Document

Revenue. Total revenue for the quarter ended June 30, 2022 was $160.6 million, an increase of 8% compared with $149.1 million in the prior year. Revenue in Puerto Rico benefited from increased transaction volumes in our payments segment in addition to the continued growth in our digital solutions, ATH Movil and ATH Business, as well as, revenue generated from a small tuck-in acquisition we completed at the beginning of the quarter. Revenue in the quarter also benefited from the printing contract entered into during June of the prior year, one-time software sales and the year over year CPI impact from the MSA with Popular, which was amended on July 1, 2022 with the close of the Popular transaction. Latin America revenue reflected organic growth.

Net Income attributable to common shareholders. For the quarter ended June 30, 2022, GAAP Net Income attributable to common shareholders was $33.6 million, or $0.47 per diluted share, a decrease of $15.6 million or $0.21 per diluted share as compared to the prior year. In the second quarter a $4.1 million impairment loss on a multi-year software development was recognized through cost of revenues, which represented an impact of $0.06 per diluted share, as well as an increase in provisions for expected losses. The quarter also reflected an increase in cost of sales driven by the aforementioned software sales, and an increase operating costs primarily due to professional fees and personnel costs.

Adjusted EBITDA. For the quarter ended June 30, 2022, Adjusted EBITDA was $73.4 million, a decrease of 9% compared to the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 45.7%, a decrease of approximately 810 basis points from the prior year. The year over year decrease in margin primarily reflects the increased expenses discussed above. In addition, the prior year margin benefited from foreign currency remeasurement gains of $1.4 million, compared with $0.2 million in losses in the current year quarter.

The Company will host a conference call to discuss its second quarter 2022 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 6023459. The replay will be available through Thursday, August 11, 2022. 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.

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 services and business process management services. Evertec owns and operates the ATH® network, one of the leading personal identification number (“PIN”) debit networks in Latin America. In addition, the Company manages a system of electronic payment networks and offers a comprehensive suite of services for core banking, cash processing and fulfillment in Puerto Rico, that process over three billion transactions annually. The Company also offers technology outsourcing in all the regions it serves. 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.

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

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.

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.

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, Inc. (“Popular”) for a significant portion of its revenues pursuant to the Company’s second amended and restated Master Services Agreement ("MSA") with them, and to grow the Company’s merchant acquiring business; as a regulated institution, the likelihood that the Company will be required to obtain regulatory approval before engaging in certain new activities or businesses, whether organically or by acquisition, and its potential inability to obtain such approval on a timely basis or at all, which may make transactions more expensive or impossible to complete, or make us less attractive to potential sellers; the Company’s ability to renew its client contracts on terms favorable to the Company, including the contract with Popular, and any significant concessions the Company may grant to Popular with respect to pricing or other key terms arising out of any disputes or in anticipation of the negotiation of the extension of the MSA, both in respect of the current term and any extension of the MSA; the Company’s dependence on its processing systems, technology infrastructure, security systems and fraudulent payment detection systems, as well as on the Company’s personnel and certain third parties with whom it does business, and the risks to the Company’s business if its systems are hacked or otherwise compromised; the Company’s ability to develop, install and adopt new software, technology and computing systems; a decreased client base due to consolidations and failures in the financial services industry; the credit risk of the Company’s merchant

clients, for which it may also be liable; the continuing market position of the ATH network; a reduction in consumer confidence, whether as a result of a global economic downturn or otherwise, which leads to a decrease in consumer spending; the Company’s dependence on credit card associations, including any adverse changes in credit card association or network rules or fees; changes in the regulatory environment and changes macroeconomic, market, in international, legal, tax, political, or administrative conditions, including inflation or the risk of recession; the geographical concentration of the Company’s business in Puerto Rico, including its business with the government of Puerto Rico and its instrumentalities, which are facing severe political and fiscal challenges; additional adverse changes in the general economic conditions in Puerto Rico, whether as a result of the government’s debt crisis or otherwise, including the continued migration of Puerto Ricans to the U.S. mainland, which could negatively affect the Company’s customer base, general consumer spending, the Company’s cost of operations and the Company’s ability to hire and retain qualified employees; operating an international business in Latin America and the Caribbean, in jurisdictions with potential political and economic instability; the Company’s ability to protect its intellectual property rights against infringement and to defend itself against claims of infringement brought by third parties; the Company’s ability to comply with U.S. federal, state, local and foreign regulatory requirements; evolving industry standards and adverse changes in global economic, political and other conditions; the Company’s level of indebtedness and the impact of rising interest rates, and restrictions contained in the Company’s debt agreements, including the secured credit facilities, as well as debt that could be incurred in the future; the Company’s ability to prevent a cybersecurity attack or breach to its information security; the possibility that the Company could lose its preferential tax rate in Puerto Rico; the possibility of future catastrophic hurricanes, earthquakes and other potential natural disasters affecting the Company’s main markets in Latin America and the Caribbean; and uncertainty related to the effect of the discontinuation of the London Interbank Offered Rate at the end of 2021.

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 we file with the SEC from time to time, in connection with considering any forward-looking statements that may be made by us and our 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.


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
(Dollar amounts in thousands, except share data)
Revenues	$	160,571	$	149,148	$	310,819	$	288,676

Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	74,313		59,381		138,972		119,185
Selling, general and administrative expenses	20,051		16,752		40,435		32,854
Depreciation and amortization	19,560		18,723		38,720		37,346
Total operating costs and expenses	113,924		94,856		218,127		189,385
Income from operations	46,647		54,292		92,692		99,291
Non-operating income (expenses)
Interest income	805		450		1,472		839
Interest expense	(5,932)		(5,658)		(11,479)		(11,564)
Earnings of equity method investment	862		394		1,432		896
Other (expenses) income	(1,138)		2,245		2,168		2,573
Total non-operating expenses	(5,403)		(2,569)		(6,407)		(7,256)
Income before income taxes	41,244		51,723		86,285		92,035
Income tax expense	7,688		2,632		13,863		7,340
Net income	33,556		49,091		72,422		84,695
Less: Net loss attributable to non-controlling interest	(33)		(106)		(65)		(5)
Net income attributable to EVERTEC, Inc.’s common stockholders	33,589		49,197		72,487		84,700
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments	(6,549)		1,732		(4,335)		(881)
Gain on cash flow hedges	3,337		1,088		13,062		5,277
Unrealized (loss) gain on change in fair value of debt securities available-for-sale	(29)		89		(56)		89
Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders	$	30,348	$	52,106	$	81,158	$	89,185
Net income per common share:
Basic	$	0.47	$	0.68	$	1.01	$	1.17
Diluted	$	0.47	$	0.68	$	1.00	$	1.16
Shares used in computing net income per common share:
Basic	71,476,850		72,127,847		71,714,876		72,139,125
Diluted	72,149,949		72,831,366		72,558,565		72,716,950


(In thousands)	June 30, 2022		December 31, 2021
Assets
Current Assets:
Cash and cash equivalents	$	288,064	$	266,351
Restricted cash	22,576		19,566
Accounts receivable, net	107,685		113,285
Prepaid expenses and other assets	46,307		37,148
Assets held-for-sale	25,161		—
Total current assets	489,793		436,350
Debt securities available-for-sale, at fair value	2,397		3,041
Investment in equity investee	15,120		12,054
Property and equipment, net	48,122		48,533

Operating lease right-of-use asset	19,330		21,229
Goodwill	385,536		393,318
Other intangible assets, net	189,604		213,288
Deferred tax asset	7,057		6,910
Net investment in leases	—		107
Other long-term assets	12,382		9,926
Total assets	$	1,169,341	$	1,144,756
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	79,039	$	74,540
Accounts payable	34,439		28,484
Contract liability	21,403		17,398
Income tax payable	3,011		7,132
Current portion of long-term debt	22,500		19,750


Current portion of operating lease liability	5,921		5,580
Total current liabilities	166,313		152,884
Long-term debt	432,723		444,785
Deferred tax liability	2,142		2,369
Contract liability - long term	32,743		36,258
Operating lease liability - long-term	14,940		16,456
Derivative liability	—		13,392
Other long-term liabilities	7,879		8,344
Total liabilities	656,740		674,488

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; 71,367,324 shares issued and outstanding as of June 30, 2022 (December 31, 2021 - 71,969,856)	713		719
Additional paid-in capital	1,671		7,565
Accumulated earnings	545,814		506,051
Accumulated other comprehensive loss, net of tax	(39,452)		(48,123)
Total EVERTEC, Inc. stockholders’ equity	508,746		466,212
Non-controlling interest	3,855		4,056
Total equity	512,601		470,268
Total liabilities and equity	$	1,169,341	$	1,144,756


	Six months ended June 30,
	2022		2021

Cash flows from operating activities
Net income	$	72,422	$	84,695
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	38,720		37,346
Amortization of debt issue costs and accretion of discount	805		991
Operating lease amortization	3,056		2,938
Provision for expected credit losses and sundry losses	1,795		85
Deferred tax benefit	(1,210)		(947)
Share-based compensation	9,444		7,235

Gain from sale of assets	—		(778)
Loss on disposition of property and equipment and impairment of software	4,370		1,106
Earnings of equity method investment	(1,432)		(896)
Dividend received from equity method investment	—		1,183
Loss on valuation of foreign currency	1,046		—
(Increase) decrease in assets:
Accounts receivable, net	2,759		(48)
Prepaid expenses and other assets	(1,972)		1,407
Other long-term assets	(3,965)		(14)
Increase (decrease) in liabilities:
Accrued liabilities and accounts payable	7,397		(10,899)
Income tax payable	(3,862)		(3,398)

Unearned income	1,025		(1,664)
Operating lease liabilities	(1,605)		(3,438)
Other long-term liabilities	1,109		(2,875)
Total adjustments	57,480		27,334
Net cash provided by operating activities	129,902		112,029
Cash flows from investing activities

Additions to software	(18,918)		(21,317)
Acquisition of customer relationships	(10,607)		(14,750)
Property and equipment acquired	(10,051)		(8,803)
Proceeds from sales of property and equipment	76		802
Purchase of certificates of deposit	(7,264)		—
Proceeds from maturities of available-for-sale debt securities	572		—
Acquisition of available-for-sale debt securities	—		(2,968)
Net cash used in investing activities	(46,192)		(47,036)
Cash flows from financing activities
Statutory withholding taxes paid on share-based compensation	(5,676)		(8,793)

Repayment of short-term borrowings for purchase of equipment and software	(853)		(1,556)
Dividends paid	(7,177)		(7,213)

Repurchase of common stock	(35,215)		(24,388)
Repayment of long-term debt	(9,875)		(24,919)
Net cash used in financing activities	(58,796)		(66,869)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash	(191)		73
Net increase (decrease) in cash, cash equivalents and restricted cash	24,723		(1,803)
Cash, cash equivalents and restricted cash at beginning of the period	285,917		221,105
Cash, cash equivalents and restricted cash at end of the period	$	310,640	$	219,302
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	288,064	$	199,891
Restricted cash	22,576		19,411
Cash, cash equivalents and restricted cash	$	310,640	$	219,302


	Three months ended June 30, 2022
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	46,078	$	30,784	$	38,539	$	64,690	$	(19,520)	$	160,571
Operating costs and expenses	28,680		25,032		22,823		40,297		(2,908)		113,924
Depreciation and amortization	5,466		2,712		1,040		4,279		6,063		19,560
Non-operating income (expenses)	309		123		332		624		(1,664)		(276)
EBITDA	23,173		8,587		17,088		29,296		(12,213)		65,931
Compensation and benefits (2)	675		973		446		555		2,756		5,405
Transaction, refinancing and other fees (3)	—		—		—		(16)		2,055		2,039
Adjusted EBITDA	$	23,848	$	9,560	$	17,534	$	29,835	$	(7,402)	$	73,375

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $13.3 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $3.7 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $2.5 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.


	Three months ended June 30, 2021
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	38,589	$	25,835	$	38,335	$	60,693	$	(14,304)	$	149,148
Operating costs and expenses	19,361		20,965		19,374		36,175		(1,019)		94,856
Depreciation and amortization	3,882		2,952		967		4,600		6,322		18,723
Non-operating income (expenses)	230		2,396		323		1,390		(1,700)		2,639
EBITDA	23,340		10,218		20,251		30,508		(8,663)		75,654
Compensation and benefits (2)	280		757		295		760		2,191		4,283
Transaction, refinancing and other fees (3)	—		—		—		(647)		971		324
Adjusted EBITDA	$	23,620	$	10,975	$	20,546	$	30,621	$	(5,501)	$	80,261

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $10.7 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $1.9 million from Payment Services - Latin America to both Payment Services - Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $1.7 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.


	Six months ended June 30, 2022
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	86,086	$	59,567	$	74,168	$	127,314	$	(36,316)	$	310,819
Operating costs and expenses	49,960		48,619		43,027		79,225		(2,704)		218,127
Depreciation and amortization	9,946		5,524		2,059		9,042		12,149		38,720
Non-operating income (expenses)	544		3,729		632		1,324		(2,629)		3,600
EBITDA	46,616		20,201		33,832		58,455		(24,092)		135,012
Compensation and benefits (2)	1,012		1,786		786		1,000		5,100		9,684
Transaction, refinancing and other fees (3)	—		—		—		(16)		4,080		4,064
Adjusted EBITDA	$	47,628	$	21,987	$	34,618	$	59,439	$	(14,912)	$	148,760

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $24.2 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $7.0 million from Payment Services - Latin America to both Payment Services - Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $5.1 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.


	Six months ended June 30, 2021
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	74,853	$	50,849	$	69,202	$	121,304	$	(27,532)	$	288,676
Operating costs and expenses	39,850		40,811		35,840		72,864		20		189,385
Depreciation and amortization	7,824		5,886		1,621		9,394		12,621		37,346
Non-operating income (expenses)	415		3,504		554		1,943		(2,947)		3,469
EBITDA	43,242		19,428		35,537		59,777		(17,878)		140,106
Compensation and benefits (2)	521		1,566		526		1,123		4,051		7,787
Transaction, refinancing and other fees (3)	660		—		—		(647)		1,244		1,257
Adjusted EBITDA	$	44,423	$	20,994	$	36,063	$	60,253	$	(12,583)	$	149,150

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $20.4 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $4.2 million from Payment Services - Latin America to both Payment Services - Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $2.9 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.


	Three months ended June 30,				Six months ended June 30,
(Dollar amounts in thousands, except share data)	2022		2021		2022		2021
Net income	$	33,556	$	49,091	$	72,422	$	84,695
Income tax expense	7,688		2,632		13,863		7,340
Interest expense, net	5,127		5,208		10,007		10,725
Depreciation and amortization	19,560		18,723		38,720		37,346
EBITDA	65,931		75,654		135,012		140,106

Equity income (1)	(862)		923		(1,432)		421
Compensation and benefits (2)	5,405		4,283		9,684		7,787
Transaction, refinancing and other fees (3)	2,901		(599)		5,496		836


Adjusted EBITDA	73,375		80,261		148,760		149,150
Operating depreciation and amortization (4)	(11,156)		(10,724)		(22,408)		(21,606)
Cash interest expense, net (5)	(4,858)		(4,944)		(9,487)		(10,020)
Income tax expense (6)	(10,325)		(7,535)		(19,002)		(15,291)
Non-controlling interest (7)	1		71		11		(72)
Adjusted net income	$	47,037	$	57,129	$	97,874	$	102,161
Net income per common share (GAAP):

Diluted	$	0.47	$	0.68	$	1.00	$	1.16
Adjusted Earnings per common share (Non-GAAP):

Diluted	$	0.65	$	0.78	$	1.35	$	1.40
Shares used in computing adjusted earnings per common share:

Diluted	72,149,949		72,831,366		72,558,565		72,716,950



	2022 Outlook(1)					2021
(Dollar amounts in millions, except per share data)	Low			High
Revenues	$	607	to	$	615	$	590
Earnings per Share (EPS) (GAAP)	$	1.81	to	$	1.90	$	2.21
Per share adjustment to reconcile GAAP EPS to Non-GAAP Adjusted EPS:
Share-based comp, non-cash equity earnings and other (2)	0.36			0.36		0.23
Merger and acquisition related depreciation and amortization (3)	0.44			0.44		0.43
Non-cash interest expense (4)	0.02			0.02		0.02
Tax effect of Non-GAAP adjustments (5)	(0.11)			(0.12)		(0.15)

Total adjustments	0.71			0.70		0.53
Adjusted EPS (Non-GAAP)	$	2.52	to	$	2.60	$	2.74
Shares used in computing adjusted earnings per common share				70.1		72.9