EVTC 8-K
EVERTEC, Inc. (EVTC)
8-K
2023-02-22
For: 2023-02-22
View Original
Added on
April 11, 2026
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): February 22, 2023
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) | ||||||||||
| (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 | ||||||
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 February 22, 2023 the Company issued a press release announcing its preliminary results for the fourth quarter ended December 31, 2022. 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 | ||||||||
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: February 22, 2023 | By: | /s/ Joaquin A. Castrillo-Salgado | ||||||
| Name: Joaquin A. Castrillo-Salgado | ||||||||
| Title: Chief Financial Officer | ||||||||
EXHIBIT INDEX
| Number | Exhibit | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
Exhibit 99.1
EVERTEC REPORTS FOURTH QUARTER AND FULL YEAR 2022 RESULTS
ANNOUNCES 2023 OUTLOOK
SAN JUAN, PUERTO RICO – February 22, 2023 – EVERTEC, Inc. (NYSE: EVTC) (“Evertec” or the “Company”) today announced results for the fourth quarter and full year ended December 31, 2022.
Fourth Quarter 2022 Highlights and Recent Highlights
•Revenue increased 4% to $161.8 million
•GAAP Net Income attributable to common shareholders was $28.7 million, or $0.44 per diluted share
•Adjusted EBITDA decreased 10% to $68.4 million
•Adjusted earnings per common share was $0.65, or a 10% decrease
•Completed the refinancing of credit facilities
Full Year 2022 Highlights
•Revenue grew 5% to $618.4 million
•GAAP Net Income attributable to common shareholders was $239.0 million, or $3.45 per diluted share
•Adjusted EBITDA decreased 9% to $269.5 million
•Adjusted earnings per common share was $2.42, or a 12% decrease
•$110 million returned to shareholders through share repurchases and dividends
•Closed the Popular Transaction which extended the main commercial agreements
•Closed two acquisitions, one in Puerto Rico and one in Latin America
Mac Schuessler, President and Chief Executive Officer stated "This was a successful year for us as we completed several milestones. We extended our main commercial agreements with our largest customer, executed on M&A with two acquisitions, refinanced our debt, aggressively repurchased stock and delivered another year of strong revenue growth. We continue to reap the benefits of the capital investments we have made over the years, both in our products and through acquisitions. Looking towards 2023, we continue to focused on finding the best ways to deploy capital to support our long-term growth strategy."
Fourth Quarter 2022 Results
Revenue. Total revenue for the quarter ended December 31, 2022 was $161.8 million, an increase of 4%, compared with $155.2 million in the prior year. Revenue in Puerto Rico reflected growth in our Merchant Acquiring and Payment Services segments as these benefited from increased transaction volumes and pricing initiatives implemented earlier in the year. Our Merchant Acquiring segment also benefited from a higher spread per transaction. ATH Movil Business continues to be a driver of growth in our Payment Services segment as was the acquisition completed in the second quarter. Latin America revenue continues to increase due to both organic growth and the revenue contribution from the BBR acquisition.
Net Income attributable to common shareholders. For the quarter ended December 31, 2022, GAAP Net Income attributable to common shareholders was $28.7 million, a decrease of $12.4 million, or $0.44 per diluted share, compared with $41.1 million or $0.56 per diluted share in the prior year. The year over year decrease reflects the impact of 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, mainly due to increased headcount in Latin America including the added headcount from the BBR acquisition, provisions for operational losses, printing supplies and cloud services, partially offset by a decrease in professional fees. Selling, general and administrative expenses increased mainly due to an increase in personnel costs and professional fees as well as higher donations. Additionally, the current quarter reflects a loss on foreign currency remeasurement of $0.8 million compared with a gain of $1.2 million in the prior year quarter and a $1.3 million loss on extinguishment of debt resulting from the refinancing of the Company's credit facilities.
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Adjusted EBITDA. For the quarter ended December 31, 2022, Adjusted EBITDA was $68.4 million, a decrease of 10% compared to the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenue) decreased approximately 660 basis points to 42.3% compared with 48.9% in the prior year. The decrease in Adjusted EBITDA and margin reflects the impact of the increased expenses discussed, the negative impact from foreign currency remeasurement and the impact from the sale of assets to Popular as part of the Popular Transaction which were of higher margin.
Adjusted Net Income. For the quarter ended December 31, 2022, Adjusted Net Income was $42.6 million, a decrease of 19% compared with $52.6 million in the prior year. Adjusted earnings per common share was $0.65, a decrease of 10% compared with $0.72 in the prior year. The decrease was driven by the lower Adjusted EBITDA and a higher adjusted tax rate in the quarter.
Full Year 2022 Results
Revenue. Total revenue for the year ended December 31, 2022 was $618.4 million, an increase of 5% compared with $589.8 million in the prior year. Revenue in Puerto Rico increased in both the Merchant Acquiring and Payment Services segments, benefiting from increased transaction volumes as well as pricing initiatives implemented during the year. Merchant Acquiring revenue also benefited from two additional months in 2022 from the expanded FirstBank relationship. Payment Services in Puerto Rico also reflected the continued growth of ATH Movil Business, revenue generated from an acquisition completed in the second quarter and revenue generated from projects completed in connection with closing the Popular Transaction. These increases were partially offset by the impact from the assets sold as part of the Popular Transaction, which impacted our Business Solutions segment by approximately $15 million, in addition to the $6.9 million one-time credit granted upon closing. Latin America revenue reflected organic growth from existing customers and the revenue contribution from the BBR acquisition.
Net Income attributable to common shareholders. For the year ended December 31, 2022, GAAP Net Income attributable to common shareholders was $239.0 million, or $3.45 per diluted share, an increase compared with $161.1 million or $2.21 per diluted share in the prior year and includes the impact of the $135.6 million gain recognized from the Popular Transaction. The results also reflect the negative impact from foreign currency remeasurement of $7.6 million for assets and liabilities denominated in US dollars in our foreign subsidiaries. Additionally, cost of revenues increased mainly driven by the revenue sharing agreement with Popular, a $4.1 million impairment loss on a multi-year software development, an increase in personnel costs, mainly due to the increased headcount discussed above, printing supplies, provisions for operational losses and cloud services. The increase in selling, general and administrative expenses was driven by an increase in personnel costs and an increase in professional fees.
Adjusted EBITDA. For the year ended December 31, 2022, Adjusted EBITDA was $269.5 million, a decrease of 9% compared to the prior year. Adjusted EBITDA margin decreased 640 basis points to 43.6% compared with 50.0% in the prior year. The decrease in Adjusted EBITDA and margin primarily reflect the negative impact from foreign currency remeasurement and the increased expenses discussed above, as well as the impact from the assets sold as part of the Popular Transaction which were of higher margin and the one-time credit granted to them upon closing in the third quarter of 2022.
Adjusted Net Income. For the year ended December 31, 2022, Adjusted Net Income was $167.6 million, a decrease of 16% compared with $199.7 million in the prior year. Adjusted earnings per common share was $2.42, a decrease of 12% compared with $2.74 in the prior year. The decrease was driven by the lower Adjusted EBITDA and a higher adjusted tax rate, which was partly impacted by the negative $7.6 million foreign currency remeasurement effect.
Stock Repurchase
During the quarter, the Company repurchased 741 thousand shares of its common stock at an average price of $32.47. For the full year 2022 the Company repurchased 2.8 million shares of its common stock at an average price of $34.37 per share for a total of $96.6 million. At December 31, 2022, the Company's share repurchase program has approximately $78 million remaining and authorized for future use. The Company may repurchase shares in the open market, through accelerated share repurchase programs, 10b5-1 plans, or in privately negotiated transactions, subject to business opportunities and other factors.
2023 Outlook
The Company's financial outlook for 2023 is as follows:
•Total consolidated revenue between $638 million and $647 million approximately 3.2% to 4.6% growth.
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•Adjusted earnings per common share between $2.53 to $2.64 representing approximately 4.5% to 9.1% growth as compared to $2.42 in 2022.
•Capital expenditures are anticipated to be approximately $70 million.
•Effective tax rate of approximately 16% to 17%.
Earnings Conference Call and Audio Webcast
The Company will host a conference call to discuss its fourth quarter and full year 2022 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 5937775. The replay will be available through Monday, March 1, 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 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. In addition, the Company's presentation of Adjusted EBITDA is substantially consistent with the equivalent measurements that are contained in the senior secured credit facilities in testing EVERTEC Group’s compliance with covenants therein such as the senior 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.
Adjusted Net Income is used to measure the Company's overall profitability because the Company believe better reflects the Company's comparable operating performance by excluding the impact of the non-cash amortization and depreciation that was
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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, including expectations that the expanded revolving facility will provide the Company with greater flexibility to execute on its strategic imperatives with a continued focus on M&A.
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 to be filed with the Securities and Exchange Commission (the "SEC") on or about 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.
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
Beatriz Brown-Sáenz
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(787) 773-5442
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EVERTEC, Inc.
Schedule 1: Unaudited Consolidated Statements of Income and Comprehensive Income
| Quarter ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| (Dollar amounts in thousands, except share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Revenues | $ | 161,787 | $ | 155,237 | $ | 618,409 | $ | 589,796 | ||||||||||||||||||
| Operating costs and expenses | ||||||||||||||||||||||||||
| Cost of revenues, exclusive of depreciation and amortization shown below | 77,377 | 67,984 | 292,621 | 250,164 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 23,334 | 18,068 | 89,770 | 68,048 | ||||||||||||||||||||||
| Depreciation and amortization | 20,186 | 18,979 | 78,618 | 75,070 | ||||||||||||||||||||||
| Total operating costs and expenses | 120,897 | 105,031 | 461,009 | 393,282 | ||||||||||||||||||||||
| Income from operations | 40,890 | 50,206 | 157,400 | 196,514 | ||||||||||||||||||||||
| Non-operating (expenses) income | ||||||||||||||||||||||||||
| Interest income | 842 | 546 | 3,121 | 1,889 | ||||||||||||||||||||||
| Interest expense | (6,530) | (5,562) | (24,772) | (22,810) | ||||||||||||||||||||||
| Gain on sale of a business | — | — | 135,642 | — | ||||||||||||||||||||||
| (Loss) gain on foreign currency remeasurement | (787) | 1,245 | (7,645) | 1,897 | ||||||||||||||||||||||
| Earnings from equity method investment | 848 | 406 | 2,968 | 1,713 | ||||||||||||||||||||||
| Other (expenses) income | (483) | 435 | 1,138 | 2,502 | ||||||||||||||||||||||
| Total non-operating (expenses) income | (6,110) | (2,930) | 110,452 | (14,809) | ||||||||||||||||||||||
| Income before income taxes | 34,780 | 47,276 | 267,852 | 181,705 | ||||||||||||||||||||||
| Income tax expense | 6,072 | 6,088 | 28,983 | 20,562 | ||||||||||||||||||||||
| Net income | 28,708 | 41,188 | 238,869 | 161,143 | ||||||||||||||||||||||
| Less: Net income (loss) attributable to non-controlling interest | — | 72 | (140) | 13 | ||||||||||||||||||||||
| Net income attributable to EVERTEC, Inc.’s common stockholders | 28,708 | 41,116 | 239,009 | 161,130 | ||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | 12,700 | (3,306) | 12,490 | (11,129) | ||||||||||||||||||||||
| Gain on cash flow hedges | 391 | 4,337 | 19,215 | 11,151 | ||||||||||||||||||||||
| Unrealized gain (loss) on change in fair value of debt securities available-for-sale | 9 | 12 | (68) | 109 | ||||||||||||||||||||||
| Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders | $ | 41,808 | $ | 42,159 | $ | 270,646 | $ | 161,261 | ||||||||||||||||||
| Net income per common share: | ||||||||||||||||||||||||||
| Basic | $ | 0.44 | $ | 0.57 | $ | 3.48 | $ | 2.24 | ||||||||||||||||||
| Diluted | $ | 0.44 | $ | 0.56 | $ | 3.45 | $ | 2.21 | ||||||||||||||||||
| Shares used in computing net income per common share: | ||||||||||||||||||||||||||
| Basic | 65,133,639 | 71,969,856 | 68,701,434 | 72,053,795 | ||||||||||||||||||||||
| Diluted | 65,824,242 | 72,983,517 | 69,312,717 | 72,870,585 | ||||||||||||||||||||||
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EVERTEC, Inc.
Schedule 2: Unaudited Consolidated Balance Sheets
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| (Dollar amounts in thousands, except share data) | December 31, 2022 | December 31, 2021 | ||||||||||||
| Assets | ||||||||||||||
| Current Assets: | ||||||||||||||
| Cash and cash equivalents | $ | 197,229 | $ | 266,351 | ||||||||||
| Restricted cash | 18,428 | 19,566 | ||||||||||||
| Accounts receivable, net | 131,080 | 113,285 | ||||||||||||
| Prepaid expenses and other assets | 42,392 | 37,148 | ||||||||||||
| Total current assets | 389,129 | 436,350 | ||||||||||||
| Debt securities available-for-sale, at fair value | 2,203 | 3,041 | ||||||||||||
| Investment in equity investee | 14,661 | 12,054 | ||||||||||||
| Property and equipment, net | 56,387 | 48,533 | ||||||||||||
| Operating lease right-of-use asset | 15,918 | 21,229 | ||||||||||||
| Goodwill | 423,392 | 393,318 | ||||||||||||
| Other intangible assets, net | 200,320 | 213,288 | ||||||||||||
| Deferred tax asset | 5,701 | 6,910 | ||||||||||||
| Derivative asset | 7,440 | — | ||||||||||||
| Net investment in lease | 14 | 107 | ||||||||||||
| Other long-term assets | 16,578 | 9,926 | ||||||||||||
| Total assets | $ | 1,131,743 | $ | 1,144,756 | ||||||||||
| Liabilities and stockholders’ equity | ||||||||||||||
| Current Liabilities: | ||||||||||||||
| Accrued liabilities | 90,341 | $ | 74,540 | |||||||||||
| Accounts payable | 46,751 | 28,484 | ||||||||||||
| Contract liability | 15,226 | 17,398 | ||||||||||||
| Income tax payable | 9,406 | 7,132 | ||||||||||||
| Current portion of long-term debt | 20,750 | 19,750 | ||||||||||||
| Short-term borrowings | 20,000 | — | ||||||||||||
| Current portion of operating lease liability | 5,936 | 5,580 | ||||||||||||
| Total current liabilities | 208,410 | 152,884 | ||||||||||||
| Long-term debt | 389,498 | 444,785 | ||||||||||||
| Deferred tax liability | 10,111 | 2,369 | ||||||||||||
| Contract liability - long term | 34,068 | 36,258 | ||||||||||||
| Operating lease liability - long-term | 10,788 | 16,456 | ||||||||||||
| Derivative liability | — | 13,392 | ||||||||||||
| Other long-term liabilities | 4,120 | 8,344 | ||||||||||||
| Total liabilities | 656,995 | 674,488 | ||||||||||||
| 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; 64,847,233 shares issued and outstanding at December 31, 2022 (December 31, 2021 - 71,969,856) | 648 | 719 | ||||||||||||
| Additional paid-in capital | — | 7,565 | ||||||||||||
| Accumulated earnings | 487,349 | 506,051 | ||||||||||||
| Accumulated other comprehensive loss, net of tax | (16,486) | (48,123) | ||||||||||||
| Total EVERTEC, Inc. stockholders’ equity | 471,511 | 466,212 | ||||||||||||
| Non-controlling interest | 3,237 | 4,056 | ||||||||||||
| Total equity | 474,748 | 470,268 | ||||||||||||
| Total liabilities and equity | $ | 1,131,743 | $ | 1,144,756 | ||||||||||
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EVERTEC, Inc.
Schedule 3: Unaudited Consolidated Statements of Cash Flows
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| Years ended December 31, | ||||||||||||||
| (In thousands) | 2022 | 2021 | ||||||||||||
| Cash flows from operating activities | ||||||||||||||
| Net income | $ | 238,869 | $ | 161,143 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 78,618 | 75,070 | ||||||||||||
| Amortization of debt issue costs and accretion of discount | 2,238 | 1,877 | ||||||||||||
| Operating lease amortization | 6,112 | 5,860 | ||||||||||||
| Loss on extinguishment of debt | 1,311 | — | ||||||||||||
| Provision for expected credit losses and sundry losses | 4,959 | 1,859 | ||||||||||||
| Deferred tax expense (benefit) | (435) | (2,826) | ||||||||||||
| Share-based compensation | 19,956 | 14,799 | ||||||||||||
| Gain on sale of a business | (135,642) | — | ||||||||||||
| Gain from sale of assets | — | (778) | ||||||||||||
| Loss on disposition of property and equipment and impairment of software | 4,943 | 1,694 | ||||||||||||
| Earnings of equity method investment | (2,968) | (1,713) | ||||||||||||
| Dividend received from equity method investment | 2,053 | 1,183 | ||||||||||||
| Loss (gain) on valuation of foreign currency | 7,645 | (1,897) | ||||||||||||
| (Increase) decrease in assets: | ||||||||||||||
| Accounts receivable | (15,571) | (18,521) | ||||||||||||
| Prepaid expenses and other assets | (4,636) | 4,322 | ||||||||||||
| Other long-term assets | (5,202) | (3,519) | ||||||||||||
| Increase (decrease) in liabilities: | ||||||||||||||
| Accounts payable and accrued liabilities | 26,954 | 1,503 | ||||||||||||
| Income tax payable | 1,281 | (359) | ||||||||||||
| Contract liability | (1,773) | (1,738) | ||||||||||||
| Operating lease liabilities | (3,797) | (4,869) | ||||||||||||
| Other long-term liabilities | (1,554) | (4,670) | ||||||||||||
| Total adjustments | (15,508) | 67,277 | ||||||||||||
| Net cash provided by operating activities | 223,361 | 228,420 | ||||||||||||
| Cash flows from investing activities | ||||||||||||||
| Additions to software | (44,850) | (41,804) | ||||||||||||
| Acquisitions of customer relationships | (10,607) | (14,750) | ||||||||||||
| Acquisitions, net of cash acquired | (44,369) | — | ||||||||||||
| Property and equipment acquired | (27,073) | (25,103) | ||||||||||||
| Proceeds from sales of property and equipment | 78 | 805 | ||||||||||||
| Purchase of certificates of deposit | (7,264) | — | ||||||||||||
| Proceeds from maturities of available-for-sale debt securities | 1,015 | — | ||||||||||||
| Acquisition of available-for-sale debt securities | (254) | (2,968) | ||||||||||||
| Net cash used in investing activities | (133,324) | (83,820) | ||||||||||||
| Cash flows from financing activities | ||||||||||||||
| Debt issuance costs | (7,355) | — | ||||||||||||
| Proceeds from issuance of long-term debt | 415,000 | — | ||||||||||||
| Net increase in short-term borrowings | 20,000 | — | ||||||||||||
| Repayments of short-terms borrowings for purchase of equipment and software | (949) | (1,651) | ||||||||||||
| Dividends paid | (13,773) | (14,409) | ||||||||||||
| Withholding taxes paid on share-based compensation | (5,685) | (8,793) | ||||||||||||
| Repurchase of common stock | (96,596) | (24,388) | ||||||||||||
| Repayment of long-term debt | (467,410) | (32,044) | ||||||||||||
| Net cash used in financing activities | (156,768) | (81,285) | ||||||||||||
| Effect of foreign exchange rate on cash, cash equivalents and restricted cash | (3,529) | 1,497 | ||||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (70,260) | 64,812 | ||||||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 285,917 | 221,105 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 215,657 | $ | 285,917 | ||||||||||
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EVERTEC, Inc.
Schedule 4: Unaudited Segment Information
| Quarter Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||
| (In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||||||||||||||
| Revenues | $ | 47,803 | $ | 34,913 | $ | 40,006 | $ | 58,679 | $ | (19,614) | $ | 161,787 | |||||||||||||||||||||||
| Operating costs and expenses | 26,853 | 29,561 | 26,688 | 39,168 | (1,373) | 120,897 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 5,317 | 4,493 | 1,056 | 4,240 | 5,080 | 20,186 | |||||||||||||||||||||||||||||
| Non-operating income (expenses) | 330 | 47 | 392 | 491 | (1,682) | (422) | |||||||||||||||||||||||||||||
| EBITDA | 26,597 | 9,892 | 14,766 | 24,242 | (14,843) | 60,654 | |||||||||||||||||||||||||||||
Compensation and benefits (2) | 788 | 840 | 357 | 611 | 2,384 | 4,980 | |||||||||||||||||||||||||||||
Transaction, refinancing and other fees (3) | 748 | 145 | — | — | 1,846 | 2,739 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 28,133 | $ | 10,877 | $ | 15,123 | $ | 24,853 | $ | (10,613) | $ | 68,373 | |||||||||||||||||||||||
(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 $3.8 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.
(3)Primarily represents fees and expenses associated with corporate transactions as defined in the 2022 Credit Agreement and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.
| Quarter Ended December 31, 2021 | |||||||||||||||||||||||||||||||||||
| (In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||||||||||||||
| Revenues | $ | 41,766 | $ | 28,322 | $ | 37,157 | $ | 64,369 | $ | (16,377) | $ | 155,237 | |||||||||||||||||||||||
| Operating costs and expenses | 23,472 | 23,132 | 20,033 | 40,157 | (1,763) | 105,031 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 4,272 | 2,700 | 952 | 4,845 | 6,210 | 18,979 | |||||||||||||||||||||||||||||
| Non-operating income (expenses) | 224 | 2,868 | 272 | 562 | (1,840) | 2,086 | |||||||||||||||||||||||||||||
| EBITDA | 22,790 | 10,758 | 18,348 | 29,619 | (10,244) | 71,271 | |||||||||||||||||||||||||||||
Compensation and benefits (2) | 921 | 759 | 231 | 582 | 1,371 | 3,864 | |||||||||||||||||||||||||||||
Transaction, refinancing and other fees (3) | — | — | — | — | 763 | 763 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 23,711 | $ | 11,517 | $ | 18,579 | $ | 30,201 | $ | (8,110) | $ | 75,898 | |||||||||||||||||||||||
(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $11.2 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $2.6 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $2.5 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.
(2)Primarily represents share-based compensation.
(3)Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.
11
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||
| (In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||||||||||||||
| Revenues | $ | 178,481 | $ | 128,221 | $ | 151,085 | $ | 235,299 | $ | (74,677) | $ | 618,409 | |||||||||||||||||||||||
| Operating costs and expenses | 103,773 | 106,693 | 94,976 | 156,915 | (1,348) | 461,009 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 20,379 | 14,121 | 4,160 | 17,027 | 22,931 | 78,618 | |||||||||||||||||||||||||||||
| Non-operating income (expenses) | 1,258 | (3,318) | 1,372 | 138,033 | (5,242) | 132,103 | |||||||||||||||||||||||||||||
| EBITDA | 96,345 | 32,331 | 61,641 | 233,444 | (55,640) | 368,121 | |||||||||||||||||||||||||||||
Compensation and benefits (2) | 3,357 | 3,598 | 1,641 | 2,114 | 9,625 | 20,335 | |||||||||||||||||||||||||||||
Transaction, refinancing, exit activity and other fees (3) | 1,078 | 145 | 325 | (134,990) | 14,493 | (118,949) | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 100,780 | $ | 36,074 | $ | 63,607 | $ | 100,568 | $ | (31,522) | $ | 269,507 | |||||||||||||||||||||||
(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $49.5 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $14.5 million from Payment Services - Latin America to both Payment Services - Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $10.7 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 2022 Credit Agreement, the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of dividends received, a software impairment charge and a gain from sale of assets.
| Year Ended December 31, 2021 | |||||||||||||||||||||||||||||||||||
| (In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||||||||||||||
| Revenues | $ | 155,392 | $ | 105,963 | $ | 143,965 | $ | 243,807 | $ | (59,331) | $ | 589,796 | |||||||||||||||||||||||
| Operating costs and expenses | 84,742 | 86,152 | 75,795 | 150,433 | (3,840) | 393,282 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 16,085 | 11,395 | 3,583 | 18,930 | 25,077 | 75,070 | |||||||||||||||||||||||||||||
| Non-operating income (expenses) | 842 | 8,216 | 1,107 | 3,056 | (7,109) | 6,112 | |||||||||||||||||||||||||||||
| EBITDA | 87,577 | 39,422 | 72,860 | 115,360 | (37,523) | 277,696 | |||||||||||||||||||||||||||||
Compensation and benefits (2) | 1,702 | 3,080 | 1,012 | 1,775 | 7,575 | 15,144 | |||||||||||||||||||||||||||||
Transaction, refinancing, and other fees (3) | 660 | — | — | (647) | 1,965 | 1,978 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 89,939 | $ | 42,502 | $ | 73,872 | $ | 116,488 | $ | (27,983) | $ | 294,818 | |||||||||||||||||||||||
(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $42.4 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software sale developments of $9.2 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $7.6 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, an impairment charge and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A, net of dividends received, a software impairment charge and a gain from sale of assets.
12
EVERTEC, Inc.
Schedule 5: Reconciliation of GAAP to Non-GAAP Operating Results
| Quarter ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| (Dollar amounts in thousands, except share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net income | $ | 28,708 | $ | 41,188 | $ | 238,869 | $ | 161,143 | ||||||||||||||||||
| Income tax expense | 6,072 | 6,088 | 28,983 | 20,562 | ||||||||||||||||||||||
| Interest expense, net | 5,688 | 5,016 | 21,651 | 20,921 | ||||||||||||||||||||||
| Depreciation and amortization | 20,186 | 18,979 | 78,618 | 75,070 | ||||||||||||||||||||||
| EBITDA | 60,654 | 71,271 | 368,121 | 277,696 | ||||||||||||||||||||||
Equity income(1) | (848) | (405) | (1,121) | (395) | ||||||||||||||||||||||
Compensation and benefits (2) | 4,980 | 3,864 | 20,335 | 15,144 | ||||||||||||||||||||||
Transaction, refinancing and other fees (3) | 3,587 | 1,168 | (117,828) | 2,373 | ||||||||||||||||||||||
| Adjusted EBITDA | 68,373 | 75,898 | 269,507 | 294,818 | ||||||||||||||||||||||
Operating depreciation and amortization (4) | (11,262) | (11,053) | (44,418) | (43,438) | ||||||||||||||||||||||
Cash interest expense, net (5) | (5,876) | (4,858) | (21,008) | (19,804) | ||||||||||||||||||||||
Income tax expense (6) | (8,599) | (7,268) | (36,509) | (31,684) | ||||||||||||||||||||||
Non-controlling interest (7) | (24) | (106) | 34 | (161) | ||||||||||||||||||||||
| Adjusted Net Income | $ | 42,612 | $ | 52,613 | $ | 167,606 | $ | 199,731 | ||||||||||||||||||
| Net income per common share (GAAP): | ||||||||||||||||||||||||||
| Diluted | $ | 0.44 | $ | 0.56 | $ | 3.45 | $ | 2.21 | ||||||||||||||||||
| Adjusted earnings per common share (Non-GAAP): | ||||||||||||||||||||||||||
| Diluted | $ | 0.65 | $ | 0.72 | $ | 2.42 | $ | 2.74 | ||||||||||||||||||
| Shares used in computing adjusted earnings per common share: | ||||||||||||||||||||||||||
| Diluted | 65,824,242 | 72,983,517 | 69,312,717 | 72,870,585 | ||||||||||||||||||||||
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, a software impairment charge and a gain from sale of assets.
4)Represents operating depreciation and amortization expense, which excludes amounts generated as a result of merger and acquisition (M&A) 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.
13
EVERTEC, Inc.
Schedule 6: Outlook Summary and Reconciliation to Non-GAAP Adjusted Earnings per Share
| Outlook 2023 | 2022 | |||||||||||||||||||||||||
| (Dollar amounts in millions, except per share data) | Low | High | ||||||||||||||||||||||||
| Revenues | $ | 638 | to | $ | 647 | $ | 618 | |||||||||||||||||||
| Earnings per Share (EPS) (GAAP) | $ | 1.89 | to | $ | 2.00 | $ | 3.45 | |||||||||||||||||||
| Per share adjustment to reconcile GAAP EPS to Non-GAAP Adjusted EPS: | ||||||||||||||||||||||||||
Share-based comp, non-cash equity earnings and other (1) | 0.30 | 0.30 | (1.42) | |||||||||||||||||||||||
Merger and acquisition related depreciation and amortization (2) | 0.45 | 0.45 | 0.49 | |||||||||||||||||||||||
Non-cash interest expense (3) | 0.02 | 0.02 | 0.01 | |||||||||||||||||||||||
Tax effect of non-gaap adjustments (4) | (0.13) | (0.13) | (0.11) | |||||||||||||||||||||||
| Total adjustments | 0.64 | 0.64 | (1.03) | |||||||||||||||||||||||
| Adjusted EPS (Non-GAAP) | $ | 2.53 | to | $ | 2.64 | $ | 2.42 | |||||||||||||||||||
| 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%).
14