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

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8-K - 8-K - EVERTEC, Inc.	a8k12312017.htm

Exhibit 99.1

EVERTEC REPORTS FOURTH QUARTER AND FULL YEAR 2017 RESULTS

ANNOUNCES 2018 OUTLOOK

SAN JUAN, PUERTO RICO – February 21, 2018 – EVERTEC, Inc. (NYSE: EVTC) (“EVERTEC” or the “Company”) today announced results for the fourth quarter and full year ended December 31, 2017.

Fourth Quarter 2017


•	Revenue decreased 2% to $99.6 million


•	GAAP Net Income attributable to common shareholders was $5.8 million, or $0.08 per diluted share


•	Adjusted EBITDA decreased 22% to $37.0 million


•	Adjusted earnings per common share was $0.24, or a 44% decline

Full Year 2017 Highlights


•	Revenue grew 5% to $407.1 million


•	GAAP Net Income attributable to common shareholders was $55.1 million, or $0.76 per diluted share


•	Adjusted EBITDA decreased 5% to $178.0 million


•	Adjusted earnings per common share was $1.47, or a 12% decline


•	$29 million returned to shareholders in share repurchases and dividends

Mac Schuessler, President and Chief Executive Officer, stated “We executed well in the fourth quarter and exceeded the high end of our full year 2017 revenue guidance range, as fourth quarter transaction volume was stronger than previously expected in Puerto Rico. Reflecting on 2017, we made significant progress on our core growth initiatives, including advancing our Latin American expansion strategy through acquisitions and recent customer wins.”

Schuessler continued, "Looking to 2018, while the post-hurricane economy in Puerto Rico has improved, many uncertainties still remain and are reflected in our 2018 financial outlook. We will continue to work to restore our customers' operations in Puerto Rico and remain committed to supporting our community as the Island rebuilds. At the same time, we are focused on capitalizing on our expanded opportunities in Latin America.”

Fourth Quarter 2017 Results

Revenue. Total revenue for the quarter ended December 31, 2017 was $99.6 million, a decrease of 2% compared with $101.9 million in the prior year. The decrease in the quarter was driven primarily by the impact of reduced volumes caused by the significant hurricanes in the third quarter of 2017 partially offset by the acquisition of PayGroup.

Net Income attributable to common shareholders. For the quarter ended December 31, 2017, GAAP Net Income attributable to common shareholders was $5.8 million, or $0.08 per diluted share, compared with $16.0 million or $0.22 per diluted share in the prior year. The decline was primarily caused by the impact of the hurricanes.

Adjusted EBITDA. For the quarter ended December 31, 2017, Adjusted EBITDA was $37.0 million, a decrease of 22% compared to the prior year. The decrease in Adjusted EBITDA was primarily driven by reduced high margin revenues due to the hurricanes and a $5.0 million impairment charge on a multi-year software development project that was impacted by delays caused by the hurricane and projected increased costs with a third party vendor.

Adjusted Net Income. For the quarter ended December 31, 2017, Adjusted Net Income was $17.7 million, a decrease of 43% compared with $31.3 million in the prior year. Adjusted earnings per common share was $0.24, a decrease of 44% compared with $0.43 in the prior year. The results included the impact of an increased tax rate in our Latin American region and a higher than anticipated proportion of Puerto Rico taxable income outside our preferential tax decree.

Full Year 2017 Results

Revenue. Total revenue for the year ended December 31, 2017 was $407.1 million, an increase of 5% compared with $389.5 million in the prior year. The increase in revenues was driven by increases in ATH debit network transaction volumes and card processing volumes, revenue generated from the PayGroup acquisition, increased revenue from the Accuprint acquisition and an increase in core banking revenue. Revenues in 2017 were negatively impacted by the two hurricanes that made landfall in Puerto Rico and the Caribbean in September of 2017.

Net Income attributable to common shareholders. For the year ended December 31, 2017, GAAP Net Income attributable to common shareholders was $55.1 million , or $0.76 per diluted share, compared with $75.0 million or $1.01 per diluted share in the prior year. The decline was caused by the impact of the hurricanes, charges taken in connection with an exit activity for a third party software solution that is no longer commercially viable, an impairment loss related to a software asset under development, expenses attributable to the PayGroup acquisition, increased depreciation expense, and higher interest expense.

Adjusted EBITDA. For the year ended December 31, 2017, Adjusted EBITDA was $178.0 million, a decrease of 5% compared to the prior year. The decrease in Adjusted EBITDA was primarily driven by reduced high margin revenues due to the hurricanes and an impairment loss related to a software asset under development.

Adjusted Net Income. For the year ended December 31, 2017, Adjusted Net Income was $107.1 million, a decrease of 14% compared with $124.7 million in the prior year. Adjusted earnings per common share was $1.47, a decrease of 12% compared with $1.67 in the prior year. The decline was primarily caused by the impact of the hurricanes, increased depreciation, higher interest expense and an increased tax rate.

Segment Reporting Change

The Company realigned its operating segments in the quarter ended December 31, 2017. The Company's operating segments are as follows: 1) Merchant Services 2) Payment Services (Puerto Rico and Caribbean) 3) Payment Services (Latin America) 4) Business Solutions. Additionally, the Corporate and Other category is presented and it consists of corporate overhead expenses, intersegment eliminations, certain leveraged activities and other non-operating and miscellaneous expenses that are not included in the operating segments. Historical results for the new operating segments for reported full-year 2015 through 2017 and quarterly periods for 2016 and 2017 are provided in a supplemental schedule attached to this release.

Share Repurchase

For the full year 2017, the Company repurchased a total of 0.5 million shares of common stock at an average price of $16.48 per share for a total of $7.7 million. As of December 31, 2017, a total of approximately $72.3 million remained available for future use under the Company’s share repurchase program.

2018 Outlook

The Company financial outlook for 2018 is as follows:


•	Total consolidated revenue between $411 million and $425 million representing growth of 1 to 5%


•	Adjusted earnings per common share guidance of $1.25 to $1.41 representing a range of -15 to -4% as compared to $1.47 in 2017


•	Capital expenditures ranging between $35 and $40 million


•	Effective tax rate ranging between 11 to 13%

Earnings Conference Call and Audio Webcast

The Company will host a conference call to discuss its Fourth quarter 2017 financial results today at 4:30 p.m. ET. Hosting the call will be Mac Schuessler, President and Chief Executive Officer, and Peter Smith, Executive Vice President and 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 10098091. The replay will be available through Wednesday, March 1, 2018. The call will be webcast live from the Company’s website at www.evertecinc.com under the Investor Relations section or directly at http://ir.evertecinc.com. A supplemental slide presentation that accompanies this call and webcast can be found on the investor relations website at ir.evertecinc.com and will remain available after the call.

About EVERTEC

EVERTEC, Inc. (NYSE: EVTC) is a leading full-service transaction processing business in Latin America, providing a broad range of merchant acquiring, payment processing and business solutions services. The Company manages a system of electronic payment networks that process approximately two billion transactions annually, and offers a comprehensive suite of services for core bank processing, cash processing and technology outsourcing. In addition, EVERTEC owns and operates the ATH® network, one of the leading personal identification number (“PIN”) debit networks in Latin America. Based in Puerto Rico, the Company operates in 26 Latin American countries and serves a diversified customer base of leading financial institutions, merchants, corporations and government agencies with “mission-critical” technology solutions. For more information, visit www.evertecinc.com.

Use of Non-GAAP Financial Information

The non-GAAP measures referenced in this release material are supplemental measures of the Company’s performance and are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America (“GAAP”). They are not measurements of the Company’s financial performance under GAAP and should not be considered as alternatives to total revenue, net income or any other performance measures derived in accordance with GAAP or as alternatives to cash flows from operating activities, as indicators of operating performance or as measures of the Company’s liquidity. In addition to GAAP measures, management uses these non-GAAP measures to focus on the factors the Company believes are pertinent to the daily management of the Company’s operations and believes that they are also frequently used by analysts, investors and other interested parties to evaluate companies in the industry. Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release. These non-GAAP measures include EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share and are defined below.

EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments. This measure is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, Adjusted EBITDA, as it relates to our 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.

Adjusted Net Income is defined as net income adjusted to exclude unusual items and other adjustments

Adjusted Earnings per common share is defined as Adjusted Net Income divided by diluted shares outstanding

In addition, our presentation of Adjusted EBITDA is substantially consistent with the equivalent measurements that are contained in the senior secured credit facilities in testing EVERTEC Group’s compliance with covenants therein such as the senior secured leverage ratio. We use Adjusted Net Income to measure our overall profitability because we believe better reflects our comparable operating performance by excluding the impact of the non-cash amortization and depreciation that was created as a result of Apollo Global Management LLC’s acquisition of a 51% indirect ownership in EVERTEC Group. In addition, in evaluating EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, you should be aware that in the future we may incur expenses such as those excluded in calculating them. Further, our presentation of these measures should not be construed as an inference that our future operating results will not be affected by unusual or nonrecurring items.

Forward-Looking Statements

Certain statements in this press release constitute “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of EVERTEC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” and “plans” and similar expressions of future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.

Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: the Company’s reliance on its relationship with Popular for a significant portion of

revenue; 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; reduction in consumer confidence leading to decreased consumer spending; the Company’s dependence on credit card associations; regulatory limitations on our activities, including the potential need to seek regulatory approval to consummate transactions, 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, tax, 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; increased compliance risks associated with operating an international business; 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.

Investor Contact

Kay Sharpton

(787) 773-5442

IR@evertecinc.com

EVERTEC, Inc.

Schedule 1: Unaudited Consolidated Statements of Income and Comprehensive Income



	Quarter ended December 31,						Year ended December 31,
(Dollar amounts in thousands, except per share data)	2017			2016			2017			2016
Revenues	$	99,628		$	101,889		$	407,144		$	389,507
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization shown below	50,748			48,682			200,650			175,809
Selling, general and administrative expenses	16,130			12,760			56,161			46,986
Depreciation and amortization	16,061			15,067			64,250			59,567
Total operating costs and expenses	82,939			76,509			321,061			282,362
Income from operations	16,689			25,380			86,083			107,145
Non-operating income (expenses)
Interest income	156			111			716			377
Interest expense	(7,407		)	(6,325		)	(29,861		)	(24,617		)
Earnings (losses) of equity method investment	191			6			604			(52		)
Other income (expense), net	(172		)	(1,203		)	2,657			544
Total non-operating expenses	(7,232		)	(7,411		)	(25,884		)	(23,748		)
Income before income taxes	9,457			17,969			60,199			83,397
Income tax expense	3,532			1,955			4,780			8,271
Net income	5,925			16,014			55,419			75,126
Less: Net income attributable to non-controlling interest	91			41			365			90
Net income attributable to EVERTEC, Inc.’s common stockholders	5,834			15,973			55,054			75,036
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	(117		)	(740		)	(635		)	(3,360		)
Gain (loss) on cash flow hedge	1,421			3,015			2,178			(1,449		)
Total comprehensive income	$	7,138		$	18,248		$	56,597		$	70,227
Net income per common share:
Basic	$	0.08		$	0.22		$	0.76		$	1.01
Diluted	$	0.08		$	0.22		$	0.76		$	1.01
Shares used in computing net income per common share:
Basic	72,390,977			73,020,599			72,479,807			74,132,863
Diluted	72,857,756			73,563,167			72,872,188			74,473,369

EVERTEC, Inc.

Schedule 2: Unaudited Consolidated Balance Sheets



(Dollar amounts in thousands)	December 31, 2017			December 31, 2016
Assets
Current Assets:
Cash and cash equivalents	$	50,423		$	51,920
Restricted cash	9,944			8,112
Accounts receivable, net	83,328			77,803
Prepaid expenses and other assets	25,011			20,430
Total current assets	168,706			158,265
Investment in equity investee	13,073			12,252
Property and equipment, net	37,924			38,930
Goodwill	398,575			370,986
Other intangible assets, net	279,961			299,119
Other long-term assets	4,549			6,110
Total assets	$	902,788		$	885,662
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	38,451		$	34,243
Accounts payable	41,135			40,845
Unearned income	7,737			4,531
Income tax payable	1,406			1,755
Current portion of long-term debt	46,487			19,789
Short-term borrowings	12,000			28,000
Total current liabilities	147,216			129,163
Long-term debt	557,251			599,667
Deferred tax liability	13,820			14,978
Unearned income—long-term	23,486			17,303
Other long-term liabilities	13,039			16,376
Total liabilities	754,812			777,487
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; 72,393,933 shares issued and outstanding at December 31, 2017 (December 31, 2016 - 72,635,032)	723			726
Additional paid-in capital	5,350			—
Accumulated earnings	148,887			116,341
Accumulated other comprehensive loss, net of tax	(10,848		)	(12,391		)
Total EVERTEC, Inc. stockholders’ equity	144,112			104,676
Non-controlling interest	3,864			3,499
Total equity	147,976			108,175
Total liabilities and equity	$	902,788		$	885,662

EVERTEC, Inc.

Schedule 3: Unaudited Consolidated Statements of Cash Flows



	Years ended December 31,
(Dollar amounts in thousands)	2017			2016
Cash flows from operating activities
Net income	$	55,419		$	75,126
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	64,250			59,567
Amortization of debt issue costs and accretion of discount	5,128			4,334
Loss on extinguishment of debt	—			1,476
Provision for doubtful accounts and sundry losses	843			1,990
Deferred tax benefit	(4,306		)	(4,594		)
Share-based compensation	9,642			6,408
Loss on impairment of software	11,441			2,277
Loss on disposition of property and equipment and other intangibles	430			453
(Earnings) losses of equity method investment	(604		)	52
(Increase) decrease in assets:
Accounts receivable	(2,099		)	(2,583		)
Prepaid expenses and other assets	(4,048		)	(1,426		)
Other long-term assets	1,654			(1,790		)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities	(870		)	14,594
Income tax payable	(349		)	405
Unearned income	8,444			8,018
Other long-term liabilities	811			3,747
Total adjustments	90,367			92,928
Net cash provided by operating activities	145,786			168,054
Cash flows from investing activities
Net (increase) decrease in restricted cash	(1,832		)	3,705
Additions to software and purchase of customer relationship	(22,174		)	(23,819		)
Acquisitions, net of cash acquired	(42,836		)	(15,600		)
Property and equipment acquired	(11,290		)	(18,450		)
Proceeds from sales of property and equipment	32			81
Net cash used in investing activities	(78,100		)	(54,083		)
Cash flows from financing activities
Proceeds from issuance of long-term debt	—			75,763
Debt issuance costs	—			(4,830		)
Net (decrease) increase in short-term borrowings	(16,000		)	11,000
Repayments of borrowings for purchase of equipment and software	(2,373		)	(2,213		)
Dividends paid	(21,762		)	(29,696		)
Withholding taxes paid on share-based compensation	(1,588		)	(548		)
Repurchase of common stock	(7,671		)	(39,946		)
Repayment of long-term debt	(19,789		)	(96,741		)
Credit amendment fees	—			(3,587		)
Net cash used in financing activities	(69,183		)	(90,798		)
Net (decrease) increase in cash and cash equivalents	(1,497		)	23,173
Cash and cash equivalents at beginning of the period	51,920			28,747
Cash and cash equivalents at end of the period	$	50,423		$	51,920

EVERTEC, Inc.

Schedule 4: Unaudited Segment Information



	Quarter Ended December 31, 2017
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	22,866	$	19,336	$	18,232	$	46,133	$	(6,939	)	$	99,628
Operating costs and expenses	17,759		19,520		11,028		28,776		5,856			82,939
Depreciation and amortization	2,317		2,553		441		3,653		7,097			16,061
Non-operating income (expenses)	553		1,539		—		10		(2,083		)	19
EBITDA	7,977		3,908		7,645		21,020		(7,781		)	32,769
Compensation and benefits ⁽¹⁾	159		371		141		394		2,139			3,204
Transaction, refinancing and other fees ⁽²⁾	—		—		—		—		1,055			1,055
Adjusted EBITDA	$	8,136	$	4,279	$	7,786	$	21,414	$	(4,587	)	$	37,028

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $6.9 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement.



	Quarter Ended December 31, 2016
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	25,680	$	12,438	$	23,111	$	49,439	$	(8,779	)	$	101,889
Operating costs and expenses	14,053		11,986		13,717		31,152		5,601			76,509
Depreciation and amortization	2,027		1,894		594		3,486		7,066			15,067
Non-operating income (expenses)	563		1,155		—		10		(2,925		)	(1,197		)
EBITDA	14,217		3,501		9,988		21,783		(10,239		)	39,250
Compensation and benefits ⁽²⁾	59		8		63		146		2,173			2,449
Transaction, refinancing and other fees ⁽³⁾	2,062		—		—		2,167		1,647			5,876
Adjusted EBITDA	$	16,338	$	3,509	$	10,051	$	24,096	$	(6,419	)	$	47,575

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $8.8 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and consulting, audit and legal expenses incurred as part of the prior year restatement of financial results, certain fees paid to resolve a software maintenance contract mater, fees paid in connection with the debt refinancing and a software impairment charge.



	Year Ended December 31, 2017
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	101,687	$	62,702	$	85,778	$	189,077	$	(32,100	)	$	407,144
Operating costs and expenses	57,463		66,786		57,574		119,761		19,477			321,061
Depreciation and amortization	8,993		8,880		2,254		15,774		28,349			64,250
Non-operating income (expenses)	2,229		8,726		1		13		(7,708		)	3,261
EBITDA	55,446		13,522		30,459		85,103		(30,936		)	153,594
Compensation and benefits⁽²⁾	589		816		573		1,687		6,090			9,755
Transaction, refinancing, exit activity and other fees ⁽³⁾	2,499		3,220		6,465		—		2,495			14,679
Adjusted EBITDA	$	58,534	$	17,558	$	37,497	$	86,790	$	(22,351	)	$	178,028

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $32.1 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and an impairment charge and contractual fee accrual for a third party software solution that was determined to be commercially unviable.



	Year Ended December 31, 2016
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	99,680	$	47,162	$	91,248	$	184,276	$	(32,859	)	$	389,507
Operating costs and expenses	49,128		45,304		52,771		113,082		22,077			282,362
Depreciation and amortization	7,597		7,285		2,672		13,783		28,230			59,567
Non-operating income (expenses)	2,238		5,584		—		24		(7,354		)	492
EBITDA	60,387		14,727		41,149		85,001		(34,060		)	167,204
Compensation and benefits⁽²⁾	637		627		480		1,961		6,777			10,482
Transaction, refinancing, and other fees ⁽³⁾	2,062		—		—		2,277		5,650			9,989
Adjusted EBITDA	$	63,086	$	15,354	$	41,629	$	89,239	$	(21,633	)	$	187,675

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $32.9 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and consulting, audit and legal expenses incurred as part of the prior year restatement of financial results, certain fees paid to resolve a software maintenance contract mater, fees paid in connection with the debt refinancing and a software impairment charge.

EVERTEC, Inc.

Schedule 5: Reconciliation of GAAP to Non-GAAP Operating Results



	Quarter ended December 31,						Year ended December 31,
(Dollar amounts in thousands, except share data)	2017			2016			2017			2016
Net income	$	5,925		$	16,014		$	55,419		$	75,126
Income tax expense	3,532			1,955			4,780			8,271
Interest expense, net	7,251			6,214			29,145			24,240
Depreciation and amortization	16,061			15,067			64,250			59,567
EBITDA	32,769			39,250			153,594			167,204
Software maintenance reimbursement and other costs⁽¹⁾	—			—						521
Equity (income) loss⁽²⁾	(191		)	(6		)	(604		)	52
Compensation and benefits ⁽³⁾	3,204			2,449			9,755			10,482
Transaction, refinancing and other fees ⁽⁴⁾	1,246			5,882			2,500			7,579
Exit activity⁽⁵⁾	—			—			12,783			—
Restatement related expenses ⁽⁶⁾	—			—			—			1,837
Adjusted EBITDA	37,028			47,575			178,028			187,675
Operating depreciation and amortization ⁽⁷⁾	(7,459		)	(7,302		)	(30,585		)	(28,468		)
Cash interest expense, net ⁽⁸⁾	(6,422		)	(5,137		)	(24,660		)	(20,468		)
Income tax expense ⁽⁹⁾	(5,264		)	(3,748		)	(15,100		)	(13,752		)
Non-controlling interest ⁽¹⁰⁾	(150		)	(89		)	(581		)	(258		)
Adjusted Net Income	$	17,733		$	31,299		$	107,102		$	124,729
Net income per common share (GAAP):
Diluted	$	0.08		$	0.22		$	0.76		$	1.01
Adjusted earnings per common share (Non-GAAP):
Diluted	$	0.24		$	0.43		$	1.47		$	1.67
Shares used in computing adjusted earnings per common share:
Diluted	72,857,786			73,563,167			72,872,188			74,473,369


(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 Dominican Republic, Consorcio de Tarjetas Dominicanas, S.A. (“CONTADO”).

(3)

Primarily represents share-based compensation and other compensation expense of $3.1 million and $1.8 million for the quarters ended December 31, 2017 and 2016 and severance payments $0.6 million for the quarter ended December 31, 2016. For the year ended December 31, 2017 and 2016 primarily represents share-based compensation and other compensation expense of $9.6 million and $6.7 million, respectively, and severance payments of $4.1 million for the year ended December 31, 2016.


(4)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, recorded as part of selling, general and administrative expense and cost of revenues, as well as relief contributions related to the Hurricanes.


(5)	Impairment charge and contractual fees accrual for a third party software solution that was determined to be commercially unviable.


(6)	Represents consulting, audit and legal expenses incurred as part of the restatement.


(7)	Represents operating depreciation and amortization expense, which excludes amounts generated as a result of the Merger and other from purchase accounting intangibles generated from acquisitions.


(8)	Represents interest expense, less interest income, as they appear on our consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount.


(9)	Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate.


(10)	Represents the 35% non-controlling equity interest in Processa, net of amortization for intangibles created as part of the purchase.

EVERTEC, Inc.

Schedule 6: Outlook Summary and Reconciliation to Non-GAAP Adjusted Earnings per Share



								2017
	2018 Outlook							Actual
(Dollar amounts in millions, except per share data)
Revenues	$	411		to	$	425		$	407
Earnings per Share (EPS) (GAAP)	$	0.60		to	$	0.76		$	0.76
Per share adjustment to reconcile GAAP EPS to Non-GAAP Adjusted EPS:
Share-based comp, non-cash equity earnings and other ⁽¹⁾	0.21				0.21			0.33
Merger and acquisition related depreciation and amortization ⁽²⁾	0.47				0.47			0.42
Non-cash interest expense ⁽³⁾	0.06				0.06			0.07
Tax effect of non-gaap adjustments ⁽⁴⁾	(0.08		)		(0.08		)	(0.10		)
Non-controlling interest ⁽⁵⁾	(0.01		)		(0.01		)	(0.01		)
Total adjustments	0.65				0.65			0.71
Adjusted EPS (Non-GAAP)	$	1.25		to	$	1.41		$	1.47
Shares used in computing adjusted earnings per common share					73.5			72.9


(1)	Represents share based compensation, the elimination of non-cash equity earnings from our 19.99% equity investment in CONTADO, severance and other adjustments to reconcile GAAP EPS to Non-GAAP EPS.


(2)	Represents depreciation and amortization expenses amounts generated as a result of the Merger and intangibles related to acquisitions.


(3)	Represents non-cash amortization of the debt issue costs, premium and accretion of discount.


(4)	Represents income tax expense on non-GAAP adjustments using the applicable GAAP tax rate (in an anticipated range of 11 to 13%).


(5)	Represents the 35% non-controlling equity interest in Processa, net of amortization for intangibles created as part of the purchase.



EVERTEC, Inc. Schedule 7: Supplemental Segment Information

	Quarter Ended March 31, 2017
(In thousands)	Payment Services - Puerto Rico & Caribbean			Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	26,452		$	12,964	$	22,485	$	47,997	$	(8,618	)	$	101,280
Operating costs and expenses	11,802			12,266		13,413		29,765		3,442			70,688
Depreciation and amortization	2,149			1,871		599		4,014		7,051			15,684
Non-operating income (expenses)	553			2,731		1		—		(1,868		)	1,417
EBITDA	17,352			5,300		9,672		22,246		(6,877		)	47,693
Compensation and benefits ⁽²⁾	99			151		95		226		1,505			2,076
Transaction, refinancing and other fees ⁽³⁾	(660		)			—		—		50			(610		)
Adjusted EBITDA	$	16,791		$	5,451	$	9,767	$	22,472	$	(5,322	)	$	49,159

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $8.6 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement.



	Quarter Ended June 30, 2017
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	27,144	$	12,973	$	23,506	$	48,672	$	(8,784	)	$	103,511
Operating costs and expenses	11,682		13,603		13,688		29,600		4,944			73,517
Depreciation and amortization	2,269		1,848		596		4,082		7,104			15,899
Non-operating income (expenses)	556		2,724		—		3		(1,805		)	1,478
EBITDA	18,287		3,942		10,414		23,157		(8,429		)	47,371
Compensation and benefits ⁽²⁾	125		156		121		286		1,439			2,127
Transaction, refinancing and other fees ⁽³⁾	—						—		632			632
Adjusted EBITDA	$	18,412	$	4,098	$	10,535	$	23,443	$	(6,358	)	$	50,130

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $8.8 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement.



	Quarter Ended September 30, 2017
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	25,225	$	17,432	$	21,555	$	46,275	$	(7,762	)	$	102,725
Operating costs and expenses	16,219		21,396		19,444		31,620		5,238			93,917
Depreciation and amortization	2,259		2,608		618		4,024		7,097			16,606
Non-operating income (expenses)	567		1,732		—		—		(1,952		)	347
EBITDA	11,832		376		2,729		18,679		(7,855		)	25,761
Compensation and benefits ⁽²⁾	205		139		216		781		1,007			2,348
Transaction, refinancing, exit activity and other fees ⁽³⁾	3,160		3,221		6,464		—		757			13,602
Adjusted EBITDA	$	15,197	$	3,736	$	9,409	$	19,460	$	(6,091	)	$	41,711

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $7.8 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and an impairment charge and contractual fee accrual for a third party software solution that was determined to be commercially unviable.



	Quarter Ended December 31, 2017
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	22,866	$	19,336	$	18,232	$	46,133	$	(6,939	)	$	99,628
Operating costs and expenses	17,759		19,520		11,028		28,776		5,856			82,939
Depreciation and amortization	2,317		2,553		441		3,653		7,097			16,061
Non-operating income (expenses)	553		1,539		—		10		(2,083		)	19
EBITDA	7,977		3,908		7,645		21,020		(7,781		)	32,769
Compensation and benefits ⁽¹⁾	159		371		141		394		2,139			3,204
Transaction, refinancing and other fees ⁽²⁾	—		—		—		—		1,055			1,055
Adjusted EBITDA	$	8,136	$	4,279	$	7,786	$	21,414	$	(4,587	)	$	37,028

(1)


(2)	Primarily represents share-based compensation and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement.



	Year Ended December 31, 2017
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	101,687	$	62,702	$	85,778	$	189,077	$	(32,100	)	$	407,144
Operating costs and expenses	57,463		66,786		57,574		119,761		19,477			321,061
Depreciation and amortization	8,993		8,880		2,254		15,774		28,349			64,250
Non-operating income (expenses)	2,229		8,726		1		13		(7,708		)	3,261
EBITDA	55,446		13,522		30,459		85,103		(30,936		)	153,594
Compensation and benefits⁽²⁾	589		816		573		1,687		6,090			9,755
Transaction, refinancing, exit activity and other fees ⁽³⁾	2,499		3,220		6,465		—		2,495			14,679
Adjusted EBITDA	$	58,534	$	17,558	$	37,497	$	86,790	$	(22,351	)	$	178,028

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $32.1 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and an impairment charge and contractual fee accrual for a third party software solution that was determined to be commercially unviable.



	Quarter Ended March 31, 2016
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions			Corporate and Other ⁽¹⁾			Total

Revenues	$	24,828	$	10,171	$	22,890	$	45,154		$	(7,564	)	$	95,479
Operating costs and expenses	12,001		10,664		12,616		28,299			5,333			68,913
Depreciation and amortization	1,879		1,621		689		3,375			7,106			14,670
Non-operating income (expenses)	581		1,186		—		(3		)	(1,496		)	268
EBITDA	15,287		2,314		10,963		20,227			(7,287		)	41,504
Compensation and benefits ⁽²⁾	369		400		238		1,103			1,571			3,681
Transaction, refinancing, exit activity and other fees ⁽³⁾	—		—		—		110			750			860
Adjusted EBITDA	$	15,656	$	2,714	$	11,201	$	21,440		$	(4,966	)	$	46,045

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $7.6 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and consulting, audit and legal expenses incurred as part of the prior year restatement of financial results.



	Quarter Ended June 30, 2016
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	25,182	$	11,608	$	23,277	$	45,737	$	(8,132	)	$	97,672
Operating costs and expenses	11,577		10,705		12,934		27,845		6,419			69,480
Depreciation and amortization	1,912		1,881		704		3,502		6,942			14,941
Non-operating income (expenses)	529		1,848		—		5		(1,493		)	889
EBITDA	16,046		4,632		11,047		21,399		(9,102		)	44,022
Compensation and benefits ⁽²⁾	154		144		121		489		1,351			2,259
Transaction, refinancing and other fees ⁽³⁾	—		—		—		—		2,558			2,558
Adjusted EBITDA	$	16,200	$	4,776	$	11,168	$	21,888	$	(5,193	)	$	48,839

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $8.1 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and consulting, audit and legal expenses incurred as part of the prior year restatement of financial results..



	Quarter Ended September 30, 2016
(In thousands)	Payment Processing - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	23,990	$	12,944	$	21,970	$	43,947	$	(8,384	)	$	94,467
Operating costs and expenses	11,497		11,951		13,504		25,786		4,722			67,460
Depreciation and amortization	1,779		1,889		685		3,420		7,116			14,889
Non-operating income (expenses)	565		1,396		—		13		(1,442		)	532
EBITDA	14,837		4,278		9,151		21,594		(7,432		)	42,428
Compensation and benefits ⁽²⁾	57		74		58		223		1,591			2,003
Transaction, refinancing and other fees ⁽³⁾	—		—		—		—		714			714
Adjusted EBITDA	$	14,894	$	4,352	$	9,209	$	21,817	$	(5,127	)	$	45,145

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $8.4 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and consulting, audit and legal expenses incurred as part of the prior year restatement of financial results.



	Quarter Ended December 31, 2016
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	25,680	$	12,438	$	23,111	$	49,439	$	(8,779	)	$	101,889
Operating costs and expenses	14,053		11,986		13,717		31,152		5,601			76,509
Depreciation and amortization	2,027		1,894		594		3,486		7,066			15,067
Non-operating income (expenses)	563		1,155		—		10		(2,925		)	(1,197		)
EBITDA	14,217		3,501		9,988		21,783		(10,239		)	39,250
Compensation and benefits ⁽²⁾	59		8		63		146		2,173			2,449
Transaction, refinancing and other fees ⁽³⁾	2,062		—		—		2,167		1,647			5,876
Adjusted EBITDA	$	16,338	$	3,509	$	10,051	$	24,096	$	(6,419	)	$	47,575

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $8.8 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and consulting, audit and legal expenses incurred as part of the prior year restatement of financial results, certain fees paid to resolve a software maintenance contract mater, fees paid in connection with the debt refinancing and a software impairment charge.



	Year Ended December 31, 2016
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total

Revenues	$	99,680	$	47,162	$	91,248	$	184,276	$	(32,859	)	$	389,507
Operating costs and expenses	49,128		45,304		52,771		113,082		22,077			282,362
Depreciation and amortization	7,597		7,285		2,672		13,783		28,230			59,567
Non-operating income (expenses)	2,238		5,584		—		24		(7,354		)	492
EBITDA	60,387		14,727		41,149		85,001		(34,060		)	167,204
Compensation and benefits⁽²⁾	637		627		480		1,961		6,777			10,482
Transaction, refinancing, and other fees ⁽³⁾	2,062		—		—		2,277		5,650			9,989
Adjusted EBITDA	$	63,086	$	15,354	$	41,629	$	89,239	$	(21,633	)	$	187,675

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $32.9 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and consulting, audit and legal expenses incurred as part of the prior year restatement of financial results, certain fees paid to resolve a software maintenance contract mater, fees paid in connection with the debt refinancing and a software impairment charge.



	Year Ended December 31, 2015
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other ⁽¹⁾			Total
Revenues	$	99,311	$	37,523	$	85,411	$	179,532	$	(28,249	)	$	373,528
Operating costs and expenses	48,853		35,790		42,804		117,079		25,642			270,168
Depreciation and amortization	7,488		5,766		1,438		16,128		34,154			64,974
Non-operating income (expenses)	2,909		4,147		—		428		(5,031		)	2,453
EBITDA	60,855		11,646		44,045		79,009		(24,768		)	170,787
Compensation and benefits⁽²⁾	1,420		132		1,361		4,044		5,280			12,237
Transaction, refinancing, and other fees⁽³⁾	$	22	$	22	$	41	$	139	$	2,928		$	3,152
Adjusted EBITDA	$	62,297	$	11,800	$	45,447	$	83,192	$	(16,560	)	$	186,176

(1)

Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $28.2 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees.


(2)	Primarily represents share-based compensation, other compensation expense and severance payments.


(3)	Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement.

EVERTEC, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 21, 2018

Attached files

EVERTEC, Inc. Reports