Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 27, 2020 | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-38504 | |
Entity Registrant Name | EVO Payments, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | Ten Glenlake Parkway | |
Entity Address, Address Line Two | South Tower, Suite 950 | |
Entity Address, City or Town | Atlanta | |
Entity Address, Country | GE | |
Entity Tax Identification Number | 82-1304484 | |
Entity Address, Postal Zip Code | 30328 | |
City Area Code | 770 | |
Local Phone Number | 709-7374 | |
Title of 12(b) Security | Class A common stock, par value $0.0001 per share | |
Trading Symbol | EVOP | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001704596 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Class A Common Stock | ||
Entity Common Stock, Shares Outstanding | 41,362,132 | |
Class B Common Stock | ||
Entity Common Stock, Shares Outstanding | 34,163,538 | |
Class C Common Stock | ||
Entity Common Stock, Shares Outstanding | 2,317,955 | |
Class D Common Stock | ||
Entity Common Stock, Shares Outstanding | 4,339,978 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 257,097 | $ 304,089 |
Accounts receivable, net | 11,568 | 15,881 |
Other receivables | 17,062 | 24,438 |
Due from related parties | 345 | 1,125 |
Inventory | 10,374 | 9,128 |
Settlement processing assets | 200,357 | 328,637 |
Other current assets | 13,927 | 12,867 |
Total current assets | 510,730 | 696,165 |
Equipment and improvements, net | 80,680 | 94,464 |
Goodwill, net | 361,102 | 378,838 |
Intangible assets, net | 224,048 | 257,560 |
Investment in unconsolidated investees | 1,986 | 2,078 |
Deferred tax assets | 220,393 | 210,275 |
Operating lease right-of-use assets | 37,386 | 45,664 |
Other assets | 21,050 | 21,360 |
Total assets | 1,457,375 | 1,706,404 |
Current liabilities: | ||
Settlement lines of credit | 18,377 | 33,103 |
Current portion of long-term debt | 4,628 | 8,744 |
Accounts payable | 13,370 | 13,584 |
Accrued expenses | 98,253 | 110,079 |
Settlement processing obligations | 287,328 | 449,302 |
Current portion of operating lease liabilities, inclusive of related party liability of $1.2 million at March 31, 2020 and December 31, 2019 | 7,032 | 7,087 |
Due to related parties | 4,067 | 7,325 |
Total current liabilities | 433,055 | 629,224 |
Long-term debt, net of current portion | 708,117 | 693,169 |
Due to related parties | 385 | 385 |
Deferred tax liabilities | 12,794 | 17,260 |
Tax receivable agreement obligations, inclusive of related party liability of $141.3 million and $141.1 million at March 31, 2020 and December 31, 2019, respectively | 150,398 | 150,274 |
ISO reserves | 2,693 | 2,758 |
Operating lease liabilities, net of current portion, inclusive of related party liability of $2.9 million and $3.2 million at March 31, 2020 and December 31, 2019, respectively. | 33,166 | 41,703 |
Other long-term liabilities | 1,391 | 1,830 |
Total liabilities | 1,341,999 | 1,536,603 |
Commitments and contingencies | ||
Redeemable non-controlling interests | 619,205 | 1,052,448 |
Shareholders' equity (deficit): | ||
Additional paid-in capital | 6,035 | |
Accumulated deficit attributable to Class A common stock | (246,961) | (587,358) |
Accumulated other comprehensive loss | (20,504) | (1,948) |
Total EVO Payments, Inc. shareholders' deficit | (261,423) | (589,299) |
Nonredeemable non-controlling interests | (242,406) | (293,348) |
Total deficit | (503,829) | (882,647) |
Total liabilities and deficit | 1,457,375 | 1,706,404 |
Class A Common Stock | ||
Shareholders' equity (deficit): | ||
Common stock | 4 | 4 |
Total deficit | 4 | 4 |
Class B Common Stock | ||
Shareholders' equity (deficit): | ||
Common stock | 3 | 3 |
Total deficit | 3 | 3 |
Class C Common Stock | ||
Shareholders' equity (deficit): | ||
Common stock | ||
Class D Common Stock | ||
Shareholders' equity (deficit): | ||
Common stock |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Operating lease liabilities, related party current | $ 1.2 | $ 1.2 |
Tax receivable agreement, related party | 141.3 | 141.1 |
Operating lease liabilities, related party non current | $ 2.9 | $ 3.2 |
Class A Common Stock | ||
Shareholders'/members' equity (deficit): | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock shares issued (in shares) | 41,361,208 | 41,233,954 |
Common stock shares outstanding (in shares) | 41,361,208 | 41,233,954 |
Class B Common Stock | ||
Shareholders'/members' equity (deficit): | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock shares authorized (in shares) | 40,000,000 | 40,000,000 |
Common stock shares issued (in shares) | 34,163,538 | 34,163,538 |
Common stock shares outstanding (in shares) | 34,163,538 | |
Class C Common Stock | ||
Shareholders'/members' equity (deficit): | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock shares authorized (in shares) | 4,000,000 | 4,000,000 |
Common stock shares issued (in shares) | 2,317,955 | 2,321,955 |
Common stock shares outstanding (in shares) | 2,317,955 | 2,321,955 |
Class D Common Stock | ||
Shareholders'/members' equity (deficit): | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock shares authorized (in shares) | 32,000,000 | 32,000,000 |
Common stock shares issued (in shares) | 4,339,978 | 4,354,978 |
Common stock shares outstanding (in shares) | 4,339,978 | 4,354,978 |
Unaudited Condensed Consolida_3
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss | ||
Revenue | $ 111,169 | $ 111,518 |
Operating expenses: | ||
Cost of services and products | 23,129 | 24,083 |
Selling, general, and administrative | 72,303 | 66,422 |
Depreciation and amortization | 21,424 | 22,745 |
Impairment of intangible assets | 6,632 | |
Total operating expenses | 116,856 | 119,882 |
Loss from operations | (5,687) | (8,364) |
Other (expense) income: | ||
Interest income | 413 | 675 |
Interest expense | (9,867) | (11,652) |
Income from investment in unconsolidated investees | 40 | 216 |
Other (expense) income, net | (49) | 1,094 |
Total other expense | (9,463) | (9,667) |
Loss before income taxes | (15,150) | (18,031) |
Income tax benefit (expense) | 1,580 | (988) |
Net loss | (13,570) | (19,019) |
Less: Net income attributable to non-controlling interests in consolidated entities | 1,039 | 582 |
Less: Net loss attributable to non-controlling interests of EVO Investco, LLC | (9,801) | (14,311) |
Net loss attributable to EVO Payments, Inc. | $ (4,808) | $ (5,290) |
Earnings per share | ||
Basic (in dollars per share) | $ (0.12) | $ (0.20) |
Diluted (in dollars per share) | $ (0.12) | $ (0.20) |
Weighted-average Class A common stock outstanding | ||
Basic (in shares) | 41,259,398 | 26,365,552 |
Diluted (in shares) | 41,259,398 | 26,365,552 |
Comprehensive loss: | ||
Net loss | $ (13,570) | $ (19,019) |
Unrealized loss on foreign currency translation adjustment, net of tax (1) | (47,709) | (2,476) |
Comprehensive loss | (61,279) | (21,495) |
Less: Comprehensive loss attributable to non-controlling interests in consolidated entities | (3,749) | (573) |
Less: Comprehensive loss attributable to non-controlling interests of EVO Investco, LLC | (34,166) | (15,332) |
Comprehensive loss attributable to EVO Payments, Inc. | $ (23,364) | $ (5,590) |
Unaudited Condensed Consolida_4
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss | ||
Unrealized loss on defined benefit pension plan, tax | $ 6.1 | $ 0.7 |
Unaudited Condensed Consolida_5
Unaudited Condensed Consolidated Statements of Changes in Equity (Deficit) - USD ($) $ in Thousands | EVO Payments, Inc. equity/(deficit) | Additional paid-in capital | Accumulated deficit attributable to Class A common stock | Accumulated other comprehensive loss | Nonredeemable non-controlling interests | Class A Common Stock | Class B Common Stock | Class C Common Stock | Class D Common Stock | Total |
Beginning balance at Dec. 31, 2018 | $ (48,608) | $ 178,176 | $ (223,799) | $ (2,993) | $ (814,074) | $ 3 | $ 4 | $ 1 | $ (862,682) | |
Beginning balance (in shares) at Dec. 31, 2018 | 26,025 | 35,914 | 2,461 | 16,786 | ||||||
Statements of Changes in Equity | ||||||||||
Prior period adjustment | (20,629) | (20,629) | 20,629 | |||||||
Net loss | (5,290) | (5,290) | (4,797) | (10,087) | ||||||
Cumulative translation adjustment | (1,047) | (1,047) | 404 | (643) | ||||||
Distributions | (15) | (15) | ||||||||
Share-based compensation expense | 1,845 | 1,845 | 1,845 | |||||||
Vesting of equity awards | (129) | (129) | (129) | |||||||
Deferred taxes in connection with share exchanges and secondary offerings | 121 | 121 | 121 | |||||||
Deferred taxes in connection with share exchanges and secondary offerings (in shares) | (2) | |||||||||
Tax receivable agreement in connection with share exchanges and secondary offerings | 334 | 334 | 334 | |||||||
Exchanges of Class C and Class D common stock for Class A common stock | (20,293) | (20,293) | 20,293 | |||||||
Exchanges of Class C and Class D common stock for Class A common stock (in shares) | 491 | (12) | (479) | |||||||
eService redeemable non-controlling interest fair value adjustment | (646) | (646) | (457) | (1,103) | ||||||
Blueapple redeemable non-controlling interest fair value adjustment | (98,922) | (98,922) | (70,062) | (168,984) | ||||||
Ending balance at Mar. 31, 2019 | (193,264) | 139,425 | (328,657) | (4,040) | (848,079) | $ 3 | $ 4 | $ 1 | (1,041,343) | |
Ending balance (in shares) at Mar. 31, 2019 | 26,514 | 35,914 | 2,449 | 16,307 | ||||||
Beginning balance at Dec. 31, 2018 | 1,010,093 | |||||||||
Redeemable non-controlling interests | ||||||||||
Net loss | (8,932) | |||||||||
Cumulative translation adjustment prior to Reorganization Transactions | (2,580) | |||||||||
Distributions | (5,465) | |||||||||
eService redeemable non-controlling interest fair value adjustment | 1,103 | |||||||||
Blueapple redeemable non-controlling interest fair value adjustment subsequent to the Reorganization Transactions | 168,984 | |||||||||
Ending balance at Mar. 31, 2019 | 1,163,203 | |||||||||
Beginning balance at Dec. 31, 2018 | (48,608) | 178,176 | (223,799) | (2,993) | (814,074) | $ 3 | $ 4 | $ 1 | (862,682) | |
Beginning balance (in shares) at Dec. 31, 2018 | 26,025 | 35,914 | 2,461 | 16,786 | ||||||
Ending balance at Dec. 31, 2019 | (589,299) | (587,358) | (1,948) | (293,348) | $ 4 | $ 3 | (882,647) | |||
Ending balance (in shares) at Dec. 31, 2019 | 41,234 | 34,164 | 2,322 | 4,355 | ||||||
Beginning balance at Dec. 31, 2018 | 1,010,093 | |||||||||
Redeemable non-controlling interests | ||||||||||
Net loss | (6,712) | |||||||||
Distributions | (9,475) | |||||||||
Ending balance at Dec. 31, 2019 | 1,052,448 | |||||||||
Statements of Changes in Equity | ||||||||||
Net loss | (4,808) | (4,808) | (1,474) | (6,282) | ||||||
Cumulative translation adjustment | (18,556) | (18,556) | (3,977) | (22,533) | ||||||
Distributions | (63) | (63) | ||||||||
Share-based compensation expense | 3,585 | 3,585 | 3,585 | |||||||
Vesting of equity awards | (339) | (339) | (339) | |||||||
Vesting of equity awards (in shares) | 107 | |||||||||
Exercise of stock options | 17 | 17 | 17 | |||||||
Exercise of stock options (in shares) | 1 | |||||||||
Deferred taxes in connection with share exchanges | 3,632 | 3,632 | 3,632 | |||||||
Tax receivable agreement in connection with share exchanges | 22 | 22 | 22 | |||||||
Exchanges of Class C and Class D common stock for Class A common stock | (882) | (882) | 882 | |||||||
Exchanges of Class C and Class D common stock for Class A common stock (in shares) | 19 | (4) | (15) | |||||||
eService redeemable non-controlling interest fair value adjustment | 25,069 | 25,069 | 4,036 | 29,105 | ||||||
Blueapple redeemable non-controlling interest fair value adjustment | 320,136 | 320,136 | 51,538 | 371,674 | ||||||
Ending balance at Mar. 31, 2020 | $ (261,423) | $ 6,035 | $ (246,961) | $ (20,504) | $ (242,406) | $ 4 | $ 3 | (503,829) | ||
Ending balance (in shares) at Mar. 31, 2020 | 41,361 | 34,164 | 2,318 | 4,340 | ||||||
Redeemable non-controlling interests | ||||||||||
Net loss | (7,288) | |||||||||
Cumulative translation adjustment prior to Reorganization Transactions | (25,176) | |||||||||
eService redeemable non-controlling interest fair value adjustment | (29,105) | |||||||||
Blueapple redeemable non-controlling interest fair value adjustment subsequent to the Reorganization Transactions | (371,674) | |||||||||
Ending balance at Mar. 31, 2020 | $ 619,205 |
Unaudited Condensed Consolida_6
Unaudited Condensed Consolidated Statements of Changes in Equity (Deficit) (Parenthetical) $ in Thousands | Dec. 31, 2018USD ($) |
Shareholders' equity (deficit) | $ (862,682) |
Additional paid-in capital | |
Shareholders' equity (deficit) | 178,176 |
Additional paid-in capital | Restatement Adjustment | |
Shareholders' equity (deficit) | $ 20,600 |
Unaudited Condensed Consolida_7
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (13,570) | $ (19,019) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 21,424 | 22,745 |
Amortization of deferred financing costs | 669 | 673 |
Change in fair value of contingent consideration | (43) | 1,953 |
Share-based compensation expense | 3,585 | 1,845 |
Impairment of intangible assets | 6,632 | |
Accrued interest expense | (4,116) | 553 |
Deferred taxes, net | (4,833) | (544) |
Other | (10) | (22) |
Changes in operating assets and liabilities, net of effect of acquisitions: | ||
Accounts receivable, net | 3,615 | 1,187 |
Other receivables | 5,307 | (612) |
Inventory | (1,939) | (758) |
Other current assets | (1,699) | (1,143) |
Operating lease right-of-use assets | 1,807 | 1,592 |
Other assets | (436) | 88 |
Related parties, net | (1,831) | 246 |
Accounts payable | 466 | 1,616 |
Accrued expenses | (3,948) | (5,895) |
Settlement processing funds, net | (29,222) | (129,102) |
Operating lease liabilities | (1,822) | (1,674) |
Other | (65) | 26 |
Net cash used in operating activities | (26,661) | (119,613) |
Cash flows from investing activities: | ||
Acquisition of businesses, net of cash acquired | (3,030) | |
Purchase of equipment and improvements | (5,167) | (6,503) |
Acquisition of intangible assets | (1,702) | (1,660) |
Collections of notes receivable | 12 | 1,400 |
Net cash used in investing activities | (6,857) | (9,793) |
Cash flows from financing activities: | ||
Proceeds from long-term debt | 176,747 | 126,597 |
Repayments of long-term debt | (176,420) | (117,713) |
Deferred financing costs paid | (2) | |
Contingent consideration paid | (781) | (331) |
Repurchases of shares to satisfy minimum tax withholding | (339) | (130) |
Proceeds from exercise of common stock options | 17 | |
Distribution to non-controlling interests holders | (63) | (5,480) |
Net cash (used in) provided by financing activities | (839) | 2,941 |
Effect of exchange rate changes on cash and cash equivalents | (12,635) | (3,149) |
Net (decrease) increase in cash and cash equivalents | (46,992) | (129,614) |
Cash and cash equivalents, beginning of period | 304,089 | 350,697 |
Cash and cash equivalents, end of period | $ 257,097 | $ 221,083 |
Description of Business and Sum
Description of Business and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Description of Business and Summary of Significant Accounting Policies | |
Description of Business and Summary of Significant Accounting Policies | (1) Description of Business and Summary of Significant Accounting Policies (a) Description of Business EVO, Inc. is a Delaware corporation whose primary asset is its ownership of approximately 50.3% The Company is a leading payment technology and services provider, offering an array of innovative, reliable and secure payment solutions to merchants across the Americas and Europe and servicing over 550,000 merchants across more than 50 markets. The Company supports all major card types in the markets it serves. The Company provides card-based payment processing services to small and middle market merchants, multinational corporations, government agencies, and other business and nonprofit enterprises located throughout the Americas and Europe. These services enable merchants to accept credit and debit cards and other electronic payment methods as payment for their products and services by providing terminal devices, card authorization, data capture, funds settlement, risk management, fraud detection, and chargeback services. The Company operates two reportable segments: the Americas and Europe. (b) Basis of Presentation and Use of Estimates The accompanying unaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, the unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, the unaudited condensed consolidated statement of changes in equity (deficit) for the three months ended March 31, 2020 and 2019, and the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 reflect all adjustments that are of a normal, recurring nature and that are considered necessary for a fair presentation of the results for the periods shown in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial reporting periods. Accordingly, certain information and footnote disclosures have been condensed or omitted in accordance with SEC rules that would ordinarily be required under U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported assets and liabilities, as of the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Estimates used for accounting purposes include, but are not limited to, valuation of redeemable non-controlling interests (“RNCI”), evaluation of realizability of deferred tax assets, determination of liabilities under the tax receivable agreement, determination of liabilities and corresponding right-of-use assets arising from lease agreements, determination of fair value of share-based compensation, establishment of severance liabilities, establishment of allowance for doubtful accounts, and assessment of recoverability of long-lived assets. (c) Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company. As the sole managing member of EVO, LLC, the Company exerts control over the Group. In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation (d) Cash and Cash Equivalents and Merchant Reserves Cash and cash equivalents include all cash balances and highly liquid securities with original maturities of three months or less. Cash balances often exceed federally insured limits; however, concentration of credit risk is limited due to the payment of funds on the day following receipt in satisfaction of the settlement process. Included in cash and cash equivalents are settlement-related cash and merchant reserves. Settlement-related cash represents funds that the Company holds when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash balances are not restricted, however these funds are generally paid out in satisfaction of settlement processing obligations and therefore are not available for general purposes. As of March 31, 2020 and December 31, 2019, settlement-related cash balances were $100.3 million and $178.8 million, respectively. Merchant reserves represent funds collected from the Company’s merchants that serve as collateral to minimize contingent liabilities associated with any losses that may occur under the respective merchant agreements. While this cash is not restricted in its use, the Company believes that maintaining the merchant reserves to collateralize merchant losses strengthens its fiduciary standings with its card network sponsors (“Member Banks”) and is in accordance with the guidelines set by the card networks. As of March 31, 2020 and December 31, 2019, merchant reserves were $87.1 million and $85.8 million, respectively. (e) Recent Accounting Pronouncements New accounting pronouncements issued by the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies are adopted as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption. Recently Adopted Accounting Pronouncements Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments Fair Value Measurement In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement Fair Value Measurement Internal Use Software In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract Recently Issued Accounting Pronouncements Not Yet Adopted Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform |
Revenue
Revenue | 3 Months Ended |
Mar. 31, 2020 | |
Revenue | |
Revenue | (2) Revenue The Company primarily earns revenue from payment processing services, and has contractual agreements with its customers that set forth the general terms and conditions of the service relationship, including line item pricing, payment terms and contract duration. The Company also earns revenue from the sale and rental of electronic point-of-sale (“POS”) equipment. The revenue recognized from the sale and rental of POS equipment totaled $9.9 million and $9.7 million for the three months ended March 31, 2020 and 2019, respectively. The table below presents a disaggregation of the Company’s revenue by segment and by division. The Company’s divisions are as follows: ● Direct – Represents the direct solicitation of merchants through referral relationships, including financial institutions and the Company’s direct sales channel. The Company has long-term, exclusive referral relationships with leading financial institutions that represent thousands of branch locations which actively pursue new merchant relationships on the Company’s behalf. The Company also has referral arrangements with ISOs that refer merchants to the Company. The Company also utilizes a direct sales team, including outbound telesales, to build and maintain relationships with its merchants and referral partners. ● Tech-enabled – Represents merchants requiring a technical integration at the point of sale between the Company and a third party software vendor whereby the third party passes information to our systems to enable payment processing. These merchant acquiring arrangements are supported by partnerships with independent software providers, integrated software dealers, and eCommerce gateway providers. In the United States, this division also supports business-to-business customers via proprietary solutions sold directly to merchants and via enterprise resource planning software dealers and integrators. ● Traditional – Represents the Company’s heritage United States portfolio composed primarily of independent sales organizations (“ISO”) relationships. The Company is not focused on this sales model, and it will represent an increasingly smaller portion of the business over time. Three Months Ended March 31, 2020 Americas Europe Total (In thousands) Divisions: Direct $ 35,677 $ 31,059 $ 66,736 Tech-enabled 28,283 9,238 37,521 Traditional 6,912 — 6,912 Totals $ 70,872 $ 40,297 $ 111,169 Three Months Ended March 31, 2019 Americas Europe Total (In thousands) Divisions: Direct $ 35,111 $ 33,084 $ 68,195 Tech-enabled 26,607 8,469 35,076 Traditional 8,247 — 8,247 Totals $ 69,965 $ 41,553 $ 111,518 |
Settlement Processing Assets an
Settlement Processing Assets and Obligations | 3 Months Ended |
Mar. 31, 2020 | |
Settlement Processing Assets and Obligations | |
Settlement Processing Assets and Obligations | (3) Settlement Processing Assets and Obligations Settlement assets and obligations represent intermediary balances within the settlement process involving the movement of funds between consumers, card issuers, card networks, the Company, and its merchants. The Company processes funds settlement through two models, the sponsorship model and the direct membership model. In certain markets, the Company operates under the sponsorship of Member Banks to process transactions through card networks such as Visa and MasterCard. As such, the Company has an agreement with these banks which dictates the sponsorship services to be provided to the Company. It is the responsibility of the Member Bank to ensure that the Company is in adherence with card network standards. The sponsoring Member Bank serves as the acquiring bank (“Acquiring Bank”) under this model. In other markets, the Company has direct membership with the various card networks and performs the process of funds settlement. As a direct member, it is the Company’s responsibility to adhere to the standards of the card networks. The Company serves as the Acquiring Bank under the direct membership model. The card networks operate as an intermediary between the card issuing banks and the Acquiring Banks, whereby funds are received by the card issuing banks and remitted to the Acquiring Bank via the card networks on a daily basis. The Company then remits these funds to its merchants, either through a Member Bank under the sponsorship model, or directly to merchants under the direct membership model. Incoming funds due from the card networks on behalf of the card issuing bank are classified as receivables from networks in the table below, whereas the funds due from the Company to its merchants are classified as settlement liabilities. The Company enters into agreements with its merchants which outline the fees charged by the Company for processing payment transactions and performing funds settlement. Under the sponsorship model, these agreements are between the Company, the Member Bank, and the merchant, whereas under the direct membership model, these agreements are exclusively between the Company and the merchant. Fees are either settled daily or monthly on a net basis or monthly through an invoice arrangement. Receivables from merchants as presented below represent amounts either net settled or invoiced to the Company’s merchants related to the various fees associated with the payment processing and funds settlement services provided by the Company. As described in Note 1, “Description of Business and Summary of Significant Accounting Policies”, the Company collects funds from merchants that serve as collateral to mitigate potential future losses, and recognizes a corresponding liability which is presented as merchant reserves within the settlement processing assets and obligations table below. While receivables from card networks and settlement liabilities due to merchants represent intermediary balances in the transaction settlement process, timing differences, interchange expense, merchant reserves and exception items cause differences between the amount the Member Banks receive from the card networks and the amount funded to merchants. A summary of settlement processing assets and obligations is as follows: March 31, December 31, 2020 2019 (In thousands) Settlement processing assets: Receivable from card networks $ 118,499 $ 232,458 Receivable from merchants 81,858 96,179 Totals $ 200,357 $ 328,637 Settlement processing obligations: Settlement liabilities due to merchants $ (200,256) $ (363,545) Merchant reserves (87,072) (85,757) Totals $ (287,328) $ (449,302) |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Earnings Per Share | (4) Earnings Per Share The following table sets forth the computation of the Company's basic and diluted net loss per Class A common share (in thousands, except share and per share data): Three Months Ended March 31, Three Months Ended March 31, 2020 2019 Numerator: Net loss attributable to EVO Payments, Inc. $ (4,808) $ (5,290) Denominator: Weighted-average Class A common stock outstanding 41,259,398 26,365,552 Effect of dilutive securities — — Total dilutive securities 41,259,398 26,365,552 Earnings per share: Basic $ (0.12) $ (0.20) Diluted $ (0.12) $ (0.20) Anti-dilutive securities: Stock options 3,913,049 2,342,168 RSUs 1,027,873 601,050 RSAs 4,791 34,880 Class C common stock 2,318,944 2,449,055 Class D common stock 4,344,758 16,306,954 Earnings per share is not separately presented for Class B common stock, Class C common stock, and Class D common stock since they have no economic rights to the earnings of the Company. Class B common stock is not considered when calculating dilutive EPS as this class of common stock may not convert to Class A common stock. Class C common stock and Class D common stock are considered in the calculation of dilutive EPS on an if-converted basis as these classes, together with the related LLC Interests, have exchange rights into Class A common stock that could result in additional Class A common stock being issued. However, the Company is in a net loss position, as such, Class C common stock and Class D common stock are anti-dilutive. All other potentially dilutive securities are determined based on the treasury stock method. Refer to Note 19, “Shareholders’ Equity”, for further information on rights to each class of stock. |
Tax Receivable Agreement
Tax Receivable Agreement | 3 Months Ended |
Mar. 31, 2020 | |
Tax Receivable Agreement | |
Tax Receivable Agreement | (5) Tax Receivable Agreement In connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA”) that requires the Company to make payments to the Continuing LLC Owners, as defined in Note 19, “Shareholders’ Equity”, that are generally equal to 85% of the applicable cash tax savings, if any, realized as a result of favorable tax attributes that will be available to the Company as a result of the Reorganization Transactions, exchanges of LLC Interests and paired Class C common stock or paired Class D common stock for Class A common stock, purchases or redemptions of LLC Interests, and payments made under the TRA. Payments will occur only after the filing of U.S. federal and state income tax returns and realization of cash tax savings from the favorable tax attributes. Due to net losses attributable to the Company in 2019, there were no realized tax savings attributable to the TRA, therefore no payments have been made related to the TRA obligation. As a result of the purchases of LLC Interests and the exchanges of LLC Interests and paired shares of Class C common stock and paired Class D common stock for shares of Class A common stock sold in connection with and following the IPO, through March 31, 2020, the Company’s deferred tax asset and payment liability pursuant to the TRA were approximately $176.9 million ($165.8 million net of amortization) and $150.4 million, respectively at March 31, 2020. The Company recorded a corresponding increase to paid-in capital for the difference between the TRA liability and the related deferred tax asset. The amounts recorded as of March 31, 2020, approximate the current estimate of expected tax savings and are subject to change after the filing of the Company’s U.S. federal and state income tax returns. Future payments under the TRA with respect to subsequent exchanges would be in addition to these amounts. For the TRA, the cash savings realized by the Company are computed by comparing the actual income tax liability of the Company to the amount of such taxes the Company would have been required to pay had there been no increase to the tax basis of the assets from member exchanges or sales of LLC Interests, and no tax benefit as a result of the Net Operating Losses (“NOLs”) generated by the increase in the Company’s tax basis of the assets in EVO, LLC. Subsequent adjustments of the TRA obligations due to certain events (e.g., changes to the expected realization of NOLs or changes in tax rates) will be recognized within other (expense) income in the unaudited condensed consolidated statements of operations and comprehensive loss. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2020 | |
Acquisitions | |
Acquisitions | (6) Acquisitions The Company determined t he pro forma impact of the acquisitions below was not significant individually and in the aggregate, to the Company’s operating results and is, therefore, not separately presented. 2019 Acquisitions (a) Delego Software ULC In September 2019, a subsidiary of EVO, Inc. acquired 100% of the outstanding shares of Delego Software ULC (“Delego”), an unlimited liability company governed by the laws of the Province of British Columbia, Canada, for CAD 42.6 million ($32.4 million, based on the foreign exchange rate at the time of the acquisition), which was funded with cash drawn from the Company’s debt facilities and fully paid at closing. The acquisition of Delego expands the Company’s integrated payment solutions business as Delego is a provider of SAP integrated payments for business to business customers. The results of operations of Delego are included in the Company’s consolidated statement of operations and comprehensive loss from the date of the acquisition in the Company’s Americas segment through the end of the period. As of March 31, 2020, the allocation of purchase price is preliminary, specifically with regards to deferred tax liabilities, because the Company has not yet completed its analysis of the historical tax records. Thus, the measurements of fair value set forth below are subject to change. The Company expects to finalize the valuations as soon as practical, but not later than one year from the acquisition date. The estimated acquisition date fair values of major classes of assets acquired and liabilities assumed are as follows: As of the Estimated acquisition date Useful Life Finite-lived intangible assets (In thousands ) Acquired software $ 8,513 7 years Customer relationships 2,964 15 years Trademarks 836 2 years Deferred tax liabilities (3,116) Other assets, net 590 Goodwill 22,628 Total purchase price $ 32,415 Goodwill in the amount of $22.6 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. Goodwill generated from the Delego acquisition is deductible for U.S. income tax purposes. (b) SF Systems In July 2019, a subsidiary of EVO, Inc. completed the acquisition of 100% of SF Systems, S.A.P.I. (“SF Systems”) for total consideration of $5.0 million, which includes an upfront payment of $4.0 million and a holdback liability of $1.0 million payable 18 months after the closing date. Net assets acquired in the SF Systems acquisition included purchased software of $2.6 million with a useful life of 5 years and goodwill of $2.4 million. Goodwill generated from the SF Systems acquisition is deductible for United States income tax purposes. SF Systems is presented in the Company’s Americas segment. (c) Way2Pay Ltd In March 2019, a subsidiary of EVO, Inc. completed the acquisition of 100% of the outstanding shares of Way2Pay Ltd (“Way2Pay”) for total consideration of €3.0 million ($3.4 million, based on the foreign exchange rate at the time of the acquisition), which includes an upfront payment of €2.7 million and a holdback liability of €0.3 million payable 18 months after the date of the agreement. Net assets acquired in the Way2Pay acquisition included purchased software of $4.0 million with a useful life of 5 years and liabilities of $0.6 million. Way2Pay is presented in the Company’s Europe segment. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases | |
Leases | (7) Leases The Company retroactively adopted ASC 842 effective January 1, 2019, using the modified retrospective transition method. The Company elected to account for lease and nonlease components in a lease arrangement as a combined lease component for all classes of leased assets. Refer to Note 1 “Description of Business and Summary of Significant Accounting Policies” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for further discussion. The Company’s leases consist primarily of real estate and personal property leases throughout the markets in which the Company operates. At contract inception, the Company determines whether an arrangement is or contains a lease, and for each identified lease, evaluates the classification as operating or financing. The Company has no finance leases as of March 31, 2020 and December 31, 2019. Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease. Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised. The weighted-average remaining lease term was 7.21 years and 7.79 years at March 31, 2020 and December 31, 2019, respectively. The Company has no significant short-term leases as of March 31, 2020 and December 31, 2019. The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset. The incremental borrowing rates were determined based on a portfolio approach considering the Company’s current secured borrowing rate adjusted for market conditions and the length of the lease term. The weighted-average discount rates used in the measurement of the lease liabilities were 6.44% and 6.67% as of March 31, 2020 and December 31, 2019, respectively. Operating lease cost is recognized on a straight-line basis over the lease term. Operating lease costs for the three months ended March 31, 2020 and 2019 were $3.0 million and $2.8 million, respectively, and are included in selling, general and administrative expenses in the unaudited condensed consolidated statement of operations and comprehensive loss. As of March 31, 2020, maturities of lease liabilities are as follows: (In thousands) Years ending: 2020 (remainder of the year) $ 9,245 2021 8,258 2022 7,660 2023 5,521 2024 5,013 2025 and thereafter 15,127 Total future minimum lease payments (undiscounted) 50,824 Less: present value discount (10,626) Present value of lease liability $ 40,198 |
Equipment and Improvements
Equipment and Improvements | 3 Months Ended |
Mar. 31, 2020 | |
Equipment and Improvements | |
Equipment and Improvements | (8) Equipment and Improvements Equipment and improvements consisted of the following: Estimated Useful Lives in March 31, December 31, Years 2020 2019 (In thousands) Card processing 3-5 $ 140,022 $ 137,190 Office equipment 3-5 43,019 42,561 Computer software 3 42,581 42,621 Leasehold improvements various 18,437 17,870 Furniture and fixtures 5-7 6,277 6,019 Totals 250,336 246,261 Less accumulated depreciation (164,503) (155,323) Foreign currency translation adjustment (5,153) 3,526 Totals $ 80,680 $ 94,464 Depreciation expense related to equipment and improvements was $10.1 million and $10.5 million for the three months ended March 31, 2020 and 2019, respectively. In the three months ended March 31, 2020, equipment and improvements, gross, and accumulated depreciation were each reduced by $1.1 million and $0.9 million, respectively, and in the three months ended March 31, 2019 by $4.6 million and $4.5 million, respectively, primarily related to asset retirements. The Company infrequently sells or disposes of assets that are not fully depreciated, and this activity represents an insignificant portion of the total reduction. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | (9) Goodwill and Intangible Assets Intangible assets, net consist of the following: March 31, 2020 Gross carrying value Accumulated amortization Accumulated impairment charges Translation and other adjustments Net (In thousands) Merchant contract portfolios and customer relationships $ 293,581 $ (167,117) $ (5,686) $ (37,152) $ 83,626 Marketing alliance agreements 186,081 (61,026) (7,557) (28,066) 89,432 Trademarks, definite-lived 21,628 (9,608) (118) (3,852) 8,050 Internally developed and acquired software 85,762 (29,001) (10,190) (4,000) 42,571 Non-compete agreements 6,462 (6,093) - - 369 Total $ 593,514 $ (272,845) $ (23,551) $ (73,070) $ 224,048 December 31, 2019 Gross carrying value Accumulated amortization Accumulated impairment charges Translation and other adjustments Net (In thousands) Merchant contract portfolios and customer relationships $ 296,033 $ (163,358) $ (7,089) $ (26,347) $ 99,239 Marketing alliance agreements 191,879 (59,545) (11,920) (17,468) 102,946 Trademarks, definite-lived 29,493 (13,129) (2,631) (4,600) 9,133 Internally developed and acquired software 84,060 (26,042) (10,190) (2,110) 45,718 Non-compete agreements 6,462 (5,938) - - 524 Trademarks, indefinite-lived 18,499 - (18,499) - - Total $ 626,426 $ (268,012) $ (50,329) $ (50,525) $ 257,560 As of March 31, 2020, the gross carrying value of merchant contract portfolios and customer relationships, marketing alliance agreements, and definite and indefinite-lived trademarks were reduced by $2.4 million, $5.8 million, $7.9 million, and $18.5 million, respectively, with an offset to accumulated amortization, accumulated impairment charges, and translation and other adjustments, for the write off of fully impaired intangible assets. Amortization expense related to intangible assets was $11.3 million and $12.4 million for the three months ended March 31, 2020 and 2019, respectively. Estimated amortization expense to be recognized during each of the five years subsequent to March 31, 2020: (In thousands) Years ending: 2020 (remainder of the year) $ 33,216 2021 39,196 2022 32,874 2023 24,678 2024 15,691 2025 and thereafter 78,393 Total $ 224,048 The following represents net intangible assets by segment: March 31, December 31, 2020 2019 (In thousands) Intangible assets, net: Americas Merchant contract portfolios and customer relationships $ 62,257 $ 74,791 Marketing alliance agreements 61,469 72,272 Trademarks, definite-lived 2,722 2,994 Internally developed and acquired software 26,291 28,697 Non-compete agreements 339 489 Total 153,078 179,243 Europe Merchant contract portfolios and customer relationships 21,369 24,448 Marketing alliance agreements 27,963 30,674 Trademarks, definite-lived 5,328 6,139 Internally developed and acquired software 16,280 17,021 Non-compete agreements 30 35 Total 70,970 78,317 Total intangible assets, net $ 224,048 $ 257,560 Goodwill activity for the three months ended March 31, 2020, in total and by reportable segment, was as follows: Reportable Segment Americas Europe Total (In thousands) Goodwill, gross, as of December 31, 2019 $ 268,049 $ 135,080 $ 403,129 Accumulated impairment losses — (24,291) (24,291) Goodwill, net, as of December 31, 2019 268,049 110,789 378,838 Foreign currency translation adjustment (10,810) (6,926) (17,736) Goodwill, net, as of March 31, 2020 $ 257,239 $ 103,863 $ 361,102 |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | 3 Months Ended |
Mar. 31, 2020 | |
Accounts Payable and Accrued Expenses | |
Accounts Payable and Accrued Expenses | (10) Accounts Payable and Accrued Expenses The Company’s accounts payable and accrued expenses consisted of the following: March 31, December 31, 2020 2019 (In thousands) Compensation and related benefits $ 14,156 $ 18,460 Third-party processing and payment network fees 36,863 36,409 Trade payables 12,449 11,571 Taxes payable 10,998 18,556 Commissions payable to third parties and agents 13,049 15,030 Unearned revenue 3,634 4,309 Other 20,474 19,328 Total accounts payable and accrued expenses $ 111,623 $ 123,663 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions | |
Related Party Transactions | (11) Related party balances consist of the following: March 31, December 31, 2020 2019 (In thousands) Due from related parties, current $ 345 $ 1,125 Due to related parties, current (4,067) (7,325) Due to related parties, long-term (385) (385) Due from related parties, current, consists of receivables due from non-controlling interest holders of consolidated subsidiaries. Due to related parties, current, consists of $2.8 million and $5.5 million as of March 31, 2020 and December 31, 2019, respectively, primarily due to non-controlling interest holders of consolidated subsidiaries, and $1.3 million and $1.8 million as of March 31, 2020 and December 31, 2019, respectively, representing commissions payable to unconsolidated investees of the Company. Due to related parties, long-term, consists of ISO commission reserves. The Company leases office space located at 515 Broadhollow Road in Melville, New York from 515 Broadhollow, LLC. 515 Broadhollow, LLC is majority owned, directly and indirectly, by the Company’s chairman. As of March 31, 2020 and December 31, 2019, the liability related to this lease amounted to $3.9 million and $4.1 million, respectively, and is included in the operating lease liabilities on the unaudited condensed consolidated balance sheets. The Company subleases a portion of this office space to an unconsolidated investee. Sublease income was less than $0.1 million for each of the three months ended March 31, 2020 and 2019. The Company leases vehicles from the non-controlling interest holder of a consolidated subsidiary. As of March 31, 2020 and December 31, 2019, these lease liabilities amounted to $0.3 million, respectively, and are included in the operating lease liabilities on the unaudited condensed consolidated balance sheets. A portion of the TRA obligation is payable to members of management and current employees. Refer to Note 5, “Tax Receivable Agreement”, for further information on the tax receivable agreement. Related party commission expense incurred with unconsolidated investees of the Company amounted to $4.4 million for each of the three months ended March 31, 2020 and 2019. The sale of equipment and services to these unconsolidated investees amounted to $0.1 million for each of three months ended March 31, 2020 and 2019. The Company provides certain professional and other services to Blueapple Inc. (“Blueapple”), a member of EVO, LLC and owner of all outstanding shares of Class B common stock of EVO, Inc. Blueapple is controlled by entities affiliated with the Company’s founder and chairman, Rafik R. Sidhom. The expense related to these services was less than $0.1 million for each of the three months ended March 31, 2020 and 2019. The Company, through two wholly owned subsidiaries and one unconsolidated investee, conducts business under ISO agreements with a relative of the Company’s founder and chairman pursuant to which the relative of the Company’s founder and chairman provides certain marketing services and equipment in exchange for a commission based on the volume of transactions processed for merchants acquired by the relative of the Company’s founder and chairman. For each of the three months ended March 31, 2020 and 2019, the Company paid commissions of $0.1 million related to this activity. NFP is the Company’s benefit and insurance broker and 401(k) manager. NFP is a portfolio company of MDP and one of the Company’s executive officers owns a minority interest in NFP. For each of the three months ended March 31, 2020 and 2019, the Company paid $0.1 million in commissions and other expenses to NFP. On April 21, 2020, the Company issued 152,250 shares of series A convertible preferred stock to an affiliate of MDP for a purchase price of $985.221685 per share. The Company also reimbursed MDP for $0.8 million of expenses in connection with the offer and sale of the preferred stock. Refer to Note 21, “Subsequent Events”, for additional details regarding the transaction and the terms of the preferred stock. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Income Taxes | (12) Income Taxes In accordance with ASC 740, Income Taxes The Company’s effective tax rate (“ETR”) was 10.43% and (5.5)% for the three months ended March 31, 2020 and 2019, respectively. The Company recorded a tax benefit of $1.9 million in the three months ended March 31, 2020 from a partial release of the U.S. interest limitation valuation allowance due to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted on March 27, 2020. The variance in the ETR for the three months ended March 31, 2020 and 2019 primarily relates to the mix of U.S. and non-U.S. earnings and related tax expense, the tax treatment of income attributable to non-controlling interests and the exclusion of tax benefits related to losses recorded in certain foreign operations. The income attributable to the non-controlling interests is taxable to EVO, LLC’s individual owners other than the Company. Income tax liabilities are incurred with respect to foreign operations whereas income of EVO, LLC in the U.S. flows through and is taxable to EVO, LLC’s owners. Management assesses the available and objectively verifiable evidence to estimate whether sufficient future taxable income will be generated to use existing deferred tax assets. A significant piece of objective, negative evidence evaluated was the cumulative loss incurred in certain jurisdictions over the preceding twelve quarters ended March 31, 2020. Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projections of future growth. As a result, the Company considered both (i) historical core earnings, after adjusting for certain nonrecurring items, and (ii) the projected future profitability of its core operations after taking into account the Company’s recovery from the COVID-19 pandemic and the impact of enacted changes in the application of the interest expense limitation rules beginning in 2022. Valuation allowances were established in the current and prior periods to reduce the carrying amount of deferred tax assets to an amount that is more likely than not to be realized in certain European jurisdictions. Release of a valuation allowance would result in the realization of all or a portion of the related deferred tax assets and a decrease to income tax expense for the period in which the release is recorded. |
Long-Term Debt and Lines of Cre
Long-Term Debt and Lines of Credit | 3 Months Ended |
Mar. 31, 2020 | |
Long-Term Debt and Lines of Credit | |
Long-Term Debt and Lines of Credit | (13) Long-Term Debt and Lines of Credit Credit Facility The Company has entered into a first lien senior secured credit facility and a second lien senior secured credit facility pursuant to a credit agreement dated December 22, 2016, and amended on October 24, 2017, April 3, 2018, and June 14, 2018 (the “Senior Secured Credit Facilities”). On May 25, 2018, the Company repaid all outstanding amounts under the second lien credit facility using a portion of the proceeds from the IPO. As of March 31, 2020, the Senior Secured Credit Facilities include revolver commitments of $200.0 million and a term loan of $665.0 million that are scheduled to mature in June 2023 and December 2023, respectively. As of March 31, 2020 and December 31, 2019, the Company’s long-term debt consists of the following: March 31, December 31, 2020 2019 (In thousands) First lien term loan $ 646,114 $ 650,891 First lien revolver 75,950 60,987 Less debt issuance costs (9,319) (9,965) Total long-term debt 712,745 701,913 Less current portion of long-term debt, including accrued interest (1) (4,628) (8,744) Total long-term debt, net of current portion $ 708,117 $ 693,169 (1) Accrued interest of approximately $0.5 million as of March 31, 2020 is presented within accrued expenses on the unaudited condensed consolidated balance sheet. Principal payment requirements on the above obligations in each of the years remaining subsequent to March 31, 2020 are as follows: (In thousands) Years ending March 31 : 2020 (remainder of the year) $ 4,945 2021 6,593 2022 6,593 2023 703,933 2024 — 2025 and thereafter — Total $ 722,064 The Senior Secured Credit Facilities contain certain customary representations and warranties, affirmative covenants and events of default. If an event of default occurs, the lenders under the Senior Secured Credit Facilities will be entitled to take various actions, including the acceleration of amounts due thereunder and exercise of the remedies on the collateral. As of March 31, 2020, the Company was in compliance with all its financial covenants. Refer to Note 21, “Subsequent Events”, for further information regarding the limited waiver obtained with respect to the Senior Secured Credit Facilities. The Company maintains intraday and overnight facilities to fund its settlement obligations. These facilities are short-term in nature, have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. At March 31, 2020 and December 31, 2019, the Company had $18.7 million and $33.3 million outstanding under these lines of credit, respectively, with additional capacity of $137.9 million and $133.9 million, respectively, to fund its settlement obligations. The weighted-average interest rates on these borrowings were 3.6% and 4.3% as of March 31, 2020 and December 31, 2019, respectively. Refer to Note 14, "Long-Term Debt and Lines of Credit" to the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, for discussion regarding the Company’s long-term debt and lines of credit. |
Supplemental Cash Flows Informa
Supplemental Cash Flows Information | 3 Months Ended |
Mar. 31, 2020 | |
Supplemental Cash Flows Information | |
Supplemental Cash Flows Information | (14) Supplemental Cash Flows Information Supplemental cash flow disclosures and noncash investing and financing activities are as follows for the three months ended March 31, 2020 and 2019: 2020 2019 (In thousands) Supplemental disclosure of cash flow data: Interest paid $ 12,680 $ 10,230 Income taxes paid 4,340 4,965 Cash paid for amounts included in operating lease liabilities 2,533 2,305 Supplemental disclosure of non-cash investing and financing activities: Acquisition holdback payable $ — $ 337 Exchanges of Class C and Class D common stock for Class A common stock 882 20,293 Operating lease liabilities arising from obtaining new or modified right-of-use assets 2,262 8,098 Decrease in operating lease liabilities and corresponding right-of-use assets resulting from lease modifications (6,701) — |
Redeemable Non-controlling Inte
Redeemable Non-controlling Interests | 3 Months Ended |
Mar. 31, 2020 | |
Redeemable Non-controlling Interests | |
Redeemable Non-controlling Interests | (15) Redeemable Non-controlling Interests The Company owns 66% of eService, the Company’s Polish subsidiary. The eService shareholders’ agreement includes a provision whereby PKO Bank Polski has the option to compel the Company to purchase the shares of eService held by PKO Bank Polski, at a price per share based on the fair value of the shares. The option expires on January 1, 2024. Because the exercise of this option is not solely within the Company’s control, the Company has classified this interest as RNCI and presents the redemption value as temporary within the mezzanine equity section of the unaudited condensed consolidated balance sheets. At each balance sheet date, the RNCI is reported at its redemption value, which represents the estimated fair value, with a corresponding adjustment to accumulated deficit. As of March 31, 2020, EVO, Inc. owns 50.3% of EVO, LLC. The EVO, LLC operating agreement includes a provision whereby Blueapple may deliver a sale notice to EVO, Inc., upon receipt of which EVO, Inc. will use its commercially reasonable best efforts to pursue a public offering of shares of its Class A common stock and use the net proceeds therefrom to purchase LLC Interests from Blueapple. Upon receipt of such a sale notice, the Company may elect, at the Company’s option (determined solely by its independent directors (within the meaning of the rules of the NASDAQ stock market (“Nasdaq”)) who are disinterested), to cause EVO, LLC to instead redeem the applicable LLC Interests for cash; provided that Blueapple consents to any election by the Company to cause EVO, LLC to redeem the LLC Interests based on the fair value of the Company’s Class A common shares on such date. Because this option is not solely within the Company’s control, the Company has classified this interest as RNCI and reports the redemption value as temporary within the mezzanine equity section of the unaudited condensed consolidated balance sheets and is reported at redemption value, which represents fair value, with a corresponding adjustment to accumulated deficit. The following table details the components of RNCI for the three months ended March 31, 2020 and for the year ended December 31, 2019: March 31, 2020 December 31, 2019 Blueapple eService Total Blueapple eService Total (In thousands) Beginning balance $ 902,258 $ 150,190 $ 1,052,448 $ 885,986 $ 124,107 $ 1,010,093 Net (loss) income (8,201) 913 (7,288) (14,567) 7,855 (6,712) Loss on OCI (20,389) (4,787) (25,176) 241 (470) (229) Purchase of Blueapple Class B common stock in connection with secondary offerings — — — (48,447) — (48,447) Decrease in maximum redemption amount in connection with purchase of Blueapple Class B common stock — — — (2,843) — (2,843) (Decrease) increase in the maximum redemption amount (371,674) (49,813) (421,487) 93,845 28,173 122,018 Allocation of eService fair value RNCI adjustment to Blueapple 20,708 — 20,708 (11,957) — (11,957) Distributions — — — — (9,475) (9,475) Ending balance $ 522,702 $ 96,503 $ 619,205 $ 902,258 $ 150,190 $ 1,052,448 |
Fair Value
Fair Value | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value | |
Fair Value | (16) Fair Value The table below presents information about items, which are carried at fair value on a recurring basis: March 31, 2020 (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $ 15,644 $ — $ — $ 15,644 Contingent consideration — — (1,568) (1,568) Blueapple RNCI (522,702) — — (522,702) eService RNCI — — (96,503) (96,503) Total $ (507,058) $ — $ (98,071) $ (605,129) December 31, 2019 (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $ 7,715 $ — $ — $ 7,715 Contingent consideration — — (2,300) (2,300) Blueapple RNCI (902,258) — — (902,258) eService RNCI — — (150,190) (150,190) Total $ (894,543) $ — $ (152,490) $ (1,047,033) Cash equivalents consist of a money market fund that is valued using a market price in an active market (Level 1). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Contingent consideration relates to potential payments that the Company may be required to make associated with acquisitions. To the extent that the valuation of these liabilities are based on inputs that are less observable or not observable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for measures categorized in Level 3. The fair value of Blueapple’s RNCI is derived from the closing stock price of the Company’s Class A common stock on the last day of the period. The fair value of eService’s RNCI is determined utilizing an income approach, weighted at 75%, based on the forecasts of expected future cash flows, and the market approach, weighted at 25%, based on the guideline public company data. In applying the income approach, significant unobservable inputs included the Weighted-Average Cost of Capital (“WACC”) used to discount the future cash flows, which was 14.5%, based on the markets in which the business operates and growth rates used within the future cash flows, which were up to 10.0%, based on historic trends, current and expected market conditions, and management’s forecast assumptions. A future increase in the WACC would result in a decrease in the fair value of RNCI in eService. Conversely, a decrease in the WACC would result in an increase in the fair value of RNCI in eService. In applying the market approach, the ranges of the valuation multiples as of March 31, 2020 were 2.75x-3.00x and 6.00x-6.25x for revenue and EBITDA, respectively. The estimated fair value of receivables, settlement processing assets and obligations, due to and from related parties and settlement lines of credit approximate their respective carrying values due to their short term nature. The estimated fair value of long-term debt as of March 31, 2020 and December 31, 2019 was $639.0 million and $711.9 million, respectively. The estimated fair value of long-term debt, which is classified as Level 2 in the fair value hierarchy, is based on quoted bid-ask spreads within the lender syndicate. Visa Series C preferred stock are carried at cost in the amount of $14.7 million as of March 31, 2020 and December 31, 2019, and are presented in other assets on the unaudited condensed consolidated balance sheets. The estimated fair value of the Visa Series C preferred stock of $32.4 million and $37.8 million as of March 31, 2020 and December 31, 2019 is based upon inputs classified as Level 3 of the fair value hierarchy. These inputs include the fair value of Visa Class A common stock as of March 31, 2020 and the conversion factor of Visa Series C preferred stock to Visa Class A common stock as of March 31, 2020, inclusive of a discount rate due to the lack of liquidity, which represents a measure of fair value that is unobservable or requires management’s judgment. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies. | |
Commitments and Contingencies | (17) Commitments and Contingencies Litigation The Company is party to various claims and lawsuits incidental to its business. The Company does not believe the ultimate outcome of such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2020 | |
Segment Information | |
Segment Information | (18) Segment Information Information on segments and reconciliations to revenue and net loss attributable to the shareholders of EVO, Inc. and members of EVO, LLC are set forth below. Segment profit, which is the measure used by our chief operating decision maker to evaluate the performance of and allocate resources to our segments, is calculated as segment revenue less (1) segment expenses, plus (2) segment income from unconsolidated investees, plus (3) segment other income, net, less (4) segment non-controlling interests. Certain corporate-wide governance functions, as well as depreciation and amortization, are not allocated to our segments. The Company does not evaluate performance or allocate resources based on segment assets, and therefore, such information is not presented. Three Months Ended March 31, 2020 2019 (In thousands) Segment revenue: Americas $ 70,872 $ 69,965 Europe 40,297 41,553 Revenue $ 111,169 $ 111,518 Segment profit: Americas $ 19,960 $ 14,880 Europe 8,823 9,693 Total segment profit 28,783 24,573 Corporate (10,509) (7,619) Depreciation and amortization (21,424) (22,745) Net interest expense (9,454) (10,977) Provision for income tax benefit (expense) 1,580 (988) Share-based compensation expense (3,585) (1,845) Less: Net loss attributable to non-controlling interests of EVO Investco, LLC (9,801) (14,311) Net loss attributable to EVO Payments, Inc. $ (4,808) $ (5,290) Capital expenditures: Americas $ 3,831 $ 1,866 Europe 1,336 4,637 Consolidated total capital expenditures $ 5,167 $ 6,503 Revenue is attributed to individual countries based on the location where the relationship is managed. For the three months ended March 31, 2020, revenue in the United States, Mexico, and Poland, as a percentage of total consolidated revenue, was 40.3%, 20.6%, and 16.5%, respectively. For the three months ended March 31, 2019, revenue in the United States, Mexico and Poland, as a percentage of total consolidated revenue, was 41.4%, 19.3%, and 18.6%, respectively. For the three months ended March 31, 2020 and 2019, there is no one customer that represents more than 10% of total revenue. |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Mar. 31, 2020 | |
Shareholders' Equity | |
Shareholders' Equity | (19) Shareholders’ Equity EVO, Inc. is a holding company and its principal assets are the LLC Interests and preferred membership interests (“Preferred LLC Interests”) in EVO, LLC. As the sole managing member of EVO, LLC, the Company operates and controls all of the business and affairs of EVO, LLC and its subsidiaries. The Company has the sole voting interest in, and controls the management of, EVO, LLC. Therefore, EVO, Inc. has consolidated the financial results of EVO, LLC and its subsidiaries. The Company has four classes of common stock outstanding: Class A common stock, Class B common stock (classified as redeemable non-controlling interest), Class C common stock (classified as non-redeemable non-controlling interest) and Class D common stock (classified as non-redeemable non-controlling interest). The Company has one class of preferred stock outstanding, its Series A convertible preferred stock (the “Preferred Stock”), which is convertible (subject to certain limitations) into shares of Class A common stock. The Preferred Stock was issued on April 21, 2020 in connection with an investment by MDP. Refer to Note 21, “Subsequent Events”, for further information regarding the Preferred Stock and Preferred LLC Interests. The voting and economic rights associated with our classes of common stock are summarized in the following table: Class of Common Stock Holders Voting rights* Economic rights Class A common stock Public, MDP, Executive Officers, and Current and Former Employees One vote per share Yes Class B common stock Blueapple 15.9% No Class C common stock Executive Officers 3.5 votes per share, subject to aggregate cap No Class D common stock MDP and Current and Former Employees One vote per share No Series A Preferred Stock MDP On an as-converted basis** Yes * Subject to certain ownership requirements, on the third anniversary of the consummation of the IPO (i.e. May 25, 2021) the voting rights of our Class B common stock will cease and each share of our Class C common stock will automatically convert into a share of our Class D common stock. ** Subject to certain voting caps as specified in the certificate of designations for the Preferred Stock Blueapple has a sale right under the EVO LLC Agreement that provides that, upon the receipt of a sale notice from Blueapple, the Company will use its commercially reasonable best efforts to pursue a public offering of shares of Class A common stock and use the net proceeds therefrom to purchase LLC Interests from Blueapple. Upon the Company’s receipt of such a sale notice, the Company may elect, at its option (determined solely by its independent directors (within the meaning of the rules of Nasdaq) who are disinterested), to cause EVO LLC to instead redeem the applicable LLC Interests for cash; provided that Blueapple consents to any election by the Company to cause EVO LLC to redeem the LLC Interests. Continuing LLC Owners (other than Blueapple) have an exchange right providing that, upon receipt of an exchange notice from such Continuing LLC Owners, the Company will exchange the applicable LLC Interests from such Continuing LLC Owners for newly issued shares of its Class A common stock on a one-for-one basis pursuant to an exchange agreement (the “Exchange Agreement”). Upon its receipt of such an exchange notice, the Company may elect, at its option (determined solely by its independent directors (within the meaning of the rules of Nasdaq) who are disinterested), to cause EVO, LLC to instead redeem the applicable LLC Interests for cash; provided that such Continuing LLC Owners consents to any election by the Company to cause EVO, LLC to redeem the LLC Interests. In the event that Continuing LLC Owners do not consent to an election by the Company to cause EVO, LLC to redeem the LLC Interests, the Company is required to exchange the applicable LLC Interests for newly issued shares of Class A common stock. If the Company elects to cause EVO, LLC to redeem LLC Interests in lieu of exchanging LLC Interests for newly issued shares of its Class A common stock, the Company will offer the other Continuing LLC Owners the right to have their respective LLC Interests redeemed in an amount up to such person’s pro rata share of the aggregate LLC Interests to be redeemed. The Company is not required to redeem any LLC Interests from Blueapple or any other Continuing LLC Owners in response to a sale notice from Blueapple if the Company elects to pursue, but is unable to complete, a public offering of shares of its Class A common stock. Continuing LLC Owners also hold certain registration rights pursuant to a registration rights agreement. MDP holds demand registration rights that require the Company to register shares of Class A common stock held by it, including any Class A common stock received upon its exchange of Class A common stock for its LLC Interests, or upon conversion of any shares of Preferred Stock held by MDP. All Continuing LLC Owners (other than Blueapple) hold customary piggyback registration rights, which includes the right to participate on a pro rata basis in any public offering the Company conducts in response to its receipt of a sale notice from Blueapple. Blueapple also has the right, in connection with any public offering the Company conducts (including any offering conducted as a result of an exercise by MDP of its registration rights), to request that the Company uses its commercially reasonable best efforts to pursue a public offering of shares of its Class A common stock and use the net proceeds therefrom to purchase a like amount of Blueapple’s LLC Interests. |
Stock Compensation Plans and Sh
Stock Compensation Plans and Share-Based Compensation Awards | 3 Months Ended |
Mar. 31, 2020 | |
Stock Compensation Plans and Share-Based Compensation Awards | |
Stock Compensation Plans and Share-Based Compensation Awards | (20) Stock Compensation Plans and Share-Based Compensation Awards The Company provides share-based compensation awards to its employees under the 2018 Omnibus Equity Incentive Plan (the “2018 Plan”), which the Company adopted in conjunction with its IPO. The 2018 Plan became effective on May 22, 2018. As of the effective date of the 2018 Plan, a total of 7,792,162 shares of the Company’s Class A common stock were reserved for issuance. The 2018 Plan provides for accelerated vesting under certain conditions. The following table summarizes share-based compensation expense, and the related income tax benefit recognized for share-based compensation awards. Share-based compensation expense is presented within selling, general, and administrative expenses within the unaudited condensed consolidated statements of operations and comprehensive loss: Three Months Ended March 31, 2020 2019 (In thousands) Share-based compensation expense $ 3,585 $ 1,845 Income tax benefit $ (407) $ (139) Unit appreciation rights/Restricted stock awards The Company assumed EVO, LLC’s obligations under the EVO, LLC Unit Appreciation Rights Plan (“UAR Plan”) and converted all of the outstanding UARs held by members of management and current and former employees at the consummation of the IPO to restricted Class A common stock (“RSAs”). In connection with the Company’s assumption of EVO, LLC’s obligation under the UAR Plan and the issuance of the RSAs, on the IPO date, the Company recorded share-based compensation expense based on the modification date fair value of the RSAs of $16.00 per share. The Company recognized share-based compensation expense related to RSAs of less than $0.1 million and $0.1 million, respectively, for the three months ended March 31, 2020 and 2019. Prior to the consummation of the IPO, no liquidity event was probable and, as such, no share-based compensation expense had been recognized for these awards. On the modification date, there were 35 members of management and current and former employees who held UARs. A summary of RSAs activity is as follows (in thousands, except per share data): Number of RSAs Weighted-average grant date fair value Balance at December 31, 2019 8 $ 16.00 Granted — — Vested (3) 16.00 Forfeited — — Balance at March 31, 2020 5 $ 16.00 As of March 31, 2020 and 2019, total unrecognized share-based compensation expense related to outstanding RSAs was less than $0.1 million and $0.2 million. The total fair value of shares vested during the three months ended March 31, 2020 and 2019, was less than $0.1 million and $0.2 million, respectively. Restricted stock units The Company recognized share-based compensation expense for RSUs granted of $1.7 million and $0.7 million, respectively, for the three months ended March 31, 2020 and 2019. A summary of RSUs activity is as follows (in thousands, except per share data): Number of RSUs Weighted-average grant date fair value Balance at December 31, 2019 876 $ 22.30 Granted 601 23.22 Vested (124) 26.01 Forfeited (8) 22.41 Balance at March 31, 2020 1,345 $ 22.37 As of March 31, 2020 and 2019, total unrecognized share-based compensation expense related to outstanding RSUs was $27.7 million and $18.3 million. RSUs settle in Class A common stock. RSUs granted in connection with the Company’s annual long-term incentive plan and ordinary course sign-on awards vest in equal annual vesting installments over a period of four years from the grant date. RSUs granted as part of a special, one-time grant on March 29, 2020 will cliff-vest upon the second anniversary of the grant date. The weighted-average remaining vesting period over which expense will be recognized for unvested RSUs is 3.0 years as of March 31, 2020 and 3.4 years as of March 31, 2019. The total fair value of shares vested during the three months ended March 31, 2020 was $3.2 million. No RSUs vested during the three months ended March 31, 2019. Stock options The Company recognized share-based compensation expense for the stock options granted of $1.9 million and $1.0 million, for the three months ended March 31, 2020 and 2019. A summary of stock option activity is as follows (in thousands, except per share and term data): Number of Options Weighted-average grant date fair value Weighted-average exercise price Weighted-average remaining contractual term Total Intrinsic Value Balance at December 31, 2019 3,369 $ 7.90 $ 20.46 8.77 $ 20,312 Granted 2,405 6.82 20.81 Exercised (1) 6.68 16.00 9 Forfeited (28) 8.08 21.36 Balance at March 31, 2020 5,745 $ 7.45 $ 20.60 9.21 $ 1,294 Exercisable at March 31, 2020 751 $ 7.83 $ 20.15 8.47 $ — As of March 31, 2020 and 2019, total unrecognized share-based compensation expense related to unvested stock options was $33.4 million and $22.9 million. The weighted-average remaining vesting period over which expense will be recognized for unvested stock options is 2.6 years in 2020 and 3.5 years in 2019. Stock options granted in connection with the Company’s annual long-term incentive plan and ordinary course sign-on awards vest in equal annual installments over a period of four years from grant date. Stock options granted as part of a special, one-time grant on March 29, 2020 will cliff-vest upon the first anniversary of the grant date. Stock options expire no later than 10 years from the date of grant. For the purpose of calculating share-based compensation expense, the fair value of the stock option grants was determined through the application of the Black-Scholes model with the following assumptions: Three Months Ended March 31, 2020 2019 Expected life (in years) 7.00 7.00 Weighted-average risk-free interest rate 0.9% 2.5% Expected volatility 30.2% 29.0% Dividend yield 0.0% 0.0% Weighted-average fair value at grant date $ 6.82 $ 9.43 The risk-free interest rate is based on the yield of a zero coupon United States Treasury security with a maturity equal to the expected life of the stock option from the date of the grant. The assumption for expected volatility is based on the historical volatility of a peer group of market participants as the Company has limited historical volatility. It is the Company’s intent to retain all profits for the operations of the business for the foreseeable future, as such the dividend yield assumption is zero. The Company applies the simplified method in determining the expected life of the stock options as the Company has limited historical basis upon which to determine historical exercise periods. The Company’s assumption of the expected life is determined based on the general grant vesting period plus half of the remaining life through expiration. All stock options exercised will be settled in Class A common stock. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events | |
Subsequent Events | (21) Subsequent Events Subsequent events have been evaluated from the balance sheet date through the date on which the unaudited condensed consolidated financial statements were available to be issued. Issuance of Preferred Stock On April 21, 2020, the Company completed the issuance and sale of 152,250 shares of its newly-issued preferred stock, par value $0.0001 per share, designated as “Series A Convertible Preferred Stock” (the “Preferred Stock”) to MDCP Cardservices II, LLC, an entity affiliated with MDP (the “Purchaser”), pursuant to the terms of an investment agreement (the “Investment Agreement”), dated as of March 29, 2020, between the Company and the Purchaser. The Company received approximately $150.0 million in total gross proceeds from the sale of the Preferred Stock. The Preferred Stock will rank senior to the Company’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), with respect to dividends and distributions on liquidation, winding-up and dissolution. Each share of Preferred Stock has initial liquidation preference of $1,000 per share. Holders of shares of Preferred Stock will be entitled to cumulative, paid-in-kind (“PIK”) dividends, which will be payable semi-annually in arrears by increasing the liquidation preference for each outstanding share of Preferred Stock. These PIK dividends accrue at an annual rate of (i) 6.00% per annum for the first ten years and (ii) 8.00% per annum thereafter, subject in each case to a 1.00% per annum increase in the event that approval of the investment by the Company’s stockholders as contemplated by Nasdaq listing rules (“Stockholder Approval”) is not obtained prior to the earlier of the Company’s 2021 annual meeting of stockholders and August 1, 2021. Holders of Preferred Stock are also entitled to participate in and receive any dividends declared or paid on the Class A Common Stock on an as-converted basis, and no dividends may be paid to holders of Class A Common Stock unless full participating dividends are concurrently paid to holders of Preferred Stock. Each holder of Preferred Stock has the right, at its option, to convert its Preferred Stock, in whole or in part, into fully paid and non-assessable shares of Class A Common Stock, at any time and from time to time after the receipt of Stockholder Approval or the consent of a majority of the Preferred Stock waiving the Company’s requirement to seek Stockholder Approval. The number of shares of Class A Common Stock into which a share of Preferred Stock will convert at any time is equal to the product of (i) the then-effective conversion rate and (ii) the quotient obtained by dividing the sum of the then-effective liquidation preference per share of Preferred Stock and the amount of any accrued and unpaid PIK dividends by the initial liquidation preference of $1,000. The conversion rate of the Preferred Stock is initially set at 63.2911 shares of Class A Common Stock, based on an implied conversion price of $15.80 per share of Class A Common Stock. The conversion rate is subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events. The conversion rate is also subject to adjustment for certain antidilutive offerings occurring during the first nine months following the issuance of the Preferred Stock, subject to certain caps set forth in the certificate of designations for the Preferred Stock. The Company has the right to settle any conversion at the request of a holder of Preferred Stock in cash based on the last reported sale price of the Class A Common Stock. Subject to certain conditions, the Company may, at its option, require conversion of all (but not less than all) of the outstanding shares of Preferred Stock to Class A Common Stock if, for at least 20 trading days during the 30 consecutive trading days immediately preceding notification of the election to convert, the last reported closing price of the Company’s Class A common stock is at least (i) 180% of the conversion price prior to the fourth semi-annual PIK dividend payment date, (ii) 170% of the conversion price on or after the fourth and prior to the sixth semi-annual PIK dividend payment date, (iii) 160% of the conversion price on or after the sixth and prior to the eighth semi-annual PIK dividend payment date, or (iv) 150% of the conversion price on or after the eighth semi-annual PIK dividend payment date. If the Company elects to mandatorily convert all outstanding shares of Preferred Stock prior to the sixth semi-annual PIK dividend payment date, then, for purposes of such conversion, the liquidation preference of each outstanding share of Preferred Stock will be increased by the compounded amount of all remaining scheduled PIK dividend payments on the Preferred Stock through, and including, the sixth semi-annual PIK dividend payment date. Pursuant to the terms of the Certificate of Designations, prior to the receipt of Stockholder Approval, no holder of Series A Preferred Stock may convert shares of Series A Preferred Stock through either an optional or a mandatory conversion into shares of Class A Common Stock if and to the extent that such conversion would result in the holder beneficially owning in excess of 19.99% of the aggregate number of votes entitled to be cast generally at a meeting of the Company’s stockholders held for the election of directors by all outstanding shares of the Company’s common stock (regardless of class) (such limitation, the “Ownership Limitation”). The holders of the Preferred Stock generally will be entitled to vote with the holders of the shares of Class A Common Stock on all matters submitted for a vote to the Class A common stockholders (voting together with the holders of shares of Class A Common Stock as one class) on an as-converted basis, subject to the Ownership Limitation. However, the voting power of the Preferred Stock on an as-converted basis is capped at all times to the extent that certain adjustments to the conversion price of the Preferred Stock occurring during the first nine months following the date the Series A Preferred Stock is initially issued would result in such conversion price declining below the closing price for the Company’s Class A common stock on March 27, 2020. If the Company undergoes a Change of Control (as defined in the certificate of designations for the Series A Preferred Stock), each holder of Preferred Stock may require the Company to repurchase all or a portion of its then-outstanding shares of Preferred Stock for cash consideration equal to 150% of the then-current liquidation preference per share of Preferred Stock plus accumulated and unpaid dividends, if any (or, if the repurchase date for such Change of Control is on or after the sixth semi-annual PIK dividend payment date, 100% of the liquidation preference per share of Series A Preferred Stock plus accumulated and unpaid dividends, if any). In addition, pursuant to the Investment Agreement, until the earlier of (x) 36 months following the issuance of the Preferred Stock, and (y) the occurrence of a transaction resulting in a Change of Control (the “Standstill Period”), subject to customary exceptions and exceptions in the case of transfers to certain permitted transferees, transfers pursuant to certain business combinations, acquisition of assets or similar transaction entered into by the Company or any transaction resulting in a Change of Control, and transfers approved by the Company’s board of directors, the Purchaser will be subject to customary transfer restrictions with respect to the Series A Preferred Stock. First Amendment to the Second Amended and Restated Limited Liability Company Agreement; Issuance of Preferred LLC Interests In connection with the sale of the Preferred Stock, the Company and EVO, LLC entered into an amendment to the Second Amended and Restated Limited Liability Company Agreement of EVO, LLC to designate a new series of preferred membership interests titled “Series A Convertible Preferred Units,” with terms in the aggregate substantially equivalent to the Series A Preferred Stock (the “Preferred LLC Interests”), and to make other clarifying changes. On April 21, 2020, the Preferred LLC Interests were issued to the Company pursuant to the terms of a preferred unit purchase agreement. Credit Facility Waiver On May 5, 2020, the Company entered into a Limited Waiver (“Limited Waiver”) with respect to its Senior Secured Credit Facilities. The Limited Waiver effects certain changes applicable to the Company’s revolving credit facility, including: (1) waiver of any default or event of default resulting from noncompliance with the consolidated leverage ratio for the period beginning June 30, 2020 and ended on September 30, 2021 (such period of time, the “Covenant Waiver Period”), and during the Covenant Waiver Period the Company will be subject to (1) a consolidated leverage ratio of 6.0x for each fiscal quarter from the quarter ended June 30, 2020 through and including March 31, 2021, a consolidated leverage ratio of 5.5x for the fiscal quarter ended June 30, 2021 and a consolidated leverage ratio of 5.25x for the fiscal quarter ended September 30, 2021 and (2) increased limitations on restricted payments and the incurrence of indebtedness. Other than the items noted above, the Limited Waiver does not modify the significant terms of the Senior Secured Credit Facilities. |
Description of Business and S_2
Description of Business and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Description of Business and Summary of Significant Accounting Policies | |
Basis of Presentation and Use of Estimates | (b) Basis of Presentation and Use of Estimates The accompanying unaudited condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, the unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2020 and 2019, the unaudited condensed consolidated statement of changes in equity (deficit) for the three months ended March 31, 2020 and 2019, and the unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 reflect all adjustments that are of a normal, recurring nature and that are considered necessary for a fair presentation of the results for the periods shown in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial reporting periods. Accordingly, certain information and footnote disclosures have been condensed or omitted in accordance with SEC rules that would ordinarily be required under U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported assets and liabilities, as of the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Estimates used for accounting purposes include, but are not limited to, valuation of redeemable non-controlling interests (“RNCI”), evaluation of realizability of deferred tax assets, determination of liabilities under the tax receivable agreement, determination of liabilities and corresponding right-of-use assets arising from lease agreements, determination of fair value of share-based compensation, establishment of severance liabilities, establishment of allowance for doubtful accounts, and assessment of recoverability of long-lived assets. |
Principles of Consolidation | (c) Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company. As the sole managing member of EVO, LLC, the Company exerts control over the Group. In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation |
Cash and Cash Equivalents and Merchant Reserves | (d) Cash and Cash Equivalents and Merchant Reserves Cash and cash equivalents include all cash balances and highly liquid securities with original maturities of three months or less. Cash balances often exceed federally insured limits; however, concentration of credit risk is limited due to the payment of funds on the day following receipt in satisfaction of the settlement process. Included in cash and cash equivalents are settlement-related cash and merchant reserves. Settlement-related cash represents funds that the Company holds when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash balances are not restricted, however these funds are generally paid out in satisfaction of settlement processing obligations and therefore are not available for general purposes. As of March 31, 2020 and December 31, 2019, settlement-related cash balances were $100.3 million and $178.8 million, respectively. Merchant reserves represent funds collected from the Company’s merchants that serve as collateral to minimize contingent liabilities associated with any losses that may occur under the respective merchant agreements. While this cash is not restricted in its use, the Company believes that maintaining the merchant reserves to collateralize merchant losses strengthens its fiduciary standings with its card network sponsors (“Member Banks”) and is in accordance with the guidelines set by the card networks. As of March 31, 2020 and December 31, 2019, merchant reserves were $87.1 million and $85.8 million, respectively. |
Recent Accounting Pronouncements | (e) Recent Accounting Pronouncements New accounting pronouncements issued by the Financial Accounting Standards Board (the “FASB”) or other standards setting bodies are adopted as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption. Recently Adopted Accounting Pronouncements Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments Fair Value Measurement In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement Fair Value Measurement Internal Use Software In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract Recently Issued Accounting Pronouncements Not Yet Adopted Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Revenue | |
Summary of revenue | Three Months Ended March 31, 2020 Americas Europe Total (In thousands) Divisions: Direct $ 35,677 $ 31,059 $ 66,736 Tech-enabled 28,283 9,238 37,521 Traditional 6,912 — 6,912 Totals $ 70,872 $ 40,297 $ 111,169 Three Months Ended March 31, 2019 Americas Europe Total (In thousands) Divisions: Direct $ 35,111 $ 33,084 $ 68,195 Tech-enabled 26,607 8,469 35,076 Traditional 8,247 — 8,247 Totals $ 69,965 $ 41,553 $ 111,518 |
Settlement Processing Assets _2
Settlement Processing Assets and Obligations (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Settlement Processing Assets and Obligations | |
Summary of settlement processing assets and obligations | March 31, December 31, 2020 2019 (In thousands) Settlement processing assets: Receivable from card networks $ 118,499 $ 232,458 Receivable from merchants 81,858 96,179 Totals $ 200,357 $ 328,637 Settlement processing obligations: Settlement liabilities due to merchants $ (200,256) $ (363,545) Merchant reserves (87,072) (85,757) Totals $ (287,328) $ (449,302) |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share | |
Schedule of computation of basic and diluted net income per share | The following table sets forth the computation of the Company's basic and diluted net loss per Class A common share (in thousands, except share and per share data): Three Months Ended March 31, Three Months Ended March 31, 2020 2019 Numerator: Net loss attributable to EVO Payments, Inc. $ (4,808) $ (5,290) Denominator: Weighted-average Class A common stock outstanding 41,259,398 26,365,552 Effect of dilutive securities — — Total dilutive securities 41,259,398 26,365,552 Earnings per share: Basic $ (0.12) $ (0.20) Diluted $ (0.12) $ (0.20) Anti-dilutive securities: Stock options 3,913,049 2,342,168 RSUs 1,027,873 601,050 RSAs 4,791 34,880 Class C common stock 2,318,944 2,449,055 Class D common stock 4,344,758 16,306,954 |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Delego Software | |
Acquisitions | |
Schedule of allocation of purchase price | As of the Estimated acquisition date Useful Life Finite-lived intangible assets (In thousands ) Acquired software $ 8,513 7 years Customer relationships 2,964 15 years Trademarks 836 2 years Deferred tax liabilities (3,116) Other assets, net 590 Goodwill 22,628 Total purchase price $ 32,415 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases | |
Schedule of maturities of lease liabilities | (In thousands) Years ending: 2020 (remainder of the year) $ 9,245 2021 8,258 2022 7,660 2023 5,521 2024 5,013 2025 and thereafter 15,127 Total future minimum lease payments (undiscounted) 50,824 Less: present value discount (10,626) Present value of lease liability $ 40,198 |
Equipment and Improvements (Tab
Equipment and Improvements (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Equipment and Improvements | |
Schedule of equipment and improvements | Estimated Useful Lives in March 31, December 31, Years 2020 2019 (In thousands) Card processing 3-5 $ 140,022 $ 137,190 Office equipment 3-5 43,019 42,561 Computer software 3 42,581 42,621 Leasehold improvements various 18,437 17,870 Furniture and fixtures 5-7 6,277 6,019 Totals 250,336 246,261 Less accumulated depreciation (164,503) (155,323) Foreign currency translation adjustment (5,153) 3,526 Totals $ 80,680 $ 94,464 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets | |
Schedule of intangible assets, net | March 31, 2020 Gross carrying value Accumulated amortization Accumulated impairment charges Translation and other adjustments Net (In thousands) Merchant contract portfolios and customer relationships $ 293,581 $ (167,117) $ (5,686) $ (37,152) $ 83,626 Marketing alliance agreements 186,081 (61,026) (7,557) (28,066) 89,432 Trademarks, definite-lived 21,628 (9,608) (118) (3,852) 8,050 Internally developed and acquired software 85,762 (29,001) (10,190) (4,000) 42,571 Non-compete agreements 6,462 (6,093) - - 369 Total $ 593,514 $ (272,845) $ (23,551) $ (73,070) $ 224,048 December 31, 2019 Gross carrying value Accumulated amortization Accumulated impairment charges Translation and other adjustments Net (In thousands) Merchant contract portfolios and customer relationships $ 296,033 $ (163,358) $ (7,089) $ (26,347) $ 99,239 Marketing alliance agreements 191,879 (59,545) (11,920) (17,468) 102,946 Trademarks, definite-lived 29,493 (13,129) (2,631) (4,600) 9,133 Internally developed and acquired software 84,060 (26,042) (10,190) (2,110) 45,718 Non-compete agreements 6,462 (5,938) - - 524 Trademarks, indefinite-lived 18,499 - (18,499) - - Total $ 626,426 $ (268,012) $ (50,329) $ (50,525) $ 257,560 |
Schedule of estimated amortization expense | (In thousands) Years ending: 2020 (remainder of the year) $ 33,216 2021 39,196 2022 32,874 2023 24,678 2024 15,691 2025 and thereafter 78,393 Total $ 224,048 |
Schedule of net intangible assets by segment | March 31, December 31, 2020 2019 (In thousands) Intangible assets, net: Americas Merchant contract portfolios and customer relationships $ 62,257 $ 74,791 Marketing alliance agreements 61,469 72,272 Trademarks, definite-lived 2,722 2,994 Internally developed and acquired software 26,291 28,697 Non-compete agreements 339 489 Total 153,078 179,243 Europe Merchant contract portfolios and customer relationships 21,369 24,448 Marketing alliance agreements 27,963 30,674 Trademarks, definite-lived 5,328 6,139 Internally developed and acquired software 16,280 17,021 Non-compete agreements 30 35 Total 70,970 78,317 Total intangible assets, net $ 224,048 $ 257,560 |
Schedule of goodwill activity | Reportable Segment Americas Europe Total (In thousands) Goodwill, gross, as of December 31, 2019 $ 268,049 $ 135,080 $ 403,129 Accumulated impairment losses — (24,291) (24,291) Goodwill, net, as of December 31, 2019 268,049 110,789 378,838 Foreign currency translation adjustment (10,810) (6,926) (17,736) Goodwill, net, as of March 31, 2020 $ 257,239 $ 103,863 $ 361,102 |
Accounts Payable and Accrued _2
Accounts Payable and Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounts Payable and Accrued Expenses | |
Schedule of accounts payable and accrued expenses | March 31, December 31, 2020 2019 (In thousands) Compensation and related benefits $ 14,156 $ 18,460 Third-party processing and payment network fees 36,863 36,409 Trade payables 12,449 11,571 Taxes payable 10,998 18,556 Commissions payable to third parties and agents 13,049 15,030 Unearned revenue 3,634 4,309 Other 20,474 19,328 Total accounts payable and accrued expenses $ 111,623 $ 123,663 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions | |
Schedule of related party balances | March 31, December 31, 2020 2019 (In thousands) Due from related parties, current $ 345 $ 1,125 Due to related parties, current (4,067) (7,325) Due to related parties, long-term (385) (385) |
Long-Term Debt and Lines of C_2
Long-Term Debt and Lines of Credit (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Long-Term Debt and Lines of Credit | |
Schedule of principal payment requirements | (In thousands) Years ending March 31 : 2020 (remainder of the year) $ 4,945 2021 6,593 2022 6,593 2023 703,933 2024 — 2025 and thereafter — Total $ 722,064 |
Supplemental Cash Flows Infor_2
Supplemental Cash Flows Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Supplemental Cash Flows Information | |
Schedule of supplemental cash flow disclosures and noncash investing and financing activities | 2020 2019 (In thousands) Supplemental disclosure of cash flow data: Interest paid $ 12,680 $ 10,230 Income taxes paid 4,340 4,965 Cash paid for amounts included in operating lease liabilities 2,533 2,305 Supplemental disclosure of non-cash investing and financing activities: Acquisition holdback payable $ — $ 337 Exchanges of Class C and Class D common stock for Class A common stock 882 20,293 Operating lease liabilities arising from obtaining new or modified right-of-use assets 2,262 8,098 Decrease in operating lease liabilities and corresponding right-of-use assets resulting from lease modifications (6,701) — |
Redeemable Non-controlling In_2
Redeemable Non-controlling Interests (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Redeemable Non-controlling Interests | |
Schedule of components of redeemable non-controlling interest | March 31, 2020 December 31, 2019 Blueapple eService Total Blueapple eService Total (In thousands) Beginning balance $ 902,258 $ 150,190 $ 1,052,448 $ 885,986 $ 124,107 $ 1,010,093 Net (loss) income (8,201) 913 (7,288) (14,567) 7,855 (6,712) Loss on OCI (20,389) (4,787) (25,176) 241 (470) (229) Purchase of Blueapple Class B common stock in connection with secondary offerings — — — (48,447) — (48,447) Decrease in maximum redemption amount in connection with purchase of Blueapple Class B common stock — — — (2,843) — (2,843) (Decrease) increase in the maximum redemption amount (371,674) (49,813) (421,487) 93,845 28,173 122,018 Allocation of eService fair value RNCI adjustment to Blueapple 20,708 — 20,708 (11,957) — (11,957) Distributions — — — — (9,475) (9,475) Ending balance $ 522,702 $ 96,503 $ 619,205 $ 902,258 $ 150,190 $ 1,052,448 |
Fair Value (Tables)
Fair Value (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value | |
Schedule of information about items which are carried at fair value on a recurring basis | March 31, 2020 (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $ 15,644 $ — $ — $ 15,644 Contingent consideration — — (1,568) (1,568) Blueapple RNCI (522,702) — — (522,702) eService RNCI — — (96,503) (96,503) Total $ (507,058) $ — $ (98,071) $ (605,129) December 31, 2019 (In thousands) Level 1 Level 2 Level 3 Total Cash equivalents $ 7,715 $ — $ — $ 7,715 Contingent consideration — — (2,300) (2,300) Blueapple RNCI (902,258) — — (902,258) eService RNCI — — (150,190) (150,190) Total $ (894,543) $ — $ (152,490) $ (1,047,033) |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Information | |
Summary of segment information | Three Months Ended March 31, 2020 2019 (In thousands) Segment revenue: Americas $ 70,872 $ 69,965 Europe 40,297 41,553 Revenue $ 111,169 $ 111,518 Segment profit: Americas $ 19,960 $ 14,880 Europe 8,823 9,693 Total segment profit 28,783 24,573 Corporate (10,509) (7,619) Depreciation and amortization (21,424) (22,745) Net interest expense (9,454) (10,977) Provision for income tax benefit (expense) 1,580 (988) Share-based compensation expense (3,585) (1,845) Less: Net loss attributable to non-controlling interests of EVO Investco, LLC (9,801) (14,311) Net loss attributable to EVO Payments, Inc. $ (4,808) $ (5,290) Capital expenditures: Americas $ 3,831 $ 1,866 Europe 1,336 4,637 Consolidated total capital expenditures $ 5,167 $ 6,503 |
Shareholder's Equity (Tables)
Shareholder's Equity (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Shareholders' Equity | |
Schedule of voting and economic rights of common stockholders | Class of Common Stock Holders Voting rights* Economic rights Class A common stock Public, MDP, Executive Officers, and Current and Former Employees One vote per share Yes Class B common stock Blueapple 15.9% No Class C common stock Executive Officers 3.5 votes per share, subject to aggregate cap No Class D common stock MDP and Current and Former Employees One vote per share No Series A Preferred Stock MDP On an as-converted basis** Yes * Subject to certain ownership requirements, on the third anniversary of the consummation of the IPO (i.e. May 25, 2021) the voting rights of our Class B common stock will cease and each share of our Class C common stock will automatically convert into a share of our Class D common stock. ** Subject to certain voting caps as specified in the certificate of designations for the Preferred Stock |
Stock Compensation Plans and _2
Stock Compensation Plans and Share-Based Compensation Awards (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Stock Compensation Plans and Share-Based Compensation Awards | |
Summary of share based compensation expense and related income tax benefit recognized for share-based compensation awards | Three Months Ended March 31, 2020 2019 (In thousands) Share-based compensation expense $ 3,585 $ 1,845 Income tax benefit $ (407) $ (139) |
Summary of stock option activity | A summary of stock option activity is as follows (in thousands, except per share and term data): Number of Options Weighted-average grant date fair value Weighted-average exercise price Weighted-average remaining contractual term Total Intrinsic Value Balance at December 31, 2019 3,369 $ 7.90 $ 20.46 8.77 $ 20,312 Granted 2,405 6.82 20.81 Exercised (1) 6.68 16.00 9 Forfeited (28) 8.08 21.36 Balance at March 31, 2020 5,745 $ 7.45 $ 20.60 9.21 $ 1,294 Exercisable at March 31, 2020 751 $ 7.83 $ 20.15 8.47 $ — |
Summary of assumptions used in estimating the grant date fair values | Three Months Ended March 31, 2020 2019 Expected life (in years) 7.00 7.00 Weighted-average risk-free interest rate 0.9% 2.5% Expected volatility 30.2% 29.0% Dividend yield 0.0% 0.0% Weighted-average fair value at grant date $ 6.82 $ 9.43 |
RSAs | |
Stock Compensation Plans and Share-Based Compensation Awards | |
Summary of stock activity | A summary of RSAs activity is as follows (in thousands, except per share data): Number of RSAs Weighted-average grant date fair value Balance at December 31, 2019 8 $ 16.00 Granted — — Vested (3) 16.00 Forfeited — — Balance at March 31, 2020 5 $ 16.00 |
RSUs | |
Stock Compensation Plans and Share-Based Compensation Awards | |
Summary of stock activity | A summary of RSUs activity is as follows (in thousands, except per share data): Number of RSUs Weighted-average grant date fair value Balance at December 31, 2019 876 $ 22.30 Granted 601 23.22 Vested (124) 26.01 Forfeited (8) 22.41 Balance at March 31, 2020 1,345 $ 22.37 |
Description of Business and S_3
Description of Business and Summary of Significant Accounting Policies - Other (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020USD ($)itemsegment | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | |
Minimum number of merchants | item | 550,000 | ||
Number of reportable segments | segment | 2 | ||
Cash and Cash Equivalents and Merchant Reserves | |||
Settlement related cash balances | $ 100,300 | $ 178,800 | |
Merchant reserve cash balances | $ 87,100 | $ 85,800 | |
Goodwill and Intangible Assets | |||
Impairment of intangible assets | $ 6,632 | ||
EVO LLC | |||
Ownership interest (as a percent) | 50.30% | ||
Minimum | |||
Number of markets | item | 50 |
Revenue - Other (Details)
Revenue - Other (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue | ||
Revenue | $ 111,169 | $ 111,518 |
Sale and Rental of POS Equipment | ||
Revenue | ||
Revenue | $ 9,900 | $ 9,700 |
Revenue - Summary (Details)
Revenue - Summary (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue | ||
Revenue | $ 111,169 | $ 111,518 |
Direct | ||
Revenue | ||
Revenue | 66,736 | 68,195 |
Tech-enabled | ||
Revenue | ||
Revenue | 37,521 | 35,076 |
Traditional | ||
Revenue | ||
Revenue | 6,912 | 8,247 |
Americas | ||
Revenue | ||
Revenue | 70,872 | 69,965 |
Americas | Direct | ||
Revenue | ||
Revenue | 35,677 | 35,111 |
Americas | Tech-enabled | ||
Revenue | ||
Revenue | 28,283 | 26,607 |
Americas | Traditional | ||
Revenue | ||
Revenue | 6,912 | 8,247 |
Europe | ||
Revenue | ||
Revenue | 40,297 | 41,553 |
Europe | Direct | ||
Revenue | ||
Revenue | 31,059 | 33,084 |
Europe | Tech-enabled | ||
Revenue | ||
Revenue | $ 9,238 | $ 8,469 |
Settlement Processing Assets _3
Settlement Processing Assets and Obligations (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Settlement processing assets: | ||
Receivable from card networks | $ 118,499 | $ 232,458 |
Receivable from merchants | 81,858 | 96,179 |
Totals | 200,357 | 328,637 |
Settlement processing obligations: | ||
Settlement liabilities due to merchants | (200,256) | (363,545) |
Merchant reserves | (87,072) | (85,757) |
Totals | $ (287,328) | $ (449,302) |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Earnings Per Share | ||
Net loss attributable to EVO Payments, Inc. | $ (4,808) | $ (5,290) |
Weighted average Class A common stock outstanding | 41,259,398 | 26,365,552 |
Total dilutive securities | 41,259,398 | 26,365,552 |
Basic (in dollars per share) | $ (0.12) | $ (0.20) |
Diluted (in dollars per share) | $ (0.12) | $ (0.20) |
Stock options | ||
Earnings Per Share | ||
Anti-dilutive securities | 3,913,049 | 2,342,168 |
RSUs | ||
Earnings Per Share | ||
Anti-dilutive securities | 1,027,873 | 601,050 |
RSAs | ||
Earnings Per Share | ||
Anti-dilutive securities | 4,791 | 34,880 |
Class C Common Stock | ||
Earnings Per Share | ||
Anti-dilutive securities | 2,318,944 | 2,449,055 |
Class D Common Stock | ||
Earnings Per Share | ||
Anti-dilutive securities | 4,344,758 | 16,306,954 |
Tax Receivable Agreement (Detai
Tax Receivable Agreement (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Tax Receivable Agreement | ||
Payment on applicable cash tax savings (as a percent) | 85.00% | |
Deferred tax asset pursuant to TRA | $ 176.9 | |
Deferred tax asset pursuant to TRA, net of amortization | 165.8 | |
Deferred tax liability pursuant to TRA | 150.4 | |
Realized tax savings | 0 | $ 0 |
Payments to TRA obligation | $ 0 | $ 0 |
Acquisitions (Details)
Acquisitions (Details) $ in Thousands, € in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | |||||
Sep. 30, 2019CAD ($) | Sep. 30, 2019USD ($) | Jul. 31, 2019USD ($) | Mar. 31, 2019EUR (€) | Mar. 31, 2019USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Allocation of purchase price | |||||||
Goodwill | $ 361,102 | $ 378,838 | |||||
Other disclosures: | |||||||
Book value of the investment | $ 1,986 | $ 2,078 | |||||
Card Processing | Minimum | |||||||
Allocation of purchase price | |||||||
Useful life of equipment | 3 years | ||||||
Card Processing | Maximum | |||||||
Allocation of purchase price | |||||||
Useful life of equipment | 5 years | ||||||
Office equipment | Minimum | |||||||
Allocation of purchase price | |||||||
Useful life of equipment | 3 years | ||||||
Office equipment | Maximum | |||||||
Allocation of purchase price | |||||||
Useful life of equipment | 5 years | ||||||
Internally developed and acquired software | |||||||
Allocation of purchase price | |||||||
Useful life of equipment | 3 years | ||||||
Delego Software | |||||||
Allocation of purchase price | |||||||
Deferred tax liability | $ (3,116) | ||||||
Other assets, net | 590 | ||||||
Goodwill | 22,628 | ||||||
Total purchase price | $ 32,415 | ||||||
Percentage of interest acquired | 100.00% | ||||||
Total consideration transferred | $ 42.6 | $ 32,400 | |||||
Delego Software | Purchased software | |||||||
Allocation of purchase price | |||||||
Finite-lived intangible assets | $ 8,513 | ||||||
Useful life of intangible assets | 7 years | 7 years | |||||
Delego Software | Customer relationships | |||||||
Allocation of purchase price | |||||||
Finite-lived intangible assets | $ 2,964 | ||||||
Useful life of intangible assets | 15 years | 15 years | |||||
Delego Software | Trademarks, definite-lived | |||||||
Allocation of purchase price | |||||||
Finite-lived intangible assets | $ 836 | ||||||
Useful life of intangible assets | 2 years | 2 years | |||||
SF Systems | |||||||
Allocation of purchase price | |||||||
Goodwill | $ 2,400 | ||||||
Percentage of interest acquired | 100.00% | ||||||
Total consideration transferred | $ 5,000 | ||||||
Upfront payment | 4,000 | ||||||
Holdback liability | $ 1,000 | ||||||
Liability repayment period | 18 months | ||||||
SF Systems | Purchased software | |||||||
Allocation of purchase price | |||||||
Finite-lived intangible assets | $ 2,600 | ||||||
Useful life of intangible assets | 5 years | ||||||
Way 2 Pay Ltd | |||||||
Allocation of purchase price | |||||||
Liabilities assumed | $ 600 | ||||||
Percentage of interest acquired | 100.00% | ||||||
Total consideration transferred | € 3 | $ 3,400 | |||||
Upfront payment | € | 2.7 | ||||||
Holdback liability | € | € 0.3 | ||||||
Liability repayment period | 18 months | 18 months | |||||
Useful life of intangible assets | 5 years | 5 years | |||||
Way 2 Pay Ltd | Purchased software | |||||||
Allocation of purchase price | |||||||
Finite-lived intangible assets | $ 4,000 |
Leases - Other (Details)
Leases - Other (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Operating Leases: | |||
Operating lease right-of-use assets | $ 37,386 | $ 45,664 | |
Current portion of operating lease liabilities | 7,032 | 7,087 | |
Noncurrent portion of operating lease liabilities | 33,166 | $ 41,703 | |
Total operating lease liabilities | $ 40,198 | ||
Weighted-average remaining lease term | 7 years 2 months 15 days | 7 years 9 months 14 days | |
Weighted-average discount rate used in the measurement of our lease liabilities | 6.44% | 6.67% | |
Operating lease costs | $ 3,000 | $ 2,800 | |
Variable lease costs | $ 500 | $ 400 |
Leases - Maturities of lease li
Leases - Maturities of lease liabilities (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Maturities of Lease Liabilities | |
2020 (remainder of the year) | $ 9,245 |
2021 | 8,258 |
2022 | 7,660 |
2023 | 5,521 |
2024 | 5,013 |
2025 and thereafter | 15,127 |
Total future minimum lease payments (undiscounted) | 50,824 |
Less: present value discount | (10,626) |
Present value of lease liability | $ 40,198 |
Equipment and Improvements (Det
Equipment and Improvements (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Equipment and Improvements | |||
Equipment and improvements, Gross Totals | $ 250,336 | $ 246,261 | |
Less accumulated depreciation | (164,503) | (155,323) | |
Foreign currency translation adjustment | (5,153) | 3,526 | |
Totals | 80,680 | 94,464 | |
Depreciation | |||
Depreciation expense | 10,100 | $ 10,500 | |
Decrease in equipment and improvements | 1,100 | 4,600 | |
Decrease in accumulated depreciation | 900 | $ 4,500 | |
Card Processing | |||
Equipment and Improvements | |||
Equipment and improvements, Gross Totals | 140,022 | 137,190 | |
Office equipment | |||
Equipment and Improvements | |||
Equipment and improvements, Gross Totals | 43,019 | 42,561 | |
Internally developed and acquired software | |||
Equipment and Improvements | |||
Equipment and improvements, Gross Totals | $ 42,581 | 42,621 | |
Estimated useful lives | 3 years | ||
Leasehold improvements | |||
Equipment and Improvements | |||
Equipment and improvements, Gross Totals | $ 18,437 | 17,870 | |
Furniture and fixtures | |||
Equipment and Improvements | |||
Equipment and improvements, Gross Totals | $ 6,277 | $ 6,019 | |
Minimum | Card Processing | |||
Equipment and Improvements | |||
Estimated useful lives | 3 years | ||
Minimum | Office equipment | |||
Equipment and Improvements | |||
Estimated useful lives | 3 years | ||
Minimum | Furniture and fixtures | |||
Equipment and Improvements | |||
Estimated useful lives | 5 years | ||
Maximum | Card Processing | |||
Equipment and Improvements | |||
Estimated useful lives | 5 years | ||
Maximum | Office equipment | |||
Equipment and Improvements | |||
Estimated useful lives | 5 years | ||
Maximum | Furniture and fixtures | |||
Equipment and Improvements | |||
Estimated useful lives | 7 years |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Intangible assets, net (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Intangible assets with finite lives: | |||
Gross carrying value | $ 593,514 | $ 626,426 | |
Accumulated amortization | (272,845) | (268,012) | |
Accumulated impairment charges | (23,551) | (50,329) | |
Foreign currency translation adjustment | (73,070) | (50,525) | |
Net | 224,048 | 257,560 | |
Accumulated impairment losses | $ (6,632) | ||
Total intangible assets, net | 224,048 | 257,560 | |
Other disclosures | |||
Amortization expense related to intangible assets | 11,300 | 12,400 | |
Trademarks, definite-lived | |||
Intangible assets with finite lives: | |||
Gross carrying value | 18,499 | ||
Accumulated impairment losses | (18,499) | ||
Other disclosures | |||
Reduction in gross carrying value | 18,500 | ||
Merchant contract portfolios and customer relationships | |||
Intangible assets with finite lives: | |||
Gross carrying value | 293,581 | 296,033 | |
Accumulated amortization | (167,117) | (163,358) | |
Accumulated impairment charges | (5,686) | (7,089) | |
Foreign currency translation adjustment | (37,152) | (26,347) | |
Net | 83,626 | 99,239 | |
Other disclosures | |||
Reduction in gross carrying value | 2,400 | ||
Marketing alliance agreements | |||
Intangible assets with finite lives: | |||
Gross carrying value | 186,081 | 191,879 | |
Accumulated amortization | (61,026) | (59,545) | |
Accumulated impairment charges | (7,557) | (11,920) | |
Foreign currency translation adjustment | (28,066) | (17,468) | |
Net | 89,432 | 102,946 | |
Other disclosures | |||
Reduction in gross carrying value | 5,800 | ||
Trademarks, definite-lived | |||
Intangible assets with finite lives: | |||
Gross carrying value | 21,628 | 29,493 | |
Accumulated amortization | (9,608) | (13,129) | |
Accumulated impairment charges | (118) | (2,631) | |
Foreign currency translation adjustment | (3,852) | (4,600) | |
Net | 8,050 | 9,133 | |
Other disclosures | |||
Reduction in gross carrying value | 7,900 | ||
Internally developed and acquired software | |||
Intangible assets with finite lives: | |||
Gross carrying value | 85,762 | 84,060 | |
Accumulated amortization | (29,001) | (26,042) | |
Accumulated impairment charges | (10,190) | (10,190) | |
Foreign currency translation adjustment | (4,000) | (2,110) | |
Net | 42,571 | 45,718 | |
Non-competition agreements | |||
Intangible assets with finite lives: | |||
Gross carrying value | 6,462 | 6,462 | |
Accumulated amortization | (6,093) | (5,938) | |
Net | $ 369 | $ 524 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Estimated amortization expense (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Estimated amortization expense | ||
2020 (remainder of the year) | $ 33,216 | |
2021 | 39,196 | |
2022 | 32,874 | |
2023 | 24,678 | |
2024 | 15,691 | |
2025 and thereafter | 78,393 | |
Total | $ 224,048 | $ 257,560 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Net intangible assets by segment (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Intangible assets, net | ||
Total intangible assets, net | $ 224,048 | $ 257,560 |
Americas | ||
Intangible assets, net | ||
Total intangible assets, net | 153,078 | 179,243 |
Americas | Merchant contract portfolios and customer relationships | ||
Intangible assets, net | ||
Total intangible assets, net | 62,257 | 74,791 |
Americas | Marketing alliance agreements | ||
Intangible assets, net | ||
Total intangible assets, net | 61,469 | 72,272 |
Americas | Trademarks, definite-lived | ||
Intangible assets, net | ||
Total intangible assets, net | 2,722 | 2,994 |
Americas | Internally developed and acquired software | ||
Intangible assets, net | ||
Total intangible assets, net | 26,291 | 28,697 |
Americas | Non-competition agreements | ||
Intangible assets, net | ||
Total intangible assets, net | 339 | 489 |
Europe | ||
Intangible assets, net | ||
Total intangible assets, net | 70,970 | 78,317 |
Europe | Merchant contract portfolios and customer relationships | ||
Intangible assets, net | ||
Total intangible assets, net | 21,369 | 24,448 |
Europe | Marketing alliance agreements | ||
Intangible assets, net | ||
Total intangible assets, net | 27,963 | 30,674 |
Europe | Trademarks, definite-lived | ||
Intangible assets, net | ||
Total intangible assets, net | 5,328 | 6,139 |
Europe | Internally developed and acquired software | ||
Intangible assets, net | ||
Total intangible assets, net | 16,280 | 17,021 |
Europe | Non-competition agreements | ||
Intangible assets, net | ||
Total intangible assets, net | $ 30 | $ 35 |
Goodwill and Intangible Asset_5
Goodwill and Intangible Assets - Goodwill activity (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Goodwill, Roll forward | ||
Goodwill, gross, at the beginning of the year | $ 403,129 | |
Accumulated impairment losses | (24,291) | |
Goodwill, net, at the beginning of the year | $ 378,838 | |
Foreign currency translation adjustment | (17,736) | |
Goodwill, net, at the end of the year | 361,102 | |
Americas | ||
Goodwill, Roll forward | ||
Goodwill, gross, at the beginning of the year | 268,049 | |
Goodwill, net, at the beginning of the year | 268,049 | |
Foreign currency translation adjustment | (10,810) | |
Goodwill, net, at the end of the year | 257,239 | |
Europe | ||
Goodwill, Roll forward | ||
Goodwill, gross, at the beginning of the year | 135,080 | |
Accumulated impairment losses | $ (24,291) | |
Goodwill, net, at the beginning of the year | 110,789 | |
Foreign currency translation adjustment | (6,926) | |
Goodwill, net, at the end of the year | $ 103,863 |
Accounts Payable and Accrued _3
Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Accounts Payable and Accrued Expenses | ||
Compensation and related benefits | $ 14,156 | $ 18,460 |
Third-party processing and payment network fees | 36,863 | 36,409 |
Trade payables | 12,449 | 11,571 |
Taxes payable | 10,998 | 18,556 |
Commissions payable to third parties and agents | 13,049 | 15,030 |
Unearned revenue | 3,634 | 4,309 |
Other | 20,474 | 19,328 |
Total accounts payable and accrued expenses | $ 111,623 | $ 123,663 |
Related Party Transactions - Re
Related Party Transactions - Related party balances (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Related party balances: | ||
Due from Related Parties, Current | $ 345 | $ 1,125 |
Due to related parties, current | (4,067) | (7,325) |
Due to related parties, long term | $ (385) | $ (385) |
Related Party Transactions - Tr
Related Party Transactions - Transactions (Details) $ / shares in Units, $ in Thousands | Apr. 21, 2020USD ($)$ / sharesshares | Mar. 31, 2020USD ($)subsidiary | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) |
Related Party Transactions | ||||
Lease liabilities | $ 40,198 | |||
Number of wholly owned subsidiaries | subsidiary | 2 | |||
Number of minority owned subsidiaries | subsidiary | 1 | |||
Purchaser | Series A Convertible Preferred Stock | Subsequent Event | ||||
Related Party Transactions | ||||
Number of shares issued | shares | 152,250 | |||
515 Broadhollow, LLC | ||||
Related Party Transactions | ||||
Lease liabilities | $ 3,900 | $ 4,100 | ||
Sublease Income | 100 | $ 100 | ||
Commission Expense | ||||
Related Party Transactions | ||||
Expenses with related parties | 4,400 | |||
Sale of Equipment and Services | ||||
Related Party Transactions | ||||
Revenue from related parties | 100 | 100 | ||
MDP | Subsequent Event | ||||
Related Party Transactions | ||||
Reimbursement of expenses | $ 800 | |||
MDP | Purchaser | Series A Convertible Preferred Stock | Subsequent Event | ||||
Related Party Transactions | ||||
Price per share | $ / shares | $ 985.221685 | |||
Minority held affiliates | ||||
Related Party Transactions | ||||
Liabilities to related companies | 2,800 | 5,500 | ||
Lease liabilities | 300 | 300 | ||
Unconsolidated investees | ||||
Related Party Transactions | ||||
Liabilities to related companies | $ 1,300 | $ 1,800 | ||
Blueapple | Treasury, Payroll, Tax Preparation and Other Services | Maximum | ||||
Related Party Transactions | ||||
Expenses with related parties | 100 | |||
Relative of Chairman | ||||
Related Party Transactions | ||||
Expenses with related parties | 100 | |||
NFP | ||||
Related Party Transactions | ||||
Expenses with related parties | $ 100 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Taxes | ||
Effective income tax rate (as a percent) | 10.43% | (5.50%) |
Tax benefit related to changes enacted as a result of the CARES Act | $ 1.9 |
Long-Term Debt and Lines of C_3
Long-Term Debt and Lines of Credit - Summary (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 |
Long-term debt | |||
Long term debt gross | $ 722,064 | ||
Less debt issuance costs | (9,319) | $ (9,965) | |
Total long-term debt | 712,745 | 701,913 | |
Less current portion of long-term debt, including accrued interest(1) of $4.1 million as of December 31, 2019 | (4,628) | (8,744) | |
Total long-term debt, long-term portion | 708,117 | 693,169 | |
Accrued interest | 4,100 | ||
Accrued Liabilities Current | |||
Long-term debt | |||
Accrued interest | 500 | ||
Senior Secured Credit Facilities | Term loan | |||
Long-term debt | |||
Face amount of debt | $ 665,000 | ||
Senior Secured Credit Facilities | Credit Facility | |||
Long-term debt | |||
Commitments | $ 200,000 | ||
First lien senior secured credit facility | Term loan | |||
Long-term debt | |||
Long term debt gross | 646,114 | 650,891 | |
First lien senior secured credit facility | Credit Facility | |||
Long-term debt | |||
Long term debt gross | $ 75,950 | $ 60,987 |
Long-Term Debt and Lines of C_4
Long-Term Debt and Lines of Credit - Principal payment requirements (Details) $ in Thousands | Mar. 31, 2020USD ($) |
Principal payment requirements: | |
2020 (remainder of the year) | $ 4,945 |
2021 | 6,593 |
2022 | 6,593 |
2023 | 703,933 |
Total | $ 722,064 |
Long-Term Debt and Lines of C_5
Long-Term Debt and Lines of Credit - Settlement Obligations (Details) - Settlement facilities - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Settlement obligations | ||
Amount outstanding | $ 18.7 | $ 33.3 |
Additional capacity | $ 137.9 | $ 133.9 |
Weighted-average interest rate | 3.60% | 4.30% |
Supplemental Cash Flows Infor_3
Supplemental Cash Flows Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Supplemental disclosure of cash flow data: | ||
Interest paid | $ 12,680 | $ 10,230 |
Income taxes paid | 4,340 | 4,965 |
Cash paid for amounts in operating lease liabilities | 2,533 | 2,305 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Acquisition holdback payable | 337 | |
Exchanges of Class C and Class D common stock for Class A common stock | 882 | 20,293 |
Operating lease liabilities arising from obtaining new or modified right-of-use assets | 2,262 | $ 8,098 |
Decrease in operating lease liabilities from lease modifications reducing the right-of-use-assets | $ (6,701) |
Redeemable Non-controlling In_3
Redeemable Non-controlling Interests (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Redeemable Non-controlling Interests | |||
Beginning balance | $ 1,052,448 | $ 1,010,093 | $ 1,010,093 |
Net loss | (7,288) | (8,932) | (6,712) |
Gain (loss) on OCI | (25,176) | (229) | |
Purchase of Blueapple Class B common stock in connection with secondary offerings | (48,447) | ||
Decrease in maximum redemption amount in connection with purchase of Blueapple Class B common stock | (2,843) | ||
Increase (decrease) in the maximum redemption amount | (421,487) | 122,018 | |
Allocation of fair value adjustment | 20,708 | (11,957) | |
Distributions | (5,465) | (9,475) | |
Ending balance | 619,205 | 1,163,203 | 1,052,448 |
Blueapple | |||
Redeemable Non-controlling Interests | |||
Beginning balance | 902,258 | 885,986 | 885,986 |
Net loss | (8,201) | (14,567) | |
Gain (loss) on OCI | (20,389) | 241 | |
Purchase of Blueapple Class B common stock in connection with secondary offerings | (48,447) | ||
Decrease in maximum redemption amount in connection with purchase of Blueapple Class B common stock | (2,843) | ||
Increase (decrease) in the maximum redemption amount | (371,674) | 93,845 | |
Allocation of fair value adjustment | 20,708 | (11,957) | |
Ending balance | $ 522,702 | 902,258 | |
eService | |||
Redeemable Non-controlling Interests | |||
Ownership interest (as a percent) | 66.00% | ||
Beginning balance | $ 150,190 | $ 124,107 | 124,107 |
Net loss | 913 | 7,855 | |
Gain (loss) on OCI | (4,787) | (470) | |
Increase (decrease) in the maximum redemption amount | (49,813) | 28,173 | |
Distributions | (9,475) | ||
Ending balance | $ 96,503 | $ 150,190 | |
EVO LLC | |||
Redeemable Non-controlling Interests | |||
Ownership interest (as a percent) | 50.30% |
Fair Value - Summary (Details)
Fair Value - Summary (Details) - Recurring - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Fair Value | ||
Cash equivalents | $ 15,644 | $ 7,715 |
Contingent consideration | (1,568) | (2,300) |
Total | (605,129) | (1,047,033) |
Blueapple | ||
Fair Value | ||
Redeemable non-controlling interest | (522,702) | (902,258) |
eService | ||
Fair Value | ||
Redeemable non-controlling interest | (96,503) | (150,190) |
Level 1 | ||
Fair Value | ||
Cash equivalents | 15,644 | 7,715 |
Total | (507,058) | (894,543) |
Level 1 | Blueapple | ||
Fair Value | ||
Redeemable non-controlling interest | (522,702) | (902,258) |
Level 3 | ||
Fair Value | ||
Contingent consideration | (1,568) | (2,300) |
Total | (98,071) | (152,490) |
Level 3 | eService | ||
Fair Value | ||
Redeemable non-controlling interest | $ (96,503) | $ (150,190) |
Fair Value - Other (Details)
Fair Value - Other (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Fair Value | ||
Long-term debt, fair value | $ 639,000 | $ 711,900 |
Long-term debt | 712,745 | 701,913 |
Estimated fair value of Visa preferred shares | 32,400 | 37,800 |
Series C preferred stock | ||
Fair Value | ||
Carrying amount of Visa preferred shares | $ 14,700 | $ 14,700 |
Minimum | Market Approach | ||
Fair Value | ||
Valuation multiples for revenue | 2.75 | |
Valuation multiples for EBITDA | 6 | |
Maximum | Market Approach | ||
Fair Value | ||
Valuation multiples for revenue | 3 | |
Valuation multiples for EBITDA | 6.25 | |
eService | Income Approach | ||
Fair Value | ||
Redeemable non-controlling interest, measurement input (as a percent) | 75.00% | |
eService | Market Approach | ||
Fair Value | ||
Redeemable non-controlling interest, measurement input (as a percent) | 25.00% | |
eService | Weighted Average Cost of Capital | ||
Fair Value | ||
Redeemable non-controlling interest, measurement input (as a percent) | 14.50% | |
eService | Maximum | Growth Rate | ||
Fair Value | ||
Redeemable non-controlling interest, measurement input (as a percent) | 10.00% |
Segment Information - Informati
Segment Information - Information on segments & reconciliations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Segment Information | ||
Revenue | $ 111,169 | $ 111,518 |
Segment profit | (15,150) | (18,031) |
Depreciation and amortization | (21,424) | (22,745) |
Net interest expense | (9,454) | (10,977) |
Provision for income tax benefit (expense) | 1,580 | (988) |
Share-based compensation expense | (3,585) | (1,845) |
Less:Net loss attributable to non-controlling interests of EVO Investco, LLC | (9,801) | (14,311) |
Net loss attributable to EVO Payments, Inc. | (4,808) | (5,290) |
Capital expenditures | 5,167 | 6,503 |
Operating | ||
Segment Information | ||
Segment profit | 28,783 | 24,573 |
Corporate | ||
Segment Information | ||
Segment profit | (10,509) | (7,619) |
Americas | ||
Segment Information | ||
Revenue | 70,872 | 69,965 |
Segment profit | 19,960 | 14,880 |
Capital expenditures | 3,831 | 1,866 |
Europe | ||
Segment Information | ||
Revenue | 40,297 | 41,553 |
Segment profit | 8,823 | 9,693 |
Capital expenditures | $ 1,336 | $ 4,637 |
Segment Information - Revenue f
Segment Information - Revenue from external customers (Detail) - Revenue from external customers - Geographic Concentration Risk | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
United States | ||
Revenue from external customers | ||
Revenue from external customers as a percentage of total revenue | 40.30% | 41.40% |
Mexico | ||
Revenue from external customers | ||
Revenue from external customers as a percentage of total revenue | 20.60% | 18.60% |
Poland | ||
Revenue from external customers | ||
Revenue from external customers as a percentage of total revenue | 16.50% | 19.30% |
Shareholder's Equity - Organiza
Shareholder's Equity - Organization structure (Details) | 3 Months Ended | |
Mar. 31, 2020shares | May 23, 2018Vote | |
Class A Common Stock | ||
Shareholders' Equity | ||
Number of votes per share | 1 | |
Exchange basis for newly issued shares | shares | 1 | |
Executive Officers | Class C Common Stock | ||
Shareholders' Equity | ||
Number of votes per share | 3.5 | |
Blueapple | Class B Common Stock | ||
Shareholders' Equity | ||
Percentage of combined voting power | 15.90% | |
MDP | Current and Former Employees | Class D Common Stock | ||
Shareholders' Equity | ||
Number of votes per share | 1 |
Stock Compensation Plans and _3
Stock Compensation Plans and Share-Based Compensation Awards - Share based compensation expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | May 22, 2018 | |
Stock Compensation Plans and Share-Based Compensation Awards | |||
Share-based compensation expense | $ 3,585 | $ 1,845 | |
Income tax benefit | $ (407) | $ (139) | |
2018 Plan | Class A Common Stock | |||
Stock Compensation Plans and Share-Based Compensation Awards | |||
Shares reserved for issuance | 7,792,162 |
Stock Compensation Plans and _4
Stock Compensation Plans and Share-Based Compensation Awards - Awards, UAR, RSA (Details) $ / shares in Units, shares in Thousands, $ in Thousands | May 25, 2018employee$ / shares | Mar. 31, 2020USD ($)$ / sharesshares | Mar. 31, 2019USD ($) | May 23, 2018USD ($) |
Stock Compensation Plans and Share-Based Compensation Awards | ||||
Share-based compensation expense | $ 3,585 | $ 1,845 | ||
RSAs | ||||
Stock Compensation Plans and Share-Based Compensation Awards | ||||
Fair value (in dollars per share) | $ / shares | $ 16 | |||
Share-based compensation expense | 100 | $ 0 | ||
Unrecognized compensation expense | $ 100 | 200 | ||
Number of employees or former employees who held awards | employee | 35 | |||
Total fair value of share based awards vested | $ 200 | |||
Number outstanding | ||||
Balance at beginning of period (in shares) | shares | 8 | |||
Vested (in shares) | shares | (3) | |||
Balance at end of period (in shares) | shares | 5 | |||
Weighted average grant date fair value | ||||
Balance at beginning of period (in dollars per share) | $ / shares | $ 16 | |||
Vested (in dollars per share) | $ / shares | 16 | |||
Balance at end of period (in dollars per share) | $ / shares | $ 16 | |||
RSAs | Maximum | ||||
Stock Compensation Plans and Share-Based Compensation Awards | ||||
Share-based compensation expense | $ 100 | |||
Total fair value of share based awards vested | $ 100 |
Stock Compensation Plans and _5
Stock Compensation Plans and Share-Based Compensation Awards - RSU (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Stock Compensation Plans and Share-Based Compensation Awards | ||
Share-based compensation expense | $ 3,585 | $ 1,845 |
RSUs | ||
Stock Compensation Plans and Share-Based Compensation Awards | ||
Share-based compensation expense | 1,700 | 700 |
Unrecognized compensation expense | $ 27,700 | $ 18,300 |
Vesting period | 4 years | |
Weighted average period outstanding for unvested RSUs | 3 years | 3 years 4 months 24 days |
Total fair value of share based awards vested | $ 3,200 | $ 0 |
Number outstanding | ||
Balance at beginning of period (in shares) | 876 | |
Granted (in shares) | 601 | |
Vested (in shares) | (124) | |
Forfeited (in shares) | (8) | |
Balance at end of period (in shares) | 1,345 | |
Weighted average grant date fair value | ||
Balance at beginning of period (in dollars per share) | $ 22.30 | |
Granted (in dollars per share) | 23.22 | |
Vested (in dollars per share) | 26.01 | |
Forfeited (in dollars per share) | 22.41 | |
Balance at end of period (in dollars per share) | $ 22.37 |
Stock Compensation Plans and _6
Stock Compensation Plans and Share-Based Compensation Awards - Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Stock Compensation Plans and Share-Based Compensation Awards | |||
Share-based compensation expense | $ 3,585 | $ 1,845 | |
Weighted average exercise price | |||
Weighted average remaining contractual term (in years) | 9 years 2 months 15 days | ||
Aggregate Intrinsic Value | $ 1,294 | ||
Aggregate Intrinsic Value,Forfeited | $ 9 | ||
Stock options | |||
Stock Compensation Plans and Share-Based Compensation Awards | |||
Share-based compensation expense | $ 1,900 | $ 1,000 | |
Number outstanding | |||
Balance at beginning of period (in shares) | 3,369 | ||
Granted (in shares) | 2,405 | ||
Forfeited (in shares) | (1) | ||
Exercised (in shares) | (28) | ||
Balance at end of period (in shares) | 5,745 | 3,369 | |
Exercisable at end of period (in shares) | 751 | ||
Weighted average grant date fair value | |||
Balance at beginning of period (in dollars per share) | $ 7.90 | ||
Granted (in dollars per share) | 6.82 | ||
Forfeited (in dollars per share) | 6.68 | ||
Exercised (in dollars per share) | 8.08 | ||
Balance at end of period (in dollars per share) | 7.45 | $ 7.90 | |
Exercisable at end of period (in dollars per share) | 7.83 | ||
Weighted average exercise price | |||
Balance at beginning of period (in dollars per share) | 20.46 | ||
Granted (in dollars per share) | 20.81 | ||
Forfeited (in dollars per share) | 16 | ||
Exercised (in dollars per share) | 21.36 | ||
Balance at end of period (in dollars per share) | 20.60 | $ 20.46 | |
Exercisable at end of period (in dollars per share) | $ 20.15 | ||
Weighted average remaining contractual term (in years) | 8 years 9 months 7 days | ||
Exercisable at Weighted average remaining contractual term (in years) | 8 years 5 months 19 days | ||
Aggregate Intrinsic Value | $ 20,312 | ||
Other disclosures | |||
Weighted average period outstanding for unvested stock options | 2 years 7 months 6 days | 3 years 6 months | |
Unrecognized compensation expense | $ 33,400 | $ 22,900 | |
Vesting period | 4 years | ||
Expiration period | 10 years |
Stock Compensation Plans and _7
Stock Compensation Plans and Share-Based Compensation Awards - Fair Value Assumptions (Details) - Stock options - $ / shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Assumptions used in estimating grant date fair values | ||
Expected life (in years) | 7 years | 7 years |
Weighted average risk free interest rate (as a percent) | 0.90% | 2.50% |
Expected volatility (as a percent) | 30.20% | 29.00% |
Dividend yield (as a percent) | 0.00% | 0.00% |
Weighted average fair value at grant date | 6.82 | 9.43 |
Subsequent Events - Issuance of
Subsequent Events - Issuance of Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 21, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Class A Common Stock | |||
Subsequent Events | |||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | |
Subsequent Event | Series A Convertible Preferred Stock | |||
Subsequent Events | |||
Proceeds from issuance of preferred stock | $ 150 | ||
Liquidation preference per share (in dollars per share) | $ 1,000 | ||
Percentage of increase in paid in kind dividend rate | 1.00% | ||
Period of antidilutive offerings to be adjusted in calculation of conversion rate | 9 months | ||
Threshold trading days | 20 | ||
Threshold consecutive trading days | 30 | ||
Threshold percentage of voting rights to enable conversion | 19.99% | ||
Percentage of then current liquidation preference per share plus accumulated and unpaid dividends as cash consideration | 150.00% | ||
Change of control, conditional period following issuance of convertible preferred stock | 36 months | ||
Subsequent Event | Series A Convertible Preferred Stock | Purchaser | |||
Subsequent Events | |||
Number of shares issued | 152,250 | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | ||
Subsequent Event | Series A Convertible Preferred Stock | Convertible Preferred Stock, Dividend Rate For First Ten Years | |||
Subsequent Events | |||
PIK dividend rate | 6.00% | ||
Subsequent Event | Series A Convertible Preferred Stock | Convertible Preferred Stock, Dividend Rate Thereafter | |||
Subsequent Events | |||
PIK dividend rate | 8.00% | ||
Subsequent Event | Series A Convertible Preferred Stock | Prior to the fourth semi-annual PIK dividend payment date | |||
Subsequent Events | |||
Threshold stock price trigger percentage | 180.00% | ||
Subsequent Event | Series A Convertible Preferred Stock | After fourth and prior to the fourth semi-annual PIK dividend payment date | |||
Subsequent Events | |||
Threshold stock price trigger percentage | 170.00% | ||
Subsequent Event | Series A Convertible Preferred Stock | On or after the sixth and prior to the eighth semi-annual PIK dividend payment date | |||
Subsequent Events | |||
Threshold stock price trigger percentage | 160.00% | ||
Subsequent Event | Series A Convertible Preferred Stock | On or after the eighth semi-annual PIK dividend payment date | |||
Subsequent Events | |||
Threshold stock price trigger percentage | 150.00% | ||
Subsequent Event | Series A Convertible Preferred Stock | Change of Control is on or after the sixth semi-annual PIK dividend payment date | |||
Subsequent Events | |||
Percentage of then current liquidation preference per share plus accumulated and unpaid dividends as cash consideration | 100.00% | ||
Subsequent Event | Class A Common Stock | |||
Subsequent Events | |||
Common stock, par value (in dollars per share) | $ 0.0001 | ||
Conversion rate | 63.2911 | ||
Conversion price | $ 15.80 |
Subsequent Events - Credit Faci
Subsequent Events - Credit Facility Waiver (Details) - Subsequent Event | 1 Months Ended |
May 31, 2020 | |
Quarter ended June 30, 2020 through and including March 31, 2021 | |
Subsequent Events | |
Consolidated leverage ratio during covenant waiver period | 6 |
Fiscal quarter ended June 30, 2021 | |
Subsequent Events | |
Consolidated leverage ratio during covenant waiver period | 5.5 |
Fiscal quarter ended September 30, 2021 | |
Subsequent Events | |
Consolidated leverage ratio during covenant waiver period | 5.25 |