EVERTEC Reports Second Quarter 2013 Results
EVERTEC Reports Second Quarter 2013 Results
SAN JUAN, Puerto Rico--(BUSINESS WIRE)-- EVERTEC, Inc. (NYS: EVTC) ("EVERTEC" or the "Company") today announced results for the second quarter ended June 30, 2013.
Second Quarter 2013 Highlights
Total revenue increased 6% to $89.2 million
Adjusted EBITDA increased 6% to $43.4 million
Adjusted Net Income increased 39% to $28.9 million, or $0.35 per diluted share
Initiated regular quarterly dividend program
Made significant progress on three notable strategic growth initiatives
"Our solid second quarter results demonstrate the strength of our diversified business model and continued focused execution of our growth strategy," said Peter Harrington, EVERTEC's President and Chief Executive Officer. "Supported by our leading, end-to-end technology platform, we continue to strategically expand the breadth and depth of our customer partnerships and service offerings across our broad Latin American footprint."
"Consistent with the growth strategy we laid out, this quarter we made significant progress on three notable initiatives: (i) we recently obtained a Third Party Processor (TPP1) license for Mexico, Panama and Costa Rica from MasterCard; (ii) we partnered with a large existing client to increase the scope of our services across their multi-country operations; and (iii) we completed preparations for the launch of dynamic currency conversion services in Costa Rica in 2014. The regular quarterly dividend program we announced today is a further reflection of both our momentum and long-term growth prospects as well as our commitment to maximizing total value for our shareholders."
Second Quarter 2013 Results
Revenues. Total revenues for the quarter ended June 30, 2013 were $89.2 million, representing an increase of 6% as compared to $84.4 million in the prior year.
Merchant Acquiring net revenues for the quarter ended June 30, 2013 were $18.2 million, representing an increase of 7% as compared to $17.0 million in the prior year. Revenue growth in the quarter was driven primarily by an increase in transaction volumes.
Payment Processing revenues for the quarter ended June 30, 2013 were $24.3 million, representing an increase of 2% as compared to $23.8 million in the prior year. The revenue growth comparison in this quarter is impacted by a non-recurring increase in processing volumes during the quarter ended June 30, 2012 related to certain one-time items. Normalizing for these one-time items, revenues in this segment grew at 6% versus the prior year.
Business Solutions revenues for the quarter ended June 30, 2013 were $46.7 million, representing an increase of 7% as compared to $43.5 million in the prior year. Revenue growth was primarily driven by an increase in our sales and higher demand for our services.
Adjusted EBITDA. For the quarter ended June 30, 2013, Adjusted EBITDA was $43.4 million, representing an increase of 6% as compared to $40.9 million in the prior year. The increase in Adjusted EBITDA was primarily due to revenue growth. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) improved by 20 basis points to 48.7% from 48.5% in the prior year as a result of operating leverage.
Adjusted Net Income. For the quarter ended June 30, 2013, Adjusted Net Income was $28.9 million ($0.35 per diluted share), representing an increase of 39% as compared to $20.7 million ($0.27 per diluted share) in the prior year. The increase in Adjusted Net Income was primarily due to the same factors impacting Adjusted EBITDA and lower pro forma cash interest expense as a result of the debt refinancing completed in April 2013, partially offset by slightly higher operating depreciation and amortization and the timing of cash income tax payments.
Recent Developments
Quarterly Dividend Program. EVERTEC announced today under a separate release that its Board of Directors initiated a regular quarterly dividend program. The first quarterly dividend of $0.10 per share is payable on September 6, 2013 to stockholders of record at the closing of business on August 19, 2013. The Board anticipates declaring this dividend in future quarters on a regular basis; however future declarations of dividends are subject to Board of Director approval and may be adjusted as business needs or market conditions change. Please refer to the Company's website at www.evertecinc.com under the Corporate Investor Relations section or directly at http://ir.evertecinc.com for a complete press release.
Earnings Conference Call and Audio Webcast
The Company will host a conference call to discuss second quarter 2013 financial results today at 5:00 PM EDT. Hosting the call will be Peter Harrington, President and Chief Executive Officer and Juan José Román, Executive Vice President and Chief Financial Officer. The conference call can be accessed live over the phone by dialing (877) 852-6561, or for international callers (719) 325-4895. A replay will be available at 8:00 PM EDT and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the pin number is 9915858. The replay will be available until Wednesday, August 14, 2013. The call will be webcast live from the Company's website at www.evertecinc.com under the Corporate Investor Relations section or directly at http://ir.evertecinc.com.
About EVERTEC
EVERTEC is the leading full-service transaction processing business in Latin America and the Caribbean. Based in Puerto Rico, EVERTEC provides a broad range of merchant acquiring, payment processing and business process management services across 19 countries in the region. EVERTEC processes over 1.8 billion transactions annually, and manages the electronic payment network for over 4,100 automated teller machines ("ATM") and over 104,000 point-of-sale payment terminals. EVERTEC is the largest merchant acquirer in the Caribbean and Central America and the sixth largest in Latin America. EVERTEC owns and operates the ATH network, one of the leading ATM and personal identification number debit networks in Latin America. In addition, EVERTEC provides a comprehensive suite of services for core bank processing, cash processing and technology outsourcing. EVERTEC serves a broad and diversified customer base of leading financial institutions, merchants, corporations and government agencies with 'mission critical' technology solutions and believes its business is well positioned to continue to expand across the fast growing Latin American region. For more information, visit http://www.evertecinc.com.
About Non-GAAP Financial Measures
This earnings release presents EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share information. These are supplemental measures of the Company's performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America ("GAAP"). They are not measurements of the Company's financial performance under GAAP and should not be considered as alternatives to total revenues, net income or any other performance measures derived in accordance with GAAP or as alternatives to cash flows from operating activities, as indicators of cash flows or as measures of the Company's liquidity. We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of the Company's performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company's industry. In addition, the Company's presentation of Adjusted EBITDA is consistent with the equivalent measurements that are contained in the Credit Agreement in testing EVERTEC Group's compliance with covenants therein such as the senior secured leverage ratio. We use Adjusted Net Income to measure the Company's overall profitability because it better reflects the Company's cash flow generation by capturing the actual cash taxes paid rather than the Company's tax expense as calculated under GAAP and excludes the impact of the non-cash amortization and depreciation that was created as a result of the Merger. For more information regarding EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share, including a quantitative reconciliation of EBITDA, Adjusted EBITDA and Adjusted Net Income to the most directly comparable GAAP financial performance measure, which is net income, see Schedule 4: Reconciliation of GAAP to Non-GAAP Operating Results in this earnings release.
Forward-Looking Statements
Certain statements in this press release constitute "forward-looking statements" within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of EVERTEC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by, or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," and "plans" and similar expressions of future or conditional verbs such as "will," "should," "would," "may," and "could" are generally forward-looking in nature and not historical facts. Any statements that refer to expectations or other characterizations of future events, circumstances or results are forward-looking statements.
Various factors that could cause actual future results and other future events to differ materially from those estimated by management include, but are not limited to: the Company's reliance on its relationship with Popular for a significant portion of our revenues; our ability to renew our client contracts on terms favorable to us; our dependence on our processing systems, technology infrastructure, security systems and fraudulent-payment-detection systems; our ability to develop, install and adopt new technology; a decreased client base due to consolidations in the banking and financial-services industry; the credit risk of our merchant clients, for which we may also be liable; the continuing market position of the ATH® network; the Company's dependence on credit card associations; changes in the regulatory environment and changes in international, legal, political, administrative or economic conditions; the geographical concentration of the Company's business in Puerto Rico; operating an international business in multiple regions with potential political and economic instability; our ability to execute our expansion and acquisition strategies; our ability to protect our intellectual property rights; our ability to recruit and retain qualified personnel; our ability to comply with federal, state, and local regulatory requirements; evolving industry standards; the Company's high level of indebtedness and restrictions contained in the Company's debt agreements; and the Company's ability to generate sufficient cash to service the Company's indebtedness and to generate future profits.
Consideration should be given to the areas of risk described above, as well as those risks set forth under the headings "Forward-Looking Statements" and "Risk Factors" in the reports the Company files with the SEC from time to time, in connection with considering any forward-looking statements that may be made by the Company and its businesses generally. We undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless we are required to do so by law.
EVERTEC, Inc. | ||||||||||||||||||||
Schedule 1: Unaudited Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||
Quarters ended June 30, | Six months ended June 30, | |||||||||||||||||||
(Dollar amounts in thousands, except per share data) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
Revenues | ||||||||||||||||||||
Merchant acquiring, net | $ | 18,165 | $ | 17,028 | $ | 35,624 | $ | 34,689 | ||||||||||||
Payment processing | 24,285 | 23,803 | 48,397 | 46,702 | ||||||||||||||||
Business solutions | 46,725 | 43,541 | 92,493 | 85,469 | ||||||||||||||||
Total revenues | 89,175 | 84,372 | 176,514 | 166,860 | ||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below | 42,257 | 39,831 | 82,759 | 77,572 | ||||||||||||||||
Selling, general and administrative expenses | 12,138 | 8,477 | 21,001 | 17,464 | ||||||||||||||||
Depreciation and amortization | 17,842 | 17,830 | 35,417 | 35,752 | ||||||||||||||||
Total operating costs and expenses | 72,237 | 66,138 | 139,177 | 130,788 | ||||||||||||||||
Income from operations | 16,938 | 18,234 | 37,337 | 36,072 | ||||||||||||||||
Non-operating (expenses) income | ||||||||||||||||||||
Interest income | 49 | 77 | 93 | 199 | ||||||||||||||||
Interest expense | (9,747 | ) | (13,254 | ) | (25,011 | ) | (24,430 | ) | ||||||||||||
Earnings of equity method investment | 348 | 509 | 625 | 575 | ||||||||||||||||
Other expenses: | ||||||||||||||||||||
Loss on extinguishment of liability | (58,464 | ) | - | (58,464 | ) | - | ||||||||||||||
Termination of consulting agreement | (16,718 | ) | - | (16,718 | ) | - | ||||||||||||||
Other expenses | (2,353 | ) | (8,397 | ) | (2,286 | ) | (10,657 | ) | ||||||||||||
Total other expenses | (77,535 | ) | (8,397 | ) | (77,468 | ) | (10,657 | ) | ||||||||||||
Total non-operating expenses | (86,885 | ) | (21,065 | ) | (101,761 | ) | (34,313 | ) | ||||||||||||
(Loss) income before income taxes | (69,947 | ) | (2,831 | ) | (64,424 | ) | 1,759 | |||||||||||||
Income tax (benefit) expense | (5,012 | ) | (798 | ) | (4,961 | ) | 258 | |||||||||||||
Net (loss) income | (64,935 | ) | (2,033 | ) | (59,463 | ) | 1,501 | |||||||||||||
Other comprehensive income, net of tax of $18, $7, $18 and $13 | ||||||||||||||||||||
Foreign currency translation adjustments | (394 | ) | 1,230 | 1,960 | 2,336 | |||||||||||||||
Total comprehensive (loss) income | $ | (65,329 | ) | $ | (803 | ) | $ | (57,503 | ) | $ | 3,837 | |||||||||
Net (loss) income per common share: (1) | ||||||||||||||||||||
Basic | $ | (0.82 | ) | $ | (0.03 | ) | $ | (0.78 | ) | $ | 0.02 | |||||||||
Diluted | $ | (0.82 | ) | $ | (0.03 | ) | $ | (0.78 | ) | $ | 0.02 | |||||||||
Shares used in computing net income per common share: (1) | ||||||||||||||||||||
Basic | 78,928,780 | 72,672,852 | 75,849,551 | 72,659,463 | ||||||||||||||||
Diluted | 78,928,780 | 72,672,852 | 75,849,551 | 76,903,210 | ||||||||||||||||
(1) | Share count was adjusted for the 2:1 stock split that occurred on April 1, 2013. | |
EVERTEC, Inc. | ||||||||||
Schedule 2: Unaudited Consolidated Balance Sheets | ||||||||||
(Dollar amounts in thousands, except per share data) | June 30, 2013 | December 31, 2012 | ||||||||
Assets | ||||||||||
Current Assets: | ||||||||||
Cash | $ | 19,587 | $ | 25,634 | ||||||
Restricted cash | 4,983 | 4,939 | ||||||||
Accounts receivable, net | 77,662 | 78,621 | ||||||||
Deferred tax asset | - | 1,434 | ||||||||
Prepaid expenses and other assets | 24,623 | 19,345 | ||||||||
Total current assets | 126,855 | 129,973 | ||||||||
Investment in equity investee | 10,751 | 11,080 | ||||||||
Property and equipment, net | 33,031 | 36,737 | ||||||||
Goodwill | 373,298 | 372,307 | ||||||||
Other intangible assets, net | 384,375 | 403,170 | ||||||||
Other long-term assets | 18,971 | 24,478 | ||||||||
Total assets | $ | 947,281 | $ | 977,745 | ||||||
Liabilities and stockholders' equity | ||||||||||
Current Liabilities: | ||||||||||
Accrued liabilities | $ | 30,257 | $ | 34,609 | ||||||
Accounts payable | 25,589 | 24,482 | ||||||||
Unearned income | 2,902 | 1,166 | ||||||||
Income tax payable | 1,092 | 2,959 | ||||||||
Current portion of long-term debt | 19,000 | 6,052 | ||||||||
Short-term borrowings | 8,663 | 26,995 | ||||||||
Deferred tax liability, net | 1,204 | 632 | ||||||||
Total current liabilities | 88,707 | 96,895 | ||||||||
Long-term debt | 674,738 | 730,709 | ||||||||
Long-term deferred tax liability, net | 16,526 | 24,614 | ||||||||
Other long-term liabilities | 633 | 3,072 | ||||||||
Total liabilities | 780,604 | 855,290 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders' equity | ||||||||||
Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued | - | - | ||||||||
Common stock, par value $0.01; 206,000,000 shares authorized; 81,876,332 and 72,846,144 | ||||||||||
shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | 819 | 728 | ||||||||
Additional paid-in capital | 153,789 | 52,155 | ||||||||
Accumulated earnings | ||||||||||
