Evertec Group: Evertec Reports Fourth-Quarter And Full-Year 2013 Results


The following excerpt is from the company's SEC filing.

SAN JUAN, PUERTO RICO – February 12, 2014 — EVERTEC, Inc. (NYSE: EVTC) (“EVERTEC” or the “Company”) today announced results for the fourth quarter and year ended December 31, 2013.

Commenting on the results, Peter Harrington, EVERTEC’s President and Chief Executive Officer, said: “Our fourth-quarter results cap a great first year for EVERTEC as a public company. The solid financial results we achieved in 2013 are a testament to the value of our diversified business model and reflect the continued execution of our growth plans. In the year ahead, we will remain focused on our growth strategies of continuing to penetrate and gain share in our existing markets; expanding into additional Latin American markets; and seeking to expand our Merchant Acquiring and Payment Processing businesses. We continue to see real opportunities in these areas and remain confident of our ability to grow in a disciplined way.”

Revenue. Total revenue for the quarter ended December 31, 2013 was $93.3 million, an increase of 3% compared with $91.0 million in the prior year.

Merchant Acquiring net revenue was $19.8 million, an increase of 9% compared with $18.1 million in the prior year. Revenue growth in the quarter was mainly driven by an increase in transaction and sales volumes.

Payment Processing revenue was $26.2 million, an increase of 6% compared with $24.8 million in the prior year. Revenue growth in the quarter was predominantly driven by an increase in ATH network and POS processing transactions, and accounts on file within our card products business.

Business Solutions revenue was $47.3 million, a decrease of 2% compared with $48.1 million in the prior year. The year-over-year decrease in Business Solutions revenue was due primarily to the completion of certain projects in the quarter ended December 31, 2012 and higher deferred revenue, partially offset by increased demand for our services in 2013.

Adjusted EBITDA. For the quarter ended December 31, 2013, Adjusted EBITDA was $49.1 million, a decrease of 6% compared with $52.1 million in the prior year. The decrease in Adjusted EBITDA was partly due to higher cost of revenues resulting from higher product sales, and lower dividend from equity method investment. In addition, the year-over-year Adjusted EBITDA comparison for the quarter was affected by the inclusion of a pro-forma cost-reduction adjustment in the prior-year quarter related to the expected elimination of certain employees, temporary employees, and professional services. These cost-reduction adjustments will not have an impact on Adjusted EBITDA comparisons in future periods. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) was 52.6% compared with 57.3% in the prior year. The decrease in Adjusted EBITDA margin was mainly due to the same factors affecting Adjusted EBITDA.

Adjusted Net Income. For the quarter ended December 31, 2013, Adjusted Net Income was $35.4 million, an increase of 28% compared with $27.7 million in the prior year. The increase in Adjusted Net Income was predominantly due to lower cash interest expense as a result of the debt refinancing completed in April 2013. Adjusted Net Income per diluted share increased 19% to $0.43 compared with $0.36 in the prior year.

Revenue. Total revenue for the year ended December 31, 2013 was $357.2 million, an increase of 5% compared with $341.7 million in the prior year.

Merchant Acquiring net revenue was $73.6 million, an increase of 6% compared with $69.6 million in the prior year. Revenue growth was driven mainly by an increase in transaction and sales volumes, partially offset by the impact of certain effects during the first half of the year related to the Durbin Amendment.

Payment Processing revenue was $99.3 million, an increase of 5% compared with $94.8 million in the prior year. Revenue growth was primarily driven by an increase in ATH network and POS processing transactions and accounts on file.

Business Solutions revenue was $184.3 million, an increase of 4% compared with $177.3 million in the prior year. Revenue growth was mainly driven by increased demand for our network and core banking products and services.

Adjusted EBITDA. For the year ended December 31, 2013, Adjusted EBITDA was $177.7 million, an increase of 5% compared with $169.6 million in the prior year. The increase in Adjusted EBITDA was primarily due to revenue growth.

Adjusted Net Income. For the year ended December 31, 2013, Adjusted Net Income was $121.3 million, an increase of 44% compared with $84.4 million in the prior year. The increase in Adjusted Net Income was primarily due to the same factors affecting Adjusted EBITDA and to lower cash interest expense as a result of the debt refinancing we completed in April 2013. Adjusted Net Income per diluted share increased 35% to $1.49 compared with $1.10 in the prior year.

The Company will host a conference call to discuss its fourth-quarter and full-year 2013 financial results today at 5:00 PM EDT. Hosting the call will be Peter Harrington, President and Chief Executive Officer, and Juan José Román, Executive Vice President and Chief Financial Officer. The conference call can be accessed live over the phone by dialing (888) 554-1417, or for international callers (719) 325-2416. 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 7777652. The replay will be available until Wednesday, February 19, 2014. The call will be webcast live from the Company’s website at www.evertecinc.com under the Investor Relations section or directly at http://ir.evertecinc.com.

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 2.1 billion transactions annually over the electronic payment networks that it manages. EVERTEC is the largest merchant acquirer in the Caribbean and Central America, and the seventh largest in Latin America. EVERTEC owns and operates the ATH network, one of the leading personal identification number (“PIN”) 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. For more information, visit http://www.evertecinc.com.

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 revenue, net income or any other performance measures derived in accordance with GAAP or as alternatives to cash flows from operating activities, as indicators of 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 to evaluate companies in the Company’s industry. In addition, the Company’s presentation of Adjusted EBITDA is consistent with the equivalent measurements 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 resulting from 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.

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 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.

Common stock, par value $0.01; 206,000,000 shares authorized; 78,286,465 and 72,846,144 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively      783         728   

4) Represents the pro forma effect of the expected net savings mainly in compensation and benefits from the reduction of certain employees, temporary employees and professional services. This pro forma amount was calculated using the net amount of actual expenses for temporary employees and professional services for the twelve-month period prior to their replacement, separation and/or elimination net of the incremental cost of the new full-time employees that were hired.

5) Represents fees and expenses associated with non-recurring corporate transactions, including costs associated with the refinancing and debt extinguishment of $58.6 million in the second quarter of 2013.

6) Represents consulting fees paid to Apollo and Popular. In connection with our initial public offering during the second quarter of 2013, our consulting agreements with Apollo and Popular were terminated.

7) Represents the elimination of the effects of purchase accounting in connection with certain customer service and software-related arrangements whereby EVERTEC receives reimbursements from Popular.

10) For the twelve months ended December 31, 2013 represents pro forma cash interest expense assuming EVERTEC’s April 2013 refinancing occurred on January 1, 2013. For 2012 periods, as well as for the three months ended December 31, 2013, represents interest expense, less interest income, as they appear on our consolidated statements of income (loss) and comprehensive income (loss), adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount.

1) Predominantly represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.

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