EVERTEC, Inc. - FORM 8-K - EX-99.1

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8-K - FORM 8-K - EVERTEC, Inc.	d579856d8k.htm
EX-99.2 - EX-99.2 - EVERTEC, Inc.	d579856dex992.htm
EX-99.4 - EX-99.4 - EVERTEC, Inc.	d579856dex994.htm
EX-99.3 - EX-99.3 - EVERTEC, Inc.	d579856dex993.htm

Exhibit 99.1

LOGO

EVERTEC REPORTS SECOND QUARTER 2013 RESULTS

SAN JUAN, PUERTO RICO – August 7, 2013 — EVERTEC, Inc. (NYSE: EVTC) (“EVERTEC” or the “Company”) today announced results for the second quarter ended June 30, 2013.

Second Quarter 2013 Highlights

•

Total revenue increased 6% to $89.2 million

•

Adjusted EBITDA increased 6% to $43.4 million

•

Adjusted Net Income increased 39% to $28.9 million, or $0.35 per diluted share

•

Initiated regular quarterly dividend program

•

Made significant progress on three notable strategic growth initiatives

“Our solid second quarter results demonstrate the strength of our diversified business model and continued focused execution of our growth strategy,” said Peter Harrington, EVERTEC’s President and Chief Executive Officer. “Supported by our leading, end-to-end technology platform, we continue to strategically expand the breadth and depth of our customer partnerships and service offerings across our broad Latin American footprint.”

“Consistent with the growth strategy we laid out, this quarter we made significant progress on three notable initiatives: (i) we recently obtained a Third Party Processor (TPP1) license for Mexico, Panama and Costa Rica from MasterCard; (ii) we partnered with a large existing client to increase the scope of our services across their multi-country operations; and (iii) we completed preparations for the launch of dynamic currency conversion services in Costa Rica in 2014. The regular quarterly dividend program we announced today is a further reflection of both our momentum and long-term growth prospects as well as our commitment to maximizing total value for our shareholders.”

Second Quarter 2013 Results

Revenues. Total revenues for the quarter ended June 30, 2013 were $89.2 million, representing an increase of 6% as compared to $84.4 million in the prior year.

Merchant Acquiring net revenues for the quarter ended June 30, 2013 were $18.2 million, representing an increase of 7% as compared to $17.0 million in the prior year. Revenue growth in the quarter was driven primarily by an increase in transaction volumes.

Payment Processing revenues for the quarter ended June 30, 2013 were $24.3 million, representing an increase of 2% as compared to $23.8 million in the prior year. The revenue growth comparison in this quarter is impacted by a non-recurring increase in processing volumes during the quarter ended June 30, 2012 related to certain one-time items. Normalizing for these one-time items, revenues in this segment grew at 6% versus the prior year.

Business Solutions revenues for the quarter ended June 30, 2013 were $46.7 million, representing an increase of 7% as compared to $43.5 million in the prior year. Revenue growth was primarily driven by an increase in our sales and higher demand for our services.

Adjusted EBITDA. For the quarter ended June 30, 2013, Adjusted EBITDA was $43.4 million, representing an increase of 6% as compared to $40.9 million in the prior year. The increase in Adjusted EBITDA was primarily due to revenue growth. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) improved by 20 basis points to 48.7% from 48.5% in the prior year as a result of operating leverage.

Adjusted Net Income. For the quarter ended June 30, 2013, Adjusted Net Income was $28.9 million ($0.35 per diluted share), representing an increase of 39% as compared to $20.7 million ($0.27 per diluted share) in the prior year. The increase in Adjusted Net Income was primarily due to the same factors impacting Adjusted EBITDA and lower pro forma cash interest expense as a result of the debt refinancing completed in April 2013, partially offset by slightly higher operating depreciation and amortization and the timing of cash income tax payments.

Recent Developments

Quarterly Dividend Program. EVERTEC announced today under a separate release that its Board of Directors initiated a regular quarterly dividend program. The first quarterly dividend of $0.10 per share is payable on September 6, 2013 to stockholders of record at the closing of business on August 19, 2013. The Board anticipates declaring this dividend in future quarters on a regular basis; however future declarations of dividends are subject to Board of Director approval and may be adjusted as business needs or market conditions change. Please refer to the Company’s website at www.evertecinc.com under the Corporate Investor Relations section or directly at http://ir.evertecinc.com for a complete press release.

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss second quarter 2013 financial results today at 5:00 PM EDT. 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) 852-6561, or for international callers (719) 325-4895. A replay will be available at 8:00 PM EDT and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the pin number is 9915858. The replay will be available until Wednesday, August 14, 2013. The call will be webcast live from the Company’s website at www.evertecinc.com under the Corporate Investor Relations section or directly at http://ir.evertecinc.com.

About EVERTEC

EVERTEC is the leading full-service transaction processing business in Latin America and the Caribbean. Based in Puerto Rico, EVERTEC provides a broad range of merchant acquiring, payment processing and business process management services across 19 countries in the region. EVERTEC processes over 1.8 billion transactions annually, and manages the electronic payment network for over 4,100 automated teller machines (“ATM”) and over 104,000 point-of-sale payment terminals. EVERTEC is the largest merchant acquirer in the Caribbean and Central America and the sixth largest in Latin America. EVERTEC owns and operates the ATH network, one of the leading ATM and personal identification number debit networks in Latin America. In addition, EVERTEC provides a comprehensive suite of services for core bank processing, cash processing and technology outsourcing. EVERTEC serves a broad

and diversified customer base of leading financial institutions, merchants, corporations and government agencies with ‘mission critical’ technology solutions and believes its business is well positioned to continue to expand across the fast growing Latin American region. 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 are supplemental measures of the Company’s performance that 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 revenues, 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 in the evaluation of companies in the Company’s industry. In addition, the Company’s presentation of Adjusted EBITDA is consistent with the equivalent measurements that are 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 that was created as a result of 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 which 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 our revenues; our ability to renew our client contracts on terms favorable to us; our dependence on our processing systems, technology infrastructure, security systems and fraudulent-payment-detection systems; 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; 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; 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 June 30,						Six months ended June 30,
(Dollar amounts in thousands, except per share data)	2013			2012			2013			2012
Revenues
Merchant acquiring, net	$	18,165		$	17,028		$	35,624		$	34,689
Payment processing		24,285			23,803			48,397			46,702
Business solutions		46,725			43,541			92,493			85,469

Total revenues		89,175			84,372			176,514			166,860

Operating costs and expenses

Cost of revenues, exclusive of depreciation and amortization shown below		42,257			39,831			82,759			77,572
Selling, general and administrative expenses		12,138			8,477			21,001			17,464
Depreciation and amortization		17,842			17,830			35,417			35,752

Total operating costs and expenses		72,237			66,138			139,177			130,788

Income from operations		16,938			18,234			37,337			36,072

Non-operating (expenses) income
Interest income		49			77			93			199
Interest expense		(9,747	)		(13,254	)		(25,011	)		(24,430	)
Earnings of equity method investment		348			509			625			575
Other expenses:
Loss on extinguishment of liability		(58,464	)		—			(58,464	)		—
Termination of consulting agreement		(16,718	)		—			(16,718	)		—
Other expenses		(2,353	)		(8,397	)		(2,286	)		(10,657	)

Total other expenses		(77,535	)		(8,397	)		(77,468	)		(10,657	)

Total non-operating expenses		(86,885	)		(21,065	)		(101,761	)		(34,313	)

(Loss) income before income taxes		(69,947	)		(2,831	)		(64,424	)		1,759
Income tax (benefit) expense		(5,012	)		(798	)		(4,961	)		258

Net (loss) income		(64,935	)		(2,033	)		(59,463	)		1,501
Other comprehensive income, net of tax of $18, $7, $18 and $13
Foreign currency translation adjustments		(394	)		1,230			1,960			2,336

Total comprehensive (loss) income	$	(65,329	)	$	(803	)	$	(57,503	)	$	3,837

Net (loss) income per common share: ⁽¹⁾
Basic	$	(0.82	)	$	(0.03	)	$	(0.78	)	$	0.02
Diluted	$	(0.82	)	$	(0.03	)	$	(0.78	)	$	0.02

Shares used in computing net income per common share: ⁽¹⁾
Basic		78,928,780			72,672,852			75,849,551			72,659,463
Diluted		78,928,780			72,672,852			75,849,551			76,903,210

⁽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)	June 30, 2013		December 31, 2012
Assets
Current Assets:
Cash	$	19,587	$	25,634
Restricted cash		4,983		4,939
Accounts receivable, net		77,662		78,621
Deferred tax asset		—		1,434
Prepaid expenses and other assets		24,623		19,345

Total current assets		126,855		129,973
Investment in equity investee		10,751		11,080
Property and equipment, net		33,031		36,737
Goodwill		373,298		372,307
Other intangible assets, net		384,375		403,170
Other long-term assets		18,971		24,478

Total assets	$	947,281	$	977,745

Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	30,257	$	34,609
Accounts payable		25,589		24,482
Unearned income		2,902		1,166
Income tax payable		1,092		2,959
Current portion of long-term debt		19,000		6,052
Short-term borrowings		8,663		26,995
Deferred tax liability, net		1,204		632

Total current liabilities		88,707		96,895
Long-term debt		674,738		730,709
Long-term deferred tax liability, net		16,526		24,614
Other long-term liabilities		633		3,072

Total liabilities		780,604		855,290

Commitments and contingencies
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; 81,876,332 and 72,846,144 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		819		728
Additional paid-in capital		153,789		52,155
Accumulated earnings		10,951		70,414
Accumulated other comprehensive income (loss)		1,118		(842	)

Total stockholders’ equity		166,677		122,455

Total liabilities and stockholders’ equity	$	947,281	$	977,745

EVERTEC, Inc.

Schedule 3: Unaudited Consolidated Statements of Cash Flows


	Six months ended June 30,
	2013			2012
Cash flows from operating activities
Net (loss) income	$	(59,463	)	$	1,501
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		35,417			35,752
Amortization of debt issue costs and premium and accretion of discount		2,369			2,427
Write-off of debt issue costs, premium and discount accounted as loss on extinguishment		16,555			—
Provision for doubtful accounts and sundry losses		826			1,173
Deferred tax benefit		(6,251	)		(5,212	)
Share-based compensation		5,483			557
Unrealized (gain) loss of indemnification assets		(19	)		216
Amortization of a contract liability		—			(703	)
Loss on disposition of property and equipment		32			47
Earnings from equity method investment		(625	)		(575	)
Dividend received from equity method investment		500			728
Premium on issuance of long-term debt		—			2,000
(Increase) decrease in assets:
Accounts receivable, net		492			4,247
Prepaid expenses and other assets		(5,417	)		993
Other long-term assets		(323	)		—
Increase (decrease) in liabilities:		—			—
Accounts payable and accrued liabilities		(3,347	)		260
Income tax payable		(1,867	)		(1,292	)
Unearned income		1,736			(124	)

Total adjustments		45,561			40,494

Net cash (used in) provided by operating activities		(13,902	)		41,995

Cash flows from investing activities
Net increase in restricted cash		(44	)		(233	)
Intangible assets acquired		(7,927	)		(3,712	)
Property and equipment acquired		(4,384	)		(5,166	)
Proceeds from sales of property and equipment		11			43

Net cash used in investing activities		(12,344	)		(9,068	)

Cash flows from financing activities
Proceeds from initial public offering, net of offering costs of $12,567		112,369			—
Proceeds from issuance of debt		700,000			208,725
Statutory minimum withholding taxes paid on cashless exercises of stock options		(16,688	)		—
Debt issuance costs		(12,077	)		(2,174	)
Repayment of short-term borrowings		(18,332	)		—
Dividends paid		—			(269,772	)
Tax windfall benefits on exercises of stock options		470			—
Issuance of common stock		91			250
Repayment of other financing agreement		(112	)		—
Repayment of long-term debt		(745,522	)		—

Net cash provided by (used in) financing activities		20,199			(62,971	)

Net decrease in cash		(6,047	)		(30,044	)
Cash at beginning of the period		25,634			56,200

Cash at end of the period	$	19,587		$	26,156

EVERTEC, Inc.

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


	Quarters ended June 30,						Six months ended June 30,
(Dollar amounts in thousands)	2013			2012			2013			2012
Net (loss) income	$	(64,935	)	$	(2,033	)	$	(59,463	)	$	1,501
Income tax (benefit) expense		(5,012	)		(798	)		(4,961	)		258
Interest expense, net		9,698			13,177			24,918			24,231
Depreciation and amortization		17,842			17,830			35,417			35,752

EBITDA		(42,407	)		28,176			(4,089	)		61,742

Software maintenance reimbursement and other costs⁽¹⁾		489			667			1,091			1,307
Equity income ⁽²⁾		153			219			(124	)		153
Compensation and benefits ⁽³⁾		6,218			593			6,549			3,100
Pro forma cost reduction adjustments⁽⁴⁾		75			—			150			—
Transaction and other non-recurring fees ⁽⁵⁾		59,645			10,477			61,515			11,734
Management fees ⁽⁶⁾		19,261			746			20,109			1,491
Purchase accounting ⁽⁷⁾		(3	)		41			(19	)		(102	)

Adjusted EBITDA		43,431			40,919			85,182			79,425

Pro forma EBITDA adjustments ⁽⁸⁾		(75	)		—			(150	)		—
Operating depreciation and amortization ⁽⁹⁾		(8,079	)		(7,636	)		(15,894	)		(15,370	)
Cash interest expense, net ⁽¹⁰⁾		(5,434	)		(11,920	)		(11,110	)		(21,804	)
Cash income taxes ⁽¹¹⁾		(969	)		(622	)		(1,666	)		(1,428	)

Adjusted Net Income	$	28,874		$	20,741		$	56,362		$	40,823

Adjusted Net income per common share:⁽¹²⁾
Basic	$	0.37		$	0.29		$	0.74		$	0.56
Diluted	$	0.35		$	0.27		$	0.70		$	0.53

Shares used in computing Adjusted Net Income per common share:⁽¹²⁾
Basic		78,928,780			72,672,852			75,849,551			72,659,463
Diluted		82,747,507			76,623,841			80,076,665			76,903,210

1)	Primarily 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)	Primarily represents non-cash equity based compensation expense.

Represents the pro forma effect of the expected net savings primarily 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.

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 where 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 quarter and the six months ended June 30, 2013 represents pro forma cash interest expense assuming EVERTEC’s April 2013 refinancing occurred on January 1, 2013.

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 June 30,						Six months ended June 30,
(Dollar amounts in thousands)	2013			2012			2013			2012
Segment income from operations
Merchant acquiring, net	$	8,161		$	7,970		$	17,395		$	16,511
Payment processing		11,719			12,756			25,270			25,065
Business solutions		8,784			8,870			19,318			17,950

Total segment income from operations		28,664			29,596			61,983			59,526
Merger related depreciation and amortization and other unallocated expenses ⁽¹⁾		(11,726	)		(11,362	)		(24,646	)		(23,454	)

Income from operations	$	16,938		$	18,234		$	37,337		$	36,072

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

EVERTEC, Inc. - FORM 8-K - EX-99.1 - August 7, 2013

Attached files

EVERTEC, Inc. Reports