Exhibit 99.1
EVERTEC REPORTS FOURTH QUARTER AND FULL YEAR 2016 RESULTS
ANNOUNCES 2017 OUTLOOK
ANNOUNCES PENDING ACQUISITION IN CHILE
SAN JUAN, PUERTO RICO – February 22, 2017 –EVERTEC, Inc. (NYSE: EVTC) (“EVERTEC” or the “Company”) today announced results for the fourth quarter and full year ended December 31, 2016.
Fourth Quarter 2016 and Recent Highlights
| • | Revenue grew 6% to $101.9 million |
| • | GAAP Net Income was $16.0 million, or $0.22 per diluted share |
| • | Adjusted EBITDA grew 2% to $47.6 million |
| • | Adjusted earnings per share was $0.43, or a 2% decline |
| • | Completed acquisition of Accuprint in Puerto Rico |
| • | $18 million returned to shareholders in share repurchases and dividends |
| • | Acquisition in Chile for a purchase price of approximately $42 million pending Federal Reserve Board approval |
Full Year 2016 Highlights
| • | Revenue grew 4% to $389.5 million |
| • | GAAP Net Income was $75.0 million, or $1.01 per diluted share |
| • | Adjusted EBITDA grew 1% to $187.6 million |
| • | Adjusted earnings per share grew 5% to $1.67 |
| • | $70 million returned to shareholders in share repurchases and dividends |
Mac Schuessler, President and Chief Executive Officer, stated “We are pleased with the achievement of our annual financial goals in a challenging environment in Puerto Rico. We enhanced our focus on customer engagement and infrastructure improvements as well as completed two strategic acquisitions.
Schuessler continued, “Additionally, I am pleased to announce that we signed an agreement for an acquisition in Chile that would expand our geographic footprint, adding talent and complementary solutions in other key markets in South America.”
Fourth Quarter 2016 Results
Revenue. Total revenue for the quarter ended December 31, 2016 was $101.9 million, an increase of 6% compared with $95.7 million in the prior year.
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Merchant Acquiring, net revenue was $23.1 million, a decrease of 1% compared with $23.4 million in the prior year. Revenue decrease in the quarter was driven primarily by the shift of revenue from the merchant acquiring segment to the payment processing segment, reflecting the second quarter 2016 client contract change.
Payment Processing revenue was $28.8 million, an increase of 4% compared with $27.7 million in the prior year. Revenue results in the quarter reflected increases in transactions processed over the ATH® debit network and card processing volumes, increased revenue related to the Processa acquisition, and the previously referenced client contract change from merchant acquiring to payment processing. These increases were partially offset by a project delay and subsequent contract modification that had an approximately $2 million revenue impact on the current quarter.
Business Solutions revenue was $50.0 million, an increase of 12% compared with $44.6 million in the prior year. Business Solutions revenue growth in the quarter reflects increased revenue from completed IT consulting projects, the addition of revenue related to the acquisition of Accuprint, the impact of the annual CPI price increase on the Banco Popular Master Service Agreement and othernon-recurring revenue.
Adjusted EBITDA. For the quarter ended December 31, 2016, Adjusted EBITDA was $47.6 million, an increase of 2% compared to the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) decreased 200 basis points to 46.7% compared with 48.7% in the prior year. The decrease in Adjusted EBITDA margin was primarily driven by a change in revenue mix, increased investment expense related to Latin America growth initiatives and increased operating taxes.
Net Income. For the quarter ended December 31, 2016, GAAP Net Income was $16.0 million, or $0.22 per diluted share, compared with $21.9 million or $0.29 per diluted share in the prior year. The reduction in GAAP net income primarily reflects debt extinguishment expense related to the refinancing, a software asset write-down, a charge for the resolution of a software maintenance contract matter and an increased tax rate in the current year.
Adjusted Net Income. For the quarter ended December 31, 2016, Adjusted Net Income was $31.3 million, a decrease of 6% compared with $33.2 million in the prior year reflecting an increased tax rate in 2016. Adjusted earnings per diluted share was $0.43, a decrease of 2% compared with $0.44 in the prior year.
Share Repurchase
During the three months ended December 31, 2016, the Company repurchased approximately 0.6 million shares of common stock at an average price of $16.38 per share for a total of $10.3 million. For the full year 2016, the Company repurchased a total of 2.5 million shares of common stock at an average price of $15.95 per share for a total of $39.9 million. As of December 31, 2016, a total of approximately $80 million remained available for future use under the Company’s share repurchase program.
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Acquisitions
On December 14, 2016, the Company completed the acquisition of Accuprint for approximately $10 million. Accuprint provides data processing and print services for banks, insurance companies andnon-financial companies. The results of this acquisition are reported within the Business Solutions segment.
On February 17, 2017, the Company’s main operating subsidiary, Evertec Group, LLC, entered into an agreement to purchase directly or indirectly 100% of the share capital of EFT Group S.A., a Chilean-based company known commercially as PayGroup at a purchase price of approximately CLP 26,918 million, or approximately US$ 42 million at current exchange rates, subject to customary adjustments. PayGroup is a payment processing and software company serving primarily financial institutions throughout Latin America. The transaction is subject to customary closing conditions, including receipt of US federal bank regulatory approval, and a special provision that allows the selling shareholders to terminate the transaction if US federal bank regulatory approval has not been secured by June 12, 2017, in which case Evertec must pay a penalty of approximately US$2 million. Receipt of US federal bank regulatory approval is dependent on factors outside the control of Evertec. There is no assurance that such approval will be obtained by June 12, 2017 or at all.
2017 Outlook
The Company financial outlook for 2017 is as follows:
| • | Total consolidated revenue between $390 and $400 million representing growth of 0 to 3% |
| • | Adjusted earnings per share guidance of $1.50 to $1.63 representing a range of-10 to-2% as compared to $1.67 in 2016 |
| • | Capital expenditures ranging between $35 and $45 million |
| • | Effective tax rate ranging between 9.5 to 10.5% |
Earnings Conference Call and Audio Webcast
The Company will host a conference call to discuss its Fourth quarter 2016 financial results today at 5:00 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, 2017. 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.
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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 more than 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 18 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.
AboutNon-GAAP Financial Measures
This earnings release presents EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted earnings per share information. These supplemental measures of the Company’s performance are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America (“GAAP”). They are not measurements of the Company’s financial performance under GAAP and should not be considered as alternatives to total revenue, net income or any other performance measures derived in accordance with GAAP or as alternatives to cash flows from operating activities, as indicators of operating performance or as measures of the Company’s liquidity. In addition to GAAP measures, management uses thesenon-GAAP measures to focus on the factors the company believes are pertinent to the daily management of the Company’s operations and believe they are frequently used by securities analysts, investors and other interested parties to evaluate companies in the industry. Reconciliations of thenon-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release.
Forward-Looking Statements
Certain statements in this press release constitute “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of EVERTEC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” and “plans” and similar expressions of future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.
Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: the Company’s reliance on its relationship with Popular 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
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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
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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) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | ||||||||||||||||
Merchant Acquiring, net | $ | 23,111 | $ | 23,370 | $ | 91,248 | $ | 85,411 | ||||||||
Payment Processing | 28,791 | 27,682 | 111,507 | 108,320 | ||||||||||||
Business Solutions | 49,987 | 44,632 | 186,752 | 179,797 | ||||||||||||
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Total revenues | 101,889 | 95,684 | 389,507 | 373,528 | ||||||||||||
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Operating costs and expenses | ||||||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below | 48,682 | 42,821 | 175,809 | 167,916 | ||||||||||||
Selling, general and administrative expenses | 12,760 | 10,235 | 46,986 | 37,278 | ||||||||||||
Depreciation and amortization | 15,067 | 15,207 | 59,567 | 64,974 | ||||||||||||
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Total operating costs and expenses | 76,509 | 68,263 | 282,362 | 270,168 | ||||||||||||
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Income from operations | 25,380 | 27,421 | 107,145 | 103,360 | ||||||||||||
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Non-operating income (expenses) | ||||||||||||||||
Interest income | 111 | 124 | 377 | 495 | ||||||||||||
Interest expense | (6,325 | ) | (5,852 | ) | (24,617 | ) | (24,266 | ) | ||||||||
Earnings (losses) of equity method investment | 6 | (49 | ) | (52 | ) | 147 | ||||||||||
Other income, net | (1,203 | ) | 876 | 544 | 2,306 | |||||||||||
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Totalnon-operating expenses | (7,411 | ) | (4,901 | ) | (23,748 | ) | (21,318 | ) | ||||||||
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Income before income taxes | 17,969 | 22,520 | 83,397 | 82,042 | ||||||||||||
Income tax expense | 1,955 | 591 | 8,271 | (3,335 | ) | |||||||||||
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Net income | 16,014 | 21,929 | 75,126 | 85,377 | ||||||||||||
Less: Net income attributable tonon-controlling interest | 41 | — | 90 | — | ||||||||||||
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Net income attributable to EVERTEC, Inc.’s common stockholders | 15,973 | 21,929 | 75,036 | 85,377 | ||||||||||||
Other comprehensive loss, net of tax | ||||||||||||||||
Foreign currency translation adjustments | (740 | ) | (1,018 | ) | (3,360 | ) | (545 | ) | ||||||||
Gain (loss) on cash flow hedge | 3,015 | (515 | ) | (1,449 | ) | (515 | ) | |||||||||
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Total comprehensive income | $ | 18,248 | $ | 20,396 | $ | 70,227 | $ | 84,317 | ||||||||
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Net income per common share: | ||||||||||||||||
Basic | $ | 0.22 | $ | 0.29 | $ | 1.01 | $ | 1.11 | ||||||||
Diluted | $ | 0.22 | $ | 0.29 | $ | 1.01 | $ | 1.11 | ||||||||
Shares used in computing net income per common share: | ||||||||||||||||
Basic | 73,020,599 | 75,780,036 | 74,132,863 | 77,066,459 | ||||||||||||
Diluted | 73,563,167 | 75,923,316 | 74,473,369 | 77,181,123 | ||||||||||||
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EVERTEC, Inc.
Schedule 2: Unaudited Consolidated Balance Sheets
| (Dollar amounts in thousands) | December 31, 2016 | December 31, 2015 | ||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash | $ | 51,920 | $ | 28,747 | ||||
Restricted cash | 8,112 | 11,818 | ||||||
Accounts receivable, net | 77,803 | 73,715 | ||||||
Deferred tax asset | — | 1,685 | ||||||
Prepaid expenses and other assets | 20,430 | 18,758 | ||||||
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Total current assets | 158,265 | 134,723 | ||||||
Investment in equity investee | 12,252 | 12,264 | ||||||
Property and equipment, net | 38,930 | 34,128 | ||||||
Goodwill | 370,986 | 368,133 | ||||||
Other intangible assets, net | 299,119 | 312,059 | ||||||
Long-term deferred tax asset | 805 | — | ||||||
Other long-term assets | 5,305 | 2,347 | ||||||
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Total assets | $ | 885,662 | $ | 863,654 | ||||
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Liabilities and stockholders’ equity | ||||||||
Current Liabilities: | ||||||||
Accrued liabilities | 34,243 | $ | 37,308 | |||||
Accounts payable | 40,845 | 21,216 | ||||||
Unearned income | 4,531 | 2,877 | ||||||
Income tax payable | 1,755 | 1,350 | ||||||
Current portion of long-term debt | 19,789 | 22,750 | ||||||
Short-term borrowings | 28,000 | 17,000 | ||||||
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Total current liabilities | 129,163 | 102,501 | ||||||
Long-term debt | 599,667 | 619,297 | ||||||
Long-term deferred tax liability | 14,978 | 20,614 | ||||||
Unearned income - long-term | 17,303 | 10,939 | ||||||
Other long-term liabilities | 16,376 | 12,089 | ||||||
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Total liabilities | 777,487 | 765,440 | ||||||
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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; 72,635,032 shares issued and outstanding at December 31, 2016 (December 31, 2015 - 74,988,210) | 726 | 750 | ||||||
Additionalpaid-in capital | — | 9,718 | ||||||
Accumulated earnings | 116,341 | 95,328 | ||||||
Accumulated other comprehensive loss, net of tax | (12,391 | ) | (7,582 | ) | ||||
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Total EVERTEC, Inc stockholders’ equity | 104,676 | 98,214 | ||||||
Non-controlling interest | 3,499 | — | ||||||
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Total equity | 108,175 | 98,214 | ||||||
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Total liabilities and stockholders’ equity | $ | 885,662 | $ | 863,654 | ||||
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EVERTEC, Inc.
Schedule 3: Unaudited Consolidated Statements of Cash Flows
| Years ended December 31, | ||||||||
| (Dollar amounts in thousands) | 2016 | 2015 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 75,126 | $ | 85,377 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 59,567 | 64,974 | ||||||
Amortization of debt issue costs and accretion of discount | 4,334 | 3,329 | ||||||
Loss on extinguishment of debt | 1,476 | — | ||||||
Provision for doubtful accounts and sundry losses | 1,990 | 2,130 | ||||||
Deferred tax benefit | (4,594 | ) | (3,090 | ) | ||||
Share-based compensation | 6,408 | 5,204 | ||||||
Loss on disposal of property and equipment and other intangibles | 453 | 143 | ||||||
Loss on impairment of software | 2,277 | — | ||||||
Losses (earnings) of equity method investment | 52 | (147 | ) | |||||
Dividend received from equity method investment | — | — | ||||||
(Increase) decrease in assets: | ||||||||
Accounts receivable, net | (2,583 | ) | (4,482 | ) | ||||
Prepaid expenses and other assets | (1,426 | ) | (146 | ) | ||||
Other long-term assets | (1,790 | ) | (70 | ) | ||||
Increase (decrease) in liabilities: | ||||||||
Accounts payable and accrued liabilities | 14,594 | 15,947 | ||||||
Income tax payable | 405 | (606 | ) | |||||
Unearned income | 8,018 | 2,207 | ||||||
Other long-term liabilities | 3,747 | (8,351 | ) | |||||
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Total adjustments | 92,928 | 77,042 | ||||||
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Net cash provided by operating activities | 168,054 | 162,419 | ||||||
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Cash flows from investing activities | ||||||||
Net decrease (increase) in restricted cash | 3,705 | (6,100 | ) | |||||
Additions to software and purchase of customer relationship | (23,819 | ) | (25,960 | ) | ||||
Acquisitions, net of cash acquired | (15,600 | ) | — | |||||
Property and equipment acquired | (18,450 | ) | (21,022 | ) | ||||
Proceeds from sales of property and equipment | 81 | 14 | ||||||
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Net cash used in investing activities | (54,083 | ) | (53,068 | ) | ||||
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Cash flows from financing activities | ||||||||
Proceeds from issuance of long-term debt | 75,763 | — | ||||||
Debt issuance costs | (4,830 | ) | — | |||||
Net increase (decrease) in short-term borrowings | 11,000 | (6,000 | ) | |||||
Repayments of borrowings for purchase of equipment and software | (2,213 | ) | (1,542 | ) | ||||
Dividends paid | (29,696 | ) | (30,921 | ) | ||||
Statutory minimum withholding taxes paid on share-based compensation | (548 | ) | (306 | ) | ||||
Tax windfall benefits on share-based compensation | — | — | ||||||
Issuance of common stock | — | — | ||||||
Repurchase of common stock | (39,946 | ) | (54,949 | ) | ||||
Settlement of stock options | — | — | ||||||
Repayment of long-term debt | (96,741 | ) | (19,000 | ) | ||||
Credit amendment fees | (3,587 | ) | — | |||||
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Net cash used in financing activities | (90,798 | ) | (112,718 | ) | ||||
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Net increase (decrease) in cash | 23,173 | (3,367 | ) | |||||
Cash at beginning of the period | 28,747 | 32,114 | ||||||
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Cash at end of the period | $ | 51,920 | $ | 28,747 | ||||
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EVERTEC, Inc.
Schedule 4: Unaudited Income from Operations by Segment
| Quarter ended December 31, | Year ended December 31, | |||||||||||||||
| (Dollar amounts in thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Segment income from operations | ||||||||||||||||
Merchant Acquiring, net | $ | 7,111 | $ | 8,999 | $ | 31,051 | $ | 36,466 | ||||||||
Payment Processing | 12,578 | 14,512 | 52,071 | 55,429 | ||||||||||||
Business Solutions | 13,495 | 11,786 | 56,794 | 50,200 | ||||||||||||
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Total segment income from operations | 33,184 | 35,297 | 139,916 | 142,095 | ||||||||||||
Merger related depreciation and amortization and other unallocated expenses(1) | (7,804 | ) | (7,876 | ) | (32,771 | ) | (38,735 | ) | ||||||||
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Income from operations | $ | 25,380 | $ | 27,421 | $ | 107,145 | $ | 103,360 | ||||||||
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| (1) | Primarily representsnon-operating depreciation and amortization expenses generated as a result of the Merger and certainnon-recurring fees and expenses. |
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EVERTEC, Inc.
Schedule 5: Reconciliation of GAAP toNon-GAAP Operating Results
| Quarter ended December 31, | Year ended December 31, | |||||||||||||||
| (Dollar amounts in thousands, except share data) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 16,014 | $ | 21,929 | $ | 75,126 | $ | 85,377 | ||||||||
Income tax expense (benefit) | 1,955 | 591 | 8,271 | (3,335 | ) | |||||||||||
Interest expense, net | 6,214 | 5,728 | 24,240 | 23,771 | ||||||||||||
Depreciation and amortization | 15,067 | 15,207 | 59,567 | 64,974 | ||||||||||||
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EBITDA | 39,250 | 43,455 | 167,204 | 170,787 | ||||||||||||
Software maintenance reimbursement and other costs(1) | — | 494 | 521 | 1,902 | ||||||||||||
Equity (income) loss(2) | (6 | ) | 49 | (19 | ) | (147 | ) | |||||||||
Compensation and benefits(3) | 2,449 | 2,302 | 10,482 | 12,237 | ||||||||||||
Transaction, refinancing and other fees(4) | 5,882 | 324 | 7,579 | 1,316 | ||||||||||||
Purchase accounting(5) | — | — | — | 82 | ||||||||||||
Restatement related expenses(6) | — | — | 1,837 | — | ||||||||||||
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Adjusted EBITDA | 47,575 | 46,624 | 187,604 | 186,177 | ||||||||||||
Operating depreciation and amortization(7) | (7,302 | ) | (7,634 | ) | (28,468 | ) | (29,301 | ) | ||||||||
Cash interest expense, net(8) | (5,137 | ) | (4,941 | ) | (20,468 | ) | (20,665 | ) | ||||||||
Income tax expense(9) | (3,748 | ) | (892 | ) | (13,752 | ) | (13,211 | ) | ||||||||
Non-controlling interest (10) | (89 | ) | — | (258 | ) | — | ||||||||||
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Adjusted Net Income | $ | 31,299 | $ | 33,157 | $ | 124,658 | $ | 123,000 | ||||||||
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Net income per common share (GAAP): | ||||||||||||||||
Diluted | $ | 0.22 | $ | 0.29 | $ | 1.01 | $ | 1.11 | ||||||||
Adjusted earnings per common share(Non-GAAP): | ||||||||||||||||
Diluted | $ | 0.43 | $ | 0.44 | $ | 1.67 | $ | 1.59 | ||||||||
Shares used in computing adjusted earnings per common share: | ||||||||||||||||
Diluted | 73,563,167 | 75,923,316 | 74,473,369 | 77,181,123 | ||||||||||||
| 1) | Predominantly represents reimbursements received for certain software maintenance expenses as part of the Merger. |
| 2) | Represents the elimination ofnon-cash equity earnings from our 19.99% equity investment in CONTADO, net of cash dividends received. |
| 3) | Primarily represents share-based compensation and other compensation expense of $1.8 million and $1.5 million for the quarters ended December 31, 2016 and 2015 and severance payments of $0.7 million and $0.2 million for the quarters ended December 31, 2016 and 2015 and share-based compensation and other compensation expense of $6.4 million and $5.3 million for the year ended December 31, 2016 and 2015 and severance payments of $3.7 million and $6.4 million for the year ended December 31, 2016 and 2015. |
| 4) | Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, certain fees paid to resolve a software maintenance contract matter, fees associated with the debt refinancing and a software writedown. |
| 5) | Represents the elimination of the effects of purchase accounting in connection with certain customer service and software-related arrangements whereby EVERTEC receives reimbursements from Popular. |
| 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. |
| 8) | Represents interest expense, less interest income, as they appear on our consolidated statements of income and comprehensive income, adjusted to excludenon-cash amortization of the debt issue costs, premium and accretion of discount. |
| 9) | Represents income tax expense calculated on adjustedpre-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. |
10
EVERTEC, Inc.
Schedule 6: Reconciliation of Adjusted Net Income to GAAP Net Income
| Quarter ended December 31, | ||||||||||||||||||||||||
| (Dollar amounts in thousands, except share data) | 2016 | 2015 | ||||||||||||||||||||||
| GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
Revenues | $ | 101,889 | $ | 101,889 | $ | 95,684 | $ | 95,684 | ||||||||||||||||
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|
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| |||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below | 48,682 | (4,736 | ) (1),(3) | 43,946 | 42,821 | (1,672 | ) (1),(3) | 41,149 | ||||||||||||||||
Selling, general and administrative expenses | 12,760 | (2,119 | ) (3),(4),(5),(6) | 10,641 | 10,235 | (1,448 | ) (3),(4),(5) | 8,787 | ||||||||||||||||
Depreciation and amortization | 15,067 | (7,765 | ) (7) | 7,302 | 15,207 | (7,573 | ) (7) | 7,634 | ||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||
Total operating costs and expenses | 76,509 | 61,889 | 68,263 | 57,570 | ||||||||||||||||||||
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|
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| |||||||||||||||||
Income from operations | 25,380 | 40,000 | 27,421 | 38,114 | ||||||||||||||||||||
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|
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|
|
| |||||||||||||||||
Non-operating income (expenses) | ||||||||||||||||||||||||
Interest income | 111 | (111 | ) (8) | — | 124 | (124 | ) (8) | — | ||||||||||||||||
Interest expense | (6,325 | ) | 1,188 | (8) | (5,137 | ) | (5,852 | ) | 911 | (8) | (4,941 | ) | ||||||||||||
Earnings of equity method investment | 6 | (6 | ) (2) | — | (49 | ) | 49 | (2) | — | |||||||||||||||
Other income, net | (1,203 | ) | 1,476 | (4) | 273 | 876 | 876 | |||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||
Totalnon-operating expenses | (7,411 | ) | (4,864 | ) | (4,901 | ) | (4,065 | ) | ||||||||||||||||
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|
|
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| |||||||||||||||||
Income before income taxes | 17,969 | 35,136 | 22,520 | 34,049 | ||||||||||||||||||||
Income tax expense | 1,955 | 1,793 | (9) | 3,748 | 591 | 301 | (9) | 892 | ||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||
Net income | 16,014 | 31,388 | 21,929 | 33,157 | ||||||||||||||||||||
Less: Net income attributable tonon-controlling interest | 41 | 48 | (10) | 89 | — | — | ||||||||||||||||||
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| |||||||||||||||||
Net income attributable to EVERTEC, Inc.’s common stockholders’ | 15,973 | 31,299 | 21,929 | 33,157 | ||||||||||||||||||||
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Earnings per common share: | ||||||||||||||||||||||||
Diluted | $ | 0.22 | $ | 0.43 | $ | 0.29 | $ | 0.44 | ||||||||||||||||
Shares used in computing earnings per common share: | ||||||||||||||||||||||||
Diluted | 73,563,167 | 75,923,316 | ||||||||||||||||||||||
| Year ended December 31, | ||||||||||||||||||||||||
| (Dollar amounts in thousands, except per share data) | 2016 | 2015 | ||||||||||||||||||||||
| GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Total revenues | $ | 389,507 | $ | 389,507 | $ | 373,528 | $ | 373,528 | ||||||||||||||||
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| |||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below | 175,809 | (8,847 | ) (1),(3) | 166,962 | 167,916 | (8,789 | ) (1),(3) | 159,127 | ||||||||||||||||
Selling, general and administrative expenses | 46,986 | (10,096 | ) (3),(4),(5),(6) | 36,890 | 37,278 | (6,748 | ) (3),(4),(5) | 30,530 | ||||||||||||||||
Depreciation and amortization | 59,567 | (31,099 | ) (7) | 28,468 | 64,974 | (35,673 | ) (7) | 29,301 | ||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||
Total operating costs and expenses | 282,362 | 232,320 | 270,168 | 218,958 | ||||||||||||||||||||
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| |||||||||||||||||
Income from operations | 107,145 | 157,187 | 103,360 | 154,570 | ||||||||||||||||||||
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|
|
| |||||||||||||||||
Non-operating income (expenses) | ||||||||||||||||||||||||
Interest income | 377 | (377 | ) (8) | — | 495 | (495 | ) (8) | — | ||||||||||||||||
Interest expense | (24,617 | ) | 4,149 | (8) | (20,468 | ) | (24,266 | ) | 3,601 | (8) | (20,665 | ) | ||||||||||||
Earnings of equity method investment | (52 | ) | (19 | ) (2) | (71 | ) | 147 | (147 | ) (2) | — | ||||||||||||||
Other income | 544 | 1,476 | (4) | 2,020 | 2,306 | 2,306 | ||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||
Totalnon-operating expenses | (23,748 | ) | (18,519 | ) | (21,318 | ) | (18,359 | ) | ||||||||||||||||
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|
| |||||||||||||||||
Income before income taxes | 83,397 | 138,668 | 82,042 | 136,211 | ||||||||||||||||||||
Income tax expense | 8,271 | 5,481 | (9) | 13,752 | (3,335 | ) | 16,546 | (9) | 13,211 | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||
Net income | 75,126 | 124,916 | 85,377 | 123,000 | ||||||||||||||||||||
Less: Net income attributable tonon-controlling interest | 90 | 168 | (10) | 258 | — | — | ||||||||||||||||||
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|
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| |||||||||||||||||
Net income attributable to EVERTEC, Inc.’s common stockholders’ | 75,036 | 124,658 | 85,377 | 123,000 | ||||||||||||||||||||
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Earnings per common share: | ||||||||||||||||||||||||
Diluted | $ | 1.01 | $ | 1.67 | $ | 1.11 | $ | 1.59 | ||||||||||||||||
Shares used in computing earnings per common share: | ||||||||||||||||||||||||
Diluted | 74,473,369 | 77,181,123 | ||||||||||||||||||||||
| 1) | Predominantly represents reimbursements received for certain software maintenance expenses as part of the Merger. |
| 2) | Represents the elimination ofnon-cash equity earnings from our 19.99% equity investment in CONTADO, net of cash dividends received. |
| 3) | Primarily represents share-based compensation and other compensation expense of $1.8 million and $1.5 million for the quarters ended December 31, 2016 and 2015 and severance payments of $0.7 million and $0.2 million for the quarters ended December 31, 2016 and 2015 and share-based compensation and other compensation expense of $6.4 million and $5.3 million for the year ended December 31, 2016 and 2015 and severance payments of $3.7 million and $6.4 million for the year ended December 31, 2016 and 2015. |
| 4) | Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, certain fees paid to resolve a software maintenance contract matter, fees associated with the debt refinancing and a software writedown. |
| 5) | Represents the elimination of the effects of purchase accounting in connection with certain customer service and software-related arrangements whereby EVERTEC receives reimbursements from Popular. |
| 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. |
| 8) | Represents interest expense, less interest income, as they appear on our consolidated statements of income and comprehensive income, adjusted to excludenon-cash amortization of the debt issue costs, premium and accretion of discount. |
| 9) | Represents income tax expense calculated on adjustedpre-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. |
11
EVERTEC, Inc.
Schedule 7: Outlook Summary and Reconciliation toNon-GAAP Adjusted Earnings per Share
| 2016 | ||||||||||||||||
| 2017 Outlook | Actual | |||||||||||||||
| (Dollar amounts in millions, except share data) | ||||||||||||||||
Revenues | $ | 390 | to | $ | 400 | $ | 390 | |||||||||
Earnings per Share (EPS) (GAAP) | $ | 0.92 | to | $ | 1.06 | $ | 1.01 | |||||||||
Per share adjustment to reconcile GAAP EPS toNon-GAAP Adjusted EPS: | ||||||||||||||||
Share-based comp,non-cash equity earnings and other(1) | 0.18 | 0.18 | 0.27 | |||||||||||||
Merger related depreciation and amortization(2) | 0.41 | 0.41 | 0.42 | |||||||||||||
Non-cash interest expense(3) | 0.05 | 0.05 | 0.05 | |||||||||||||
Tax effect of non-gaap adjustments(4) | (0.06 | ) | (0.06 | ) | (0.07 | ) | ||||||||||
Non-controlling interest(5) | (0.01 | ) | (0.01 | ) | (0.00 | ) | ||||||||||
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|
| |||||||||||
Total adjustments | 0.58 | 0.58 | 0.67 | |||||||||||||
Adjusted EPS(Non-GAAP) | $ | 1.50 | to | $ | 1.63 | $ | 1.67 | |||||||||
Shares used in computing adjusted earnings per share | 73.5 | 74.5 | ||||||||||||||
| 1) | Represents share based compensation, the elimination ofnon-cash equity earnings from our 19.99% equity investment in CONTADO, and other adjustments to reconcile GAAP EPS toNon-GAAP EPS. |
| 2) | Represents depreciation and amortization expenses amounts generated as a result of the Merger. |
| 3) | Representsnon-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 9.5% to 10.5%). |
| 5) | Represents the 35%non-controlling equity interest in Processa, net of amortization for intangibles created as part of the purchase. |
12