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

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Exhibit 99.1

LOGO

EVERTEC REPORTS THIRD-QUARTER 2014 RESULTS

SAN JUAN, PUERTO RICO – November 5, 2014 – EVERTEC, Inc. (NYSE: EVTC) (“EVERTEC” or the “Company”) today announced results for the third quarter ended September 30, 2014.

Third-Quarter 2014 Highlights

•

Total revenue increased to $88.6 million; Merchant Acquiring segment revenue increased 6% and Payment Processing segment revenue increased 4%

•

Adjusted Net Income per diluted share increased 11% to $0.40

•

Announced $75 million stock repurchase plan, and bought back approximately 1 million shares or $25 million of common stock

Commenting on the quarter, Peter Harrington, EVERTEC’s President and Chief Executive Officer, said, “Our business continues to perform well. We continued to expand in our markets, despite the lingering impact of lower hardware and software sales, along with some unexpected softness in Puerto Rico consumer spending in the quarter. We are very pleased to have implemented our first Colombian processing customer. With the implementation of this customer, we have established our first business in South America.”

Harrington continued, “Reflecting both our confidence in our long-term growth prospects and our commitment to enhancing total shareholder value, in September this year we announced a new $75 million stock repurchase program. As of October 31, 2014, we bought back approximately $25 million of our stock under this authorization supported by our strong free cash flow generation and significant balance sheet flexibility. Overall, I remain optimistic about our outlook based on our leading franchise, diversified business model, and ability to capitalize on the strong secular growth trends in the Latin American markets we serve.”

Third-Quarter 2014 Results

Revenue. Total revenue for the quarter ended September 30, 2014 was $88.6 million, an increase of 1% compared with $87.4 million in the prior year.

Merchant Acquiring net revenue was $19.2 million, an increase of 6% compared with $18.2 million in the prior year. Revenue growth in the quarter was driven mainly by an increase in transaction volumes.

Payment Processing revenue was $25.6 million, an increase of 4% compared with $24.7 million in the prior year. Revenue growth in the quarter was driven mainly by an increase in accounts on file and transactions within the card products business.

Business Solutions revenue was $43.8 million, a decrease of 2% compared with $44.5 million in the prior year. The decrease in revenue was mainly due to a $1.9 million year-over-year decline in hardware and software sales, partially offset by increased revenue from core banking solutions and IT consulting services.

Adjusted EBITDA. For the quarter ended September 30, 2014, Adjusted EBITDA was $44.5 million, an increase of 3% compared with $43.4 million in the prior year. The increase in Adjusted EBITDA was due primarily to revenue growth and operating leverage in our Merchant Acquiring and Payment Processing businesses. Adjusted EBITDA margin was 50.2%, compared with 49.7% in the prior year.

Adjusted Net Income. For the quarter ended September 30, 2014, Adjusted Net Income was $31.4 million, an increase of 6% compared with $29.5 million in the prior year. The increase in Adjusted Net Income was driven mainly by Adjusted EBITDA growth and lower levels of operating depreciation and amortization expense. 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 third-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 (888) 428-9473 or (719) 325-2448 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 2119933. The replay will be available until Wednesday, November 12, 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 one of the 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, Inc. for a significant portion of revenue; 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

Alan Cohen

Executive Vice President

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 (Loss) and Comprehensive Income (Loss)


	Quarters ended September 30,						Nine months ended September 30,
(Dollar amounts in thousands, except per share data)	2014			2013			2014			2013
Revenues
Merchant Acquiring, net	$	19,227		$	18,211		$	58,345		$	53,835
Payment Processing		25,611			24,731			77,019			73,128
Business Solutions		43,804			44,472			131,609			136,965

Total revenues		88,642			87,414			266,973			263,928

Operating costs and expenses

Cost of revenues, exclusive of depreciation and amortization shown below		38,625			38,903			115,109			121,176
Selling, general and administrative expenses		7,104			8,990			25,629			30,477
Depreciation and amortization		16,453			17,657			49,457			53,074

Total operating costs and expenses		62,182			65,550			190,195			204,727

Income from operations		26,460			21,864			76,778			59,201

Non-operating (expenses) income
Interest income		91			54			245			147
Interest expense		(6,370	)		(6,403	)		(19,780	)		(31,414	)
Earnings of equity method investment		241			198			905			823
Other income (expenses):
Loss on extinguishment of debt		—			—			—			(58,464	)
Termination of consulting agreement		—			—			—			(16,718	)
Other income (expenses)		(249	)		448			2,127			(1,838	)

Total other expenses		(249	)		448			2,127			(77,020	)

Total non-operating expenses		(6,287	)		(5,703	)		(16,503	)		(107,464	)

Income (loss) before income taxes		20,173			16,161			60,275			(48,263	)
Income tax expense (benefit)		1,082			1,358			5,205			(3,603	)

Net income (loss)		19,091			14,803			55,070			(44,660	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		378			(210	)		(6,573	)		1,750

Total comprehensive income (loss)	$	19,469		$	14,593		$	48,497		$	(42,910	)

Net income (loss) per common share: ⁽¹⁾
Basic	$	0.24		$	0.18		$	0.70		$	(0.57	)
Diluted	$	0.24		$	0.18		$	0.70		$	(0.57	)

Shares used in computing net income (loss) per common share: ⁽¹⁾
Basic		78,666,241			81,905,566			78,485,109			77,890,406
Diluted		79,216,924			82,862,538			79,193,452			77,890,406

⁽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)	September 30, 2014			December 31, 2013
Assets
Current Assets:
Cash	$	29,226		$	22,485
Restricted cash		6,126			5,433
Accounts receivable, net		68,969			68,434
Deferred tax asset		3,378			2,537
Prepaid expenses and other assets		21,880			17,524

Total current assets		129,579			116,413
Investment in equity investee		11,492			10,639
Property and equipment, net		29,482			33,240
Goodwill		369,304			373,119
Other intangible assets, net		338,248			367,780
Other long-term assets		12,335			18,162

Total assets		890,440			919,353

Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities		26,023			26,571
Accounts payable		14,748			18,630
Unearned income		8,866			5,595
Income tax payable		1,945			259
Current portion of long-term debt		19,000			19,000
Short-term borrowings		8,000			51,200
Deferred tax liability, net		350			543

Total current liabilities		78,932			121,798
Long-term debt		652,102			665,680
Long-term deferred tax liability, net		20,308			20,212
Other long-term liabilities		238			333

Total liabilities		751,580			808,023

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; 78,672,101shares issued and outstanding at September 30, 2014 (December 31, 2013- 78,286,465)		787			783
Additional paid-in capital		83,296			80,718
Accumulated earnings		60,924			29,403
Accumulated other comprehensive (loss) income, net of tax		(6,147	)		426

Total stockholders’ equity		138,860			111,330

Total liabilities and stockholders’ equity		890,440			919,353

EVERTEC, Inc.

Schedule 3: Unaudited Consolidated Statements of Cash Flows


	Nine months ended September 30,
	2014			2013
Cash flows from operating activities
Net income (loss)	$	55,070		$	(44,660	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		49,457			53,074
Amortization of debt issue costs and premium and accretion of discount		2,315			3,136
Write-off of debt issue costs, premium and discount accounted as loss on extinguishment		—			16,555
Provision for doubtful accounts and sundry losses		1,102			954
Deferred tax benefit		(1,486	)		(6,723	)
Share-based compensation		1,314			5,719
Unrealized loss (gain) of indemnification assets		459			(21	)
Loss on disposition of property and equipment and other intangibles		23			30
Earnings of equity method investment		(905	)		(823	)
Dividend received from equity method investment		326			500
Decrease (increase) in assets:
Accounts receivable, net		309			9,035
Prepaid expenses and other assets		(4,283	)		(2,591	)
Other long-term assets		2,497			(1,928	)
(Decrease) increase in liabilities:
Accounts payable and accrued liabilities		(7,357	)		(18,485	)
Income tax payable		1,686			(2,713	)
Unearned income		3,271			2,625

Total adjustments		48,728			58,344

Net cash provided by operating activities		103,798			13,684

Cash flows from investing activities
Net increase in restricted cash		(693	)		(157	)
Intangible assets acquired		(9,100	)		(9,591	)
Property and equipment acquired		(7,463	)		(7,380	)
Proceeds from sales of property and equipment		44			16

Net cash used in investing activities		(17,212	)		(17,112	)

Cash flows from financing activities
Proceeds from initial public offering, net of offering costs of $12,567		—			112,369
Proceeds from issuance of long-term debt		—			700,000
Statutory minimum withholding taxes paid on cashless exercises of stock options		(1,004	)		(16,704	)
Debt issuance costs		—			(12,077	)
Net decrease in short-term borrowing		(42,000	)		(22,663	)
Proceeds from short-term borrowing for purchase of equipment		—			1,800
Repayment of short-term borrowing for purchase of equipment		(1,200	)		—
Dividends paid		(23,547	)		(8,192	)
Tax windfall benefits on exercises of stock options		1,937			1,627
Issuance of common stock, net		314			91
Repayment of other financing agreement		(95	)		(224	)
Repayment of long-term debt		(14,250	)		(750,273	)

Net cash (used in) provided by financing activities		(79,845	)		5,754

Net increase in cash		6,741			2,326
Cash at beginning of the period		22,485			25,634

Cash at end of the period	$	29,226		$	27,960

EVERTEC, Inc.

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


	Quarters ended September 30,						Nine months ended September 30,
(Dollar amounts in thousands)	2014			2013			2014			2013
Net income (loss)	$	19,091		$	14,803		$	55,070		$	(44,660	)
Income tax expense (benefit)		1,082			1,358			5,205			(3,603	)
Interest expense, net		6,279			6,349			19,535			31,267
Depreciation and amortization		16,453			17,657			49,457			53,074

EBITDA		42,905			40,167			129,267			36,078

Software maintenance reimbursement and other costs⁽¹⁾		661			588			1,770			1,679
Equity income ⁽²⁾		(241	)		(198	)		(580	)		(322	)
Compensation and benefits ⁽³⁾		648			324			1,573			6,873
Pro forma cost reduction adjustments⁽⁴⁾		—			25			—			175
Transaction and other non-recurring fees ⁽⁵⁾		269			2,515			2,785			64,030
Management fees ⁽⁶⁾		—			—			—			20,109
Purchase accounting ⁽⁷⁾		286			(2	)		459			(21	)

Adjusted EBITDA		44,528			43,419			135,274			128,601

Pro forma EBITDA adjustments ⁽⁸⁾		—			(25	)		—			(175	)
Operating depreciation and amortization ⁽⁹⁾		(7,338	)		(7,896	)		(22,102	)		(23,790	)
Cash interest expense, net ⁽¹⁰⁾		(5,500	)		(5,582	)		(16,911	)		(16,692	)
Cash income taxes ⁽¹¹⁾		(300	)		(373	)		(703	)		(2,039	)

Adjusted Net Income	$	31,390		$	29,543		$	95,558		$	85,905

Adjusted Net income per common share: ⁽¹²⁾
Basic	$	0.40		$	0.36		$	1.22		$	1.10
Diluted	$	0.40		$	0.36		$	1.21		$	1.06

Shares used in computing Adjusted Net Income per common share: ⁽¹²⁾
Basic		78,666,241			81,905,566			78,485,109			77,890,406
Diluted		79,216,924			82,862,538			79,193,452			80,675,185

(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. This pro forma amount was calculated using the net amount of actual expenses for the twelve-month period prior to their separation.

(5)	Represents fees and expenses associated with non-recurring corporate transactions, including $1.1 million of fees associated with the withdrawn senior secured notes offering in the second quarter of 2014 and 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 nine months ended September 30, 2013, represents pro forma cash interest expense assuming EVERTEC’s April 2013 refinancing occurred on January 1, 2013, 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. For the three and nine months ended September 30, 2014 and the three months ended September 30, 2013, 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 September 30,						Nine months ended September 30,
(Dollar amounts in thousands)	2014			2013			2014			2013
Segment income from operations
Merchant Acquiring, net	$	8,518		$	8,568		$	25,700		$	25,963
Payment Processing		14,707			14,056			44,738			38,536
Business Solutions		12,696			11,282			36,232			30,600

Total segment income from operations		35,921			33,906			106,670			95,099
Merger related depreciation and amortization and other unallocated expenses ⁽¹⁾		(9,461	)		(12,042	)		(29,892	)		(35,898	)

Income from operations	$	26,460		$	21,864		$	76,778		$	59,201

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

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