Evertec - 10-Q quarterly report FY2021 Q2

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021 or


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 001-35872

EVERTEC, Inc.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


Puerto Rico		66-0783622
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

Cupey Center Building,	Road 176, Kilometer 1.3,
San Juan,	Puerto Rico	00926
(Address of principal executive offices)		(Zip Code)

(787) 759-9999

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	EVTC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

At July 27, 2021, there were 71,969,856 outstanding shares of common stock of EVERTEC, Inc.

TABLE OF CONTENTS


		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	1
	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2021 and 2020	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	34
Part II. OTHER INFORMATION		35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity in Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
SIGNATURES		37

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various important factors. Among the important factors that significantly impact our business and could impact our business in the future are:

•our reliance on our relationship with Popular, Inc. (“Popular”) for a significant portion of our revenues pursuant to our Master Services Agreement ("MSA") with them, and to grow our merchant acquiring business;

•as a regulated institution, the likelihood we will be required to obtain regulatory approval before engaging in certain new activities or businesses, whether organically or by acquisition, and our potential inability to obtain such approval on a timely basis or at all, which may make transactions more expensive or impossible to complete, or make us less attractive to potential sellers;

•our ability to renew our client contracts on terms favorable to us, including our contract with Popular, and any significant concessions we may have to grant to Popular with respect to pricing or other key terms in anticipation of the negotiation of the extension of the MSA, both in respect of the current term and any extension of the MSA;

•our dependence on our processing systems, technology infrastructure, security systems and fraudulent payment detection systems, as well as on our personnel and certain third parties with whom we do business, and the risks to our business if our systems are hacked or otherwise compromised;

•our ability to develop, install and adopt new software, technology and computing systems;

•a decreased client base due to consolidations and failures in the 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;

•a reduction in consumer confidence, whether as a result of a global economic downturn or otherwise, which leads to a decrease in consumer spending;

•our dependence on credit card associations, including any adverse changes in credit card association or network rules or fees;

•changes in the regulatory environment and changes in international, legal, tax, political, administrative or economic conditions;

•the geographical concentration of our business in Puerto Rico, including our business with the government of Puerto Rico and its instrumentalities, which are facing severe political and fiscal challenges;

•additional adverse changes in the general economic conditions in Puerto Rico, whether as a result of the government’s debt crisis or otherwise, including the continued migration of Puerto Ricans to the U.S. mainland, which could negatively affect our customer base, general consumer spending, our cost of operations and our ability to hire and retain qualified employees;

•operating an international business in Latin America and the Caribbean, in jurisdictions with potential political and economic instability;

•our ability to protect our intellectual property rights against infringement and to defend ourselves against claims of infringement brought by third parties;

•our ability to comply with U.S. federal, state, local and foreign regulatory requirements;

•evolving industry standards and adverse changes in global economic, political and other conditions;

•our level of indebtedness and restrictions contained in our debt agreements, including the senior secured credit facilities, as well as debt that could be incurred in the future;

•our ability to prevent a cybersecurity attack or breach in our information security;

•the possibility that we could lose our preferential tax rate in Puerto Rico;

•the possibility of future catastrophic hurricanes, earthquakes and other potential natural disasters affecting our main markets in Latin America and the Caribbean;

•uncertainty related to the effect of the discontinuation of the London Interbank Offered Rate at the end of 2021;

•the continued impact of the COVID-19 pandemic and measures taken in response to the outbreak, on our resources, net income and liquidity due to current and future disruptions in operations as well as the macroeconomic instability caused by the pandemic; and

•the nature, timing and amount of any restatement.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various important factors, including those set forth under “Item 1A. Risk Factors,” of our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021, as updated in our subsequent filings with the SEC, and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report. These forward-looking statements speak only as of the date of this Report, and, except as required by applicable law, we do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

Where You Can Find More Information

All reports we file with the SEC are available for download free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also provide copies of our SEC filings free of charge upon request and make electronic copies of our reports available for download, free of charge, through our website at www.evertecinc.com as soon as reasonably practicable after filing such material with the SEC. Information contained on our website is not part of this Report.

EVERTEC, Inc. Unaudited Condensed Consolidated Balance Sheets

(In thousands, except for share information)


	June 30, 2021		December 31, 2020
Assets
Current Assets:
Cash and cash equivalents	$	199,891	$	202,649
Restricted cash	19,411		18,456
Accounts receivable, net	93,878		95,727
Prepaid expenses and other assets	42,360		42,214
Total current assets	355,540		359,046
Debt securities available-for-sale, at fair value	3,059		—
Investment in equity investee	13,398		12,835
Property and equipment, net	41,240		43,538

Operating lease right-of-use asset	24,326		27,538
Goodwill	396,603		397,670
Other intangible assets, net	224,685		219,909
Deferred tax asset	5,577		5,730
Net investment in leases	207		301
Other long-term assets	6,149		6,012
Total assets	$	1,070,784	$	1,072,579
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	59,749	$	58,033
Accounts payable	27,818		43,348
Contract liability	23,769		24,958
Income tax payable	3,125		6,573
Current portion of long-term debt	16,999		14,250


Operating lease payable	5,445		5,830
Total current liabilities	136,905		152,992
Long-term debt	454,085		481,041
Deferred tax liability	2,018		2,748
Contract liability - long term	30,693		31,336
Operating lease liability - long-term	19,581		22,402
Derivative liability	19,768		25,578
Other long-term liabilities	9,690		14,053
Total liabilities	672,740		730,150
Commitments and contingencies (Note 14)
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; 71,969,856 shares issued and outstanding as of June 30, 2021 (December 31, 2020 - 72,137,678)	719		721
Additional paid-in capital	—		5,340
Accumulated earnings	436,817		379,934
Accumulated other comprehensive loss, net of tax	(43,769)		(48,254)
Total EVERTEC, Inc. stockholders’ equity	393,767		337,741
Non-controlling interest	4,277		4,688
Total equity	398,044		342,429
Total liabilities and equity	$	1,070,784	$	1,072,579

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share information)


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020

Revenues (affiliates Note 15)	$	149,148	$	117,937	$	288,676	$	239,879

Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	59,381		56,979		119,185		111,046
Selling, general and administrative expenses	16,752		17,529		32,854		34,846
Depreciation and amortization	18,723		17,839		37,346		35,634
Total operating costs and expenses	94,856		92,347		189,385		181,526
Income from operations	54,292		25,590		99,291		58,353
Non-operating income (expenses)
Interest income	450		373		839		736
Interest expense	(5,658)		(6,183)		(11,564)		(12,962)
Earnings of equity method investment	394		193		896		531
Other income, net	2,245		172		2,573		280
Total non-operating expenses	(2,569)		(5,445)		(7,256)		(11,415)
Income before income taxes	51,723		20,145		92,035		46,938
Income tax expense	2,632		4,520		7,340		9,038
Net income	49,091		15,625		84,695		37,900
Less: Net (loss) income attributable to non-controlling interest	(106)		141		(5)		205
Net income attributable to EVERTEC, Inc.’s common stockholders	49,197		15,484		84,700		37,695
Other comprehensive income (loss), net of tax of $11, $(2), $435 and $(1,087)
Foreign currency translation adjustments	1,732		1,067		(881)		(7,238)
Gain (loss) on cash flow hedges	1,088		(678)		5,277		(12,537)
Unrealized gain on change in fair value of debt securities available-for-sale	89		—		89		—
Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders	$	52,106	$	15,873	$	89,185	$	17,920
Net income per common share - basic attributable to EVERTEC, Inc.’s common stockholders	$	0.68	$	0.22	$	1.17	$	0.52
Net income per common share - diluted attributable to EVERTEC, Inc.’s common stockholders	$	0.68	$	0.21	$	1.16	$	0.52

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share information)


	Number of Shares of Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Non-Controlling Interest		Total Stockholders’ Equity
Balance at December 31, 2020	72,137,678	$	721	$	5,340	$	379,934	$	(48,254)	$	4,688	$	342,429
Share-based compensation recognized	—	—		3,380		—		—		—		3,380
Repurchase of common stock	(382,974)	(4)		(1,290)		(12,974)		—		—		(14,268)
Restricted stock units delivered	411,739	4		(7,430)		(1,302)		—		—		(8,728)
Net income	—	—		—		35,503		—		101		35,604
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,605)		—		—		(3,605)
Other comprehensive income (loss)	—	—		—		—		1,576		(381)		1,195
Balance at March 31, 2021	72,166,443	$	721	$	—	$	397,556	$	(46,678)	$	4,408	$	356,007
Share-based compensation recognized	—	—		3,855		—		—		—		3,855
Repurchase of common stock	(231,314)	(2)		(3,790)		(6,328)		—		—		(10,120)
Restricted stock units delivered	34,727	—		(65)		—		—		—		(65)
Net income	—	—		—		49,197		—		(106)		49,091
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,608)		—		—		(3,608)
Other comprehensive income (loss)	—	—		—		—		2,909		(25)		2,884
Balance at June 30, 2021	71,969,856	$	719	$	—	$	436,817	$	(43,769)	$	4,277	$	398,044


	Number of Shares of Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Non-Controlling Interest		Total Stockholders’ Equity
Balance at December 31, 2019	72,000,261	$	720	$	—	$	296,476	$	(30,009)	$	4,436	$	271,623
Share-based compensation recognized	—	—		3,483		—		—		—		3,483
Repurchase of common stock	(336,022)	(3)		(775)		(6,522)		—		—		(7,300)
Restricted stock units delivered	201,066	2		(2,708)		—		—		—		(2,706)
Net income	—	—		—		22,211		—		64		22,275
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,600)		—		—		(3,600)
Other comprehensive loss	—	—		—		—		(20,164)		(853)		(21,017)
Cumulative adjustment from the implementation of Current Expected Credit Loss model	—	—		—		(74)		—		—		(74)
Balance at March 31, 2020	71,865,305	$	719	$	—	$	308,491	$	(50,173)	$	3,647	$	262,684
Share-based compensation recognized	—	—		3,639		—		—		—		3,639

Restricted stock units delivered	(2,445)	—		(71)		—		—		—		(71)
Net income	—	—		—		15,484		—		141		15,625
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,593)		—		—		(3,593)
Other comprehensive loss	—	—		—		—		389		295		684
Balance at June 30, 2020	71,862,860	$	719	$	3,568	$	320,382	$	(49,784)	$	4,083	$	278,968

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)


	Six months ended June 30,
	2021		2020

Cash flows from operating activities
Net income	$	84,695	$	37,900
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	37,346		35,634
Amortization of debt issue costs and accretion of discount	991		1,074
Operating lease amortization	2,938		2,890
Provision for expected credit losses and sundry losses	85		922
Deferred tax benefit	(947)		(1,214)
Share-based compensation	7,235		7,122
Gain from sale of assets	(778)		—
Loss on disposition of property and equipment and impairment of intangible	1,106		193
Earnings of equity method investment	(896)		(531)
Dividend received from equity method investment	1,183		—
Decrease (increase) in assets:
Accounts receivable, net	(48)		14,387
Prepaid expenses and other assets	1,407		(4,102)
Other long-term assets	(14)		1,141
(Decrease) increase in liabilities:
Accrued liabilities and accounts payable	(10,899)		(13,653)
Income tax payable	(3,398)		4,988
Contract liability	(1,664)		2,817
Operating lease liabilities	(3,438)		(3,281)
Other long-term liabilities	(2,875)		965
Total adjustments	27,334		49,352
Net cash provided by operating activities	112,029		87,252
Cash flows from investing activities

Additions to software	(21,317)		(11,833)
Acquisition of customer relationship	(14,750)		—
Property and equipment acquired	(8,803)		(6,614)
Proceeds from sales of property and equipment	802		—
Acquisition of available-for-sale debt securities	(2,968)		—
Net cash used in investing activities	(47,036)		(18,447)
Cash flows from financing activities
Statutory withholding taxes paid on share-based compensation	(8,793)		(2,777)
Net borrowings under Revolving Facility	—		15,000

Repayment of short-term borrowings for purchase of equipment and software	(1,556)		(1,553)
Dividends paid	(7,213)		(7,193)

Repurchase of common stock	(24,388)		(7,300)
Repayment of long-term debt	(24,919)		(24,123)
Net cash used in financing activities	(66,869)		(27,946)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash	73		(2,890)
Net (decrease) increase in cash, cash equivalents and restricted cash	(1,803)		37,969
Cash, cash equivalents and restricted cash at beginning of the period	221,105		131,121
Cash, cash equivalents and restricted cash at end of the period	$	219,302	$	169,090
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	199,891	$	146,920
Restricted cash	19,411		22,170
Cash, cash equivalents and restricted cash	$	219,302	$	169,090
Supplemental disclosure of cash flow information:
Cash paid for interest	$	10,940	$	12,352
Cash paid for income taxes	7,835		4,579




Supplemental disclosure of non-cash activities:

Payable due to vendor related to equipment and software acquired	$	721	$	1,484

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 – The Company and Basis of Presentation

The Company

EVERTEC, Inc. and its subsidiaries (collectively the “Company,” or “EVERTEC”) is a leading full-service transaction-processing business in Puerto Rico, the Caribbean and Latin America. The Company is based in Puerto Rico and provides a broad range of merchant acquiring, payment services and business process management services. The Company provides services across 26 countries in the region. EVERTEC owns and operates the ATH network, one of the leading personal identification number ("PIN") debit networks in Latin America. EVERTEC manages a system of electronic payment networks and offers a comprehensive suite of services for core bank, cash processing and fulfillment in Puerto Rico. In addition, EVERTEC offers technology outsourcing in all the regions the Company serves. EVERTEC serves a broad and diversified customer base of leading financial institutions, merchants, corporations and government agencies with solutions that are essential to their operations, enabling them to issue, process and accept transactions securely.

Basis of Presentation

The unaudited condensed consolidated financial statements of EVERTEC have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the accompanying unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements. Actual results could differ from these estimates.

Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted from these statements pursuant to the rules and regulations of the Securities and Exchange Commission and, accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements of the Company for the year ended December 31, 2020, included in the Company’s 2020 Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements, prepared in accordance with GAAP, contain all adjustments necessary for a fair presentation. Intercompany accounts and transactions are eliminated in consolidation.

Note 2 – Recent Accounting Pronouncements

Accounting Pronouncements Issued Prior to 2021 and Not Yet Adopted

In March 2020, the FASB issued updated guidance for ASC Topic 848, Reference Rate Reform, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met for a limited period of time in order to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update are elective and apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments to this update are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this guidance will not have an impact on the Company's unaudited condensed consolidated financial statements.

Note 3 – Debt Securities

Accounting policy

Debt securities available-for-sale are accounted for under the provisions of ASC 320 Investments – Debt and Equity Securities, which requires that debt securities available-for-sale ("AFS") be carried at fair value on the Company’s unaudited condensed consolidated balance sheets with unrealized gains (losses) recorded through other comprehensive income (“OCI”). Debt securities in an unrealized loss position which the Company intends to sell or for which it is more likely than not that the Company will be required to sell before recovery of the amortized cost basis, are written down to fair value through income.

Quarterly, for debt securities in an unrealized loss position that the Company does not intend or will, more likely than not, not be required to sell, the Company evaluates if the decline in fair value has resulted from credit losses or other factors. If it is determined that the decline in fair value is related to credit losses, the Company records an allowance for credit losses, limited

to the amount by which the fair value is less than the amortized cost basis. If the Company determines that the decline in value is related to factors other than credit, the Company recognizes the impairment through OCI.

Debt securities were purchased close to the final trading day of the quarter ended March 31, 2021 and are held by a trust in the Costa Rica National Bank as a collateral requirement for settlement activities. The Company may substitute securities as needed but must maintain certain levels of collateral based on transaction volumes.

The amortized cost, gross unrealized gains and losses recorded in OCI, and estimated fair value as of June 30, 2021 were as follows:


	June 30, 2021
(In thousands)			Gross unrealized
	Amortized cost		Gains	Losses	Fair Value
Costa Rica Government Obligations
After 1 to 5 years	$	2,970	89	—	$	3,059

No debt securities were sold during the quarter ended June 30, 2021. A provision for credit losses was not required for the period presented above. Refer to Note 7 for disclosure requirements related to the fair value hierarchy.

Note 4 – Property and Equipment, net

Property and equipment, net consists of the following:


(In thousands)	Useful life in years	June 30, 2021		December 31, 2020
Buildings	30	$	1,412	$	1,437
Data processing equipment	3 - 5	128,355		124,897
Furniture and equipment	3 - 20	7,131		6,691
Leasehold improvements	5 -10	3,116		3,098
		140,014		136,123
Less - accumulated depreciation and amortization		(100,006)		(93,826)
Depreciable assets, net		40,008		42,297
Land		1,232		1,241
Property and equipment, net		$	41,240	$	43,538

Depreciation and amortization expense related to property and equipment for the three and six months ended June 30, 2021 amounted to $4.4 million and $8.8 million, respectively, compared to $4.3 million and $8.5 million for the corresponding periods in 2020.

During the six months ended June 30, 2021, the Company recorded a loss on the disposition of damaged POS devices amounting to $0.5 million through cost of revenues.

Note 5 – Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill, allocated by operating segments, were as follows (see Note 16):


(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Balance at December 31, 2020	$	160,972	$	52,754	$	138,121	$	45,823	$	397,670


Foreign currency translation adjustments	—		(1,067)		—		—		(1,067)
Balance at June 30, 2021	$	160,972	$	51,687	$	138,121	$	45,823	$	396,603

Goodwill is tested for impairment on an annual basis as of August 31, or more often if events or changes in circumstances indicate there may be impairment. The Company may test for goodwill impairment using a qualitative or a quantitative analysis. In the quantitative analysis, the Company compares the estimated fair value of the reporting units to their carrying values, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the fair value does not exceed the carrying value, an impairment loss is recorded for the excess of the carrying value over the fair value, limited to the recorded balance of goodwill. No impairment losses were recognized for the periods ended June 30, 2021 or 2020.

The carrying amount of other intangible assets at June 30, 2021 and December 31, 2020 was as follows:


		June 30, 2021
(In thousands)	Useful life in years	Gross amount		Accumulated amortization		Net carrying amount
Customer relationships	8 - 14	$	358,524	$	(259,325)	$	99,199
Trademarks	2 - 15	41,995		(36,085)		5,910
Software packages	3 - 10	307,975		(204,419)		103,556
Non-compete agreement	15	56,539		(40,519)		16,020
Other intangible assets, net		$	765,033	$	(540,348)	$	224,685


		December 31, 2020
(Dollar amounts in thousands)	Useful life in years	Gross amount		Accumulated amortization		Net carrying amount
Customer relationships	8 - 14	$	343,981	$	(246,088)	$	97,893
Trademarks	2 - 15	42,036		(35,467)		6,569
Software packages	3 - 10	289,205		(191,662)		97,543
Non-compete agreement	15	56,539		(38,635)		17,904
Other intangible assets, net		$	731,761	$	(511,852)	$	219,909

During the first quarter of 2021, the Company acquired a customer relationship in Puerto Rico amounting to $14.8 million that will be amortized over ten years. Revenue and expenses in connection with this customer relationship are included as part of the Merchant Acquiring segment.

Amortization expense related to other intangibles for the three and six months ended June 30, 2021 amounted to $14.3 million and $28.5 million, respectively, compared to $13.5 million and $27.1 million for the corresponding periods in 2020. During the six months period ended June 30, 2021, the Company recorded an impairment charge through cost of revenues amounting to $0.6 million for a software solution that will no longer be used. The impairment charge affected the Company’s Payment Services – Puerto Rico & Caribbean segment.

The estimated amortization expense of the balances outstanding at June 30, 2021 for the next five years is as follows:


(Dollar amounts in thousands)
Remaining 2021	$	27,557
2022	49,099
2023	43,845
2024	32,817
2025	11,359

Note 6 – Debt and Short-Term Borrowings

Total debt at June 30, 2021 and December 31, 2020 follows:


(In thousands)	June 30, 2021		December 31, 2020
2023 Term A Loan bearing interest at a variable interest rate (LIBOR plus applicable margin(1)(2))	$	176,161	$	188,788
2024 Term B Loan bearing interest at a variable interest rate (LIBOR plus applicable margin(1)(3))	294,923		306,503

Note payable due January 1, 2022(1)	721		1,443
Total debt	$	471,805	$	496,734

(1)Net of unaccreted discount and unamortized debt issue costs, as applicable.

(2)Applicable margin of 1.75% at June 30, 2021 and December 31, 2020.

(3)Subject to a minimum rate ("LIBOR floor") of 0% plus applicable margin of 3.50% at June 30, 2021 and December 31, 2020.

Secured Credit Facilities

On November 27, 2018, EVERTEC and EVERTEC Group, LLC ("EVERTEC Group") (collectively, the “Borrower”) entered into a credit agreement providing for the secured credit facilities, consisting of a $220.0 million term loan A facility that matures on November 27, 2023 (the “2023 Term A Loan"), a $325.0 million term loan B facility that matures on November 27, 2024 (the “2024 Term B Loan”), and a $125.0 million revolving credit facility (the “Revolving Facility”) that matures on November 27, 2023, with a syndicate of lenders and Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent, swingline lender and line of credit issuer (collectively the “2018 Credit Agreement”).

The 2018 Credit Agreement requires mandatory repayment of outstanding principal balances based on a percentage of excess cash flow, provided that no such payment shall be due if the resulting amount of the excess cash flow multiplied by the applicable percentage is less than $10 million. On March 8, 2021 and March 5, 2020, in connection with this mandatory repayment clause, the Company repaid $17.8 million and $17.0 million, respectively, as a result of excess cash flow calculation performed for the years ended December 31, 2020 and 2019, respectively.

The unpaid principal balance at June 30, 2021 of the 2023 Term A Loan and the 2024 Term B Loan was $177.1 million and $297.5 million, respectively. The additional borrowing capacity under our Revolving Facility at June 30, 2021 was $119.1 million. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

Notes Payable

In December 2019, EVERTEC Group entered into two non-interest bearing financing agreements amounting to $2.4 million to purchase software and maintenance. As of June 30, 2021 and December 31, 2020, the outstanding principal balance of the notes payable was $0.8 million and $1.5 million, respectively. These notes are included in accounts payable in the Company's unaudited condensed consolidated balance sheets.

Interest Rate Swaps

As of June 30, 2021, the Company has an interest rate swap agreement, entered into in December 2018, which converts a portion of the interest rate payments on the Company's 2024 Term B Loan from variable to fixed:

Swap Agreement

Effective date

Maturity Date

Notional Amount

Variable Rate

Fixed Rate

2018 Swap

April 2020

November 2024

$250 million

1-month LIBOR

2.89%

The Company has accounted for this agreement as a cash flow hedge.

As of June 30, 2021 and December 31, 2020, the carrying amount of the derivative included on the Company's unaudited condensed consolidated balance sheets was $19.8 million and $25.6 million, respectively. The fair value of this derivative is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 8 for disclosure of losses recorded on cash flow hedging activities.

During the three and six months ended June 30, 2021, the Company reclassified losses of $1.8 million and $3.5 million, respectively, from accumulated other comprehensive loss into interest expense compared to $1.4 million and $1.6 million for the corresponding period in 2020. Based on current LIBOR rates, the Company expects to reclassify losses of $7.0 million from accumulated other comprehensive loss into interest expense over the next 12 months.

The cash flow hedge is considered highly effective.

Note 7 – Financial Instruments and Fair Value Measurements

Recurring Fair Value Measurements

Debt Securities Available for Sale

The fair value of debt securities is estimated based on observable inputs, therefore classifying as a Level 2 asset within the fair value hierarchy. The fair value of debt securities at June 30, 2021 was $3.1 million.

Derivatives Instruments

The fair value of the Company's interest rate swap is estimated using Level 2 inputs under the fair value hierarchy. This derivative was in a liability position with a balance of $19.8 million and $25.6 million as of June 30, 2021 and December 31, 2020, respectively.

The following table presents the carrying value, as applicable, and estimated fair value for financial instruments at June 30, 2021 and December 31, 2020:


	June 30, 2021				December 31, 2020
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Costa Rica government obligations	$	3,059	$	3,059	$	—	$	—
Financial liabilities:
Interest rate swap	19,768		19,768		25,578		25,578
2023 Term A Loan	176,161		175,121		188,788		186,678
2024 Term B Loan	294,923		296,942		306,503		308,339

The fair values of the term loans at June 30, 2021 and December 31, 2020 were obtained using prices provided by third party service providers. Their pricing is based on various inputs such as market quotes, recent trading activity in a non-active market or imputed prices. These inputs are considered Level 3 inputs under the fair value hierarchy. Also, the pricing may include the use of an algorithm that could take into account movements in the general high yield market, among other variants. The secured term loans are not measured at fair value in balance sheets.

Note 8 – Equity

Accumulated Other Comprehensive Loss

The following table provides a summary of the changes in the balances of accumulated other comprehensive loss for the six months ended June 30, 2021:


(In thousands)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Unrealized Gains on Debt Securities AFS		Total
Balance - December 31, 2020, net of tax	$	(24,842)	$	(23,412)	—		$	(48,254)
Other comprehensive (loss) income before reclassifications	(881)		1,790		89		998
Effective portion reclassified to net income	—		3,487		—		3,487
Balance - June 30, 2021, net of tax	$	(25,723)	$	(18,135)	$	89	$	(43,769)

Note 9 – Share-based Compensation

Long-term Incentive Plan ("LTIP")

In the first quarter of 2019, 2020 and 2021, the Compensation Committee (the "Compensation Committee") of the Company's Board of Directors ("Board") approved grants of restricted stock units (“RSUs”) to executives and certain employees pursuant to the 2019 LTIP, 2020 LTIP and 2021 LTIP, respectively, all under the terms of the Company's 2013 Equity Incentive Plan. Under the LTIPs, the Company granted RSUs to eligible participants as time-based awards and/or performance-based awards.

The vesting of the RSUs is dependent upon service and/or performance conditions as defined in the grants. Employees that received time-based awards with service conditions are entitled to receive a specific number of shares of the Company’s common stock on the vesting date if the employee provides services to the Company through the vesting date. Time-based awards vest over a period of three years in substantially equal installments commencing on the grant date and ending on February 22 of each year for the 2019 LTIP, February 27 of each year for the 2020 LTIP, and March 2 of each year for the 2021 LTIP.

For the performance-based awards under the 2019 LTIP, 2020 LTIP, and 2021 LTIP, the Compensation Committee established adjusted earnings before income taxes, depreciation and amortization ("Adjusted EBITDA") as the primary performance measure while maintaining focus on total shareholder return through the use of a market-based total shareholder return ("TSR") performance modifier. The Adjusted EBITDA measure is based on annual targets and can produce a payout between 0% and 200%. The TSR modifier adjusts the shares earned based on the core Adjusted EBITDA performance upwards or downwards (+/- 25%) based on the Company’s relative TSR at the end of the three-year performance period as compared to the companies in the Russell 2000 Index. The Adjusted EBITDA performance measure will be calculated for the one-year period commencing on January 1 of the year of the grant and ending on December 31 of the same year, relative to the goals set by the Compensation Committee for this same period. The shares earned will be subject to an additional two-year service vesting period and will vest on February 22, 2022 for the 2019 LTIP, February 27, 2023 for the 2020 LTIP, and March 2, 2024 for the 2021 LTIP. Unless otherwise specified in the award agreement, or in an employment agreement, awards are forfeited if the employee voluntarily ceases to be employed by the Company prior to vesting.

The following table summarizes nonvested RSUs activity for the six months ended June 30, 2021:


Nonvested RSUs	Shares	Weighted-average grant date fair value
Nonvested at December 31, 2020	1,093,515	$	27.88
Granted	705,970	31.93
Vested	(683,706)	20.95
Forfeited	(5,051)	30.75
Nonvested at June 30, 2021	1,110,728	$	34.71

For the three and six months ended June 30, 2021, the Company recognized $3.9 million and $7.2 million of share-based compensation expense, compared with $3.6 million and $7.1 million for the corresponding period in 2020.

As of June 30, 2021, the maximum unrecognized cost for RSUs was $27.5 million. The cost is expected to be recognized over a weighted average period of 2.1 years.

Note 10 – Revenues

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into primary geographical markets, nature of the products and services, and timing of transfer of goods and services. The Company's operating segments are determined by the nature of the products and services the Company provides and the primary geographical markets in which the Company operates. Revenue disaggregated by segment is discussed in Note 16, Segment Information.

In the following tables, revenue for each segment, excluding intersegment revenues, is disaggregated by timing of revenue recognition for the periods indicated.


	Three months ended June 30, 2021
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	11	$	508	$	—	$	1,104	$	1,623
Products and services transferred over time	26,148		23,491		38,335		59,551		147,525
	$	26,159	$	23,999	$	38,335	$	60,655	$	149,148


	Three months ended June 30, 2020
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	32	$	206	$	—	$	2,765	$	3,003
Products and services transferred over time	19,553		17,887		24,765		52,729		114,934
	$	19,585	$	18,093	$	24,765	$	55,494	$	117,937


	Six months ended June 30, 2021
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	89	$	1,184	$	—	$	3,602	$	4,875
Products and services transferred over time	50,930		46,112		69,202		117,557		283,801
	$	51,019	$	47,296	$	69,202	$	121,159	$	288,676



	Six months ended June 30, 2020
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Total
Timing of revenue recognition
Products and services transferred at a point in time	$	37	$	637	$	—	$	3,062	$	3,736
Products and services transferred over time	40,186		37,696		49,886		108,375		236,143
	$	40,223	$	38,333	$	49,886	$	111,437	$	239,879

Contract Balances

The following table provides information about contract assets from contracts with customers.


(In thousands)	June 30, 2021		December 31, 2020
Balance at beginning of period	$	2,796	$	1,191
Services transferred to customers	2,753		3,934
Transfers to accounts receivable	(2,822)		(2,329)
Balance at end of period	$	2,727	$	2,796

The current portion of contract assets is recorded as part of prepaid expenses and other assets, and the long-term portion is included in other long-term assets in the unaudited condensed consolidated balance sheets.

Accounts receivable, net at June 30, 2021 amounted to $93.9 million. Contract liability and contract liability - long term at June 30, 2021 amounted to $23.8 million and $30.7 million, respectively, and may arise when consideration is received or due in advance from customers prior to performance. The contract liability is mainly comprised of upfront fees for implementation or set up activities, including fees charged in pre-production periods in connection with hosting services. Contract liabilities may also arise when consideration is received or due in advance from customers prior to performance. During the three and six months ended June 30, 2021, the Company recognized revenue of $7.1 million and $15.4 million, respectively that was included in the contract liability at December 31, 2020. During the three and six months ended June 30, 2020, the Company recognized revenue of $4.0 million and $9.2 million, respectively that was included in the contract liability at December 31, 2019.

Transaction price allocated to the remaining performance obligations

The estimated aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially satisfied at June 30, 2021 is $296.4 million. This amount primarily consists of professional service fees for implementation or set up activities related to managed services and maintenance services, typically recognized over the life of the contract, which varies from 2 to 5 years. It also includes professional service fees for customizations or development of on-premise licensing agreements, which are recognized over time based on inputs relative to the total expected inputs to satisfy a performance obligation.

Note 11 – Current Expected Credit Losses

Allowance for Current Expected Credit Losses

Trade receivables from contracts with customers are financial assets analyzed by the Company under the expected credit loss model. To measure expected credit losses, trade receivables are grouped based on shared risk characteristics (i.e., the relevant industry sector and customer's geographical location) and days past due (i.e., delinquency status), while considering the following:

•Customers in the same geographical location share similar risk characteristics associated with the macroeconomic environment of their country.

•The Company has two main industry sectors: private and governmental. The private pool is comprised mainly of leading financial institutions, merchants and corporations, while the governmental pool is comprised of government agencies. The governmental customers possess different risk characteristics than private customers because although all invoices are due 30 days after issuance, governmental customers usually pay within 60 to 90 days after issuance (i.e., approximately 30 to 60 more days than private customers).

•The expected credit loss rate is likely to increase as receivables move to older aging buckets. The Company used the following aging categories to estimate the risk of delinquency status: (i) 0 days past due; (ii) 1-30 days past due; (iii) 31-60 days past due; (iv) 61-90 days past due; and (v) over 90 days past due.

The credit losses of the Company’s trade receivables have been low historically and most balances are collected within one year. Therefore, the Company determined that the expected loss rates should be calculated using the historical loss rates adjusted by macroeconomic factors. The historical rates are calculated for each of the aging categories used for pooling trade receivables. To determine the collected portion of each bucket, the collection time of each trade receivable is identified, to estimate the proportion of outstanding balances per aging bucket that ultimately will not be collected. This is used to determine the expectation of losses based on the history of uncollected trade receivables once the specific past due period is surpassed. The historical rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of customers to settle the receivables by applying a country risk premium as the forward-looking macroeconomic factor. Specific reserves are established for certain customers for which collection is doubtful.

Rollforward of the Allowance for Expected Current Credit Losses

The following table provides information about the allowance for expected current credit losses on trade receivables.



(In thousands)	June 30, 2021		December 31, 2020
Balance at beginning of period	$	2,401	$	3,460
Current period (release) provision for expected credit losses	(26)		832
Write-offs	(112)		(1,894)
Recoveries of amounts previously written-off	—		3
Balance at end of period	$	2,263	$	2,401

The Company does not have a delinquency threshold for writing-off trade receivables. The Company has a formal process for the review and approval of write-offs.

Impairment losses on trade receivables are presented as net impairment losses within cost of revenue, exclusive of depreciation and amortization in the unaudited condensed consolidated statements of income and comprehensive income. Subsequent recoveries of amounts previously written-off, when applicable are credited against the allowance for expected current credit losses within accounts receivable, net on the unaudited condensed consolidated balance sheets.

Note 12 – Income Tax

The components of income tax expense for the three and six months ended June 30, 2021 and 2020, respectively, consisted of the following:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2021		2020		2021		2020
Current tax provision	$	2,689	$	4,654	$	8,287	$	10,252
Deferred tax benefit	(57)		(134)		(947)		(1,214)
Income tax expense	$	2,632	$	4,520	$	7,340	$	9,038

The Company conducts operations in Puerto Rico, the United States, and certain countries in Latin America. As a result, the income tax expense includes the effect of taxes paid to the government of Puerto Rico as well as foreign jurisdictions. The following table presents the components of income tax expense for the three and six months ended June 30, 2021 and 2020, and its segregation based on location of operations:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2021		2020		2021		2020

Current tax (benefit) provision
Puerto Rico	$	(569)	$	1,528	$	1,035	$	3,207
United States	45		139		75		294
Foreign countries	3,213		2,987		7,177		6,751
Total current tax provision	$	2,689	$	4,654	$	8,287	$	10,252
Deferred tax (benefit) provision
Puerto Rico	$	(226)	$	(458)	$	(520)	$	(546)
United States	242		1,126		(187)		1,101
Foreign countries	(73)		(802)		(240)		(1,769)
Total deferred tax benefit	$	(57)	$	(134)	$	(947)	$	(1,214)

Taxes payable to foreign countries by EVERTEC’s subsidiaries will be paid by such subsidiary and the corresponding liability and expense will be presented in EVERTEC’s consolidated financial statements.

As of June 30, 2021, the Company has $89.1 million of unremitted earnings from foreign subsidiaries, compared to $80.2 million as of December 31, 2020. The Company has not recognized a deferred tax liability on undistributed earnings for the Company’s foreign subsidiaries because these earnings are intended to be indefinitely reinvested.

As of June 30, 2021, the gross deferred tax asset amounted to $21.1 million and the gross deferred tax liability amounted to $16.4 million, compared to $22.0 million and $19.0 million, respectively, as of December 31, 2020. As of June 30, 2021, there is a valuation allowance against the gross deferred tax asset of approximately $1.1 million.

Income tax expense differs from the amount computed by applying the Puerto Rico statutory income tax rate to the income before income taxes as a result of the following:


	Six months ended June 30,
(In thousands)	2021		2020
Computed income tax at statutory rates	$	34,513	$	17,602
Differences in tax rates due to multiple jurisdictions	960		1,149
Effect of income subject to tax-exemption grant	(23,863)		(12,050)
Unrecognized tax (benefit) expense	(3,580)		193
Excess tax benefits on share-based compensation	(976)		—
Other, net	286		2,144
Income tax expense	$	7,340	$	9,038

Note 13 – Net Income Per Common Share

The reconciliation of the numerator and denominator of the income per common share is as follows:


	Three months ended June 30,				Six months ended June 30,
(In thousands, except per share information)	2021		2020		2021		2020


Net income available to EVERTEC, Inc.’s common shareholders	$	49,197	$	15,484	$	84,700	$	37,695
Weighted average common shares outstanding	72,127,847		71,864,499		72,139,125		71,938,574
Weighted average potential dilutive common shares (1)	703,519		909,866		577,825		1,080,645
Weighted average common shares outstanding - assuming dilution	72,831,366		72,774,365		72,716,950		73,019,219
Net income per common share - basic	$	0.68	$	0.22	$	1.17	$	0.52
Net income per common share - diluted	$	0.68	$	0.21	$	1.16	$	0.52

(1)Potential common shares consist of common stock issuable under RSUs awards using the treasury stock method.

On February 18, 2021 and April 22, 2021, respectively the Company's Board declared quarterly cash dividends of $0.05 per share of common stock, which were paid on March 26, 2021 and June 4, 2021, respectively to stockholders of record as of the close of business on March 1, 2021 and May 3, 2021, respectively.

Note 14 – Commitments and Contingencies

EVERTEC is a defendant in a number of legal proceedings arising in the ordinary course of business. Based on the opinion of legal counsel and other factors, management believes that the final disposition of these matters will not have a material adverse effect on the business, results of operations, financial condition, or cash flows of the Company. The Company has identified certain claims as a result of which a loss may be incurred, but in the aggregate the loss would be insignificant. For other claims regarding proceedings that are in an initial phase, the Company is unable to estimate the range of possible loss, if any, but at this time believes that any loss related to such claims will not be material.

Note 15 – Related Party Transactions

The following table presents the Company’s transactions with related parties for the three and six months ended June 30, 2021 and 2020:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2021		2020		2021		2020
Total revenues (1)(2)	$	61,884	$	53,788	$	122,253	$	108,360
Cost of revenues	$	569	$	1,782	$	1,618	$	2,400
Operating lease cost and other fees	$	1,609	$	2,060	$	3,524	$	4,041
Interest earned from affiliate
Interest income	$	130	$	108	$	238	$	197

(1)Popular revenues as a percentage of total revenues were 42%, 45%, 42% and 45%, respectively, for each of the periods presented above.

(2)Includes revenues generated from investee accounted for under the equity method of $0.1 million, $0.1 million, $0.1 million and $0.4 million, respectively, for each of the periods presented above.

As of June 30, 2021 and December 31, 2020, EVERTEC had the following balances arising from transactions with related parties:


(In thousands)	June 30, 2021		December 31, 2020
Cash and restricted cash deposits in affiliated bank	$	113,023	$	126,189
Other due to/from affiliate
Accounts receivable	$	28,518	$	28,419
Prepaid expenses and other assets	$	4,197	$	4,678
Operating lease right-of-use assets	$	15,282	$	17,099

Accounts payable	$	3,063	$	4,607
Contract liabilities	$	35,654	$	35,807
Operating lease liabilities	$	15,750	$	17,781

Note 16 – Segment Information

The Company operates in four business segments: Payment Services - Puerto Rico & Caribbean, Payment Services - Latin America (collectively "Payment Services segments"), Merchant Acquiring, and Business Solutions.

The Payment Services - Puerto Rico & Caribbean segment revenues are comprised of revenues related to providing access to the ATH debit network and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and point of sale ("POS") transactions, and ATM management and monitoring. The segment revenues also include revenues from card processing services (such as credit and debit card processing, authorization and settlement and fraud monitoring and control to debit or credit issuers), payment processing services (such as payment and billing products for merchants, businesses and financial institutions), ATH Movil (person-to-person and person-to-merchant digital transactions) and EBT (which principally consist of services to the government of Puerto Rico for the delivery of benefits to participants). For ATH debit network and processing services, revenues are primarily driven by the number of transactions processed. Revenues are derived primarily from network fees, transaction switching and processing fees, and the leasing of POS devices. For card issuer processing, revenues are primarily dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed and other processing services. For EBT services, revenues are primarily derived from the number of beneficiaries on file.

The Payment Services - Latin America segment revenues consist of revenues related to providing access to the ATH network of ATMs and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring. The segment revenues also include revenues from card processing services (such as credit and debit card processing, authorization and settlement and fraud monitoring and control to debit or credit issuers), payment processing services (such as payment and billing products for merchants, businesses and financial institutions), as well as licensed software solutions for risk and fraud management and card payment processing. For network and processing services, revenues are primarily driven by the number of transactions processed. Revenues are derived primarily from network fees, transaction switching and processing fees, and the leasing of POS devices. For card issuer processing, revenues are primarily dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed, and other processing services.

The Merchant Acquiring segment consists of revenues from services that allow merchants to accept electronic methods of payment. In the Merchant Acquiring segment, revenues include a discount fee and membership fees charged to merchants, debit network fees and rental fees from POS devices and other equipment, net of credit card interchange and assessment fees charged by credit cards associations (such as VISA or MasterCard) or payment networks. The discount fee is generally a percentage of the transaction value. EVERTEC also charges merchants for other services that are unrelated to the number of transactions or the transaction value.

The Business Solutions segment consists of revenues from a full suite of business process management solutions in various product areas such as core bank processing, network hosting and management, IT professional services, business process outsourcing, item processing, cash processing, and fulfillment. Core bank processing and network services revenues are derived in part from a recurrent fixed fee and from fees based on the number of accounts on file (i.e. savings or checking accounts, loans, etc.) or computer resources utilized. Revenues from other processing services within the Business Solutions segment are generally volume-based and depend on factors such as the number of accounts processed. In addition, EVERTEC is a reseller of hardware and software products and these resale transactions are generally non-recurring.

In addition to the four operating segments described above, management identified certain functional cost areas that operate independently and do not constitute businesses in themselves. These areas could neither be concluded as operating segments nor could they be combined with any other operating segments. Therefore, these areas are aggregated and presented within the “Corporate and Other” category in the financial statements alongside the operating segments. The Corporate and Other category consists of corporate overhead expenses, intersegment eliminations, certain leveraged activities and other non-operating and miscellaneous expenses that are not included in the operating segments. The overhead and leveraged costs relate to activities such as:

•marketing,

•corporate finance and accounting,

•human resources,

•legal,

•risk management functions,

•internal audit,

•corporate debt related costs,

•non-operating depreciation and amortization expenses generated as a result of merger and acquisition activity,

•intersegment revenues and expenses, and

•other non-recurring fees and expenses that are not considered when management evaluates financial performance at a segment level

The Chief Operating Decision Maker ("CODM") reviews the operating segments separate financial information to assess performance and to allocate resources. Management evaluates the operating results of each of its operating segments based upon revenues and Adjusted EBITDA. Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments. Adjusted EBITDA, as it relates to operating segments, is presented in conformity with ASC Topic 280, Segment Reporting, given that it is reported to the CODM for purposes of allocating resources. Segment asset disclosure is not used by the CODM as a measure of segment performance since the segment evaluation is driven by revenues and Adjusted EBITDA. As such, segment assets are not disclosed in the notes to the accompanying unaudited condensed consolidated financial statements.

The following tables set forth information about the Company’s operations by its four business segments for the periods indicated:


	Three months ended June 30, 2021
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	38,589	$	25,835	$	38,335	$	60,693	$	(14,304)	$	149,148
Operating costs and expenses	19,361		20,965		19,374		36,175		(1,019)		94,856
Depreciation and amortization	3,882		2,952		967		4,600		6,322		18,723
Non-operating income (expenses)	230		2,396		323		1,390		(1,700)		2,639
EBITDA	23,340		10,218		20,251		30,508		(8,663)		75,654
Compensation and benefits (2)	280		757		295		760		2,191		4,283
Transaction, refinancing and other fees (3)	—		—		—		(647)		971		324
Adjusted EBITDA	$	23,620	$	10,975	$	20,546	$	30,621	$	(5,501)	$	80,261

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $10.7 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $1.9 million from Payment Services - Latin America to both Payment Services - Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $1.7 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)Primarily represents share-based compensation and severance payments.

(3)Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A, net of dividends received, a software impairment charge and a gain from sale of assets.


	Three months ended June 30, 2020
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	27,461	$	19,797	$	24,764	$	55,495	$	(9,580)	$	117,937
Operating costs and expenses	17,453		17,947		12,230		37,008		7,709		92,347
Depreciation and amortization	3,193		2,815		455		4,381		6,995		17,839
Non-operating income (expenses)	(178)		584		158		684		(883)		365
EBITDA	13,023		5,249		13,147		23,552		(11,177)		43,794
Compensation and benefits (2)	253		835		235		472		1,956		3,751
Transaction, refinancing and other fees (3)	—		—		—		—		2,656		2,656
Adjusted EBITDA	$	13,276	$	6,084	$	13,382	$	24,024	$	(6,565)	$	50,201

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $7.3 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $2.3 million from Payment Services - Latin America to Payment Services - Puerto Rico & Caribbean.

(2)Primarily represents share-based compensation and severance payments.

(3)Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.


	Six months ended June 30, 2021
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	74,853	$	50,849	$	69,202	$	121,304	$	(27,532)	$	288,676
Operating costs and expenses	39,850		40,811		35,840		72,864		20		189,385
Depreciation and amortization	7,824		5,886		1,621		9,394		12,621		37,346
Non-operating income (expenses)	415		3,504		554		1,943		(2,947)		3,469
EBITDA	43,242		19,428		35,537		59,777		(17,878)		140,106
Compensation and benefits (2)	521		1,566		526		1,123		4,051		7,787
Transaction, refinancing and other fees (3)	660		—		—		(647)		1,244		1,257
Adjusted EBITDA	$	44,423	$	20,994	$	36,063	$	60,253	$	(12,583)	$	149,150

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $20.4 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $4.2 million from Payment Services - Latin America to both Payment Services - Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $2.9 million from Payment Services - Puerto Rico & Caribbean to Payment Services - Latin America.

(2)Primarily represents share-based compensation and severance payments.

(3)Primarily represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of dividends received, a software impairment charge and a gain from sale of assets.


	Six months ended June 30, 2020
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	57,348	$	41,437	$	49,885	$	111,438	$	(20,229)	$	239,879
Operating costs and expenses	34,859		35,598		26,936		70,625		13,508		181,526
Depreciation and amortization	6,442		5,572		954		8,677		13,989		35,634
Non-operating income (expenses)	(65)		1,338		312		1,071		(1,845)		811
EBITDA	28,866		12,749		24,215		50,561		(21,593)		94,798
Compensation and benefits (2)	484		1,577		451		908		3,831		7,251
Transaction, refinancing and other fees (3)	—		—		—		—		4,442		4,442
Adjusted EBITDA	$	29,350	$	14,326	$	24,666	$	51,469	$	(13,320)	$	106,491

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $16.3 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $3.9 million from Payment Services - Latin America to Payment Services - Puerto Rico & Caribbean.

(2)Primarily represents share-based compensation and severance payments.

The reconciliation of EBITDA to consolidated net income is as follows:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2021		2020		2021		2020
Total EBITDA	$	75,654	$	43,794	$	140,106	$	94,798
Less:
Income tax expense	2,632		4,520		7,340		9,038
Interest expense, net	5,208		5,810		10,725		12,226
Depreciation and amortization	18,723		17,839		37,346		35,634
Net income	$	49,091	$	15,625	$	84,695	$	37,900

Note 17 – Subsequent Events

On July 22, 2021, the Board declared a regular quarterly cash dividend of $0.05 per share on the Company’s outstanding shares of common stock. The dividend will be paid on September 3, 2021 to stockholders of record as of the close of business on August 2, 2021. The Board anticipates declaring this dividend in future quarters on a regular basis; however future declarations of dividends are subject to the Board’s approval and may be adjusted as business needs or market conditions change.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) covers: (i) the results of operations for the three and six months ended months ended June 30, 2021 and 2020 and (ii) the financial condition as of June 30, 2021. You should read the following discussion and analysis in conjunction with the audited consolidated financial statements (the “Audited Consolidated Financial Statements”) and related notes for the fiscal year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K and with the unaudited condensed consolidated financial statements (the “Unaudited Condensed Consolidated Financial Statements”) and related notes appearing elsewhere herein. This MD&A contains forward-looking statements that involve risks and uncertainties. Our actual results may differ from those indicated in the forward-looking statements. See “Forward-Looking Statements” for a discussion of the risks, uncertainties and assumptions associated with these statements.

Except as otherwise indicated or unless the context otherwise requires, (a) the terms “EVERTEC,” “we,” “us,” “our,” “our Company” and “the Company” refer to EVERTEC, Inc. and its subsidiaries on a consolidated basis, (b) the term “Holdings” refers to EVERTEC Intermediate Holdings, LLC, but not any of its subsidiaries and (c) the term “EVERTEC Group” refers to EVERTEC Group, LLC and its predecessor entities and their subsidiaries on a consolidated basis. EVERTEC Inc.’s subsidiaries include Holdings, EVERTEC Group, EVERTEC Dominicana, SAS, Evertec Chile Holdings SpA (formerly known as Tecnopago SpA), Evertec Chile SpA (formerly known as EFT Group SpA), Evertec Chile Global SpA (formerly known as EFT Global Services SpA), Evertec Chile Servicios Profesionales SpA (formerly known as EFT Servicios Profesionales SpA), EFT Group S.A., Tecnopago España SL, Paytrue S.A., Caleidon, S.A., Evertec Brasil Solutions Informática Ltda. (formerly known as Paytrue Solutions Informática Ltda.), EVERTEC Panamá, S.A., EVERTEC Costa Rica, S.A. (“EVERTEC CR”), EVERTEC Guatemala, S.A., Evertec Colombia, SAS (formerly known as Processa, SAS), EVERTEC USA, LLC, EGM Ingeniería sin Fronteras, S.A.S. ("Place to Pay") and EVERTEC México Servicios de Procesamiento, S.A. de C.V. Neither EVERTEC nor Holdings conducts any operations other than with respect to its indirect or direct ownership of EVERTEC Group.

Executive Summary

EVERTEC is a leading full-service transaction-processing business in Puerto Rico, the Caribbean and Latin America, providing a broad range of merchant acquiring, payment services and business process management services. According to the August 2020 Nilson Report, we are one of the largest merchant acquirers in Latin America based on total number of transactions and we believe we are the largest merchant acquirer in the Caribbean and Central America. We serve 26 countries out of 11 offices, including our headquarters in Puerto Rico. We own and operate the ATH network, one of the leading personal identification number ("PIN") debit networks in Latin America. We manage a system of electronic payment networks and offer a comprehensive suite of services for core banking, cash processing, and fulfillment in Puerto Rico, that process approximately three billion transactions annually. Additionally we offer technology outsourcing in all the regions we serve. We serve a diversified customer base of leading financial institutions, merchants, corporations and government agencies with “mission-critical” technology solutions that enable them to issue, process and accept transactions securely. We believe our business is well-positioned to continue to expand across the fast-growing Latin American region.

We are differentiated, in part, by our diversified business model, which enables us to provide our varied customer base with a broad range of transaction-processing services from a single source across numerous channels and geographic markets. We believe this capability provides several competitive advantages that will enable us to continue to penetrate our existing customer base with complementary new services, win new customers, develop new sales channels and enter new markets. We believe these competitive advantages include:

•Our ability to provide competitive products;

•Our ability to provide in one package a range of services that traditionally had to be sourced from different vendors;

•Our ability to serve customers with disparate operations across several geographies with technology solutions that enable them to manage their business as one enterprise; and

•Our ability to capture and analyze data across the transaction-processing value chain and use that data to provide value-added services that are differentiated from those offered by pure-play vendors that serve only one portion of the transaction-processing value chain (such as only merchant acquiring or payment services).

Our broad suite of services spans the entire transaction-processing value chain and includes a range of front-end customer-facing solutions such as the electronic capture and authorization of transactions at the point-of-sale, as well as back-end support services such as the clearing and settlement of transactions and account reconciliation for card issuers. These include: (i) merchant acquiring services, which enable point of sales (“POS”) and e-commerce merchants to accept and process electronic

methods of payment such as debit, credit, prepaid and electronic benefit transfer (“EBT”) cards; (ii) payment processing services, which enable financial institutions and other issuers to manage, support and facilitate the processing of credit, debit, prepaid, automated teller machines (“ATM”) and EBT card programs; and (iii) business process management solutions, which provide “mission-critical” technology solutions such as core bank processing, as well as IT outsourcing and cash management services to financial institutions, corporations and governments. We provide these services through scalable, end-to-end technology platforms that we manage and operate in-house and that generate significant operating efficiencies that enable us to maximize profitability.

We sell and distribute our services primarily through a proprietary direct sales force with established customer relationships. We continue to pursue joint ventures and merchant acquiring alliances. We benefit from an attractive business model, the hallmarks of which are recurring revenue, scalability, significant operating margins and moderate capital expenditure requirements. Our revenue is predominantly recurring in nature because of the mission-critical and embedded nature of the services we provide. In addition, we generally negotiate multi-year contracts with our customers. We believe our business model should enable us to continue to grow our business organically in the primary markets we serve without significant incremental capital expenditures.

Relationship with Popular

On September 30, 2010, EVERTEC Group entered into a 15-year MSA, and several related agreements with Popular. Under the terms of the MSA, Popular agreed to use EVERTEC services on an ongoing exclusive basis for the duration of the agreement. Additionally, Popular granted us a right of first refusal on the development of certain new financial technology products and services for the duration of the Master Services Agreement.

Factors and Trends Affecting the Results of Our Operations

The ongoing migration from cash and paper methods of payment to electronic payments continues to benefit the transaction-processing industry globally. We believe that the penetration of electronic payments in the markets in which we operate is significantly lower relative to the U.S. market, and that this ongoing shift will continue to generate substantial growth opportunities for our business. For example, currently the adoption of banking products, including electronic payments, in the Latin American and Caribbean regions is lower relative to the mature U.S. and European markets. We believe that the unbanked and underbanked population in our markets will continue to shrink, and therefore drive incremental penetration and growth of electronic payments in Puerto Rico and other Latin American regions. We also benefit from the trend of financial institutions and government agencies outsourcing technology systems and processes. Many medium- and small-size institutions in the Latin American markets in which we operate have outdated computer systems and updating these IT legacy systems is financially and logistically challenging, which presents a business opportunity for us.

Finally, our financial condition and results of operations are, in part, dependent on the economic and general conditions of the geographies in which we operate.

Results of Operations

Comparison of the three months ended June 30, 2021 and 2020


	Three months ended June 30,
In thousands	2021		2020		Variance

Revenues	$	149,148	$	117,937	$	31,211	26	%
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	59,381		56,979		2,402		4	%
Selling, general and administrative expenses	16,752		17,529		(777)		(4)	%
Depreciation and amortization	18,723		17,839		884		5	%
Total operating costs and expenses	94,856		92,347		2,509		3	%
Income from operations	$	54,292	$	25,590	$	28,702	112	%

Revenues

Total revenues for the three months ended June 30, 2021 increased by $31.2 million or 26% to $149.1 million when compared to the prior year quarter, primarily driven by transactional revenue growth in Puerto Rico positively impacted by incremental federal stimulus and increased consumer demand, coupled with increased revenue from the Company's digital solutions, mainly ATH Movil and ATH Movil Business. Latin America reflected double-digit growth driven mainly by recent new business implementations, such as Santander in Chile, Banco Popular de Costa Rica and Mercado Libre in Mexico, in addition to increased revenue from the expansion of Place to Pay. Prior year revenue was negatively impacted by COVID-19 related stay-at-home orders across all the regions in which the Company operates.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2021 amounted to $59.4 million, an increase of $2.4 million or 4% when compared to the same period in the prior year. The increase during the three months is driven by an increase in salaries and benefits.

Selling, General and Administrative

Selling, general and administrative expenses for the three months ended June 30, 2021 decreased by $0.8 million or 4% when compared to the same period in the prior year. The decrease is almost entirely related to a decrease in professional services, as prior year includes expenses incurred for corporate transactions, partially offset by an increase in salaries and benefits.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended June 30, 2021 amounted to $18.7 million, an increase of $0.9 million or 5% when compared to the same period in the prior year. Increased expense during the three months is driven by an increase in software amortization driven by key projects that have gone into production as well as increased capital expenditures.

Non-Operating Expenses


	Three months ended June 30,
In thousands	2021		2020		Variance

Interest income	$	450	$	373	$	77	21	%
Interest expense	(5,658)		(6,183)		525		8	%
Earnings of equity method investment	394		193		201		104	%
Other income	2,245		172		2,073		1,205	%
Total non-operating expenses	$	(2,569)	$	(5,445)	$	2,876	53	%

Non-operating expenses for the three months ended June 30, 2021 decreased by $2.9 million to $2.6 million when compared to the same period in the prior year. The decrease is mainly related to a $2.1 million increase in other income driven by the favorable impact of foreign currency exchange on remeasurement, a gain on sale of assets and a with a $0.5 million decrease in interest expense, resulting from a reduction in interest rates and a lower outstanding balance as a result of debt repayments made during the prior year and in the first quarter.

Income Tax Expense


	Three months ended June 30,
In thousands	2021		2020		Variance
Income tax expense	$	2,632	$	4,520	$	(1,888)	(42)	%

Income tax expense for the three months ended June 30, 2021 amounted to $2.6 million, a decrease of $1.9 million when compared to the same period in the prior year. The effective tax rate for the period was 5.1%, compared with 22.4% in the 2020 period. The decrease in the effective tax rate primarily reflects the impact of the reversal of a potential liability for uncertain tax

positions as a result of the expiration of the statute of limitation in the current year quarter, while the prior year quarter was impacted by the revenue mix towards higher taxed businesses.

Comparison of the six months ended June 30, 2021 and 2020


	Six months ended June 30,
In thousands	2021		2020		Variance

Revenues	$	288,676	$	239,879	$	48,797	20	%
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	119,185		111,046		8,139		7	%
Selling, general and administrative expenses	32,854		34,846		(1,992)		(6)	%
Depreciation and amortization	37,346		35,634		1,712		5	%
Total operating costs and expenses	189,385		181,526		7,859		4	%
Income from operations	$	99,291	$	58,353	$	40,938	70	%

Revenues

Total revenues for the six months ended June 30, 2021 increased by $48.8 million or 20% to $288.7 million when compared to the same period in the prior year, as revenue in the prior year period was impacted by COVID-19 stay-at-home orders in all of the regions in which the Company operates. Revenue increased across all of the Company's segments. Puerto Rico business benefited from COVID related federal stimulus, sales volume growth, as well as continued growth in the Company's digital solutions, such as ATH Movil. Latin America revenues growth was mainly driven from new business and projects that went into production.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2021 amounted to $119.2 million, an increase of $8.1 million or 7% when compared to the same period in the prior year. The increase is primarily driven by an increase in salaries and benefits, mainly due to increased headcount, coupled with an increase in technology services. Additionally, cost of sales increased primarily due to hardware and software sales completed during the six month period.

Selling, General and Administrative

Selling, general and administrative expenses for the six months ended June 30, 2021 decreased by $2.0 million or 6% when compared to the same period in the prior year. The decrease is almost entirely related to a decrease in professional services, as prior year includes expenses incurred for corporate transactions, partially offset by an increase in salaries and benefits.

Depreciation and Amortization

Depreciation and amortization expense for the six months ended June 30, 2021 amounted to $37.3 million, an increase of $1.7 million or 5% when compared to the same period in the prior year. Increased expense during the period months is driven by the same factors explained above for the quarter.

Non-Operating Expenses


	Six months ended June 30,
In thousands	2021		2020		Variance

Interest income	$	839	$	736	$	103	14	%
Interest expense	(11,564)		(12,962)		1,398		11	%
Earnings of equity method investment	896		531		365		69	%
Other income	2,573		280		2,293		819	%
Total non-operating expenses	$	(7,256)	$	(11,415)	$	4,159	36	%

Non-operating expenses for the six months ended June 30, 2021 decreased by $4.2 million to $7.3 million when compared to the same period in the prior year. The decrease is mainly related to a $2.3 million increase in Other Income for the same reasons explained above for the quarter, coupled with a $1.4 million decrease in interest expense, resulting from a reduction in interest rates and a lower outstanding balance.

Income Tax Expense


	Six months ended June 30,
In thousands	2021	2020	Variance
Income tax expense	7,340	9,038	$	(1,698)	(19)	%

Income tax expense for the six months ended June 30, 2021 amounted to $7.3 million, a decrease of $1.7 million when compared to the same period in the prior year. The effective tax rate for the period was 8.0% compared with 19.3% in the 2020 period. The decrease in the effective tax rate was primarily driven by the same reasons explained above for the quarter.

Segment Results of Operations

POS devices. For card issuer processing, revenues are primarily dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed, and other processing services.

•marketing,

•corporate finance and accounting,

•human resources,

•legal,

•risk management functions,

•internal audit,

•corporate debt related costs,

•non-operating depreciation and amortization expenses generated as a result of merger and acquisition activity,

•intersegment revenues and expenses, and

•other non-recurring fees and expenses that are not considered when management evaluates financial performance at a segment level

The following tables set forth information about the Company’s operations by its four business segments for the periods indicated below.

Comparison of the three months ended June 30, 2021 and 2020

Payment Services - Puerto Rico & Caribbean


	Three months ended June 30,
In thousands	2021		2020
Revenues	$38,589		$27,461
Adjusted EBITDA	23,620		13,276
Adjusted EBITDA Margin	61.2	%	48.3	%

Payment Services - Puerto Rico & Caribbean segment revenues for the three months ended June 30, 2021 increased by $11.1 million to $38.6 million when compared to the same period in the prior year, driven by increased POS transactions compared to the prior year quarter which was impacted by a decline in transaction volumes due to the impact of COVID-19. In addition, the Company recognized an incremental $1.7 million in revenue from ATH Movil and ATH Movil Business as consumer preference continues to shift to digital payment products, as well as an increase in transaction processing and monitoring revenue recognized for services provided from the Payment Services - Puerto Rico & Caribbean segment to the Payment Services - Latin America Segment. Adjusted EBITDA increased by $10.3 million to $23.6 million driven by the increase in revenues, partially offset by higher operating expenses driven by higher equipment expenses.

Payment Services - Latin America


	Three months ended June 30,
In thousands	2021		2020
Revenues	$25,835		$19,797
Adjusted EBITDA	10,975		6,084
Adjusted EBITDA Margin	42.5	%	30.7	%

Payment Services - Latin America segment revenues for the three months ended June 30, 2021 increased by $6.0 million to $25.8 million driven mainly by revenues generated by expansion of services with existing clients and new client contracts, such as Santander in Chile and Mercado Libre in Mexico, and increased volume from PlacetoPay. Adjusted EBITDA increased by $4.9 million when compared to the same period in the prior year primarily due to the increase in revenues, coupled with the favorable impact of remeasurement of assets and liabilities denominated in US dollars, partially offset by an increase in fees for transaction processing and monitoring services from the Payment Services - Puerto Rico & Caribbean segment to the Payment Services - Latin America Segment.

Merchant Acquiring


	Three months ended June 30,
In thousands	2021		2020
Revenues	$38,335		$24,764
Adjusted EBITDA	20,546		13,382
Adjusted EBITDA Margin	53.6	%	54.0	%

Merchant Acquiring segment revenues for the three months ended June 30, 2021 increased by $13.6 million to $38.3 million primarily driven by an increase in sales volume as a result of incremental federal stimulus from COVID, increased consumer demand, while the prior year period was impacted by lower sales volume as a result of the COVID-19 pandemic. Adjusted EBITDA increased by $7.2 million driven by the increase in revenues, partially offset by an increase in operating expenses driven by the increased transaction volume at a lower average ticket.

Business Solutions


	Three months ended June 30,
In thousands	2021		2020
Revenues	$60,693		$55,495
Adjusted EBITDA	30,621		24,024
Adjusted EBITDA Margin	50.5	%	43.3	%

Business Solutions segment revenues for the three months ended June 30, 2021 increased by $5.2 million to $60.7 million mainly as a result of an increase in core banking revenue driven by the shift to digital as mobile banking usage continues to increase. Adjusted EBITDA increased by $6.6 million to $30.6 million as a result of the increase in revenue as well as lower operating expenses as the prior year quarter included costs for a one-time project and special payments for employees working on Evertec premises.

Comparison of the six months ended June 30, 2021 and 2020

Payment Services - Puerto Rico & Caribbean


	Six months ended June 30,
In thousands	2021		2020
Revenues	$74,853		$57,348
Adjusted EBITDA	44,423		29,350
Adjusted EBITDA Margin	59.3	%	51.2	%

Payment Services - Puerto Rico & Caribbean segment revenues for the six months ended June 30, 2021 increased by $17.5 million to $74.9 million, due to an increase in transactions when compared to the same period in the prior year which was impacted by a decline in transaction volumes due to the impact of COVID-19. Revenue also benefited from an incremental $4.2 million in revenue recognized from ATH Movil and ATH Movil Business, as well as an increase in transaction processing and monitoring revenue recognized for services provided from the Payment Services - Puerto Rico & Caribbean segment to the Payment Services - Latin America Segment. Adjusted EBITDA increased by $15.1 million to $44.4 million driven by the increase in revenues, as well as a decrease in cost of sales, partially offset by higher operating expenses driven by higher equipment expenses.

Payment Services - Latin America


	Six months ended June 30,
In thousands	2021		2020
Revenues	$50,849		$41,437
Adjusted EBITDA	20,994		14,326
Adjusted EBITDA Margin	41.3	%	34.6	%

Payment Services - Latin America segment revenues for the six months ended June 30, 2021 increased by $9.4 million to $50.8 million driven mainly by revenues generated by new client contracts, increased revenue for services related to card products and increased volume from Place to Pay, partially offset by client attrition. Adjusted EBITDA increased by $6.7 million when compared to the same period in the prior year primarily due to the increase in revenues and the positive impact from foreign currency remeasurement, partially offset by an increase in fees for transaction processing and monitoring services from the Payment Services - Puerto Rico & Caribbean segment to the Payment Services - Latin America Segment.

Merchant Acquiring


	Six months ended June 30,
In thousands	2021		2020
Revenues	$69,202		$49,885
Adjusted EBITDA	$36,063		24,666
Adjusted EBITDA Margin	52.1	%	49.4	%

Merchant Acquiring segment revenues for the six months ended June 30, 2021 increased by $19.3 million to $69.2 million as a result of an increase in transaction volumes that continue to benefit from the impact of federal stimulus, while the prior year period was impacted by lower sales volume as a result of the beginning of the COVID-19 pandemic. Adjusted EBITDA increased by $11.4 million driven by the increase in revenues, partially offset by an increase in operating expenses driven by the increased transaction volume.

Business Solutions


	Six months ended June 30,
In thousands	2021		2020
Revenues	$121,304		$111,438
Adjusted EBITDA	60,253		51,469
Adjusted EBITDA Margin	49.7	%	46.2	%

Business Solutions segment revenues for the six months ended June 30, 2021 increased by $9.9 million to $121.3 million as a result of an increase in core banking revenues coupled with an increase in IT consulting services revenue, as the Company continues to benefit from the shift to digital. Adjusted EBITDA increased by $8.8 million to $60.3 million as a result of the increase in revenue, partially offset by an increase in costs of sales.

Liquidity and Capital Resources

Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of working capital needs, capital expenditures, and acquisitions. We also have a $125.0 million Revolving Facility, of which $119.1 million was available for borrowing as of June 30, 2021. The Company issues letters of credit against our Revolving Facility which reduce our availability of funds to be drawn.

As of June 30, 2021, we had cash and cash equivalents of $199.9 million, of which $83.7 million resides in our subsidiaries located outside of Puerto Rico for purposes of (i) funding the respective subsidiary’s current business operations and (ii) funding potential future investment outside of Puerto Rico. We intend to indefinitely reinvest these funds outside of Puerto Rico, and based on our liquidity forecast, we will not need to repatriate this cash to fund the Puerto Rico operations or to meet debt-service obligations. However, if in the future we determine that we no longer need to maintain cash balances within our foreign subsidiaries, we may elect to distribute such cash to the Company in Puerto Rico. Distributions from the foreign subsidiaries to Puerto Rico may be subject to tax withholding and other tax consequences. Additionally, our credit agreement imposes certain restrictions on the distribution of dividends from subsidiaries.

Our primary use of cash is for operating expenses, working capital requirements, capital expenditures, dividend payments, share repurchases, debt service, acquisitions and other transactions as opportunities present themselves.

Based on our current level of operations, we believe our cash flows from operations and the available secured Revolving Facility will be adequate to meet our liquidity needs for the next twelve months. However, our ability to fund future operating expenses, dividend payments, capital expenditures, mergers and acquisitions, and our ability to make scheduled payments of interest, to pay principal on or refinance our indebtedness and to satisfy any other of our present or future debt obligations will depend on our future operating performance, which may be affected by general economic, financial and other factors beyond our control.


	Six months ended June 30,
(In thousands)	2021		2020

Cash provided by operating activities	$	112,029	$	87,252
Cash used in investing activities	(47,036)		(18,447)
Cash used in financing activities	(66,869)		(27,946)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash	73		(2,890)
(Decrease) increase in cash, cash equivalents and restricted cash	$	(1,803)	$	37,969

Net cash provided by operating activities for the six months ended June 30, 2021 was $112.0 million compared to $87.3 million for the same period in the prior year. The $24.8 million increase in cash provided by operating activities is primarily driven by the increase in net income, partially offset by a decrease in collections for accounts receivable.

Net cash used in investing activities for the six months ended June 30, 2021 was $47.0 million compared to $18.4 million for the same period in the prior year. The $28.6 million increase is primarily attributable to the acquisition of a $14.8 million customer relationship, an increase in additions to software of $9.5 million, and the purchase of $3.0 million in available-for-sale debt securities during the period.

Net cash used in financing activities for the six months ended June 30, 2021 was $66.9 million compared to $27.9 million for the same period in the prior year. The $38.9 million increase was mainly attributed to an increase in cash used to repurchase common stock of $17.1 million, a $6.0 million increase in withholding taxes paid on share-based compensation and the impact in the prior year of a $15.0 million draw on our Revolving Facility, while none in 2021.

Capital Resources

Our principal capital expenditures are for hardware and computer software (purchased and internally developed) and additions to property and equipment. We invested approximately $30.1 million and $18.4 million, during the six months ended June 30, 2021 and 2020, respectively. In addition, in 2021, the Company acquired a $14.8 million customer relationship as well as $3.0 million in available-for-sale debt securities. Generally, we fund capital expenditures with cash flow generated from operations and, if necessary, borrowings under our Revolving Facility.

Dividend Payments

On February 18, 2021 and April 22, 2021, respectively the Board declared quarterly cash dividends of $0.05 per share of common stock, which were paid on March 26, 2021 and June 4, 2021, respectively, to stockholders of record as of the close of business on March 1, 2021 and May 3, 2021, respectively.

On July 22, 2021, our Board declared a regular quarterly cash dividend of $0.05 per share on the Company’s outstanding shares of common stock. The dividend will be paid on September 3, 2021 to stockholders of record as of the close of business on August 2, 2021. The Board anticipates declaring this dividend in future quarters on a regular basis; however future declarations of dividends are subject to the Board’s approval and may be adjusted as business needs or market conditions change.

Financial Obligations

Secured Credit Facilities

On November 27, 2018, EVERTEC and EVERTEC Group (“Borrower”) entered into a credit agreement providing for the secured credit facilities, consisting of a $220.0 million term loan A facility that matures on November 27, 2023 (the “2023 Term A Loan”), a $325.0 million term loan B facility that matures on November 27, 2024 (the “2024 Term B Loan”), and a $125.0 million revolving credit facility (the “Revolving Facility”) that matures on November 27, 2023, with a syndicate of lenders and Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent, swingline lender and line of credit issuer (collectively the “2018 Credit Agreement”).

The 2018 Credit Agreement require mandatory repayment of outstanding principal balances based on a percentage of excess cash flows provided that no such payment shall be due if the resulting amount of the excess cash flows multiplied by the applicable percentage is less than $10 million. On March 8, 2021 and March 5, 2020, in connection with this mandatory

repayment clause, the Company repaid $17.8 million and $17.0 million, respectively, as a result of excess cash flows for the years ended December 31, 2020 and 2019.

Notes Payable

Interest Rate Swaps

Swap Agreement

Effective date

Maturity Date

Notional Amount

Variable Rate

Fixed Rate

2018 Swap

April 2020

November 2024

$250 million

1-month LIBOR

2.89%

The Company has accounted for this agreement as a cash flow hedge.

During the three and six months ended June 30, 2021 and 2020, the Company reclassified losses of $1.8 million and $3.5 million, respectively and losses of $1.4 million and $1.6 million, respectively, from accumulated other comprehensive loss into interest expense. Based on current LIBOR rates, the Company expects to reclassify losses of $7.0 million from accumulated other comprehensive loss into interest expense over the next 12 months.

The cash flow hedge is considered highly effective.

Covenant Compliance

As of June 30, 2021, our secured leverage ratio was 1.50 to 1.00, as determined in accordance with the 2018 Credit Agreement. As of the date of filing of this Form 10-Q, no event has occurred that constitutes an Event of Default or Default under our 2018 Credit Agreement.

Net Income Reconciliation to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share (Non-GAAP Measures)

We define “EBITDA” as earnings before interest, taxes, depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted to exclude unusual items and other adjustments described below. Adjusted EBITDA by segment is reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance. For this reason, Adjusted EBITDA, as it relates to our segments, is presented in conformity with ASC Topic 280, Segment Reporting, and is excluded from the definition of non-GAAP financial measures under the Securities and Exchange Commission's Regulation G and Item 10(e) of Regulation S-K. We define “Adjusted Net Income” as net income adjusted to exclude unusual items and other adjustments described below. We define “Adjusted Earnings per common share” as Adjusted Net Income divided by diluted shares outstanding.

We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of ourselves and other companies in our industry. In addition, our presentation of Adjusted EBITDA is substantially consistent with the

equivalent measurements that are contained in the senior secured credit facilities in testing EVERTEC Group’s compliance with covenants therein such as the secured leverage ratio. We use Adjusted Net Income to measure our overall profitability because we believe better reflects our comparable operating performance by excluding the impact of the non-cash amortization and depreciation that was created as a result of the Merger. In addition, in evaluating EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share, you should be aware that in the future we may incur expenses such as those excluded in calculating them. Further, our presentation of these measures should not be construed as an inference that our future operating results will not be affected by unusual or nonrecurring items.

Some of the limitations of EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted earnings per common share are as follows:

•they do not reflect cash outlays for capital expenditures or future contractual commitments;

•they do not reflect changes in, or cash requirements for, working capital;

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements;

•in the case of EBITDA and Adjusted EBITDA, they do not reflect interest expense, or the cash requirements necessary to service interest, or principal payments, on indebtedness;

•in the case of EBITDA and Adjusted EBITDA, they do not reflect income tax expense or the cash necessary to pay income taxes; and

•other companies, including other companies in our industry, may not use EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Earnings per common share or may calculate EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share differently than as presented in this Report, limiting their usefulness as a comparative measure.

EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share are not measurements of liquidity or financial performance under GAAP. You should not consider EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share as alternatives to cash flows from operating activities or any other performance measures determined in accordance with GAAP, as an indicator of cash flows, as a measure of liquidity or as an alternative to operating or net income determined in accordance with GAAP.

A reconciliation of net income to EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per common share is provided below:


	Three months ended June 30,				Six months ended June 30,				Twelve months ended
(In thousands, except per share information)	2021		2020		2021		2020		June 30, 2021
Net income	$	49,091	$	15,625	$	84,695	$	37,900	$	116,042
Income tax expense	2,632		4,520		7,340		9,038		12,596
Interest expense, net	5,208		5,810		10,725		12,226		16,554
Depreciation and amortization	18,723		17,839		37,346		35,634		54,607
EBITDA	75,654		43,794		140,106		94,798		199,799
Equity income (1)	923		(193)		421		(531)		318
Compensation and benefits (2)	4,283		3,751		7,787		7,251		11,415
Transaction, refinancing and other fees (3)	(599)		2,849		836		4,973		2,705
Adjusted EBITDA	80,261		50,201		149,150		106,491		214,237
Operating depreciation and amortization (4)	(10,724)		(9,578)		(21,606)		(19,055)		(30,753)
Cash interest expense, net (5)	(4,944)		(5,606)		(10,020)		(11,616)		(15,613)
Income tax expense (6)	(7,535)		(7,079)		(15,291)		(14,257)		(20,470)
Non-controlling interest (7)	71		(165)		(72)		(257)		(218)
Adjusted net income	$	57,129	$	27,773	$	102,161	$	61,306	$	147,183
Net income per common share (GAAP):
Diluted	$	0.68	$	0.21	$	1.16	$	0.52
Adjusted Earnings per common share (Non-GAAP):
Diluted	$	0.78	$	0.38	$	1.40	$	0.84
Shares used in computing adjusted earnings per common share:
Diluted	72,831,366		72,774,365		72,716,950		73,019,219

1)Represents the elimination of dividends received net of non-cash equity earnings from our 19.99% equity investment in Dominican Republic, Consorcio de Tarjetas Dominicanas S.A. ("CONTADO").

2)Primarily represents share-based compensation and severance payments.

3)Represents fees and expenses associated with corporate transactions as defined in the 2018 Credit Agreement, recorded as part of selling, general and administrative expenses, a software impairment charge and a gain from sale of assets.

4)Represents operating depreciation and amortization expense, which excludes amounts generated as a result of merger and acquisition activity.

5)Represents interest expense, less interest income, as they appear on our consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount.

6)Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discrete items.

7)Represents the 35% non-controlling equity interest in Evertec Colombia, net of amortization for intangibles created as part of the purchase.

Off-Balance Sheet Arrangements

In the ordinary course of business, the Company may enter into commercial commitments. With the exception of the letters of credit issued against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility, as of June 30, 2021, the Company did not have any off-balance sheet items.

Seasonality

Our payment businesses generally experience moderate increased activity during the traditional holiday shopping periods and around other nationally recognized holidays, which follow consumer spending patterns.

Effect of Inflation

While inflationary increases in certain input costs, such as occupancy, labor and benefits, and general administrative costs, have an impact on our operating results, inflation has had minimal net effect on our operating results during the last three years as overall inflation has been offset by increased selling process and cost reduction actions. We cannot assure you, however, that we will not be affected by general inflation in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks arising from our normal business activities. These market risks principally involve the possibility of changes in interest rates that will adversely affect the value of our financial assets and liabilities or future cash flows and earnings. Market risk is the potential loss arising from adverse changes in market rates and prices.

Interest Rate Risks

We issued floating-rate debt which is subject to fluctuations in interest rates. Our secured credit facilities accrue interest at variable rates and only the 2024 Term B Loan is subject to a floor or a minimum rate. A 100 basis point increase in interest rates over our floor(s) on our debt balances outstanding as of June 30, 2021, under the secured credit facilities, would increase our annual interest expense by approximately $2.7 million. The impact on future interest expense as a result of future changes in interest rates will depend largely on the gross amount of our borrowings at that time.

As of June 30, 2021, the Company has an interest rate swap agreement, entered into December 2018, which converts a portion of our outstanding variable rate debt to fixed.

The interest rate swap exposes us to credit risk in the event that the counterparty to the swap agreement does not or cannot meet its obligations. The notional amount is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. The loss would be limited to the amount that would have been received, if any, over the remaining life of the swap. The counterparty to the swap is a major US based financial institution and we expect the counterparty to be able to perform its obligations under the swap. We use derivative financial instruments for hedging purposes only and not for trading or speculative purposes

See Note 6 of the Unaudited Condensed Consolidated Financial Statements for additional information related to the secured credit facilities.

Foreign Exchange Risk

We conduct business in certain countries in Latin America. Some of this business is conducted in the countries’ local currencies. The resulting foreign currency translation adjustments, from operations for which the functional currency is other than the U.S. dollar, are reported in accumulated other comprehensive loss in the unaudited condensed consolidated balance sheets. As of June 30, 2021, the Company had $25.7 million in an unfavorable foreign currency translation adjustment as part of accumulated other comprehensive loss compared with an unfavorable foreign currency translation adjustment of $24.8 million at December 31, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2021, the Company’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a -15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are defendants in various lawsuits or arbitration proceedings arising in the ordinary course of business. Management believes, based on the opinion of legal counsel and other factors, that the aggregated liabilities, if any, arising from such actions will not have a material adverse effect on the financial condition, results of operations and the cash flows of the Company.

Item 1A. Risk Factors

Investing in our common shares involves a high degree of risk. In addition to the other information set forth in this Report, you should carefully consider the factors described in the section titled "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Annual Report"). There have been no material changes to the risk factors described in the our 2020 Annual Report. If any of the risk factors described in our 2020 Annual Report actually materializes, our business, financial condition and results of operations could be materially adversely affected. In such an event, the market price of our common shares could decline and you may lose all or part of your investment.

The risks described in our 2020 Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes repurchases of the Company’s common stock in the three months period ended June 30, 2021:


Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of a publicly announced program (1)	Approximate dollar value of shares that may yet be purchased under the program



4/1/2021-4/30/2021	3,086	37.315	3,086
5/1/2021-5/31/2021	22,942	43.587	22,942
6/1/2021-6/30/2021	205,286	43.864	205,286
	231,314	43.75	231,314	75,612,455

(1) On December 17, 2020, the Company announced that its Board approved an increase and extension to the then-current stock

repurchase program, authorizing the purchase of up to $100 million of the Company’s common stock and extended the

expiration to December 31, 2023.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits















10.1*+			Form of Restricted Stock Unit Award Agreement for grant of restricted stock units to directors under the EVERTEC, Inc. 2013 Equity Incentive Plan, dated June 1, 2021, by and between EVERTEC, Inc. and the director (applicable to Frank G. D'Angelo, Kelly Barrett, Olga Botero, Jorge A. Junquera, Iván Pagán, Aldo J. Polak, Alan H. Schumacher, and Brian J. Smith).
10.2*+			Restricted Stock Unit Award Agreement for grant of restricted stock units under the EVERTEC, Inc. 2013 Equity Incentive Plan, dated June 7, 2021, by and between EVERTEC, Inc. and Diego Viglianco.
10.3*+			Restricted Stock Unit Award Agreement for grant of restricted stock units under the EVERTEC, Inc. 2013 Equity Incentive Plan , for executive recruitment, dated June 7,2021, by and between EVERTEC, Inc. and Diego Viglianco.
31.1*			CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**			CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**			CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL**			Instance document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL**			Inline Taxonomy Extension Schema
101.CAL XBRL**			Inline Taxonomy Extension Calculation Linkbase
101.DEF XBRL**			Inline Taxonomy Extension Definition Linkbase
101.LAB XBRL**			Inline Taxonomy Extension Label Linkbase
101.PRE XBRL**			Inline Taxonomy Extension Presentation Linkbase
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

+ This exhibit is a management contract or a compensatory plan or arrangement.

SIGNATURES

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


	EVERTEC, Inc. (Registrant)

Date: August 4, 2021	By:	/s/ Morgan Schuessler
		Morgan Schuessler Chief Executive Officer

Date: August 4, 2021	By:	/s/ Joaquin A. Castrillo-Salgado
		Joaquin A. Castrillo-Salgado Chief Financial Officer (Principal Financial and Accounting Officer)


Note 1 - The Company and Basis of Presentation			6
Note 2 - Recent Accounting Pronouncements			6
Note 3 - Debt Securities			7
Note 4 - Property and Equipment, net			7
Note 5 - Goodwill and Other Intangible Assets			7
Note 6 - Debt and Short-Term Borrowings			8
Note 7 - Financial Instruments and Fair Value Measurements			10
Note 8 - Equity			10
Note 9 - Share-based Compensation			11
Note 10 - Revenues			11
Note 11 - Current Expected Credit Losses			13
Note 12 - Income Tax			14
Note 13 - Net Income per Common Share			15
Note 14 - Commitments and Contingencies			15
Note 15 - Related Party Transactions			15
Note 16 - Segment Information			16
Note 17 - Subsequent Events			20

Evertec - 10-Q quarterly report FY2021 Q2

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