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
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)




PaymentServices –Puerto Rico &
Caribbean


 


PaymentServices –Latin America


 


MerchantAcquiring, net


 


BusinessSolutions


 


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)




PaymentServices –Puerto Rico &
Caribbean


 


PaymentServices –Latin America


 


MerchantAcquiring, net


 


BusinessSolutions


 


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


 


(1) Corporate and Other consists of corporate overhead, certain
leveraged activities, other non-operating expenses and intersegment
eliminations. Intersegment revenue eliminations predominantly reflect
$8.6 million processing fee from the Payments Services – Puerto Rico and
Caribbean segment to the Merchant Acquiring segment.(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.


EVERTEC, Inc.


Schedule 5: Reconciliation of GAAP to Non-GAAP Operating Results