654 | 4,794 | 6,299 | 18,623 | ||||||
| Non-operating income (expenses) | 185 | 1,108 | 231 | 553 | (1,247) | 830 | ||||||
| EBITDA | 19,902 | 9,210 | 15,286 | 29,269 | (9,215) | 64,452 | ||||||
| Compensation and benefits (2) | 241 | 809 | 231 | 363 | 1,860 | 3,504 | ||||||
| Transaction, refinancing and other fees (3) | 660 | — | — | — | 273 | 933 | ||||||
| Adjusted EBITDA | $ | 20,803 | $ | 10,019 | $ | 15,517 | $ | 29,632 | $ | (7,082) | $ | 68,889 |
(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $9.7 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $2.3 million from Payment Services - Latin America to Payment Services - Puerto Rico & Caribbean, and transaction processing and monitoring fees of $1.2 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America. Corporate and Other was impacted by the intersegment elimination of revenue recognized in the Payment Services - Latin America segment and capitalized in the Payment Services - Puerto Rico & Caribbean segment; excluding this impact, Corporate and Other Adjusted EBITDA would be $3.5 million.
(2)Primarily represents share-based compensation.
(3)Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, a software impairment charge and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.
| Three months ended March 31, 2020 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (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 | $ | 29,887 | $ | 21,640 | $ | 25,121 | $ | 55,943 | $ | (10,649) | $ | 121,942 |
| Operating costs and expenses | 17,406 | 17,651 | 14,706 | 33,617 | 5,799 | 89,179 | ||||||
| Depreciation and amortization | 3,249 | 2,757 | 499 | 4,296 | 6,994 | 17,795 | ||||||
| Non-operating income (expenses) | 113 | 754 | 154 | 387 | (962) | 446 | ||||||
| EBITDA | 15,843 | 7,500 | 11,068 | 27,009 | (10,416) | 51,004 | ||||||
| Compensation and benefits (2) | 231 | 742 | 216 | 436 | 1,875 | 3,500 | ||||||
| Transaction, refinancing and other fees (3) | — | — | — | — | 1,786 | 1,786 | ||||||
| Adjusted EBITDA | $ | 16,074 | $ | 8,242 | $ | 11,284 | $ | 27,445 | $ | (6,755) | $ | 56,290 |
(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $9.0 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $1.6 million from Payment Services - Latin America to Payment Services - Puerto Rico & Caribbean. Corporate and Other was impacted by the intersegment elimination of revenue recognized in the Payment Services - Latin America segment and capitalized in the Payment Services - Puerto Rico & Caribbean segment; excluding this impact, Corporate and Other Adjusted EBITDA would be $5.1 million.
(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.
EVERTEC, Inc.
Schedule 5: Reconciliation of GAAP to Non-GAAP Operating Results
| Three months ended March 31, | ||||
|---|---|---|---|---|
| (Dollar amounts in thousands, except share data) | 2021 | 2020 | ||
| Net income | $ | 35,604 | $ | 22,275 |
| Income tax expense | 4,708 | 4,518 | ||
| Interest expense, net | 5,517 | 6,416 | ||
| Depreciation and amortization | 18,623 | 17,795 | ||
| EBITDA | 64,452 | 51,004 | ||
| Equity income (1) | (502) | (338) | ||
| Compensation and benefits (2) | 3,504 | 3,500 | ||
| Transaction, refinancing and other fees (3) | 1,435 | 2,124 | ||
| Adjusted EBITDA | 68,889 | 56,290 | ||
| Operating depreciation and amortization (4) | (10,882) | (9,477) | ||
| Cash interest expense, net (5) | (5,076) | (6,010) | ||
| Income tax expense (6) | (7,756) | (7,178) | ||
| Non-controlling interest (7) | (143) | (92) | ||
| Adjusted net income | $ | 45,032 | $ | 33,533 |
| Net income per common share (GAAP): | ||||
| Diluted | $ | 0.49 | $ | 0.30 |
| Adjusted Earnings per common share (Non-GAAP): | ||||
| Diluted | $ | 0.62 | $ | 0.46 |
| Shares used in computing adjusted earnings per common share: | ||||
| Diluted | 72,949,401 | 73,293,005 |
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").
2)Primarily represents share-based compensation.
3)Represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, recorded as part of selling, general and administrative expenses and a software impairment charge.
4)Represents operating depreciation and amortization expense, which excludes amounts generated as a result of merger and acquisition activity.
5)Represents interest expense, less interest income, as they appear on our consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount.
6)Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discrete items.
7)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 Share
| 2021 Outlook | 2020 | ||||||
|---|---|---|---|---|---|---|---|
| (Dollar amounts in millions, except per share data) | Low | High | |||||
| Revenues | $ | 543 | to | $ | 552 | $ | 511 |
| Earnings per Share (EPS) (GAAP) | $ | 1.70 | to | $ | 1.77 | $ | 1.43 |
| Per share adjustment to reconcile GAAP EPS to Non-GAAP Adjusted EPS: | |||||||
| Share-based comp, non-cash equity earnings and other (1) | 0.21 | 0.21 | 0.29 | ||||
| Merger and acquisition related depreciation and amortization (2) | 0.42 | 0.42 | 0.45 | ||||
| Non-cash interest expense (3) | 0.02 | 0.02 | 0.01 | ||||
| Tax effect of Non-GAAP adjustments (4) | (0.09) | (0.09) | (0.11) | ||||
| Non-controlling interest (5) | (0.01) | (0.01) | (0.01) | ||||
| Total adjustments | 0.55 | 0.55 | 0.63 | ||||
| Adjusted EPS (Non-GAAP) | $ | 2.25 | to | $ | 2.32 | $ | 2.07 |
| Shares used in computing adjusted earnings per common share | 73.0 | 73.1 |
(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 the Merger and intangibles related to acquisitions.
(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 13% to 14%).
(5)Represents the 35% non-controlling equity interest in Evertec Colombia net of amortization for intangibles created as part of the purchase.
11
Document
Exhibit 99.2
EVERTEC ANNOUNCES MANAGEMENT CHANGES
Diego Viglianco Named Chief Operating Officer
Philip Steurer Named Chief Strategy Officer
SAN JUAN, PUERTO RICO - April 29, 2021 - EVERTEC, Inc. (NYSE: EVTC) (“Evertec” or the “Company”) today announced management changes, including the addition of Diego Viglianco as Chief Operating Officer and naming Philip Steurer, formerly Evertec Chief Operating Officer, as Chief Strategy Officer.
Mac Schuessler, President and Chief Executive Officer stated, “I am pleased to add Diego to the Evertec team and also appoint Phil as our Chief Strategy Officer as we continue to focus on our strategic vision and growth plans for the Company. Phil has been with Evertec since 2012 and his knowledge of the payments industry, as well as our business, will help us drive alignment of product strategy, customer excellence and market opportunity. Diego’s experience in Latin American payments combined with his technical expertise will further strengthen our leadership team as we shape the future of Evertec."
Diego Viglianco most recently served as the CEO of Interbanking, S.A, a digital financial ACH/Real Time payments company headquartered in Argentina. Previously, Viglianco has held senior management positions with Prisma Medios De Pago S.A in Argentina, MasterCard in Argentina and Miami, USA, and Promocion y Operacion S.A. de C.V. (PROSA) in Mexico. Viglianco holds an MBA in Economy and Business Administration from ESEADE University, Argentina and a Bachelor of Science in Engineering from University of Salvador, Argentina.
Philip Steurer most recently served as Chief Operating Officer and joined Evertec in 2012. Before joining the Company, Steurer worked for over 11 years at First Data Corporation, where he last served as Senior Vice President, Latín America and Caribbean. Steurer holds an MBA in Finance from Indiana University and a Bachelor of Business Administration degree in Finance from the University of Notre Dame.
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 manages a system of electronic payment networks and offers a comprehensive suite of services for core banking, cash processing and fulfillment in Puerto Rico, that process approximately three billion transactions annually. The Company also offers technology outsourcing in 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.
Investor Contact
Kay Sharpton
(787) 773-5442
IR@evertecinc.com