EX-99.1 2 d722923dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

EVERTEC REPORTS FIRST-QUARTER 2014 RESULTS

SAN JUAN, PUERTO RICO – May 7, 2014 – EVERTEC, Inc. (NYSE: EVTC) (“EVERTEC” or the “Company”) today announced results for the first quarter ended March 31, 2014.

First-Quarter 2014 Highlights

 

    Total revenue of $87.2 million; Merchant Acquiring segment revenue increased 10% and Payment Processing segment revenue increased 4%.

 

    Adjusted EBITDA increased 8% to $45.2 million.

 

    Adjusted Net Income increased 16% to $32.0 million, or $0.40 per diluted share.

Peter Harrington, EVERTEC’s President and Chief Executive Officer, commented on the results: “We are pleased with the continued solid performance of our payments businesses in the first quarter of 2014. These results demonstrate strong secular growth in the Latin American markets we serve, our ability to gain share, and our focus on execution. Looking forward, we aim to further penetrate our existing customer base and markets with our broad set of differentiated, value-added services.”

First-Quarter 2014 Results

Revenue. Total revenue for the quarter ended March 31, 2014 was $87.2 million, essentially flat compared with $87.3 million in the prior year.

Merchant Acquiring net revenue was $19.3 million, an increase of 10% compared with $17.5 million in the prior year. Revenue growth in the quarter was predominantly driven by an increase in transaction volumes.

Payment Processing revenue was $25.0 million, an increase of 4% compared with $24.1 million in the prior year. Revenue growth in the quarter was predominantly driven by new customer additions and an increase in accounts on file within our card products business, as well as an increase in ATH network and POS processing transactions.

Business Solutions revenue was $42.9 million, a decrease of 6% compared with $45.8 million in the prior year. The decrease in Business Solutions revenue was mainly due to a $3.5 million decline in hardware and software product sales in the quarter, partly offset by increased demand for our network and core banking products and services.

Adjusted EBITDA. For the quarter ended March 31, 2014, Adjusted EBITDA was $45.2 million, an increase of 8% compared with $41.8 million in the prior year. The increase in Adjusted EBITDA was predominantly due to revenue growth and significant operating leverage in our Merchant Acquiring and Payment Processing businesses, and a foreign exchange gain of $1.0 million related to an inter-company loan, which is reflected in other income. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenue) was 51.9% compared with 47.8% in the prior year. The increase in Adjusted EBITDA margin was mainly due to the same factors affecting Adjusted EBITDA.


Adjusted Net Income. For the quarter ended March 31, 2014, Adjusted Net Income was $32.0 million, an increase of 16% compared with $27.5 million in the prior year. The increase in Adjusted Net Income was predominantly driven by Adjusted EBITDA growth and lower levels of operating depreciation and amortization expense, and cash taxes paid. EVERTEC recorded no cash taxes in the first quarter of 2014 mainly because of overpayments made in the 2013 fiscal year. EVERTEC expects cash taxes to return to a more normalized level for the remainder of 2014. Adjusted Net Income per diluted share increased 11% to $0.40 compared with $0.36 in the prior year.

Earnings Conference Call and Audio Webcast

The Company has scheduled a conference call to discuss its first-quarter 2014 financial results today at 5:00 PM ET. Hosting the call will be Peter Harrington, President and Chief Executive Officer, and Juan José Román, Executive Vice President and Chief Financial Officer. The conference call can be accessed live over the phone by dialing (877) 741-4249 or (719) 325-4833 for international callers. A replay will be available at 8:00 PM ET and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the pin number is 8900269. The replay will be available until Wednesday, May 14, 2014. 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.

About EVERTEC

EVERTEC, Inc. (NYSE: EVTC) is the leading full-service transaction processing business in Latin America, providing a broad range of merchant acquiring, payment processing and business solutions services. The largest merchant acquirer in the Caribbean and Central America—and the seventh largest in Latin America—EVERTEC serves 19 countries in the region from its base in Puerto Rico. The Company manages a system of electronic payment networks that process more than 2.1 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. The Company serves a diversified customer base of leading financial institutions, merchants, corporations and government agencies with mission-critical technology solutions. For more information, visit http://www.evertecinc.com.

About Non-GAAP Financial Measures

This earnings release presents EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share information. These supplemental measures of the Company’s performance 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 cash flows or as measures of the Company’s liquidity. We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of the Company’s performance and believe they are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry. In addition, the Company’s presentation of Adjusted EBITDA is consistent with the equivalent measurements contained in the Credit Agreement in testing EVERTEC Group’s


compliance with covenants therein such as the senior secured leverage ratio. We use Adjusted Net Income to measure the Company’s overall profitability because it better reflects the Company’s cash flow generation by capturing the actual cash taxes paid rather than the Company’s tax expense as calculated under GAAP, and excludes the impact of the non-cash amortization and depreciation resulting from our 2010 merger involving an affiliate of Apollo Global management, LLC (the “Merger”). For more information regarding EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share, including a quantitative reconciliation of EBITDA, Adjusted EBITDA and Adjusted Net Income to the most directly comparable GAAP financial performance measure, which is net income, see Schedule 4: Reconciliation of GAAP to Non-GAAP Operating Results in this earnings release.

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 revenues; our ability to renew our client contracts on terms favorable to us; the effectiveness of our risk management procedures; our dependence on our processing systems, technology infrastructure, security systems and fraudulent-payment-detection systems, and the risk that our systems may experience breakdowns or fail to prevent security breaches or fraudulent transfers; our ability to develop, install and adopt new technology; a decreased client base due to consolidations in the banking and financial-services industry; the credit risk of our merchant clients, for which we may also be liable; the continuing market position of the ATH® network; the Company’s dependence on credit card associations; regulatory limitations on our activities due to our relationship with Popular and our role as a service provider to financial institutions; changes in the regulatory environment and changes in international, legal, political, administrative or economic conditions; 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 in countries and counterparties that put us at risk of violating U.S. sanctions laws;our ability to execute our expansion and acquisition strategies; our ability to protect our intellectual property rights; our ability to recruit and retain qualified personnel; our ability to comply with federal, state, and local regulatory requirements; evolving industry standards; the Company’s high level of indebtedness and restrictions contained in the Company’s debt agreements; and the Company’s ability to generate sufficient cash to service the Company’s indebtedness and to generate future profits.


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. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.

Contacts

Investor Contact

Luis M. Cabrera

Senior Vice President

Head of Investor Relations

(787) 773-5302

IR@evertecinc.com

Media Contact

Wanda Betancourt, APR

Senior Vice President

Communications and Marketing

(787) 773-5302

NewsMedia@evertecinc.com


EVERTEC, Inc.

Schedule 1: Unaudited Consolidated Statements of Income and Comprehensive Income

 

     Quarters ended March 31,  
(Dollar amounts in thousands, except per share data)    2014     2013  

Revenues

    

Merchant Acquiring, net

   $ 19,291      $ 17,459   

Payment Processing

     25,002        24,112   

Business Solutions

     42,917        45,768   
  

 

 

   

 

 

 

Total revenues

     87,210        87,339   
  

 

 

   

 

 

 

Operating costs and expenses

    

Cost of revenues, exclusive of depreciation and amortization shown below

     37,645        40,502   

Selling, general and administrative expenses

     8,062        8,863   

Depreciation and amortization

     16,614        17,575   
  

 

 

   

 

 

 

Total operating costs and expenses

     62,321        66,940   
  

 

 

   

 

 

 

Income from operations

     24,889        20,399   
  

 

 

   

 

 

 

Non-operating (expenses) income

    

Interest income

     75        44   

Interest expense

     (6,909     (15,264

Earnings of equity method investment

     321        277   

Other income

     1,991        67   
  

 

 

   

 

 

 

Total non-operating (expenses) income

     (4,522     (14,876
  

 

 

   

 

 

 

Income before income taxes

     20,367        5,523   

Income tax expense

     2,161        51   
  

 

 

   

 

 

 

Net income

     18,206        5,472   

Other comprehensive (loss) income, net of tax

    

Foreign currency translation adjustments

     (7,745     2,354   
  

 

 

   

 

 

 

Total comprehensive income

   $ 10,461      $ 7,826   
  

 

 

   

 

 

 

Net income per common share: (1)

    

Basic

   $ 0.23      $ 0.08   

Diluted

   $ 0.23      $ 0.07   

Shares used in computing net income per common share: (1)

    

Basic

     78,375,335        72,736,107   

Diluted

     79,236,195        76,879,263   

 

(1) Share count was adjusted for the 2:1 stock split that occurred on April 1, 2013.


EVERTEC, Inc.

Schedule 2: Unaudited Consolidated Balance Sheets

 

(Dollar amounts in thousands, except per share data)    March 31, 2014     December 31, 2013  

Assets

    

Current Assets:

    

Cash

   $ 27,242      $ 22,485   

Restricted cash

     5,247        5,433   

Accounts receivable, net

     68,403        68,434   

Deferred tax asset

     3,823        2,537   

Prepaid expenses and other assets

     18,919        17,524   
  

 

 

   

 

 

 

Total current assets

     123,634        116,413   

Investment in equity investee

     10,895        10,639   

Property and equipment, net

     30,494        33,240   

Goodwill

     369,101        373,119   

Other intangible assets, net

     355,801        367,780   

Other long-term assets

     15,958        18,162   
  

 

 

   

 

 

 

Total assets

   $ 905,883      $ 919,353   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Current Liabilities:

    

Accrued liabilities

   $ 28,057      $ 26,571   

Accounts payable

     12,107        18,630   

Unearned income

     7,213        5,595   

Income tax payable

     1,762        259   

Current portion of long-term debt

     19,000        19,000   

Short-term borrowings

     40,600        51,200   

Deferred tax liability, net

     356        543   
  

 

 

   

 

 

 

Total current liabilities

     109,095        121,798   

Long-term debt

     661,153        665,680   

Long-term deferred tax liability, net

     20,767        20,212   

Other long-term liabilities

     301        333   
  

 

 

   

 

 

 

Total liabilities

     791,316        808,023   
  

 

 

   

 

 

 

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; 78,381,126 and 78,286,465 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively

     784        783   

Additional paid-in capital

     81,332        80,718   

Accumulated earnings

     39,770        29,403   

Accumulated other comprehensive income (loss), net of tax

     (7,319     426   
  

 

 

   

 

 

 

Total stockholders’ equity

     114,567        111,330   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 905,883      $ 919,353   
  

 

 

   

 

 

 


EVERTEC, Inc.

Schedule 3: Unaudited Consolidated Statements of Cash Flows

 

     Three months ended March 31,  
     2014     2013  

Cash flows from operating activities

    

Net income

   $ 18,206      $ 5,472   

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

    

Depreciation and amortization

     16,614        17,575   

Amortization of debt issue costs and premium and accretion of discount

     770        1,466   

Provision for doubtful accounts and sundry losses

     571        660   

Deferred tax benefit

     (1,428     (234

Share-based compensation

     350        331   

Unrealized loss (gain) of indemnification assets

     179        (16

Loss on disposition of property and equipment and other intangibles

     57        11   

Earnings of equity method investment

     (321     (277

Decrease (increase) in assets:

    

Accounts receivable, net

     261        4,196   

Prepaid expenses and other assets

     (1,435     (1,449

Other long-term assets

     1,108        (838

(Decrease) increase in liabilities:

    

Accounts payable and accrued liabilities

     (8,039     7,354   

Income tax payable

     1,503        (1,197

Unearned income

     1,618        777   
  

 

 

   

 

 

 

Total adjustments

     11,808        28,359   
  

 

 

   

 

 

 

Net cash provided by operating activities

     30,014        33,831   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Net decrease in restricted cash

     186        112   

Intangible assets acquired

     (986     (2,197

Property and equipment acquired

     (1,501     (2,257

Proceeds from sales of property and equipment

     1        8   
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,300     (4,334
  

 

 

   

 

 

 

Cash flows from financing activities

    

Net decrease in short-term borrowing

     (10,000     (18,332

Repayment of short-term borrowing for purchase of equipment

     (600     —     

Repayment of long-term debt

     (4,750     (2,671

Repayment of other financing agreement

     (32     —     

Dividends paid

     (7,839     —     

Tax windfall benefits on exercise of stock options

     398        —     

Statutory minimum withholding taxes paid on cashless exercise of stock options

     (134     —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (22,957     (21,003
  

 

 

   

 

 

 

Net increase in cash

     4,757        8,494   

Cash at beginning of the period

     22,485        25,634   
  

 

 

   

 

 

 

Cash at end of the period

   $ 27,242      $ 34,128   
  

 

 

   

 

 

 


EVERTEC, Inc.

Schedule 4: Reconciliation of GAAP to Non-GAAP Operating Results

 

     Quarters ended March 31,  
(Dollar amounts in thousands, except per share data)    2014     2013  

Net income

   $ 18,206      $ 5,472   

Income tax expense

     2,161        51   

Interest expense, net

     6,834        15,220   

Depreciation and amortization

     16,614        17,575   
  

 

 

   

 

 

 

EBITDA

     43,815        38,318   

Software maintenance reimbursement and other costs(1)

     546        602   

Equity income (2)

     (321     (277

Compensation and benefits (3)

     488        331   

Pro forma cost reduction adjustments(4)

     —          75   

Transaction, refinancing and other non-recurring fees (5)

     517        1,870   

Management fees (6)

     —          848   

Purchase accounting (7)

     179        (16
  

 

 

   

 

 

 

Adjusted EBITDA

     45,224        41,751   

Pro forma cost reduction adjustments (8)

     —          (75

Operating depreciation and amortization (9)

     (7,483     (7,815

Cash interest expense, net (10)

     (5,755     (5,676

Cash income taxes (11)

     —          (697
  

 

 

   

 

 

 

Adjusted Net Income

   $ 31,986      $ 27,488   
  

 

 

   

 

 

 

Adjusted net income per common share: (12)

    

Basic

   $ 0.41      $ 0.38   

Diluted

   $ 0.40      $ 0.36   

Shares used in computing adjusted net income per common share: (12)

    

Basic

     78,375,335        72,736,107   

Diluted

     79,236,195        76,879,263   

 

(1) Predominantly represents reimbursements received for certain software maintenance expenses as part of the Merger.
(2) Represents the elimination of non-cash equity earnings from our 19.99% equity investment in CONTADO, net of cash dividends received.
(3) Predominantly represents non-cash equity based compensation expense.
(4) Represents the pro forma effect of the expected net savings mainly in compensation and benefits from the reduction of certain employees, temporary employees and professional services. This pro forma amount was calculated using the net amount of actual expenses for temporary employees and professional services for the twelve-month period prior to their replacement, separation and/or elimination net of the incremental cost of the new full-time employees that were hired.
(5) Represents fees and expenses associated with non-recurring corporate transactions, including costs associated with the refinancing and debt extinguishment of $58.6 million in the second quarter of 2013.
(6) Represents consulting fees paid to Apollo and Popular. In connection with our initial public offering during the second quarter of 2013, our consulting agreements with Apollo and Popular were terminated.
(7) Represents the elimination of the effects of purchase accounting in connection with certain customer service and software-related arrangements whereby EVERTEC receives reimbursements from Popular.
(8) Represents the elimination of the pro forma benefits described in note 4 above.
(9) Represents operating depreciation and amortization expense, which excludes amounts generated as a result of the Merger.
(10) For the three months ended March 31, 2013, represents pro forma cash interest expense assuming EVERTEC’s April 2013 refinancing occurred on January 1, 2013. For the three months ended March 31, 2014, represents interest expense, less interest income, as they appear on our consolidated statements of income (loss) and comprehensive income (loss), adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount.
(11) Represents cash taxes paid for each period presented.
(12) Share count was adjusted for the 2:1 stock split that occurred on April 1, 2013.


Schedule 5: Unaudited Income from Operations by Segment

 

     Quarters ended March 31,  
(Dollar amounts in thousands)    2014     2013  

Segment income from operations

    

Merchant Acquiring, net

   $ 8,404      $ 9,234   

Payment Processing

     14,717        12,760   

Business Solutions

     11,424        10,534   
  

 

 

   

 

 

 

Total segment income from operations

     34,545        32,528   

Merger related depreciation and amortization and other unallocated expenses (1)

     (9,656     (12,129
  

 

 

   

 

 

 

Income from operations

   $ 24,889      $ 20,399   
  

 

 

   

 

 

 

 

(1) Predominantly represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.