News

EVERTEC Reports Second Quarter 2019 Results

Increases Annual Guidance

Announces Pending Acquisition in Colombia for PlacetoPay

Expands Citibank Regional Collection Platform to Mexico and Guatemala

SAN JUAN, Puerto Rico–(BUSINESS WIRE)–EVERTEC, Inc. (NYSE: EVTC) (“Evertec” or the “Company”) today announced results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights and Recent Highlights

  • Revenue grew 8% to $122.5 million
  • GAAP Net Income attributable to common shareholders was $27.1 million or $0.37 per diluted share
  • Adjusted EBITDA increased 7% to $57.8 million
  • Adjusted earnings per common share was $0.51, an increase of 11%
  • Repurchased 0.4 million shares for $10.7 million
  • Signed agreement to acquire PlacetoPay, a Colombian-based payment gateway
  • Expanded Citibank regional collection and payment platform to include Mexico and Guatemala
  • Signed agreement with Santander Chile for acquiring processing services

Six-Month Year-to-Date 2019 Highlights

  • Revenue grew 8% to $241.4 million
  • GAAP Net Income attributable to common shareholders was $53.7 million or $0.73 per diluted share
  • Adjusted EBITDA increased 7% to $115.4 million
  • Adjusted earnings per common share was $1.01, an increase of 9%

Mac Schuessler, President and Chief Executive Officer stated, “We exceeded our expectations for the quarter and are increasing our guidance for the full-year. Additionally, we are pleased with the recent agreement to acquire ‘PlacetoPay’ in Colombia, a gateway and payment service provider. The acquisition, along with new agreements such as our expanded regional collection platform with Citibank in Mexico and Guatemala, as well as the previously announced processing agreement with Santander Chile, will meaningfully advance our Latin American growth strategy in 2020 and beyond.”

Second Quarter 2019 Results

Revenue. Total revenue for the quarter ended June 30, 2019 was $122.5 million, an increase of 8% compared with $113.3 million in the prior year. Revenue increase in the quarter reflected growth across all segments and included benefits from value added solutions, new managed services and other pricing actions. Additionally, increased revenue was driven by hardware and software sales and the completion of several projects for approximately $2.5 million.

Net Income attributable to common shareholders. For the quarter ended June 30, 2019, GAAP Net Income attributable to common shareholders was $27.1 million, or $0.37 per diluted share, an increase of $7.0 million or $0.10 per diluted share as compared to the prior year.

Adjusted EBITDA. For the quarter ended June 30, 2019, Adjusted EBITDA was $57.8 million, an increase of 7% compared to the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 47.2%, a decreased of approximately 30 basis points from last year. The year over year decrease in margin primarily reflects the impact of an elevated average ticket last year as a result of disaster relief spending that drove higher than normal margins last year and higher mix of Business Solution revenue with lower margin contribution as well as increased infrastructure expenses and negative foreign currency exchange impact.

Adjusted Net Income. For the quarter ended June 30, 2019, Adjusted Net Income was $37.2 million, an increase of 8% compared with $34.5 million in the prior year and reflects a lower effective tax rate of approximately 11%. Adjusted earnings per common share was $0.51, an increase of 11% compared to $0.46 in the prior year.

Acquisition and New Agreements

As of July 26, 2019, the Company’s main operating subsidiary, Evertec Group, LLC, entered into an agreement to purchase 100% of the shares of capital stock of an entity commercially known as PlacetoPay, a Colombian-based company, that is a gateway and payment service provider primarily in Colombia and Ecuador. The transaction is subject to customary closing conditions, including US federal bank regulatory approval. Receipt of US federal bank regulatory approval is dependent on factors outside the control of Evertec and there is no assurance that such approval will be obtained.

During the months of May and June, the Company entered into agreements with Citibanamex and Citibank to expand its collection and payments platform to Guatemala and Mexico.

On June 27, 2019, the Company announced an agreement with Santander Chile for acquiring processing services, as well as other solutions and services, as Santander enters the merchant acquiring market.

Share Repurchase

During the three months ended June 30, 2019, the Company repurchased a total of 0.4 million shares of common stock at an average price of $29.08 per share for a total of $10.7 million. As of June 30, 2019, a total of approximately $34.1 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 $477 million and $482 million representing growth of 5% to 6%, compared with $469 million to $476 million previously estimated.
  • Adjusted earnings per common share is expected to be between $1.92 and $1.98 representing growth of 4% to 8% from $1.84 in 2018, compared with $1.84 to $1.92 previously estimated.
  • Capital expenditures are now anticipated to range between $50 million and $55 million, compared with $40 million to $45 million previously estimated, and reflects increases related to new contracts in Latin America and a hardware refresh.

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss its second 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 10132431. The replay will be available through Wednesday, August 7, 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 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 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 June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

(Dollar amounts in thousands, except share data)

 

 

 

 

 

 

 

 

Revenues

 

$

122,548

 

 

$

113,347

 

 

$

241,384

 

 

$

223,621

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

 

 

 

 

Cost of revenues, exclusive of depreciation and amortization shown below

 

52,601

 

 

49,131

 

 

102,620

 

 

96,551

 

Selling, general and administrative expenses

 

15,064

 

 

17,848

 

 

30,203

 

 

31,280

 

Depreciation and amortization

 

17,195

 

 

15,728

 

 

33,468

 

 

31,595

 

Total operating costs and expenses

 

84,860

 

 

82,707

 

 

166,291

 

 

159,426

 

Income from operations

 

37,688

 

 

30,640

 

 

75,093

 

 

64,195

 

Non-operating income (expenses)

 

 

 

 

 

 

 

 

Interest income

 

257

 

 

164

 

 

516

 

 

321

 

Interest expense

 

(7,373

)

 

(7,665

)

 

(14,924

)

 

(15,344

)

Earnings of equity method investment

 

133

 

 

175

 

 

355

 

 

374

 

Other income, net

 

(1,079

)

 

(69

)

 

(871

)

 

748

 

Total non-operating expenses

 

(8,062

)

 

(7,395

)

 

(14,924

)

 

(13,901

)

Income before income taxes

 

29,626

 

 

23,245

 

 

60,169

 

 

50,294

 

Income tax expense

 

2,489

 

 

3,112

 

 

6,298

 

 

7,047

 

Net income

 

27,137

 

 

20,133

 

 

53,871

 

 

43,247

 

Less: Net income attributable to non-controlling interest

 

79

 

 

81

 

 

169

 

 

173

 

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

 

27,058

 

 

20,052

 

 

53,702

 

 

43,074

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

2,325

 

 

(4,307

)

 

4,290

 

 

(1,900

)

(Loss) gain on cash flow hedges

 

(6,042

)

 

387

 

 

(10,097

)

 

1,890

 

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

 

$

23,341

 

 

$

16,132

 

 

$

47,895

 

 

$

43,064

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.38

 

 

$

0.28

 

 

$

0.74

 

 

$

0.59

 

Diluted

 

$

0.37

 

 

$

0.27

 

 

$

0.73

 

 

$

0.58

 

Shares used in computing net income per common share:

 

 

 

 

 

 

 

 

Basic

 

72,128,795

 

 

72,637,733

 

 

72,252,974

 

 

72,524,228

 

Diluted

 

73,300,553

 

 

74,389,126

 

 

73,649,933

 

 

73,905,690

 

 

EVERTEC, Inc.

Schedule 2: Unaudited Consolidated Condensed Balance Sheets

 

(In thousands)

 

June 30, 2019

 

December 31, 2018

Assets

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

64,025

 

 

$

69,973

 

Restricted cash

 

13,524

 

 

16,773

 

Accounts receivable, net

 

93,735

 

 

100,323

 

Prepaid expenses and other assets

 

34,955

 

 

29,124

 

Total current assets

 

206,239

 

 

216,193

 

Investment in equity investee

 

11,975

 

 

12,149

 

Property and equipment, net

 

44,544

 

 

36,763

 

Operating lease right-of-use asset

 

32,363

 

 

 

Goodwill

 

396,275

 

 

394,644

 

Other intangible assets, net

 

249,667

 

 

259,269

 

Deferred tax asset

 

1,779

 

 

1,917

 

Net investment in lease

 

900

 

 

1,060

 

Other long-term assets

 

6,751

 

 

5,297

 

Total assets

 

$

950,493

 

 

$

927,292

 

Liabilities and stockholders’ equity

 

 

 

 

Current Liabilities:

 

 

 

 

Accrued liabilities

 

$

45,883

 

 

$

57,006

 

Accounts payable

 

34,920

 

 

47,272

 

Unearned income

 

11,240

 

 

11,527

 

Income tax payable

 

1,937

 

 

6,650

 

Current portion of long-term debt

 

14,250

 

 

14,250

 

Current portion of operating lease liability

 

6,294

 

 

 

Total current liabilities

 

114,524

 

 

136,705

 

Long-term debt

 

517,491

 

 

524,056

 

Deferred tax liability

 

7,396

 

 

9,950

 

Unearned income – long term

 

30,365

 

 

26,075

 

Operating lease liability – long-term

 

27,043

 

 

 

Other long-term liabilities

 

24,874

 

 

14,900

 

Total liabilities

 

721,693

 

 

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; 71,937,516 shares issued and outstanding at June 30, 2019 (December 31, 2018 – 72,378,710)

 

719

 

 

723

 

Additional paid-in capital

 

 

 

5,783

 

Accumulated earnings

 

253,361

 

 

228,742

 

Accumulated other comprehensive loss, net of tax

 

(29,596

)

 

(23,789

)

Total EVERTEC, Inc. stockholders’ equity

 

224,484

 

 

211,459

 

Non-controlling interest

 

4,316

 

 

4,147

 

Total equity

 

228,800

 

 

215,606

 

Total liabilities and equity

 

$

950,493

 

 

$

927,292

 

 

EVERTEC, Inc.

Schedule 3: Unaudited Consolidated Condensed Statements of Cash Flows

 

 

 

Six months ended June 30,

 

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

Net income

 

$

53,871

 

 

$

43,247

 

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

 

 

 

 

Depreciation and amortization

 

33,468

 

 

31,595

 

Amortization of debt issue costs and accretion of discount

 

835

 

 

2,361

 

Operating lease expense

 

3,579

 

 

 

Provision for doubtful accounts and sundry losses

 

2,884

 

 

369

 

Deferred tax benefit

 

(1,821

)

 

(1,113

)

Share-based compensation

 

6,715

 

 

7,322

 

Loss on disposition of property and equipment and other intangibles

 

645

 

 

11

 

Earnings of equity method investment

 

(355

)

 

(374

)

Dividend received from equity method investment

 

 

 

390

 

(Increase) decrease in assets:

 

 

 

 

Accounts receivable, net

 

5,384

 

 

811

 

Prepaid expenses and other assets

 

(5,833

)

 

(4,236

)

Other long-term assets

 

(3,060

)

 

(333

)

Increase (decrease) in liabilities:

 

 

 

 

Accounts payable and accrued liabilities

 

(17,955

)

 

(8,856

)

Income tax payable

 

(4,713

)

 

2,487

 

Unearned income

 

4,004

 

 

3,102

 

Operating lease liabilities

 

(2,877

)

 

 

Other long-term liabilities

 

1,179

 

 

73

 

Total adjustments

 

22,079

 

 

33,609

 

Net cash provided by operating activities

 

75,950

 

 

76,856

 

Cash flows from investing activities

 

 

 

 

Additions to software

 

(20,023

)

 

(9,015

)

Property and equipment acquired

 

(15,625

)

 

(6,837

)

Proceeds from sales of property and equipment

 

29

 

 

14

 

Net cash used in investing activities

 

(35,619

)

 

(15,838

)

Cash flows from financing activities

 

 

 

 

Statutory withholding taxes paid on share-based compensation

 

(6,162

)

 

(2,014

)

Net decrease in short-term borrowings

 

 

 

(12,000

)

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

 

(818

)

 

(700

)

Dividends paid

 

(7,227

)

 

 

Repurchase of common stock

 

(28,196

)

 

 

Repayment of long-term debt

 

(7,125

)

 

(36,262

)

Net cash used in financing activities

 

(49,528

)

 

(50,976

)

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

 

(9,197

)

 

10,042

 

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

 

$

77,549

 

 

$

70,409

 

Reconciliation of cash, cash equivalents and restricted cash

 

 

 

 

Cash and cash equivalents

 

$

64,025

 

 

$

59,333

 

Restricted cash

 

13,524

 

 

11,076

 

Cash, cash equivalents and restricted cash

 

$

77,549

 

 

$

70,409

 

 

EVERTEC, Inc.

Schedule 4: Unaudited Segment Information

 

 

Three months ended June 30, 2019

(In thousands)

Payment

Services –

Puerto Rico &

Caribbean

 

Payment

Services –

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and

Other
(1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$

30,482

 

 

$

21,106

 

 

$

26,793

 

 

$

55,183

 

 

$

(11,016

)

 

$

122,548

 

Operating costs and expenses

13,630

 

 

17,654

 

 

15,230

 

 

35,959

 

 

2,387

 

 

84,860

 

Depreciation and amortization

2,740

 

 

2,547

 

 

423

 

 

4,479

 

 

7,006

 

 

17,195

 

Non-operating income (expenses)

470

 

 

1,601

 

 

10

 

 

34

 

 

(3,061

)

 

(946

)

EBITDA

20,062

 

 

7,600

 

 

11,996

 

 

23,737

 

 

(9,458

)

 

53,937

 

Compensation and benefits (2)

257

 

 

173

 

 

255

 

 

529

 

 

2,284

 

 

3,498

 

Transaction, refinancing and other fees (3)

 

 

 

 

 

 

 

 

362

 

 

362

 

Adjusted EBITDA

$

20,319

 

 

$

7,773

 

 

$

12,251

 

 

$

24,266

 

 

$

(6,812

)

 

$

57,797

 

  1. Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect $9.7 million processing fee from the Payments Services – Puerto Rico & Caribbean segment to the Merchant Acquiring segment and intercompany software license and development revenues of $1.3 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 $5.

Contacts

Investors

Kay Sharpton

(787) 773-5442

IR@evertecinc.com

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