EVERTEC, Inc. (NYSE: EVTC) (“EVERTEC” or the “Company”) today announced
results for the first quarter ended March 31, 2013.
“We are pleased to report another quarter of strong financial results
and to begin a new chapter as a publicly traded company. Our successful
initial public offering and our continued strong financial results are a
testament to the value of our best-in-class technology platform,
diversified business model and leading franchise. These qualities have
allowed us to provide our customers with differentiated, value-add
services, become the leading payments processor and related technology
provider in the Latin American region and to continue to penetrate new
markets and geographies,” said Peter Harrington, EVERTEC’s President and
Chief Executive Officer. “We remain excited by the breadth of
opportunities available to us to continue to build long-term shareholder
value including our continuing ability to capitalize on the powerful
secular trends in the high-growth Latin American payments market.”
First Quarter 2013 Results
Revenues. Total revenues for the quarter ended March 31, 2013
were $87.3 million, representing an increase of 6% as compared to $82.5
million in the prior year.
Merchant Acquiring revenues for the quarter ended March 31, 2013 were
$17.5 million, representing a decrease of 1% as compared to $17.7
million in the prior year. The revenue growth comparison in this quarter
is impacted by certain effects related to the Durbin Amendment which
went into effect in the fourth quarter of 2011. Normalizing for the
effects related to the Durbin Amendment, revenues in this segment grew
at 8% vs. the prior year.
Payment Processing revenues for the quarter ended March 31, 2013 were
$24.1 million, representing an increase of 5% as compared to $22.9
million in the prior year. Revenue growth was primarily driven by an
increase in transactions processed and accounts on file.
Business Solutions revenues for the quarter ended March 31, 2013 were
$45.8 million, representing an increase of 9% as compared to $41.9
million in the prior year. Revenue growth was primarily driven by an
increase in demand for our network and core banking products and
services.
Adjusted EBITDA. For the quarter ended March 31, 2013 Adjusted
EBITDA was $41.8 million, representing an increase of 8% as compared to
$38.5 million in the prior year. The increase in Adjusted EBITDA was
primarily driven by the aforementioned growth in revenues and
significant operating leverage in our business. Adjusted EBITDA margin
(Adjusted EBITDA as a percentage of total revenues) improved by
approximately 110 basis points to 47.8% from 46.7% in the prior year.
Adjusted Net Income. For the quarter ended March 31, 2013
Adjusted Net Income was $27.5 million ($0.36 per diluted share),
representing an increase of 37% as compared to $20.1 million ($0.26 per
diluted share) in the prior year. The increase in Adjusted Net Income
was primarily driven by the same factors impacting Adjusted EBITDA and
lower pro forma cash interest expense as a result of the refinancing
described in greater detail below.
Recent Developments
Initial Public Offering. On April 17, 2013, EVERTEC successfully
completed its initial public offering (“IPO”) of 28.8 million shares of
common stock at $20.00 per share. The offering included 6.3 million
primary shares sold by EVERTEC and 22.5 million secondary shares sold by
certain stockholders of the Company. Net proceeds to the Company of
approximately $117.4 million from the offering were used to redeem $91.0
million aggregate principal amount of the 11% senior notes due 2018
issued by two of EVERTEC’s subsidiaries and pay transaction related fees
and expenses.
Debt Refinancing. Concurrent with its IPO, EVERTEC’s subsidiary
entered into $800.0 million of new senior secured credit facilities
comprised of a $100 million revolving credit facility (undrawn at
close), $300 million term loan A, and $400 million term loan B. Net
proceeds from the loans were used to refinance all of the Company’s
outstanding indebtedness under its existing senior secured credit
facilities and to redeem the portion of the 11% senior notes due 2018
that remained outstanding after the application of net primary IPO
proceeds, as described above. Pro forma for the refinancing, EVERTEC
will reduce its annual interest expense by approximately 55% or $29.6
million per annum.
Earnings Conference Call and Audio Webcast
The Company will host a conference call to discuss first 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 (888) 503-8169, or
for international callers (719) 325-2393. 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 1905328. The
replay will be available until Monday, May 13, 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, Inc.
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 our 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
our 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 our liquidity. We present EBITDA and Adjusted EBITDA because
we consider them important supplemental measures of our performance and
believe they are frequently used by securities analysts, investors and
other interested parties in the evaluation of companies in our industry.
In addition, our 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 our
overall profitability because it better reflects our cash flow
generation by capturing the actual cash taxes paid rather than our 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: our reliance on our 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; our dependence on credit card
associations; changes in the regulatory environment and changes in
international, legal, political, administrative or economic conditions;
the geographical concentration of our 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; our high level of
indebtedness and restrictions contained in our debt agreements; and our
ability to generate sufficient cash to service our 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 us and our businesses
generally. We undertake no obligation to release publicly any revisions
to any forward-looking statements, to report events or to report the
occurrence of unanticipated events unless we are required to do so by
law.
EVERTEC, Inc.
Schedule 1: Unaudited Consolidated Statements of Income and
Comprehensive Income
|
|
|
|
|
|
Quarters ended March 31,
|
(Dollar amounts in thousands, except per share data)
|
|
2013
|
|
2012
|
Revenues
|
|
|
|
|
Merchant acquiring, net
|
|
$
|
17,459
|
|
|
$
|
17,661
|
|
Payment processing
|
|
|
24,112
|
|
|
|
22,899
|
|
Business solutions
|
|
|
45,768
|
|
|
|
41,928
|
|
Total revenues
|
|
|
87,339
|
|
|
|
82,488
|
|
|
|
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
Cost of revenues, exclusive of depreciation and amortization shown
below
|
|
|
40,502
|
|
|
|
37,741
|
|
Selling, general and administrative expenses
|
|
|
8,863
|
|
|
|
8,987
|
|
Depreciation and amortization
|
|
|
17,575
|
|
|
|
17,922
|
|
Total operating costs and expenses
|
|
|
66,940
|
|
|
|
64,650
|
|
|
|
|
|
|
Income from operations
|
|
|
20,399
|
|
|
|
17,838
|
|
|
|
|
|
|
Non-operating (expenses) income
|
|
|
|
|
Interest income
|
|
|
44
|
|
|
|
122
|
|
Interest expense
|
|
|
(15,264
|
)
|
|
|
(11,176
|
)
|
Earnings of equity method investment
|
|
|
277
|
|
|
|
66
|
|
Other income (expenses)
|
|
|
67
|
|
|
|
(2,260
|
)
|
Total non-operating expenses
|
|
|
(14,876
|
)
|
|
|
(13,248
|
)
|
Income before income taxes
|
|
|
5,523
|
|
|
|
4,590
|
|
Income tax expense
|
|
|
51
|
|
|
|
1,056
|
|
Net income
|
|
|
5,472
|
|
|
|
3,534
|
|
Other comprehensive income, net of income tax expense of $0 and $6
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
2,354
|
|
|
|
1,106
|
|
Total comprehensive income
|
|
$
|
7,826
|
|
|
$
|
4,640
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: (1)
|
|
|
|
|
Basic
|
|
$
|
0.08
|
|
|
$
|
0.05
|
|
Diluted
|
|
$
|
0.07
|
|
|
$
|
0.05
|
|
|
|
|
|
|
Shares used in computing net income per common share: (1)
|
|
|
|
|
Basic
|
|
|
72,736,107
|
|
|
|
72,646,074
|
|
Diluted
|
|
|
76,879,263
|
|
|
|
76,317,066
|
|
|
|
|
|
|
|
|
|
|
(1) Share count was adjusted for the 2:1 stock split that occurred
on April 1, 2013. Share count does not include the 6.3 million
primary shares that were issued in connection with our initial
public offering.
|
|
|
|
|
|
|
|
|
|
EVERTEC, Inc.
Schedule 2: Unaudited Consolidated Balance Sheets
|
|
|
|
|
|
(Dollar amounts in thousands, except per share data)
|
|
March 31, 2013
|
|
December 31, 2012
|
Assets
|
|
|
|
|
Current Assets:
|
|
|
|
|
Cash
|
|
$
|
34,128
|
|
$
|
25,634
|
|
Restricted cash
|
|
|
4,827
|
|
|
4,939
|
|
Accounts receivable, net
|
|
|
74,747
|
|
|
78,621
|
|
Deferred tax asset
|
|
|
2,857
|
|
|
1,434
|
|
Prepaid expenses and other assets
|
|
|
20,822
|
|
|
19,345
|
|
Total current assets
|
|
|
137,381
|
|
|
129,973
|
|
Investment in equity investee
|
|
|
11,389
|
|
|
11,080
|
|
Property and equipment, net
|
|
|
35,088
|
|
|
36,737
|
|
Goodwill
|
|
|
373,718
|
|
|
372,307
|
|
Other intangible assets, net
|
|
|
392,269
|
|
|
403,170
|
|
Other long-term assets
|
|
|
24,034
|
|
|
24,478
|
|
Total assets
|
|
$
|
973,879
|
|
$
|
977,745
|
|
Liabilities and stockholders' equity
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
Accrued liabilities
|
|
$
|
43,672
|
|
$
|
34,609
|
|
Accounts payable
|
|
|
22,817
|
|
|
24,482
|
|
Unearned income
|
|
|
1,943
|
|
|
1,166
|
|
Income tax payable
|
|
|
1,762
|
|
|
2,959
|
|
Current portion of long-term debt
|
|
|
-
|
|
|
6,052
|
|
Short-term borrowings
|
|
|
8,663
|
|
|
26,995
|
|
Deferred tax liability, net
|
|
|
1,034
|
|
|
632
|
|
Total current liabilities
|
|
|
79,891
|
|
|
96,895
|
|
Long-term debt
|
|
|
734,718
|
|
|
730,709
|
|
Long-term deferred tax liability, net
|
|
|
25,618
|
|
|
24,614
|
|
Other long-term liabilities
|
|
|
3,040
|
|
|
3,072
|
|
Total liabilities
|
|
|
843,267
|
|
|
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;
72,846,144 shares issued and outstanding at March 31, 2013 and
December 31, 2012
|
|
|
728
|
|
|
728
|
|
Additional paid-in capital
|
|
|
52,486
|
|
|
52,155
|
|
Accumulated earnings
|
|
|
75,886
|
|
|
70,414
|
|
Accumulated other comprehensive income (loss)
|
|
|
1,512
|
|
|
(842
|
)
|
Total stockholders' equity
|
|
|
130,612
|
|
|
122,455
|
|
Total liabilities and stockholders' equity
|
|
$
|
973,879
|
|
$
|
977,745
|
|
|
|
|
|
|
|
|
|
EVERTEC, Inc.
Schedule 3: Unaudited Consolidated Statements of Cash Flows
|
|
|
|
|
|
Quarters ended March 31,
|
|
|
2013
|
|
2012
|
Cash flows from operating activities
|
|
|
|
|
Net income
|
|
$
|
5,472
|
|
|
$
|
3,534
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
17,575
|
|
|
|
17,922
|
|
Amortization of debt issue costs and premium and accretion of
discount
|
|
|
1,466
|
|
|
|
1,170
|
|
Provision for doubtful accounts and sundry losses
|
|
|
660
|
|
|
|
397
|
|
Deferred tax benefit
|
|
|
(234
|
)
|
|
|
(962
|
)
|
Share-based compensation
|
|
|
331
|
|
|
|
260
|
|
Unrealized (gain) loss of indemnification assets
|
|
|
(16
|
)
|
|
|
175
|
|
Amortization of a contract liability
|
|
|
-
|
|
|
|
(703
|
)
|
Loss on disposition of property and equipment
|
|
|
11
|
|
|
|
20
|
|
Earnings of equity method investment
|
|
|
(277
|
)
|
|
|
(66
|
)
|
(Increase) decrease in assets:
|
|
|
|
|
Accounts receivable, net
|
|
|
4,196
|
|
|
|
3,930
|
|
Prepaid expenses and other assets
|
|
|
(1,449
|
)
|
|
|
1,934
|
|
Other long-term assets
|
|
|
(838
|
)
|
|
|
-
|
|
Increase (decrease) in liabilities:
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
7,354
|
|
|
|
4,477
|
|
Income tax payable
|
|
|
(1,197
|
)
|
|
|
(1,380
|
)
|
Unearned income
|
|
|
777
|
|
|
|
15
|
|
Total adjustments
|
|
|
28,359
|
|
|
|
27,189
|
|
Net cash provided by operating activities
|
|
|
33,831
|
|
|
|
30,723
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
Net decrease (increase) in restricted cash
|
|
|
112
|
|
|
|
(220
|
)
|
Intangible assets acquired
|
|
|
(2,197
|
)
|
|
|
(1,139
|
)
|
Property and equipment acquired
|
|
|
(2,257
|
)
|
|
|
(2,532
|
)
|
Proceeds from sales of property and equipment
|
|
|
8
|
|
|
|
8
|
|
Net cash used in investing activities
|
|
|
(4,334
|
)
|
|
|
(3,883
|
)
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Short-term borrowings
|
|
|
(18,332
|
)
|
|
|
-
|
|
Issuance of common stock
|
|
|
-
|
|
|
|
250
|
|
Repayment of long-term debt
|
|
|
(2,671
|
)
|
|
|
-
|
|
Net cash (used in) provided by financing activities
|
|
|
(21,003
|
)
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
8,494
|
|
|
|
27,090
|
|
Cash at beginning of the period
|
|
|
25,634
|
|
|
|
56,200
|
|
Cash at end of the period
|
|
$
|
34,128
|
|
|
$
|
83,290
|
|
|
|
|
|
|
|
|
|
|
EVERTEC, Inc.
Schedule 4: Reconciliation of GAAP to Non-GAAP Operating Results
|
|
|
|
|
|
|
|
Quarters ended March 31,
|
(Dollar amounts in thousands, except per share data)
|
|
2013
|
|
2012
|
|
|
|
|
|
Net income
|
|
$
|
5,472
|
|
|
$
|
3,534
|
|
Income tax expense
|
|
|
51
|
|
|
|
1,056
|
|
Interest expense, net
|
|
|
15,220
|
|
|
|
11,054
|
|
Depreciation and amortization
|
|
|
17,575
|
|
|
|
17,922
|
|
EBITDA
|
|
|
38,318
|
|
|
|
33,566
|
|
|
|
|
|
|
Software maintenance reimbursement and other costs(1)
|
|
|
602
|
|
|
|
640
|
|
Equity income (2)
|
|
|
(277
|
)
|
|
|
(66
|
)
|
Compensation and benefits (3)
|
|
|
331
|
|
|
|
2,507
|
|
Pro forma cost reduction adjustments (4)
|
|
|
75
|
|
|
|
-
|
|
Transaction and other non-recurring fees (5)
|
|
|
1,870
|
|
|
|
1,257
|
|
Management fees (6)
|
|
|
848
|
|
|
|
745
|
|
Purchase accounting (7)
|
|
|
(16
|
)
|
|
|
(143
|
)
|
Adjusted EBITDA
|
|
|
41,751
|
|
|
|
38,506
|
|
|
|
|
|
|
Pro forma EBITDA adjustments (8)
|
|
|
(75
|
)
|
|
|
-
|
|
Operating depreciation and amortization (9)
|
|
|
(7,815
|
)
|
|
|
(7,734
|
)
|
Cash interest expense, net (10)
|
|
|
(5,676
|
)
|
|
|
(9,884
|
)
|
Cash income taxes (11)
|
|
|
(697
|
)
|
|
|
(805
|
)
|
Adjusted Net Income
|
|
$
|
27,488
|
|
|
$
|
20,083
|
|
|
|
|
|
|
Adjusted Net Income per common share: (12)
|
|
|
|
|
Basic
|
|
$
|
0.38
|
|
|
$
|
0.28
|
|
Diluted
|
|
$
|
0.36
|
|
|
$
|
0.26
|
|
|
|
|
|
|
Shares used in computing Adjusted Net Income per
|
|
|
|
|
common share: (12)
|
|
|
|
|
Basic
|
|
|
72,736,107
|
|
|
|
72,646,074
|
|
Diluted
|
|
|
76,879,263
|
|
|
|
76,317,066
|
|
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) Mainly represents adjustments related to non-cash equity based
compensation.
4) Represents the pro forma effect of the expected net compensation and
benefits savings from the reduction of certain employees. This pro forma
amount was calculated using the net amount of actual expenses for
certain employees for the twelve months period prior to their separation.
5) Represents non-recurring expenses and fees associated with certain
one-time corporate transactions.
6) Represents the management fee payable to the equity sponsors. On
April 17, 2013, the management services fee 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 EBITDA adjustments to reflect the pro
forma benefit related to head count reduction described in note 4 above.
9) Represents operating depreciation and amortization expense which
excludes amounts generated as a result of the Merger.
10) Represents interest expense, less interest income, as they appear on
our consolidated statements of income, adjusted to exclude non-cash
amortization of debt issue costs, premium and accretion of discount. For
the quarter ended March 31, 2013 represents pro forma cash interest
expense assuming EVERTEC’s April 2013 refinancing occurred on January 1,
2013. Actual cash interest expense for the quarter ended March 31, 2013
was $13.8 million.
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. Share count does not include the 6.3 million primary
shares that were issued in connection with our initial public offering.