Evertec Reports First Quarter 2019 Results

SAN JUAN, Puerto Rico–(BUSINESS WIRE)–EVERTEC, Inc. (NYSE: EVTC) (“Evertec” or the “Company”) today announced
results for the first quarter ended March 31, 2019.

First Quarter 2019 Highlights

Revenue grew 8% to $118.8 million
GAAP Net Income attributable to common shareholders was $26.6 million
or $0.36 per diluted share
Adjusted EBITDA increased 7% to $57.6 million
Adjusted earnings per common share was $0.50, an increase of 6%
Repurchased 0.6 million shares for $17.5 million

Mac Schuessler, President and Chief Executive Officer stated, “We are
pleased with our financial performance during the quarter as well as the
execution against our share repurchase program. We remain focused on our
expansion into Latin America and supporting our clients in Puerto Rico.”

First Quarter 2019 Results

Revenue. Total revenue for the quarter ended March 31, 2019 was
$118.8 million an increase of 8% compared with $110.3 million in the
prior year. Revenue increase in the quarter reflected growth from
elevated sales volumes in Puerto Rico and increased core banking
transactions in part due to last year’s hurricane impacted results.
Additionally, revenue growth was as a result of an increase in network
services related to new managed services projects as well as one-time
revenue related to an electronic benefits service contract of
approximately $2.7 million.

Net Income attributable to common shareholders. For the quarter
ended March 31, 2019, GAAP Net Income attributable to common
shareholders was $26.6 million, or $0.36 per diluted share, an increase
of $3.6 million or $0.05 per diluted share as compared to the prior year.

Adjusted EBITDA. For the quarter ended March 31, 2019, Adjusted
EBITDA was $57.6 million, an increase of 7% compared to the prior year.
Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total
revenues) decreased (40) basis points to 48.5% compared with 48.9% in
the prior year. The decrease in Adjusted EBITDA margin was primarily
driven by lower corporate expense in the prior year quarter due to
timing of projects.

Adjusted Net Income. For the quarter ended March 31, 2019,
Adjusted Net Income was $37.1 million, an increase of 7% compared with
$34.6 million in the prior year. Adjusted earnings per common share was
$0.50, an increase of 6% as compared to $0.47 in the prior year.

Share Repurchase

During the three months ended March 31, 2019, the Company repurchased a
total of 0.6 million shares of common stock at an average price of
$28.27 per share for a total of $17.5 million. As of March 31, 2019, a
total of approximately $44.9 million remained available for future use
under the Company’s share repurchase program.

2019 Outlook

The Company is adjusting its financial outlook for 2019 as follows:

Total consolidated revenue is now expected to be between $469 million
and $476 million representing growth of 3% to 5%, compared with $464
million and $476 million previously
Adjusted earnings per common share is now expected to be between $1.84
and $1.92 representing growth of 0% to 4% from $1.84 in 2018, compared
with $1.80 to $1.90 previously
Capital expenditures continue to range between $40 million and
$45 million
Non-GAAP effective tax rate of approximately 13%.

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss its first quarter
2019 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 10130502. The replay will be available through Wednesday, May
8, 2019. 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 Latin America, providing a broad range of
merchant acquiring, payment processing and business solutions services.
The Company manages a system of electronic payment networks that process
more than two billion transactions annually and offers a comprehensive
suite of services for core bank processing, cash processing and
technology outsourcing. In addition, Evertec owns and operates the ATH®
network, one of the leading personal identification number (“PIN”) debit
networks in Latin America. 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 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.

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 for a significant portion of revenue 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 the Company’s
Master Services Agreement (MSA) with Popular, and any significant
concessions the Company may have to grant to Popular with respect to
pricing or other key terms in anticipation of the negotiation of the
extension of the MSA, both in respect of the current term and any
extension of the MSA; a potential government shutdown; a continuation of
the Government of Puerto Rico’s fiscal crisis; the effectiveness of the
Company’s risk management procedures; dependence on the Company’s
processing systems, technology infrastructure, security systems and
fraudulent-payment-detection systems, and the risk that the Company’s
systems may experience breakdowns or fail to prevent security breaches,
confidential data theft or fraudulent transfers; our ability to develop,
install and adopt new technology; impairments to the Company’s
amortizable intangible assets and goodwill; a decreased client base due
to consolidations in the banking and financial-services industry; the
credit risk of the Company’s merchant clients, for which the Company may
also be liable; a decline in the market for the Company’s services due
to increased competition, changes in consumer spending or payment
preferences; the continuing market position of the ATH® network; the
Company’s dependence on credit card associations and debit networks;
regulatory limitations on the Company’s activities, including the
potential need to seek regulatory approval to consummate transactions,
due to the Company’s relationship with Popular and the Company’s role as
a service provider to financial institutions and the Company’s potential
inability to obtain such approval on a timely basis or at all; changes
in the regulatory environment and changes in international, legal, tax,
political, administrative or economic conditions; the Company’s ability
to comply with federal, state, and local regulatory requirements; the
geographical concentration of the Company’s business in Puerto Rico;
operating an international business in multiple regions with potential
political and economic instability; operating an international business
in countries and with counterparties that increase the Company’s
compliance risks and puts the Company at risk of violating U.S.
sanctions laws; the Company’s ability to execute the Company’s expansion
and acquisition strategies; the Company’s ability to protect the
Company’s intellectual property rights; the Company’s ability to recruit
and retain qualified personnel; evolving industry standards; the
Company’s high level of indebtedness and restrictions contained in the
Company’s debt agreements; the Company’s ability to generate sufficient
cash to service the Company’s indebtedness and to generate future
profits and the impact of natural disasters or catastrophic events in
the countries in which the Company operates.

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 Condensed Statements of Income and Comprehensive Income

	Three months ended March 31,
	2019			2018
(Dollar amounts in thousands, except share data)
Revenues	$	118,836		$	110,274

Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization shown below	50,019			47,420
Selling, general and administrative expenses	15,139			13,432
Depreciation and amortization	16,273			15,867
Total operating costs and expenses	81,431			76,719
Income from operations	37,405			33,555
Non-operating income (expenses)
Interest income	259			157
Interest expense	(7,551		)	(7,679		)
Earnings of equity method investment	222			199
Other income, net	208			817
Total non-operating expenses	(6,862		)	(6,506		)
Income before income taxes	30,543			27,049
Income tax expense	3,809			3,935
Net income	26,734			23,114
Less: Net income attributable to non-controlling interest	90			92
Net income attributable to EVERTEC, Inc.’s common stockholders	26,644			23,022
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	1,965			2,407
(Loss) gain on cash flow hedges	(4,055		)	1,503
Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders	$	24,554		$	26,932
Net income per common share:
Basic	$	0.37		$	0.32
Diluted	$	0.36		$	0.31
Shares used in computing net income per common share:
Basic	72,378,532			72,409,462
Diluted	73,770,066			73,372,835

EVERTEC, Inc. Schedule 2: Unaudited Consolidated Condensed Balance Sheets

(Dollar amounts in thousands, except for share information)	March 31, 2019			December 31, 2018
Assets
Current Assets:
Cash and cash equivalents	$	73,183		$	69,973
Restricted cash	13,318			16,773
Accounts receivable, net	96,307			100,323
Prepaid expenses and other assets	34,451			29,124
Total current assets	217,259			216,193
Investment in equity investee	12,337			12,149
Property and equipment, net	45,778			36,763
Operating lease right-of-use asset	34,743			—
Goodwill	395,723			394,644
Other intangible assets, net	252,592			259,269
Deferred tax asset	2,167			1,917
Net investment in lease	982			1,060
Other long-term assets	7,195			5,297
Total assets	$	968,776		$	927,292
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	44,353		$	57,006
Accounts payable	45,995			47,272
Unearned income	12,156			11,527
Income tax payable	6,841			6,650
Current portion of long-term debt	14,250			14,250
Short-term borrowings	15,000			—
Current portion of operating lease liability	9,458			—
Total current liabilities	148,053			136,705
Long-term debt	520,771			524,056
Deferred tax liability	9,041			9,950
Unearned income – long term	30,199			26,075
Operating lease liability	25,475			—
Other long-term liabilities	18,739			14,900
Total liabilities	752,278			711,686
Stockholders’ equity
Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued	—			—
Common stock, par value $0.01; 206,000,000 shares authorized; 72,267,445 shares issued and outstanding at March 31, 2019 (December 31, 2018 – 72,378,710)	722			723
Additional paid-in capital	—			5,783
Accumulated earnings	237,418			228,742
Accumulated other comprehensive loss, net of tax	(25,879		)	(23,789		)
Total EVERTEC, Inc. stockholders’ equity	212,261			211,459
Non-controlling interest	4,237			4,147
Total equity	216,498			215,606
Total liabilities and equity	$	968,776		$	927,292

EVERTEC, Inc. Schedule 3: Unaudited Consolidated Condensed Statements of Cash Flows

	Three months ended March 31,
	2019			2018
Cash flows from operating activities
Net income	$	26,734		$	23,114
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	16,273			15,867
Amortization of debt issue costs and accretion of discount	415			1,270
Operating lease expense	1,472			—
Provision for doubtful accounts and sundry losses	815			221
Deferred tax benefit	(882		)	(1,152		)
Share-based compensation	3,279			3,637
Loss on disposition of property and equipment and other intangibles	22			11
Earnings of equity method investment	(222		)	(199		)
(Increase) decrease in assets:
Accounts receivable, net	3,961			(6,815		)
Prepaid expenses and other assets	(5,326		)	(5,108		)
Other long-term assets	(2,558		)	(1,117		)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities	(18,339		)	(4,905		)
Income tax payable	191			2,716
Unearned income	4,754			2,645
Operating lease liabilities	(1,281		)	—
Other long-term liabilities	31			183
Total adjustments	2,605			7,254
Net cash provided by operating activities	29,339			30,368
Cash flows from investing activities
Additions to software	(8,917		)	(5,208		)
Property and equipment acquired	(5,071		)	(4,157		)
Proceeds from sales of property and equipment	32			—
Net cash used in investing activities	(13,956		)	(9,365		)
Cash flows from financing activities
Statutory withholding taxes paid on share-based compensation	(5,928		)	(204		)
Net increase (decrease) in short-term borrowings	15,000			(12,000		)
Repayment of short-term borrowings for purchase of equipment and software	(34		)	(114		)
Dividends paid	(3,617		)	—
Repurchase of common stock	(17,486		)	—
Repayment of long-term debt	(3,563		)	(5,041		)
Net cash used in financing activities	(15,628		)	(17,359		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(245		)	3,644
Cash, cash equivalents and restricted cash at beginning of the period	86,746			60,367
Cash, cash equivalents and restricted cash at end of the period	$	86,501		$	64,011
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	73,183		$	53,471
Restricted cash	13,318			10,540
Cash, cash equivalents and restricted cash	$	86,501		$	64,011

EVERTEC, Inc. Schedule 4: Unaudited Segment Information

	Three months ended March 31, 2019
(In thousands)	Payment Services – Puerto Rico & Caribbean		Payment Services – Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	32,017	$	20,831	$	25,974	$	51,364	$	(11,350	)	$	118,836
Operating costs and expenses	14,215		17,573		14,718		32,910		2,015			81,431
Depreciation and amortization	2,643		2,196		468		3,854		7,112			16,273
Non-operating income (expenses)	581		2,634		21		186		(2,992		)	430
EBITDA	21,026		8,088		11,745		22,494		(9,245		)	54,108
Compensation and benefits ⁽²⁾	237		166		220		554		2,262			3,439
Transaction, refinancing and other fees ⁽³⁾	—		2		—		—		47			49
Adjusted EBITDA	$	21,263	$	8,256	$	11,965	$	23,048	$	(6,936	)	$	57,596

(1) Corporate and Other consists of corporate overhead, certain
leveraged activities, other non-operating expenses and intersegment
eliminations. Intersegment revenue eliminations predominantly reflect
$9.2 million processing fee from the Payments Services – Puerto Rico &
Caribbean segment to the Merchant Acquiring segment and intercompany
software license and development revenues of $2.1 million from the
Payment Services – Latin America segment charged to the Payment Services
– Puerto Rico & Caribbean segment. Corporate and Other was impacted by
the intersegment elimination of revenue recognized in the Payment
Services – Latin America segment and capitalized in the Payment Services
– Puerto Rico & Caribbean segment; excluding this impact, Corporate and
Other Adjusted EBITDA would be $4.8 million.
(2) Primarily
represents share-based compensation, other compensation expense and
severance payments.
(3) Primarily represents fees and expenses
associated with corporate transactions as defined in the Credit
Agreement and the elimination of non-cash equity earnings from our
19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net
of cash dividends received.

	Three months ended March 31, 2018
(In thousands)	Payment Services – Puerto Rico & Caribbean			Payment Services – Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	27,168		$	20,391	$	23,379	$	47,921	$	(8,585	)	$	110,274
Operating costs and expenses	12,933			18,060		13,141		29,015		3,570			76,719
Depreciation and amortization	2,316			2,449		420		3,519		7,163			15,867
Non-operating income (expenses)	816			1,813		4		300		(1,917		)	1,016
EBITDA	17,367			6,593		10,662		22,725		(6,909		)	50,438
Compensation and benefits ⁽²⁾	193			400		190		440		2,606			3,829
Transaction, refinancing and other fees ⁽³⁾	(250		)	—		—		—		(49		)	(299		)
Adjusted EBITDA	$	17,310		$	6,993	$	10,852	$	23,165	$	(4,352	)	$	53,968

EVERTEC, Inc. Schedule 5: Reconciliation of GAAP to Non-GAAP Operating Results

	Three months ended March 31,
(Dollar amounts in thousands, except share data)	2019			2018
Net income	$	26,734		$	23,114
Income tax expense	3,809			3,935
Interest expense, net	7,292			7,522
Depreciation and amortization	16,273			15,867
EBITDA	54,108			50,438
Equity income ⁽¹⁾	(222		)	(199		)
Compensation and benefits⁽²⁾	3,439			3,829
Transaction, refinancing and other fees ⁽³⁾	271			(100		)
Adjusted EBITDA	57,596			53,968
Operating depreciation and amortization ⁽⁴⁾	(7,965		)	(7,321		)
Cash interest expense, net ⁽⁵⁾	(7,132		)	(6,368		)
Income tax expense ⁽⁶⁾	(5,300		)	(5,567		)
Non-controlling interest ⁽⁷⁾	(112		)	(138		)
Adjusted net income	$	37,087		$	34,574
Net income per common share (GAAP):
Diluted	$	0.36		$	0.31
Adjusted Earnings per common share (Non-GAAP):
Diluted	$	0.50		$	0.47
Shares used in computing adjusted earnings per common share:
Diluted	73,770,066			73,372,835

1) Represents the elimination of non-cash equity earnings from our
19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net
of cash dividends received.
2) Primarily represents share-based
compensation and other compensation expense of $3.3 million and $3.6
million for the quarters ended March 31, 2019 and 2018, respectively and
severance payments of $0.2 million for both quarters ended March 31,
2019 and 2018.
3) Represents fees and expenses associated with
corporate transactions as defined in the Credit Agreement, recorded as
part of selling, general and administrative expenses and cost of
revenues.

Contacts

Investor Contact
Kay Sharpton
(787) 773-5442
IR@evertecinc.com

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