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EVERTEC Reports Second Quarter 2022 Results

 UPDATES ANNUAL GUIDANCE

SAN JUAN, Puerto Rico–(BUSINESS WIRE)–EVERTEC, Inc. (NYSE: EVTC) (“Evertec” or the “Company”) today announced results for the second quarter ended June 30, 2022.

Second Quarter 2022 and Recent Highlights

  • Revenue increased 8% to $160.6 million
  • GAAP Net Income attributable to common shareholders was $33.6 million a decrease of 32% , or $0.47 per diluted share, a decrease of 31%
  • Adjusted EBITDA decreased 9% to $73.4 million
  • Adjusted earnings per common share was $0.65, a decrease of 17%
  • Share repurchases totaled $14.0 million
  • Completed Popular transaction and BBR acquisition in Chile on July 1

Mac Schuessler, President and Chief Executive Officer stated, “We are pleased with another quarter of strong revenue in both Puerto Rico and Latin America. Additionally, we closed on the Popular transaction and the BBR acquisition in Chile as expected, and will now focus on continuing to support Popular on their strategic objectives and integrating BBR as we continue to expand in Latin America.”

Second Quarter 2022 Results

Revenue. Total revenue for the quarter ended June 30, 2022 was $160.6 million, an increase of 8% compared with $149.1 million in the prior year. Revenue in Puerto Rico benefited from increased transaction volumes in our payments segment in addition to the continued growth in our digital solutions, ATH Movil and ATH Business, as well as, revenue generated from a small tuck-in acquisition we completed at the beginning of the quarter. Revenue in the quarter also benefited from the printing contract entered into during June of the prior year, one-time software sales and the year over year CPI impact from the MSA with Popular, which was amended on July 1, 2022 with the close of the Popular transaction. Latin America revenue reflected organic growth.

Net Income attributable to common shareholders. For the quarter ended June 30, 2022, GAAP Net Income attributable to common shareholders was $33.6 million, or $0.47 per diluted share, a decrease of $15.6 million or $0.21 per diluted share as compared to the prior year. In the second quarter a $4.1 million impairment loss on a multi-year software development was recognized through cost of revenues, which represented an impact of $0.06 per diluted share, as well as an increase in provisions for expected losses. The quarter also reflected an increase in cost of sales driven by the aforementioned software sales, and an increase operating costs primarily due to professional fees and personnel costs.

Adjusted EBITDA. For the quarter ended June 30, 2022, Adjusted EBITDA was $73.4 million, a decrease of 9% compared to the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 45.7%, a decrease of approximately 810 basis points from the prior year. The year over year decrease in margin primarily reflects the increased expenses discussed above. In addition, the prior year margin benefited from foreign currency remeasurement gains of $1.4 million, compared with $0.2 million in losses in the current year quarter.

Adjusted Net Income. For the quarter ended June 30, 2022, Adjusted Net Income was $47.0 million, a decrease of 18% compared with $57.1 million in the prior year. Adjusted earnings per common share was $0.65, a decrease of 17% compared to $0.78 in the prior year. The decrease was driven by the decrease in Adjusted EBITDA and a higher adjusted tax rate in the quarter.

Share Repurchase

During the three months ended June 30, 2022, the Company repurchased 357,114 shares of its common stock at an average price of $39.30 per share for a total of $14.0 million. As of June 30, 2022, a total of approximately $115 million remained available for future use under the Company’s share repurchase program.

2022 Outlook

The Company’s financial outlook for 2022 is as follows:

  • Total consolidated revenue is now anticipated between $607 million and $615 million representing a growth of approximately 3% to 4% compared with $597 million and $605 million, previously estimated.
  • Adjusted earnings per common share continue to be expected between $2.52 to $2.60 representing a decline of 8% to 5% as compared to $2.74 in 2021. This excludes the gain on sale from the Popular transaction and one-time adjustments.
  • Capital expenditures continue to be expected at approximately $60 million.
  • Effective tax rate is now anticipated between 14% to 15%, an increase from the 13% to 14% previously estimated.

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss its second quarter 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 6023459. The replay will be available through Thursday, August 11, 2022. 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 over 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 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; as a regulated institution, the likelihood that the Company will be required to obtain regulatory approval before engaging in certain new activities or businesses, whether organically or by acquisition, and its 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 us less attractive to potential sellers; the Company’s ability to renew its client contracts on terms favorable to the Company, including the contract with Popular, and any significant concessions the Company may grant to Popular with respect to pricing or other key terms arising out of any disputes or in anticipation of the negotiation of the extension of the MSA, both in respect of the current term and any extension of the MSA; 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 macroeconomic, market, in international, legal, tax, political, or administrative conditions, including inflation or the risk of recession; 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 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 the impact of rising interest rates, 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 at the end of 2021.

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 we file with the SEC from time to time, in connection with considering any forward-looking statements that may be made by us and our businesses generally. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

 

EVERTEC, Inc.

Schedule 1: Unaudited Condensed Consolidated Statements of Income and Comprehensive Income

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

(Dollar amounts in thousands, except share data)

 

 

 

 

 

 

 

 

Revenues

 

$

160,571

 

 

$

149,148

 

 

$

310,819

 

 

$

288,676

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

Cost of revenues, exclusive of depreciation and amortization

 

 

74,313

 

 

 

59,381

 

 

 

138,972

 

 

 

119,185

 

Selling, general and administrative expenses

 

 

20,051

 

 

 

16,752

 

 

 

40,435

 

 

 

32,854

 

Depreciation and amortization

 

 

19,560

 

 

 

18,723

 

 

 

38,720

 

 

 

37,346

 

Total operating costs and expenses

 

 

113,924

 

 

 

94,856

 

 

 

218,127

 

 

 

189,385

 

Income from operations

 

 

46,647

 

 

 

54,292

 

 

 

92,692

 

 

 

99,291

 

Non-operating income (expenses)

 

 

 

 

 

 

 

 

Interest income

 

 

805

 

 

 

450

 

 

 

1,472

 

 

 

839

 

Interest expense

 

 

(5,932

)

 

 

(5,658

)

 

 

(11,479

)

 

 

(11,564

)

Earnings of equity method investment

 

 

862

 

 

 

394

 

 

 

1,432

 

 

 

896

 

Other (expenses) income

 

 

(1,138

)

 

 

2,245

 

 

 

2,168

 

 

 

2,573

 

Total non-operating expenses

 

 

(5,403

)

 

 

(2,569

)

 

 

(6,407

)

 

 

(7,256

)

Income before income taxes

 

 

41,244

 

 

 

51,723

 

 

 

86,285

 

 

 

92,035

 

Income tax expense

 

 

7,688

 

 

 

2,632

 

 

 

13,863

 

 

 

7,340

 

Net income

 

 

33,556

 

 

 

49,091

 

 

 

72,422

 

 

 

84,695

 

Less: Net loss attributable to non-controlling interest

 

 

(33

)

 

 

(106

)

 

 

(65

)

 

 

(5

)

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

 

 

33,589

 

 

 

49,197

 

 

 

72,487

 

 

 

84,700

 

Other comprehensive (loss) income, net of tax

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(6,549

)

 

 

1,732

 

 

 

(4,335

)

 

 

(881

)

Gain on cash flow hedges

 

 

3,337

 

 

 

1,088

 

 

 

13,062

 

 

 

5,277

 

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

 

 

(29

)

 

 

89

 

 

 

(56

)

 

 

89

 

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

 

$

30,348

 

 

$

52,106

 

 

$

81,158

 

 

$

89,185

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.47

 

 

$

0.68

 

 

$

1.01

 

 

$

1.17

 

Diluted

 

$

0.47

 

 

$

0.68

 

 

$

1.00

 

 

$

1.16

 

Shares used in computing net income per common share:

 

 

 

 

 

 

 

 

Basic

 

 

71,476,850

 

 

 

72,127,847

 

 

 

71,714,876

 

 

 

72,139,125

 

Diluted

 

 

72,149,949

 

 

 

72,831,366

 

 

 

72,558,565

 

 

 

72,716,950

 

 
 

EVERTEC, Inc.

Schedule 2: Unaudited Condensed Consolidated Balance Sheets

 
 

(In thousands)

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

288,064

 

 

$

266,351

 

Restricted cash

 

 

22,576

 

 

 

19,566

 

Accounts receivable, net

 

 

107,685

 

 

 

113,285

 

Prepaid expenses and other assets

 

 

46,307

 

 

 

37,148

 

Assets held-for-sale

 

 

25,161

 

 

 

 

Total current assets

 

 

489,793

 

 

 

436,350

 

Debt securities available-for-sale, at fair value

 

 

2,397

 

 

 

3,041

 

Investment in equity investee

 

 

15,120

 

 

 

12,054

 

Property and equipment, net

 

 

48,122

 

 

 

48,533

 

Operating lease right-of-use asset

 

 

19,330

 

 

 

21,229

 

Goodwill

 

 

385,536

 

 

 

393,318

 

Other intangible assets, net

 

 

189,604

 

 

 

213,288

 

Deferred tax asset

 

 

7,057

 

 

 

6,910

 

Net investment in leases

 

 

 

 

 

107

 

Other long-term assets

 

 

12,382

 

 

 

9,926

 

Total assets

 

$

1,169,341

 

 

$

1,144,756

 

Liabilities and stockholders’ equity

 

 

 

 

Current Liabilities:

 

 

 

 

Accrued liabilities

 

$

79,039

 

 

$

74,540

 

Accounts payable

 

 

34,439

 

 

 

28,484

 

Contract liability

 

 

21,403

 

 

 

17,398

 

Income tax payable

 

 

3,011

 

 

 

7,132

 

Current portion of long-term debt

 

 

22,500

 

 

 

19,750

 

Current portion of operating lease liability

 

 

5,921

 

 

 

5,580

 

Total current liabilities

 

 

166,313

 

 

 

152,884

 

Long-term debt

 

 

432,723

 

 

 

444,785

 

Deferred tax liability

 

 

2,142

 

 

 

2,369

 

Contract liability – long term

 

 

32,743

 

 

 

36,258

 

Operating lease liability – long-term

 

 

14,940

 

 

 

16,456

 

Derivative liability

 

 

 

 

 

13,392

 

Other long-term liabilities

 

 

7,879

 

 

 

8,344

 

Total liabilities

 

 

656,740

 

 

 

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; 71,367,324 shares issued and outstanding as of June 30, 2022 (December 31, 2021 – 71,969,856)

 

 

713

 

 

 

719

 

Additional paid-in capital

 

 

1,671

 

 

 

7,565

 

Accumulated earnings

 

 

545,814

 

 

 

506,051

 

Accumulated other comprehensive loss, net of tax

 

 

(39,452

)

 

 

(48,123

)

Total EVERTEC, Inc. stockholders’ equity

 

 

508,746

 

 

 

466,212

 

Non-controlling interest

 

 

3,855

 

 

 

4,056

 

Total equity

 

 

512,601

 

 

 

470,268

 

Total liabilities and equity

 

$

1,169,341

 

 

$

1,144,756

 

 
 

 

EVERTEC, Inc.

Schedule 3: Unaudited Condensed Consolidated Statements of Cash Flows

 

 

 

Six months ended June 30,

 

 

 

2022

 

 

 

2021

 

Cash flows from operating activities

 

 

 

 

Net income

 

$

72,422

 

 

$

84,695

 

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

 

 

 

 

Depreciation and amortization

 

 

38,720

 

 

 

37,346

 

Amortization of debt issue costs and accretion of discount

 

 

805

 

 

 

991

 

Operating lease amortization

 

 

3,056

 

 

 

2,938

 

Provision for expected credit losses and sundry losses

 

 

1,795

 

 

 

85

 

Deferred tax benefit

 

 

(1,210

)

 

 

(947

)

Share-based compensation

 

 

9,444

 

 

 

7,235

 

Gain from sale of assets

 

 

 

 

 

(778

)

Loss on disposition of property and equipment and impairment of software

 

 

4,370

 

 

 

1,106

 

Earnings of equity method investment

 

 

(1,432

)

 

 

(896

)

Dividend received from equity method investment

 

 

 

 

 

1,183

 

Loss on valuation of foreign currency

 

 

1,046

 

 

 

 

(Increase) decrease in assets:

 

 

 

 

Accounts receivable, net

 

 

2,759

 

 

 

(48

)

Prepaid expenses and other assets

 

 

(1,972

)

 

 

1,407

 

Other long-term assets

 

 

(3,965

)

 

 

(14

)

Increase (decrease) in liabilities:

 

 

 

 

Accrued liabilities and accounts payable

 

 

7,397

 

 

 

(10,899

)

Income tax payable

 

 

(3,862

)

 

 

(3,398

)

Unearned income

 

 

1,025

 

 

 

(1,664

)

Operating lease liabilities

 

 

(1,605

)

 

 

(3,438

)

Other long-term liabilities

 

 

1,109

 

 

 

(2,875

)

Total adjustments

 

 

57,480

 

 

 

27,334

 

Net cash provided by operating activities

 

 

129,902

 

 

 

112,029

 

Cash flows from investing activities

 

 

 

 

Additions to software

 

 

(18,918

)

 

 

(21,317

)

Acquisition of customer relationships

 

 

(10,607

)

 

 

(14,750

)

Property and equipment acquired

 

 

(10,051

)

 

 

(8,803

)

Proceeds from sales of property and equipment

 

 

76

 

 

 

802

 

Purchase of certificates of deposit

 

 

(7,264

)

 

 

 

Proceeds from maturities of available-for-sale debt securities

 

 

572

 

 

 

 

Acquisition of available-for-sale debt securities

 

 

 

 

 

(2,968

)

Net cash used in investing activities

 

 

(46,192

)

 

 

(47,036

)

Cash flows from financing activities

 

 

 

 

Statutory withholding taxes paid on share-based compensation

 

 

(5,676

)

 

 

(8,793

)

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

 

 

(853

)

 

 

(1,556

)

Dividends paid

 

 

(7,177

)

 

 

(7,213

)

Repurchase of common stock

 

 

(35,215

)

 

 

(24,388

)

Repayment of long-term debt

 

 

(9,875

)

 

 

(24,919

)

Net cash used in financing activities

 

 

(58,796

)

 

 

(66,869

)

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

 

 

(191

)

 

 

73

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

24,723

 

 

 

(1,803

)

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

 

$

310,640

 

 

$

219,302

 

Reconciliation of cash, cash equivalents and restricted cash

 

 

 

 

Cash and cash equivalents

 

$

288,064

 

 

$

199,891

 

Restricted cash

 

 

22,576

 

 

 

19,411

 

Cash, cash equivalents and restricted cash

 

$

310,640

 

 

$

219,302

 

 
 

 

EVERTEC, Inc.

Schedule 4: Unaudited Segment Information

 

 

Three months ended June 30, 2022

(In thousands)

Payment

Services –

Puerto Rico &

Caribbean

 

Payment

Services –

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other
(1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

46,078

 

$

30,784

 

$

38,539

 

$

64,690

 

 

$

(19,520

)

 

$

160,571

 

Operating costs and expenses

 

28,680

 

 

25,032

 

 

22,823

 

 

40,297

 

 

 

(2,908

)

 

 

113,924

 

Depreciation and amortization

 

5,466

 

 

2,712

 

 

1,040

 

 

4,279

 

 

 

6,063

 

 

 

19,560

 

Non-operating income (expenses)

 

309

 

 

123

 

 

332

 

 

624

 

 

 

(1,664

)

 

 

(276

)

EBITDA

 

23,173

 

 

8,587

 

 

17,088

 

 

29,296

 

 

 

(12,213

)

 

 

65,931

 

Compensation and benefits (2)

 

675

 

 

973

 

 

446

 

 

555

 

 

 

2,756

 

 

 

5,405

 

Transaction, refinancing and other fees (3)

 

 

 

 

 

 

 

(16

)

 

 

2,055

 

 

 

2,039

 

Adjusted EBITDA

$

23,848

 

$

9,560

 

$

17,534

 

$

29,835

 

 

$

(7,402

)

 

$

73,375

 

Contacts

Investors
(787) 773-5442

IR@evertecinc.com

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