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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 

 
FORM 8-K
 
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 20, 2019
 
EVERTEC, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
  
Puerto Rico
 
66-0783622
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification number)
 
 
Cupey Center Building, Road 176, Kilometer 1.3,
San Juan, Puerto Rico
 
00926
(Address of principal executive offices)
 
(Zip Code)
(787) 759-9999
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
 
 
   
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 2.02 Results of Operations and Financial Condition.
On February 20, 2019 the Company issued a press release announcing its results for the fourth quarter and year ended December 31, 2018. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
Note: The information contained in this Item 2.02 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
 
(d)
Exhibits.
Number
  
Exhibit
99.1
  
Press Release re: fourth quarter earnings issued by EVERTEC, Inc. dated February 20, 2019






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 

 
EVERTEC, Inc.
 
(Registrant)
 
 
 
Date: February 20, 2019
By:
/s/ Joaquin A. Castrillo-Salgado
 
 
Name: Joaquin A. Castrillo-Salgado
 
 
Title:   Chief Financial Officer






EXHIBIT INDEX
 
Number
  
Exhibit
99.1
  



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
 396815287_g350595ex991pg05.jpg

EVERTEC REPORTS FOURTH QUARTER AND FULL YEAR 2018 RESULTS
ANNOUNCES 2019 OUTLOOK

SAN JUAN, PUERTO RICO – February 20, 2019 – EVERTEC, Inc. (NYSE: EVTC) (“EVERTEC” or the “Company”) today announced results for the fourth quarter and full year ended December 31, 2018.
Fourth Quarter 2018
 
Revenue increased 19% to $118.2 million
GAAP Net Income attributable to common shareholders was $20.2 million, or $0.27 per diluted share
Adjusted EBITDA increased $15.6 million to $52.6 million
Adjusted earnings per common share was $0.46, or a 92% increase
Full Year 2018 Highlights
 
Revenue grew 11% to $453.9 million
GAAP Net Income attributable to common shareholders was $86.3 million, or $1.16 per diluted share
Adjusted EBITDA increased 19% to $212.5 million
Adjusted earnings per common share was $1.84, or a 25% increase
$17 million returned to shareholders in share repurchases and dividends

Mac Schuessler, President and Chief Executive Officer stated “We set a new revenue record in the fourth quarter, exceeded our most recent full year guidance and far surpassed our expectations from the beginning of the year. Looking to 2019, we expect to continue to benefit from the momentum in Puerto Rico and our continued investments in growing our business. We anticipate the Latin American markets will continue to evolve, creating new opportunities for our business."
Fourth Quarter 2018 Results
Revenue. Total revenue for the quarter ended December 31, 2018 was $118.2 million, an increase of 19% compared with $99.6 million in the prior year. Revenue increase in the quarter primarily reflects growth over last year's hurricane impacted results as well as the elevated sales volume in Puerto Rico driven by post-hurricane recovery activity, federal relief and benefit programs.
Net Income attributable to common shareholders. For the quarter ended December 31, 2018, GAAP Net Income attributable to common shareholders was $20.2 million, or $0.27 per diluted share, compared with $5.8 million or $0.08 per diluted share in the prior year.
Adjusted EBITDA. For the quarter ended December 31, 2018, Adjusted EBITDA was $52.6 million, an increase of 42% compared to the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenue) increased 730 basis points to 44.5% compared with 37.2% in the prior year. The increase in Adjusted EBITDA margin was primarily driven by growth over the hurricane impacted results in the fourth quarter of 2017 as well as a $5.0 million impairment charge in the previous year.
Adjusted Net Income. For the quarter ended December 31, 2018, Adjusted Net Income was $34.5 million, an increase of 95% compared with $17.7 million in the prior year. Adjusted earnings per common share was $0.46, an increase of 92% compared with $0.24 in the prior year. The results included the impact of higher cash interest expense and a lower tax rate in the quarter.

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Full Year 2018 Results
Revenue. Total revenue for the year ended December 31, 2018 was $453.9 million, an increase of 11% compared with $407.1 million in the prior year. The increase in revenues reflects growth over last year's hurricane impacted results and was driven by increases in ATH debit network transaction volumes and card processing volumes, revenue generated from a full year of results from the acquisition of the business formerly known as PayGroup, that closed in July 2017, and an increase in network revenue.
Net Income attributable to common shareholders. For the year ended December 31, 2018, GAAP Net Income attributable to common shareholders was $86.3 million, or $1.16 per diluted share, compared with $55.1 million or $0.76 per diluted share in the prior year. The increase reflects growth over last year's hurricane impacted results, as well as two charges taken last year, one in connection with an exit activity for a third-party software solution and an impairment loss related to a software asset under development, partially offset by increased interest expense.
Adjusted EBITDA. For the year ended December 31, 2018, Adjusted EBITDA was $212.5 million, an increase of 19% compared to the prior year. Adjusted EBITDA margin increased 310 basis points to 46.8% compared with 43.7% in the prior year. The increase in Adjusted EBITDA margin was primarily driven by growth over last year's hurricane impacted results and an impairment loss related to a software asset under development.
Adjusted Net Income. For the year ended December 31, 2018, Adjusted Net Income was $137.2 million, an increase of 28% compared with $107.1 million in the prior year. Adjusted earnings per common share was $1.84, an increase of 25% compared with $1.47 in the prior year. The increase reflects growth over last year's hurricane impacted results, partially offset by higher cash interest expense.
Share Repurchase
During the three months ended December 31, 2018 and for the full year 2018, the Company repurchased a total of 0.4 million shares of common stock at an average price of $27.22 per share for a total of $10.0 million. As of December 31, 2018, a total of approximately $62.3 million remained available for future use under the Company’s share repurchase program.
2019 Outlook
The Company financial outlook for 2019 is as follows:
 
Total consolidated revenue between $464 million and $476 million representing growth of 2% to 5%
Adjusted earnings per common share between $1.80 to $1.90 representing a range of -2% to 3% as compared to $1.84 in 2018
Capital expenditures ranging between $40 and $45 million
Effective tax rate of approximately 13%
Earnings Conference Call and Audio Webcast
The Company will host a conference call to discuss its fourth quarter 2018 financial results today at 4:30 p.m. ET. Hosting the call will be Mac Schuessler, President and Chief Executive Officer, and Joaquin Castrillo, Chief Financial Officer. The conference call can be accessed live over the phone by dialing (888) 338-7153 or for international callers by dialing (412) 317-5117. A replay will be available one hour after the end of the conference call and can be accessed by dialing (877) 344-7529 or (412) 317-0088 for international callers; the pin number is 10127757. The replay will be available through Wednesday, February 27, 2019. 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

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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 the Company's segments, is presented in conformity with Accounting Standards Codification 280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's Regulation G and Item 10(e) of Regulation S-K. In addition, the Company's 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.

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.

The Company uses Adjusted Net Income to measure the Company's overall profitability because the Company believe better reflects the Company's 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 (the "Merger"). In addition, in evaluating EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, you should be aware that in the future the Company may incur expenses such as those excluded in calculating them. Further, the Company's presentation of these measures should not be construed as an inference that the Company's future operating results will not be affected by unusual or nonrecurring items.

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 and to grow the Company's merchant acquiring business; the Company's ability to renew its client contracts on terms favorable to the Company, including the Company's Master Services Agreement (MSA) with Popular, and any significant concessions the Company may have to grant to Popular with respect to pricing or other key terms in anticipation of the negotiation of the extension of the MSA, both in respect of the current term and any extension of the MSA; a potential government shutdown; a continuation of the Government of Puerto Rico’s fiscal crisis; the effectiveness of the Company’s risk management procedures; dependence on the Company's processing systems, technology infrastructure, security systems and

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fraudulent-payment-detection systems, and the risk that the Company's systems may experience breakdowns or fail to prevent security breaches, confidential data theft or fraudulent transfers; our ability to develop, install and adopt new technology; impairments to the Company’s amortizable intangible assets and goodwill; a decreased client base due to consolidations in the banking and financial-services industry; the credit risk of the Company’s merchant clients, for which the Company may also be liable; a decline in the market for the Company’s services due to increased competition, changes in consumer spending or payment preferences; the continuing market position of the ATH® network; the Company’s dependence on credit card associations and debit networks; regulatory limitations on the Company’s activities, including the potential need to seek regulatory approval to consummate transactions, due to the Company’s relationship with Popular and the Company’s role as a service provider to financial institutions and the Company’s potential inability to obtain such approval on a timely basis or at all; changes in the regulatory environment and changes in international, legal, tax, political, administrative or economic conditions; the Company’s ability to comply with federal, state, and local regulatory requirements; 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 an international business in countries and with counterparties that increase the Company’s compliance risks and puts the Company at risk of violating U.S. sanctions laws; the Company’s ability to execute the Company’s expansion and acquisition strategies; the Company’s ability to protect the Company’s intellectual property rights; the Company’s ability to recruit and retain qualified personnel; evolving industry standards; the Company’s high level of indebtedness and restrictions contained in the Company’s debt agreements; the Company’s ability to generate sufficient cash to service the Company’s indebtedness and to generate future profits and the impact of natural disasters or catastrophic events in the countries in which the Company operates.
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. The Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless the Company is required to do so by law.


Investor Contact
Kay Sharpton
(787) 773-5442
IR@evertecinc.com

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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)
 
2018
 
2017
 
2018
 
2017
Revenues
 
$
118,231

 
$
99,628

 
$
453,869

 
$
407,144

Operating costs and expenses
 
 
 
 
 
 
 
 
Cost of revenues, exclusive of depreciation and amortization shown below
 
50,942

 
50,748

 
196,957

 
200,650

Selling, general and administrative expenses
 
23,033

 
16,130

 
68,717

 
56,161

Depreciation and amortization
 
15,684

 
16,061

 
63,067

 
64,250

Total operating costs and expenses
 
89,659

 
82,939

 
328,741

 
321,061

Income from operations
 
28,572

 
16,689

 
125,128

 
86,083

Non-operating income (expenses)
 
 
 
 
 
 
 
 
Interest income
 
261

 
156

 
787

 
716

Interest expense
 
(7,143
)
 
(7,407
)
 
(30,044
)
 
(29,861
)
Earnings of equity method investment
 
80

 
191

 
692

 
604

Other income (expense), net
 
724

 
(172
)
 
2,602

 
2,657

Total non-operating expenses
 
(6,078
)
 
(7,232
)
 
(25,963
)
 
(25,884
)
Income before income taxes
 
22,494

 
9,457

 
99,165

 
60,199

Income tax expense
 
2,247

 
3,532

 
12,596

 
4,780

Net income
 
20,247

 
5,925

 
86,569

 
55,419

Less: Net income attributable to non-controlling interest
 
48

 
91

 
299

 
365

Net income attributable to EVERTEC, Inc.’s common stockholders
 
20,199

 
5,834

 
86,270

 
55,054

Other comprehensive (loss) income, net of tax
 
 
 
 
 
 
 

Foreign currency translation adjustments
 
(4,339
)
 
(117
)
 
(10,564
)
 
(635
)
(Loss) gain on cash flow hedge
 
(4,486
)
 
1,421

 
(2,377
)
 
2,178

Total comprehensive income
 
$
11,374

 
$
7,138

 
$
73,329

 
$
56,597

Net income per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.27

 
$
0.08

 
$
1.19

 
$
0.76

Diluted
 
$
0.27

 
$
0.08

 
$
1.16

 
$
0.76

Shares used in computing net income per common share:
 
 
 
 
 
 
 
 
Basic
 
72,656,706

 
72,390,977

 
72,607,321

 
72,479,807

Diluted
 
74,690,226

 
72,857,756

 
74,420,110

 
72,872,188

                                                                                                                                

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EVERTEC, Inc.
Schedule 2: Unaudited Consolidated Balance Sheets
 
(Dollar amounts in thousands, except share data)
 
December 31,
2018
 
December 31,
2017
Assets
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
 
$
69,973

 
$
50,423

Restricted cash
 
16,773

 
9,944

Accounts receivable, net
 
100,323

 
83,328

Prepaid expenses and other assets
 
29,124

 
25,011

Total current assets
 
216,193

 
168,706

Investment in equity investee
 
12,149

 
13,073

Property and equipment, net
 
36,763

 
37,924

Goodwill
 
394,644

 
398,575

Other intangible assets, net
 
259,269

 
279,961

Deferred tax asset
 
1,917

 
988

Other long-term assets
 
6,357

 
3,561

Total assets
 
$
927,292

 
$
902,788

Liabilities and stockholders’ equity
 
 
 
 
Current Liabilities:
 
 
 
 
Accrued liabilities
 
$
57,006

 
$
38,451

Accounts payable
 
47,272

 
41,135

Unearned income
 
11,527

 
7,737

Income tax payable
 
6,650

 
1,406

Current portion of long-term debt
 
14,250

 
46,487

Short-term borrowings
 

 
12,000

Total current liabilities
 
136,705

 
147,216

Long-term debt
 
524,056

 
557,251

Deferred tax liability
 
9,950

 
13,820

Unearned income—long-term
 
26,075

 
23,486

Other long-term liabilities
 
14,900

 
13,039

Total liabilities
 
711,686

 
754,812

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; 72,378,710 shares issued and outstanding at December 31, 2018 (December 31, 2017 - 72,393,933)
 
723

 
723

Additional paid-in capital
 
5,783

 
5,350

Accumulated earnings
 
228,742

 
148,887

Accumulated other comprehensive loss, net of tax
 
(23,789
)
 
(10,848
)
Total EVERTEC, Inc. stockholders’ equity
 
211,459

 
144,112

Non-controlling interest
 
4,147

 
3,864

Total equity
 
215,606

 
147,976

Total liabilities and equity
 
$
927,292

 
$
902,788


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EVERTEC, Inc.
Schedule 3: Unaudited Consolidated Statements of Cash Flows
 
 
 
Years ended December 31,
(In thousands)
 
2018
 
2017
Cash flows from operating activities
 
 
 
 
Net income
 
$
86,569

 
$
55,419

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
63,067

 
64,250

Amortization of debt issue costs and accretion of discount
 
4,316

 
5,128

Loss on extinguishment of debt
 
2,645

 

Provision for doubtful accounts and sundry losses
 
2,112

 
843

Deferred tax benefit
 
(4,611
)
 
(4,306
)
Share-based compensation
 
12,592

 
9,642

Loss on impairment of software
 

 
11,441

Loss on disposition of property and equipment and other intangibles
 
109

 
430

Earnings of equity method investment
 
(692
)
 
(604
)
Dividend received from equity method investment
 
390

 

(Increase) decrease in assets:
 
 
 
 
Accounts receivable
 
(18,181
)
 
(2,099
)
Prepaid expenses and other assets
 
(3,911
)
 
(4,048
)
Other long-term assets
 
(4,432
)
 
1,654

Increase (decrease) in liabilities:
 
 
 
 
Accounts payable and accrued liabilities
 
16,057

 
(870
)
Income tax payable
 
5,245

 
(349
)
Unearned income
 
7,021

 
8,444

Other long-term liabilities
 
4,438

 
811

Total adjustments
 
86,165

 
90,367

Net cash provided by operating activities
 
172,734

 
145,786

Cash flows from investing activities
 
 
 
 
Additions to software
 
(27,386
)
 
(22,174
)
Acquisitions, net of cash acquired
 

 
(42,836
)
Property and equipment acquired
 
(13,933
)
 
(11,290
)
Proceeds from sales of property and equipment
 
19

 
32

Net cash used in investing activities
 
(41,300
)
 
(76,268
)
Cash flows from financing activities
 
 
 
 
Proceeds from issuance of long-term debt
 
545,000

 

Debt issuance costs
 
(4,418
)
 

Net decrease in short-term borrowings
 
(12,000
)
 
(16,000
)
Repayments of borrowings for purchase of equipment and software
 
(720
)
 
(2,373
)
Dividends paid
 
(7,273
)
 
(21,762
)
Withholding taxes paid on share-based compensation
 
(2,159
)
 
(1,588
)
Repurchase of common stock
 
(10,000
)
 
(7,671
)
Repayment of long-term debt
 
(613,485
)
 
(19,789
)
Net cash used in financing activities
 
(105,055
)
 
(69,183
)
Net increase in cash, cash equivalents and restricted cash
 
26,379

 
335

Cash, cash equivalents and restricted cash at beginning of the period
 
60,367

 
60,032

Cash, cash equivalents and restricted cash at end of the period
 
$
86,746

 
$
60,367


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EVERTEC, Inc.
Schedule 4: Unaudited Segment Information

 
Quarter Ended December 31, 2018
(In thousands)
Payment
Services -
Puerto Rico & Caribbean
 
Payment
Services -
Latin America
 
Merchant
Acquiring, net
 
Business
Solutions
 
Corporate and Other (1)
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
29,957

 
$
22,365

 
$
25,826

 
$
51,617

 
$
(11,534
)
 
$
118,231

Operating costs and expenses
12,922

 
19,883

 
14,365

 
35,883

 
6,606

 
89,659

Depreciation and amortization
2,504

 
2,249

 
430

 
3,441

 
7,060

 
15,684

Non-operating income (expenses)
451

 
4,702

 
(5
)
 
99

 
(4,443
)
 
804

EBITDA
19,990

 
9,433

 
11,886

 
19,274

 
(15,523
)
 
45,060

Compensation and benefits (2)
202

 
(46
)
 
192

 
479

 
2,162

 
2,989

Transaction, refinancing and other fees (3)

 

 

 
(1
)
 
4,575

 
4,574

Adjusted EBITDA
$
20,192

 
$
9,387

 
$
12,078

 
$
19,752

 
$
(8,786
)
 
$
52,623

 
 
(1)
Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations.  Intersegment eliminations predominantly reflect the $9.2 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software sale and developments of $2.3 million from Payment Services- Latin America to Payment Services- Puerto Rico & Caribbean 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 2018 Credit Agreement, relief contributions related to the 2017 hurricanes and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received.

 
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 (2)
159

 
371

 
141

 
394

 
2,139

 
3,204

Transaction, refinancing and other fees (3)

 

 

 

 
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 & 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 the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received.

8




 
Year Ended December 31, 2018
(In thousands)
Payment
Services -
Puerto Rico & Caribbean
 
Payment
Services -
Latin America
 
Merchant
Acquiring, net
 
Business
Solutions
 
Corporate and Other (1)
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
114,119

 
$
80,899

 
$
99,655

 
$
197,602

 
$
(38,406
)
 
$
453,869

Operating costs and expenses
52,006

 
75,240

 
55,778

 
126,232

 
19,485

 
328,741

Depreciation and amortization
9,734

 
9,284

 
1,698

 
13,878

 
28,473

 
63,067

Non-operating income (expenses)
2,420

 
11,750

 
3

 
477

 
(11,356
)
 
3,294

EBITDA
74,267

 
26,693

 
45,578

 
85,725

 
(40,774
)
 
191,489

Compensation and benefits (2)
1,087

 
1,034

 
938

 
2,088

 
8,512

 
13,659

Transaction, refinancing, exit activity and other fees (3)
(250
)
 

 

 

 
7,561

 
7,311

Adjusted EBITDA
$
75,104

 
$
27,727

 
$
46,516

 
$
87,813

 
$
(24,701
)
 
$
212,459

 
 
(1)
Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations.  Intersegment eliminations predominantly reflect the $36.1 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software sale and developments of $2.3 million from Payment Services- Latin America to Payment Services- Puerto Rico & Caribbean 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 2018 Credit Agreement, relief contributions related to the 2017 hurricanes and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received.
 
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, 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 & 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, an impairment charge and contractual fee accrual for a third party software solution that was determined to be commercially unviable and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received.

9



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)
 
2018
 
2017
 
2018
 
2017
Net income
 
$
20,247

 
$
5,925

 
$
86,569

 
$
55,419

Income tax expense
 
2,247

 
3,532

 
12,596

 
4,780

Interest expense, net
 
6,882

 
7,251

 
29,257

 
29,145

Depreciation and amortization
 
15,684

 
16,061

 
63,067

 
64,250

EBITDA
 
45,060

 
32,769

 
191,489

 
153,594

Equity income(1)
 
(80
)
 
(191
)
 
(259
)
 
(604
)
Compensation and benefits (2)
 
2,989

 
3,204

 
13,659

 
9,755

Transaction, refinancing and other fees (3)
 
4,654

 
1,246

 
7,570

 
2,500

Exit activity (4)
 

 

 

 
12,783

Adjusted EBITDA
 
52,623

 
37,028

 
212,459

 
178,028

Operating depreciation and amortization (5)
 
(7,299
)
 
(7,459
)
 
(29,208
)
 
(30,585
)
Cash interest expense, net (6)
 
(6,707
)
 
(6,422
)
 
(26,103
)
 
(24,660
)
Income tax expense (7)
 
(4,022
)
 
(5,264
)
 
(19,514
)
 
(15,100
)
Non-controlling interest (8)
 
(87
)
 
(150
)
 
(472
)
 
(581
)
Adjusted Net Income
 
$
34,508

 
$
17,733

 
$
137,162

 
$
107,102

Net income per common share (GAAP):
 
 
 
 
 
 
 
 
Diluted
 
$
0.27

 
$
0.08

 
$
1.16

 
$
0.76

Adjusted earnings per common share (Non-GAAP):
 
 
 
 
 
 
 
 
Diluted
 
$
0.46

 
$
0.24

 
$
1.84

 
$
1.47

Shares used in computing adjusted earnings per common share:
 
 
 
 
 
 
 
 
Diluted
 
74,690,226

 
72,857,786

 
74,420,110

 
72,872,188

 
 
(1)
Represents the elimination of non-cash equity earnings from the Company's 19.99% equity investment in Dominican Republic, Consorcio de Tarjetas Dominicanas, S.A. (“CONTADO”), net of dividends received.
(2)
Primarily represents share-based compensation and other compensation expense of $2.9 million and $3.1 million for the quarters ended December 31, 2018 and 2017. For the year ended December 31, 2018 and 2017 primarily represents share-based compensation and other compensation expense of $12.6 million and $9.6 million, respectively, and severance payments of $1.0 million for the year ended December 31, 2018.
(3)
Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, recorded as part of selling, general and administrative expense and cost of revenues, as well as relief contributions related to the 2017 hurricanes.
(4)
Impairment charge and contractual fees accrual for a third party software solution that was determined to be commercially unviable.
(5)
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.
(6)
Represents interest expense, less interest income, as they appear on the consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount.
(7)
Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discreet items.
(8)
Represents the 35% non-controlling equity interest in Evertec Colombia (formerly referred to as Processa), net of amortization for intangibles created as part of the purchase.

10



EVERTEC, Inc.
Schedule 6: Outlook Summary and Reconciliation to Non-GAAP Adjusted Earnings per Share
 
 
 
 
 
 
 
 
 
2018
 
 
2019 Outlook
 
Actual
(Dollar amounts in millions, except per share data)
 
 
 
 
 
 
 
 
Revenues
 
$
464

 
to
 
$
476

 
$
454

Earnings per Share (EPS) (GAAP)
 
$
1.26

 
to
 
$
1.36

 
$
1.16

Per share adjustment to reconcile GAAP EPS to Non-GAAP Adjusted EPS:
 
 
 
 
 
 
 
 
Share-based comp, non-cash equity earnings and other (1)
 
0.18

 
 
 
0.18

 
0.29

Merger and acquisition related depreciation and amortization (2)
 
0.41

 
 
 
0.41

 
0.45

Non-cash interest expense (3)
 
0.04

 
 
 
0.04

 
0.05

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
 
0.54

 
 
 
0.54

 
0.68

Adjusted EPS (Non-GAAP)
 
$
1.80

 
to
 
$
1.90

 
$
1.84

Shares used in computing adjusted earnings per common share
 
 
 
 
 
74.4

 
74.4


 
 
(1)
Represents share-based compensation, the elimination of non-cash equity earnings from the Company's 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 (anticipated at approximately 13%).
(5)
Represents the 35% non-controlling equity interest in Evertec Colombia (formerly referred to as Processa) net of amortization for intangibles created as part of the purchase.


11
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