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EVERTEC Reports Fourth Quarter and Full Year 2022 Results

Announces 2023 Outlook

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.

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.
  • 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 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.

 

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

 

 

EVERTEC, Inc.

Schedule 2: Unaudited Consolidated Balance Sheets

 

(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

 

 

EVERTEC, Inc.

Schedule 3: Unaudited Consolidated Statements of Cash Flows

 

 

 

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

 

 

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.

 

 

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.

 

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.

 

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%).

 

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