News

EVERTEC Reports First Quarter 2020 Results

Suspends Annual Guidance

SAN JUAN, Puerto Rico–(BUSINESS WIRE)–EVERTEC, Inc. (NYSE: EVTC) (“Evertec” or the “Company”) today announced results for the first quarter ended March 31, 2020.

First Quarter 2020 Highlights

  • Revenue grew 3% to $121.9 million
  • GAAP Net Income attributable to common shareholders was $22.2 million or $0.30 per diluted share
  • Adjusted EBITDA decreased 2% to $56.3 million
  • Adjusted earnings per common share was $0.46, a decrease of 8%

Mac Schuessler, President and Chief Executive Officer stated, “First and foremost, we want to express our sympathies to those impacted by the pandemic and our gratitude to the essential workers on the front lines. At Evertec, we have learned from previous natural disasters to be resilient as well as to be focused on the safety of our team members and our customers. While we continue to monitor the pandemic’s impact to our business, at this time, the depth and length of the impact is unclear, so we are suspending our annual guidance. We will continue our focus on our strategic initiatives that will build momentum for our growth strategy over the longer-term.”

First Quarter 2020 Results

Revenue. Total revenue for the quarter ended March 31, 2020 was $121.9 million, an increase of 3% compared with $118.8 million in the prior year. Revenue increase in the quarter reflected growth in the first two months of the quarter, partially offset by slowdown in transactions resulting from COVID-19 during March and the prior year recognition of $2.7 million in one-time revenue related to a completed project.

Net Income attributable to common shareholders. For the quarter ended March 31, 2020, GAAP Net Income attributable to common shareholders was $22.2 million, or $0.30 per diluted share, a decrease of $4.4 million or $0.06 per diluted share as compared to the prior year.

Adjusted EBITDA. For the quarter ended March 31, 2020, Adjusted EBITDA was $56.3 million, a decrease of 2% compared to the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 46.2%, a decrease of approximately 230 basis points from the prior year. The year over year decrease in margin primarily reflects the impact of lower transactional revenues primarily driven by COVID-19 as well as higher operational expenses.

Adjusted Net Income. For the quarter ended March 31, 2020, Adjusted Net Income was $33.5 million, a decrease of 10% compared with $37.1 million in the prior year. Adjusted earnings per common share was $0.46, a decrease of 8% compared to $0.50 in the prior year.

Share Repurchase

During the three months ended March 31, 2020, the Company repurchased a total of 336 thousand shares of its common stock at an average price of $21.73 per share for a total of $7.3 million. As of March 31, 2020, a total of approximately $23 million remained available for future use under the Company’s share repurchase program.

2020 Outlook

The Company is suspending its financial outlook for 2020 given the uncertainty around the duration of the pandemic and its impact on the economy.

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss its first quarter 2020 financial results today at 10:00 a.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 10142331. The replay will be available through Friday, May 15, 2020. 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 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; the possibility of future catastrophic hurricanes affecting Puerto Rico and/or the Caribbean, as well as other potential natural disasters; the nature, timing and amount of any restatement; and the potential impact of COVID-19 on our revenues, net income and liquidity due to future disruptions in operations as well as the macroeconomic instability caused by the pandemic.

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 Condensed Consolidated Statements of Income and Comprehensive Income

 

 

 

Three months ended March 31,

 

 

2020

 

2019

(Dollar amounts in thousands, except share data)

 

 

 

 

Revenues

 

$

121,942

 

 

$

118,836

 

 

 

 

 

 

Operating costs and expenses

 

 

 

 

Cost of revenues, exclusive of depreciation and amortization

 

54,067

 

 

50,019

 

Selling, general and administrative expenses

 

17,317

 

 

15,139

 

Depreciation and amortization

 

17,795

 

 

16,273

 

Total operating costs and expenses

 

89,179

 

 

81,431

 

Income from operations

 

32,763

 

 

37,405

 

Non-operating income (expenses)

 

 

 

 

Interest income

 

363

 

 

259

 

Interest expense

 

(6,779

)

 

(7,551

)

Earnings of equity method investment

 

338

 

 

222

 

Other income, net

 

108

 

 

208

 

Total non-operating expenses

 

(5,970

)

 

(6,862

)

Income before income taxes

 

26,793

 

 

30,543

 

Income tax expense

 

4,518

 

 

3,809

 

Net income

 

22,275

 

 

26,734

 

Less: Net income attributable to non-controlling interest

 

64

 

 

90

 

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

 

22,211

 

 

26,644

 

Other comprehensive income (loss), net of tax

 

 

 

 

Foreign currency translation adjustments

 

(8,305

)

 

1,965

 

Loss on cash flow hedges

 

(11,859

)

 

(4,055

)

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

 

$

2,047

 

 

$

24,554

 

Net income per common share:

 

 

 

 

Basic

 

$

0.31

 

 

$

0.37

 

Diluted

 

$

0.30

 

 

$

0.36

 

Shares used in computing net income per common share:

 

 

 

 

Basic

 

72,012,648

 

 

72,378,532

 

Diluted

73,293,005

73,770,066

 

EVERTEC, Inc.

Schedule 2: Unaudited Condensed Consolidated Balance Sheets

 

(In thousands)

 

March 31, 2020

 

December 31, 2019

Assets

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

 

$

103,521

 

 

$

111,030

 

Restricted cash

 

21,583

 

 

20,091

 

Accounts receivable, net

 

95,305

 

 

106,812

 

Prepaid expenses and other assets

 

39,904

 

 

38,085

 

Total current assets

 

260,313

 

 

276,018

 

Investment in equity investee

 

12,568

 

 

12,288

 

Property and equipment, net

 

41,984

 

 

43,791

 

Operating lease right-of-use asset

 

28,356

 

 

29,979

 

Goodwill

 

394,498

 

 

399,487

 

Other intangible assets, net

 

229,787

 

 

241,937

 

Deferred tax asset

 

3,261

 

 

2,131

 

Net investment in leases

 

554

 

 

722

 

Other long-term assets

 

7,897

 

 

5,323

 

Total assets

 

$

979,218

 

 

$

1,011,676

 

Liabilities and stockholders’ equity

 

 

 

 

Current Liabilities:

 

 

 

 

Accrued liabilities

 

$

52,652

 

 

$

58,160

 

Accounts payable

 

28,230

 

 

39,165

 

Unearned income

 

18,138

 

 

20,668

 

Income tax payable

 

9,190

 

 

6,298

 

Current portion of long-term debt

 

14,250

 

 

14,250

 

Current portion of operating lease liability

 

5,740

 

 

5,773

 

Total current liabilities

 

128,200

 

 

144,314

 

Long-term debt

 

490,844

 

 

510,947

 

Deferred tax liability

 

2,957

 

 

4,261

 

Unearned income – long term

 

32,037

 

 

28,437

 

Operating lease liability – long-term

 

22,869

 

 

24,679

 

Other long-term liabilities

 

39,627

 

 

27,415

 

Total liabilities

 

716,534

 

 

740,053

 

 

 

 

 

 

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; 71,865,305 shares issued and outstanding at March 31, 2020 (December 31, 2019 – 72,000,261)

 

719

 

 

720

 

Additional paid-in capital

 

 

 

 

Accumulated earnings

 

308,491

 

 

296,476

 

Accumulated other comprehensive loss, net of tax

 

(50,173

)

 

(30,009

)

Total EVERTEC, Inc. stockholders’ equity

 

259,037

 

 

267,187

 

Non-controlling interest

 

3,647

 

 

4,436

 

Total equity

 

262,684

 

 

271,623

 

Total liabilities and equity

 

$

979,218

 

 

$

1,011,676

 

EVERTEC, Inc.

Schedule 3: Unaudited Condensed Consolidated Statements of Cash Flows

 

 

 

Three months ended March 31,

 

 

2020

 

2019

Cash flows from operating activities

 

 

 

 

Net income

 

$

22,275

 

 

$

26,734

 

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

 

 

 

 

Depreciation and amortization

 

17,795

 

 

16,273

 

Amortization of debt issue costs and accretion of discount

 

621

 

 

415

 

Operating lease amortization

 

1,173

 

 

1,472

 

Provision for doubtful accounts and sundry losses

 

104

 

 

815

 

Deferred tax benefit

 

(1,080

)

 

(882

)

Share-based compensation

 

3,483

 

 

3,279

 

Loss on disposition of property and equipment and other intangibles

 

81

 

 

22

 

Earnings of equity method investment

 

(338

)

 

(222

)

(Increase) decrease in assets:

 

 

 

 

Accounts receivable, net

 

11,729

 

 

3,961

 

Prepaid expenses and other assets

 

(1,836

)

 

(5,326

)

Other long-term assets

 

(2,477

)

 

(2,558

)

Increase (decrease) in liabilities:

 

 

 

 

Accrued liabilities and accounts payable

 

(20,662

)

 

(18,339

)

Income tax payable

 

3,307

 

 

191

 

Unearned income

 

1,075

 

 

4,754

 

Operating lease liabilities

 

(1,409

)

 

(1,281

)

Other long-term liabilities

 

84

 

 

31

 

Total adjustments

 

11,650

 

 

2,605

 

Net cash provided by operating activities

 

33,925

 

 

29,339

 

Cash flows from investing activities

 

 

 

 

Additions to software

 

(6,055

)

 

(8,917

)

Property and equipment acquired

 

(3,357

)

 

(5,071

)

Proceeds from sales of property and equipment

 

 

 

32

 

Net cash used in investing activities

 

(9,412

)

 

(13,956

)

Cash flows from financing activities

 

 

 

 

Statutory withholding taxes paid on share-based compensation

 

(2,706

)

 

(5,928

)

Net decrease in short-term borrowings

 

 

 

15,000

 

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

 

(792

)

 

(34

)

Dividends paid

 

 

 

(3,617

)

Repurchase of common stock

 

(7,300

)

 

(17,486

)

Repayment of long-term debt

 

(20,560

)

 

(3,563

)

Net cash used in financing activities

 

(31,358

)

 

(15,628

)

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

 

828

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

(6,017

)

 

(245

)

Cash, cash equivalents and restricted cash at beginning of the period

 

131,121

 

 

86,746

 

Cash, cash equivalents and restricted cash at end of the period

 

$

125,104

 

 

$

86,501

 

Reconciliation of cash, cash equivalents and restricted cash

 

 

 

 

Cash and cash equivalents

 

$

103,521

 

 

$

73,183

 

Restricted cash

 

21,583

 

 

13,318

 

Cash, cash equivalents and restricted cash

 

$

125,104

 

 

$

86,501

 

EVERTEC, Inc.

Schedule 4: Unaudited Segment Information

 

 
 

Three months ended March 31, 2020

(In thousands)

 

Payment

Services –

Puerto Rico & Caribbean

 

Payment

Services –

Latin America

 

Merchant

Acquiring, net

 

Business

Solutions

 

Corporate and Other (1)

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

29,887

 

 

$

21,640

 

 

$

25,121

 

 

$

55,943

 

 

$

(10,649

)

 

$

121,942

 

Operating costs and expenses

 

17,406

 

 

17,651

 

 

14,706

 

 

33,617

 

 

5,799

 

 

89,179

 

Depreciation and amortization

 

3,249

 

 

2,757

 

 

499

 

 

4,296

 

 

6,994

 

 

17,795

 

Non-operating income (expenses)

 

113

 

 

754

 

 

154

 

 

387

 

 

(962

)

 

446

 

EBITDA

 

15,843

 

 

7,500

 

 

11,068

 

 

27,009

 

 

(10,416

)

 

51,004

 

Compensation and benefits (2)

 

231

 

 

742

 

 

216

 

 

436

 

 

1,875

 

 

3,500

 

Transaction, refinancing and other fees (3)

 

 

 

 

 

 

 

 

 

1,786

 

 

1,786

 

Adjusted EBITDA

 

$

16,074

 

 

$

8,242

 

 

$

11,284

 

 

$

27,445

 

 

$

(6,755

)

 

$

56,290

 

  1. Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $9.0 million processing fee from Payments Services – Puerto Rico & Caribbean to Merchant Acquiring and intercompany software sale and developments of $1.6 million from Payment Services – Latin America to the Payment Services – Puerto Rico & Caribbean. 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 $5.1 million.
  2. Primarily represents share-based compensation.
  3. Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received.

 

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 the $9.2 million processing fee from Payments Services – Puerto Rico & Caribbean to Merchant Acquiring and intercompany software sale and developments of $2.1 million from Payment Services – Latin America to Payment Services – Puerto Rico & Caribbean. 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 2018 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

 

 

 

Three months ended March 31,

(Dollar amounts in thousands, except share data)

 

2020

 

2019

Net income

 

$

22,275

 

 

$

26,734

 

Income tax expense

 

4,518

 

 

3,809

 

Interest expense, net

 

6,416

 

 

7,292

 

Depreciation and amortization

 

17,795

 

 

16,273

 

EBITDA

 

51,004

 

 

54,108

 

Equity income (1)

 

(338

)

 

(222

)

Compensation and benefits (2)

 

3,500

 

 

3,439

 

Transaction, refinancing and other fees (3)

 

2,124

 

 

271

 

Adjusted EBITDA

 

56,290

 

 

57,596

 

Operating depreciation and amortization (4)

 

(9,477

)

 

(7,965

)

Cash interest expense, net (5)

 

(6,010

)

 

(7,132

)

Income tax expense (6)

 

(7,178

)

 

(5,300

)

Non-controlling interest (7)

 

(92

)

 

(112

)

Adjusted net income

 

$

33,533

 

 

$

37,087

 

Net income per common share (GAAP):

 

 

 

 

Diluted

 

$

0.30

 

 

$

0.36

 

Adjusted Earnings per common share (Non-GAAP):

 

 

 

 

Diluted

 

$

0.46

 

 

$

0.50

 

Shares used in computing adjusted earnings per common share:

 

 

 

 

Diluted

 

73,293,005

 

 

73,770,066

 

Contacts

Investor Contact
Kay Sharpton

(787) 773-5442

IR@evertecinc.com

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