Evertec - 10-Q quarterly report FY2022 Q2

000155986512/312022Q2FALSE00015598652022-01-012022-06-3000015598652022-07-29xbrli:shares00015598652022-06-30iso4217:USD00015598652021-12-31iso4217:USDxbrli:shares00015598652022-04-012022-06-3000015598652021-04-012021-06-3000015598652021-01-012021-06-300001559865us-gaap:CommonStockMember2021-12-310001559865us-gaap:AdditionalPaidInCapitalMember2021-12-310001559865us-gaap:RetainedEarningsMember2021-12-310001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001559865us-gaap:NoncontrollingInterestMember2021-12-310001559865us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100015598652022-01-012022-03-310001559865us-gaap:CommonStockMember2022-01-012022-03-310001559865us-gaap:RetainedEarningsMember2022-01-012022-03-310001559865us-gaap:NoncontrollingInterestMember2022-01-012022-03-310001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001559865us-gaap:CommonStockMember2022-03-310001559865us-gaap:AdditionalPaidInCapitalMember2022-03-310001559865us-gaap:RetainedEarningsMember2022-03-310001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001559865us-gaap:NoncontrollingInterestMember2022-03-3100015598652022-03-310001559865us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001559865us-gaap:CommonStockMember2022-04-012022-06-300001559865us-gaap:RetainedEarningsMember2022-04-012022-06-300001559865us-gaap:NoncontrollingInterestMember2022-04-012022-06-300001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001559865us-gaap:CommonStockMember2022-06-300001559865us-gaap:AdditionalPaidInCapitalMember2022-06-300001559865us-gaap:RetainedEarningsMember2022-06-300001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001559865us-gaap:NoncontrollingInterestMember2022-06-300001559865us-gaap:CommonStockMember2020-12-310001559865us-gaap:AdditionalPaidInCapitalMember2020-12-310001559865us-gaap:RetainedEarningsMember2020-12-310001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001559865us-gaap:NoncontrollingInterestMember2020-12-3100015598652020-12-310001559865us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100015598652021-01-012021-03-310001559865us-gaap:CommonStockMember2021-01-012021-03-310001559865us-gaap:RetainedEarningsMember2021-01-012021-03-310001559865us-gaap:NoncontrollingInterestMember2021-01-012021-03-310001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001559865us-gaap:CommonStockMember2021-03-310001559865us-gaap:AdditionalPaidInCapitalMember2021-03-310001559865us-gaap:RetainedEarningsMember2021-03-310001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001559865us-gaap:NoncontrollingInterestMember2021-03-3100015598652021-03-310001559865us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001559865us-gaap:CommonStockMember2021-04-012021-06-300001559865us-gaap:RetainedEarningsMember2021-04-012021-06-300001559865us-gaap:NoncontrollingInterestMember2021-04-012021-06-300001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001559865us-gaap:CommonStockMember2021-06-300001559865us-gaap:AdditionalPaidInCapitalMember2021-06-300001559865us-gaap:RetainedEarningsMember2021-06-300001559865us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001559865us-gaap:NoncontrollingInterestMember2021-06-3000015598652021-06-30evtc:country0001559865us-gaap:SubsequentEventMemberevtc:DisposalGroupPopularMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberus-gaap:CommonStockMember2022-07-010001559865evtc:DisposalGroupPopularMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2022-06-300001559865us-gaap:BuildingMember2022-01-012022-06-300001559865us-gaap:BuildingMember2022-06-300001559865us-gaap:BuildingMember2021-12-310001559865evtc:DataProcessingEquipmentMembersrt:MinimumMember2022-01-012022-06-300001559865evtc:DataProcessingEquipmentMembersrt:MaximumMember2022-01-012022-06-300001559865evtc:DataProcessingEquipmentMember2022-06-300001559865evtc:DataProcessingEquipmentMember2021-12-310001559865us-gaap:FurnitureAndFixturesMembersrt:MinimumMember2022-01-012022-06-300001559865srt:MaximumMemberus-gaap:FurnitureAndFixturesMember2022-01-012022-06-300001559865us-gaap:FurnitureAndFixturesMember2022-06-300001559865us-gaap:FurnitureAndFixturesMember2021-12-310001559865srt:MinimumMemberus-gaap:LeaseholdImprovementsMember2022-01-012022-06-300001559865srt:MaximumMemberus-gaap:LeaseholdImprovementsMember2022-01-012022-06-300001559865us-gaap:LeaseholdImprovementsMember2022-06-300001559865us-gaap:LeaseholdImprovementsMember2021-12-310001559865evtc:PaymentServicesPuertoRicoCaribbeanMember2021-12-310001559865evtc:PaymentServicesLatinAmericaMember2021-12-310001559865evtc:MerchantAcquiringNetMember2021-12-310001559865evtc:BusinessSolutionsMember2021-12-310001559865evtc:PaymentServicesPuertoRicoCaribbeanMember2022-01-012022-06-300001559865evtc:PaymentServicesLatinAmericaMember2022-01-012022-06-300001559865evtc:MerchantAcquiringNetMember2022-01-012022-06-300001559865evtc:BusinessSolutionsMember2022-01-012022-06-300001559865evtc:PaymentServicesPuertoRicoCaribbeanMember2022-06-300001559865evtc:PaymentServicesLatinAmericaMember2022-06-300001559865evtc:MerchantAcquiringNetMember2022-06-300001559865evtc:BusinessSolutionsMember2022-06-300001559865us-gaap:CustomerRelationshipsMembersrt:MinimumMember2022-01-012022-06-300001559865srt:MaximumMemberus-gaap:CustomerRelationshipsMember2022-01-012022-06-300001559865us-gaap:CustomerRelationshipsMember2022-06-300001559865us-gaap:TrademarksMembersrt:MinimumMember2022-01-012022-06-300001559865srt:MaximumMemberus-gaap:TrademarksMember2022-01-012022-06-300001559865us-gaap:TrademarksMember2022-06-300001559865srt:MinimumMemberus-gaap:ComputerSoftwareIntangibleAssetMember2022-01-012022-06-300001559865srt:MaximumMemberus-gaap:ComputerSoftwareIntangibleAssetMember2022-01-012022-06-300001559865us-gaap:ComputerSoftwareIntangibleAssetMember2022-06-300001559865us-gaap:NoncompeteAgreementsMember2022-01-012022-06-300001559865us-gaap:NoncompeteAgreementsMember2022-06-300001559865us-gaap:CustomerRelationshipsMembersrt:MinimumMember2021-01-012021-12-310001559865srt:MaximumMemberus-gaap:CustomerRelationshipsMember2021-01-012021-12-310001559865us-gaap:CustomerRelationshipsMember2021-12-310001559865us-gaap:TrademarksMembersrt:MinimumMember2021-01-012021-12-310001559865srt:MaximumMemberus-gaap:TrademarksMember2021-01-012021-12-310001559865us-gaap:TrademarksMember2021-12-310001559865srt:MinimumMemberus-gaap:ComputerSoftwareIntangibleAssetMember2021-01-012021-12-310001559865srt:MaximumMemberus-gaap:ComputerSoftwareIntangibleAssetMember2021-01-012021-12-310001559865us-gaap:ComputerSoftwareIntangibleAssetMember2021-12-310001559865us-gaap:NoncompeteAgreementsMember2021-01-012021-12-310001559865us-gaap:NoncompeteAgreementsMember2021-12-310001559865us-gaap:CustomerRelationshipsMember2022-04-012022-06-300001559865us-gaap:ComputerSoftwareIntangibleAssetMember2022-04-012022-06-300001559865us-gaap:ComputerSoftwareIntangibleAssetMember2021-01-012021-06-300001559865us-gaap:LineOfCreditMemberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMember2022-06-300001559865us-gaap:LineOfCreditMemberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMember2021-12-310001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LineOfCreditMember2022-06-300001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LineOfCreditMember2021-12-310001559865evtc:NotePayableDueOnJanuaryOneTwoThousandTwentyTwoMemberus-gaap:NotesPayableToBanksMember2022-06-300001559865evtc:NotePayableDueOnJanuaryOneTwoThousandTwentyTwoMemberus-gaap:NotesPayableToBanksMember2021-12-310001559865us-gaap:LineOfCreditMemberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMember2022-01-012022-06-30xbrli:pure0001559865us-gaap:LineOfCreditMemberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMember2021-01-012021-12-310001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMember2022-06-300001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMember2021-12-310001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMember2022-01-012022-06-300001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMember2021-01-012021-12-310001559865us-gaap:LineOfCreditMemberevtc:CreditAgreement2018Memberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMember2018-11-270001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LineOfCreditMemberevtc:CreditAgreement2018Member2018-11-270001559865evtc:SeniorSecuredRevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberevtc:CreditAgreement2018Member2018-11-2700015598652018-12-310001559865evtc:CreditAgreement2018Member2018-01-012018-12-310001559865evtc:CreditAgreement2018Member2021-03-082021-03-080001559865evtc:CreditAgreement2018Member2021-12-310001559865evtc:SeniorSecuredRevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-06-300001559865us-gaap:NotesPayableToBanksMemberevtc:NonInterestBearingFinancingAgreementTwoMember2019-12-31evtc:agreement0001559865us-gaap:NotesPayableToBanksMemberevtc:NonInterestBearingFinancingAgreementTwoMember2022-01-012022-01-310001559865us-gaap:NotesPayableToBanksMemberevtc:NonInterestBearingFinancingAgreementTwoMember2021-12-310001559865evtc:InterestRateSwap2018AgreementMember2022-06-300001559865us-gaap:LondonInterbankOfferedRateLIBORMemberevtc:InterestRateSwap2018AgreementMember2022-01-012022-06-300001559865us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-06-300001559865us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001559865us-gaap:FairValueInputsLevel2Member2022-06-300001559865us-gaap:FairValueInputsLevel2Member2021-12-310001559865us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-06-300001559865us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-06-300001559865us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001559865us-gaap:ForeignGovernmentDebtSecuritiesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001559865us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-06-300001559865us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-06-300001559865us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001559865us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001559865us-gaap:CertificatesOfDepositMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-06-300001559865us-gaap:CertificatesOfDepositMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-06-300001559865us-gaap:CertificatesOfDepositMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001559865us-gaap:CertificatesOfDepositMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001559865us-gaap:LineOfCreditMemberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-06-300001559865us-gaap:LineOfCreditMemberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-06-300001559865us-gaap:LineOfCreditMemberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001559865us-gaap:LineOfCreditMemberevtc:TermOneDueOnNovemberTwentySevenTwoThousandTwentyThreeMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LineOfCreditMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2022-06-300001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LineOfCreditMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-06-300001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LineOfCreditMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001559865evtc:TermTwoDueOnNovemberTwentySevenTwoThousandTwentyFourMemberus-gaap:LineOfCreditMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001559865us-gaap:AccumulatedTranslationAdjustmentMember2021-12-310001559865us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2021-12-310001559865us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-12-310001559865us-gaap:AccumulatedTranslationAdjustmentMember2022-01-012022-06-300001559865us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2022-01-012022-06-300001559865us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-01-012022-06-300001559865us-gaap:AccumulatedTranslationAdjustmentMember2022-06-300001559865us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember2022-06-300001559865us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-06-300001559865evtc:TimeBasedAwardsMember2022-01-012022-06-300001559865srt:MinimumMemberus-gaap:PerformanceSharesMember2022-01-012022-06-300001559865srt:MaximumMemberus-gaap:PerformanceSharesMember2022-01-012022-06-300001559865us-gaap:PerformanceSharesMember2022-01-012022-06-300001559865us-gaap:RestrictedStockUnitsRSUMember2021-12-310001559865us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001559865us-gaap:RestrictedStockUnitsRSUMember2022-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2022-04-012022-06-300001559865evtc:PaymentServicesLatinAmericaMemberus-gaap:TransferredAtPointInTimeMember2022-04-012022-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:MerchantAcquiringNetMember2022-04-012022-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:BusinessSolutionsMember2022-04-012022-06-300001559865us-gaap:TransferredAtPointInTimeMember2022-04-012022-06-300001559865us-gaap:TransferredOverTimeMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2022-04-012022-06-300001559865us-gaap:TransferredOverTimeMemberevtc:PaymentServicesLatinAmericaMember2022-04-012022-06-300001559865us-gaap:TransferredOverTimeMemberevtc:MerchantAcquiringNetMember2022-04-012022-06-300001559865us-gaap:TransferredOverTimeMemberevtc:BusinessSolutionsMember2022-04-012022-06-300001559865us-gaap:TransferredOverTimeMember2022-04-012022-06-300001559865evtc:PaymentServicesPuertoRicoCaribbeanMember2022-04-012022-06-300001559865evtc:PaymentServicesLatinAmericaMember2022-04-012022-06-300001559865evtc:MerchantAcquiringNetMember2022-04-012022-06-300001559865evtc:BusinessSolutionsMember2022-04-012022-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2021-04-012021-06-300001559865evtc:PaymentServicesLatinAmericaMemberus-gaap:TransferredAtPointInTimeMember2021-04-012021-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:MerchantAcquiringNetMember2021-04-012021-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:BusinessSolutionsMember2021-04-012021-06-300001559865us-gaap:TransferredAtPointInTimeMember2021-04-012021-06-300001559865us-gaap:TransferredOverTimeMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2021-04-012021-06-300001559865us-gaap:TransferredOverTimeMemberevtc:PaymentServicesLatinAmericaMember2021-04-012021-06-300001559865us-gaap:TransferredOverTimeMemberevtc:MerchantAcquiringNetMember2021-04-012021-06-300001559865us-gaap:TransferredOverTimeMemberevtc:BusinessSolutionsMember2021-04-012021-06-300001559865us-gaap:TransferredOverTimeMember2021-04-012021-06-300001559865evtc:PaymentServicesPuertoRicoCaribbeanMember2021-04-012021-06-300001559865evtc:PaymentServicesLatinAmericaMember2021-04-012021-06-300001559865evtc:MerchantAcquiringNetMember2021-04-012021-06-300001559865evtc:BusinessSolutionsMember2021-04-012021-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2022-01-012022-06-300001559865evtc:PaymentServicesLatinAmericaMemberus-gaap:TransferredAtPointInTimeMember2022-01-012022-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:MerchantAcquiringNetMember2022-01-012022-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:BusinessSolutionsMember2022-01-012022-06-300001559865us-gaap:TransferredAtPointInTimeMember2022-01-012022-06-300001559865us-gaap:TransferredOverTimeMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2022-01-012022-06-300001559865us-gaap:TransferredOverTimeMemberevtc:PaymentServicesLatinAmericaMember2022-01-012022-06-300001559865us-gaap:TransferredOverTimeMemberevtc:MerchantAcquiringNetMember2022-01-012022-06-300001559865us-gaap:TransferredOverTimeMemberevtc:BusinessSolutionsMember2022-01-012022-06-300001559865us-gaap:TransferredOverTimeMember2022-01-012022-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2021-01-012021-06-300001559865evtc:PaymentServicesLatinAmericaMemberus-gaap:TransferredAtPointInTimeMember2021-01-012021-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:MerchantAcquiringNetMember2021-01-012021-06-300001559865us-gaap:TransferredAtPointInTimeMemberevtc:BusinessSolutionsMember2021-01-012021-06-300001559865us-gaap:TransferredAtPointInTimeMember2021-01-012021-06-300001559865us-gaap:TransferredOverTimeMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2021-01-012021-06-300001559865us-gaap:TransferredOverTimeMemberevtc:PaymentServicesLatinAmericaMember2021-01-012021-06-300001559865us-gaap:TransferredOverTimeMemberevtc:MerchantAcquiringNetMember2021-01-012021-06-300001559865us-gaap:TransferredOverTimeMemberevtc:BusinessSolutionsMember2021-01-012021-06-300001559865us-gaap:TransferredOverTimeMember2021-01-012021-06-300001559865evtc:PaymentServicesPuertoRicoCaribbeanMember2021-01-012021-06-300001559865evtc:PaymentServicesLatinAmericaMember2021-01-012021-06-300001559865evtc:MerchantAcquiringNetMember2021-01-012021-06-300001559865evtc:BusinessSolutionsMember2021-01-012021-06-3000015598652021-01-012021-12-3100015598652022-07-01evtc:ProfessionalServicesAllOtherContractsMembersrt:MinimumMember2022-06-300001559865srt:MaximumMember2022-07-01evtc:ProfessionalServicesAllOtherContractsMember2022-06-3000015598652022-02-152022-02-1500015598652022-04-212022-04-210001559865us-gaap:CustomerConcentrationRiskMemberevtc:PopularIncMemberus-gaap:SalesRevenueNetMember2022-04-012022-06-300001559865us-gaap:CustomerConcentrationRiskMemberevtc:PopularIncMemberus-gaap:SalesRevenueNetMember2021-04-012021-06-300001559865us-gaap:CustomerConcentrationRiskMemberevtc:PopularIncMemberus-gaap:SalesRevenueNetMember2022-01-012022-06-300001559865us-gaap:CustomerConcentrationRiskMemberevtc:PopularIncMemberus-gaap:SalesRevenueNetMember2021-01-012021-06-300001559865evtc:PopularIncMember2022-04-012022-06-300001559865evtc:PopularIncMember2021-01-012021-06-300001559865evtc:PopularIncMember2021-04-012021-06-300001559865evtc:PopularIncMember2022-01-012022-06-30evtc:segment0001559865us-gaap:OperatingSegmentsMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2022-04-012022-06-300001559865us-gaap:OperatingSegmentsMemberevtc:PaymentServicesLatinAmericaMember2022-04-012022-06-300001559865us-gaap:OperatingSegmentsMemberevtc:MerchantAcquiringNetMember2022-04-012022-06-300001559865us-gaap:OperatingSegmentsMemberevtc:BusinessSolutionsMember2022-04-012022-06-300001559865evtc:CorporateAndReconcilingItemsMember2022-04-012022-06-300001559865evtc:CorporateAndReconcilingItemsMemberevtc:PaymentProcessingMember2022-04-012022-06-300001559865evtc:SoftwareSaleAndDevelopmentsMemberevtc:CorporateAndReconcilingItemsMember2022-04-012022-06-300001559865evtc:TransactionProcessingAndMonitoringFeesMemberevtc:CorporateAndReconcilingItemsMember2022-04-012022-06-300001559865evtc:ConsorciodeTarjetasDominicanasS.A.Member2022-06-300001559865us-gaap:OperatingSegmentsMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2021-04-012021-06-300001559865us-gaap:OperatingSegmentsMemberevtc:PaymentServicesLatinAmericaMember2021-04-012021-06-300001559865us-gaap:OperatingSegmentsMemberevtc:MerchantAcquiringNetMember2021-04-012021-06-300001559865us-gaap:OperatingSegmentsMemberevtc:BusinessSolutionsMember2021-04-012021-06-300001559865evtc:CorporateAndReconcilingItemsMember2021-04-012021-06-300001559865evtc:CorporateAndReconcilingItemsMemberevtc:PaymentProcessingMember2021-04-012021-06-300001559865evtc:SoftwareSaleAndDevelopmentsMemberevtc:CorporateAndReconcilingItemsMember2021-04-012021-06-300001559865evtc:TransactionProcessingAndMonitoringFeesMemberevtc:CorporateAndReconcilingItemsMember2021-04-012021-06-300001559865evtc:ConsorciodeTarjetasDominicanasS.A.Member2021-06-300001559865us-gaap:OperatingSegmentsMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2022-01-012022-06-300001559865us-gaap:OperatingSegmentsMemberevtc:PaymentServicesLatinAmericaMember2022-01-012022-06-300001559865us-gaap:OperatingSegmentsMemberevtc:MerchantAcquiringNetMember2022-01-012022-06-300001559865us-gaap:OperatingSegmentsMemberevtc:BusinessSolutionsMember2022-01-012022-06-300001559865evtc:CorporateAndReconcilingItemsMember2022-01-012022-06-300001559865evtc:CorporateAndReconcilingItemsMemberevtc:PaymentProcessingMember2022-01-012022-06-300001559865evtc:SoftwareSaleAndDevelopmentsMemberevtc:CorporateAndReconcilingItemsMember2022-01-012022-06-300001559865evtc:TransactionProcessingAndMonitoringFeesMemberevtc:CorporateAndReconcilingItemsMember2022-01-012022-06-300001559865us-gaap:OperatingSegmentsMemberevtc:PaymentServicesPuertoRicoCaribbeanMember2021-01-012021-06-300001559865us-gaap:OperatingSegmentsMemberevtc:PaymentServicesLatinAmericaMember2021-01-012021-06-300001559865us-gaap:OperatingSegmentsMemberevtc:MerchantAcquiringNetMember2021-01-012021-06-300001559865us-gaap:OperatingSegmentsMemberevtc:BusinessSolutionsMember2021-01-012021-06-300001559865evtc:CorporateAndReconcilingItemsMember2021-01-012021-06-300001559865evtc:CorporateAndReconcilingItemsMemberevtc:PaymentProcessingMember2021-01-012021-06-300001559865evtc:SoftwareSaleAndDevelopmentsMemberevtc:CorporateAndReconcilingItemsMember2021-01-012021-06-300001559865evtc:TransactionProcessingAndMonitoringFeesMemberevtc:CorporateAndReconcilingItemsMember2021-01-012021-06-300001559865us-gaap:SubsequentEventMemberevtc:PopularIncMemberevtc:CollaborativeArrangementMerchantAcquiringIndependentSalesOrganizationAgreementMember2022-07-012022-07-010001559865us-gaap:SubsequentEventMemberevtc:PopularIncMemberevtc:CollaborativeArrangementATHNetworkParticipationAgreementMember2022-07-012022-07-010001559865us-gaap:SubsequentEventMemberevtc:PopularIncMemberevtc:CollaborativeArrangementMasterServicesAgreementMember2022-07-012022-07-010001559865us-gaap:SubsequentEventMemberevtc:BBRSpAAcquisitionMember2022-07-010001559865us-gaap:SubsequentEventMemberevtc:BBRSpAAcquisitionMember2022-07-012022-07-01iso4217:CLP0001559865us-gaap:SubsequentEventMember2022-07-282022-07-28

Table of Contents

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, 2022 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 ☐

Table of Contents

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 29, 2022, there were 66,778,164 outstanding shares of common stock of EVERTEC, Inc.

Table of Contents

TABLE OF CONTENTS


		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of Ju ne 3 0 , 2022 and December 31, 2021	1
	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended Ju ne 3 0 , 2022 and 2021	2
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended Ju ne 3 0 , 2022 and 2021	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended Ju ne 3 0 , 2022 and 2021	5
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39
Part II. OTHER INFORMATION		40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity in Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	41
Item 6.	Exhibits	42
SIGNATURES		43

Table of Contents

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 differ materially from those in the forward-looking statements as a result of various factors. Among the 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 second amended and restated 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 grant to Popular with respect to pricing or other key terms arising out of any disputes or 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 macroeconomic, market, international, legal, tax, political, or administrative conditions, including inflation or the risk of recession;

•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 the impact of rising interest rates, restrictions contained in our debt agreements, including the secured credit facilities, as well as debt that could be incurred in the future;

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

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

Table of Contents

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

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

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 factors, including those set forth under “Part 1, Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2022, as updated by Part II, Item 1A. “Risk Factors” in this Report, and 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 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 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 at no charge upon request and make electronic copies of our reports available for download through our website at www.evertecinc.com as soon as reasonably practicable after filing such material with the SEC.

Table of Contents

EVERTEC, Inc. Unaudited Condensed Consolidated Balance Sheets

(In thousands, except for share information)


	June 30, 2022		December 31, 2021
Assets
Current Assets:
Cash and cash equivalents	$	288,064	$	266,351
Restricted cash	22,576		19,566
Accounts receivable, net	107,685		113,285
Prepaid expenses and other assets	46,307		37,148
Assets held-for-sale	25,161		—
Total current assets	489,793		436,350
Debt securities available-for-sale, at fair value	2,397		3,041
Investment in equity investee	15,120		12,054
Property and equipment, net	48,122		48,533

Operating lease right-of-use asset	19,330		21,229
Goodwill	385,536		393,318
Other intangible assets, net	189,604		213,288
Deferred tax asset	7,057		6,910
Net investment in leases	—		107
Other long-term assets	12,382		9,926
Total assets	$	1,169,341	$	1,144,756
Liabilities and stockholders’ equity
Current Liabilities:
Accrued liabilities	$	79,039	$	74,540
Accounts payable	34,439		28,484
Contract liability	21,403		17,398
Income tax payable	3,011		7,132
Current portion of long-term debt	22,500		19,750


Current portion of operating lease liability	5,921		5,580
Total current liabilities	166,313		152,884
Long-term debt	432,723		444,785
Deferred tax liability	2,142		2,369
Contract liability - long term	32,743		36,258
Operating lease liability - long-term	14,940		16,456
Derivative liability	—		13,392
Other long-term liabilities	7,879		8,344
Total liabilities	656,740		674,488
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; 71,367,324 shares issued and outstanding as of June 30, 2022 (December 31, 2021 - 71,969,856)	713		719
Additional paid-in capital	1,671		7,565
Accumulated earnings	545,814		506,051
Accumulated other comprehensive loss, net of tax	(39,452)		(48,123)
Total EVERTEC, Inc. stockholders’ equity	508,746		466,212
Non-controlling interest	3,855		4,056
Total equity	512,601		470,268
Total liabilities and equity	$	1,169,341	$	1,144,756

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

Table of Contents

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,
	2022		2021		2022		2021

Revenues (affiliates Note 15)	$	160,571	$	149,148	$	310,819	$	288,676





Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	74,313		59,381		138,972		119,185
Selling, general and administrative expenses	20,051		16,752		40,435		32,854
Depreciation and amortization	19,560		18,723		38,720		37,346
Total operating costs and expenses	113,924		94,856		218,127		189,385
Income from operations	46,647		54,292		92,692		99,291
Non-operating income (expenses)
Interest income	805		450		1,472		839
Interest expense	(5,932)		(5,658)		(11,479)		(11,564)
Earnings of equity method investment	862		394		1,432		896
Other (expenses) income	(1,138)		2,245		2,168		2,573
Total non-operating expenses	(5,403)		(2,569)		(6,407)		(7,256)
Income before income taxes	41,244		51,723		86,285		92,035
Income tax expense	7,688		2,632		13,863		7,340
Net income	33,556		49,091		72,422		84,695
Less: Net loss attributable to non-controlling interest	(33)		(106)		(65)		(5)
Net income attributable to EVERTEC, Inc.’s common stockholders	33,589		49,197		72,487		84,700
Other comprehensive income (loss), net of tax of $(18), $11, $405 and $435
Foreign currency translation adjustments	(6,549)		1,732		(4,335)		(881)
Gain on cash flow hedges	3,337		1,088		13,062		5,277
Unrealized (loss) gain on change in fair value of debt securities available-for-sale	$	(29)	$	89	$	(56)	$	89
Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders	$	30,348	$	52,106	$	81,158	$	89,185
Net income per common share - basic attributable to EVERTEC, Inc.’s common stockholders	$	0.47	$	0.68	$	1.01	$	1.17
Net income per common share - diluted attributable to EVERTEC, Inc.’s common stockholders	$	0.47	$	0.68	$	1.00	$	1.16

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

Table of Contents

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, 2021	71,969,856	$	719	$	7,565	$	506,051	$	(48,123)	$	4,056	$	470,268
Share-based compensation recognized	—	—		4,279		—		—		—		4,279
Repurchase of common stock	(521,643)	(5)		(6,193)		(14,981)		—		—		(21,179)
Restricted stock units delivered	251,085	3		(5,651)		—		—		—		(5,648)
Net income	—	—		—		38,898		—		(32)		38,866
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,598)		—		—		(3,598)
Other comprehensive income	—	—		—		—		11,912		248		12,160

Balance at March 31, 2022	71,699,298	$	717	$	—	$	526,370	$	(36,211)	$	4,272	$	495,148
Share-based compensation recognized	—	—		5,165		—		—		—		5,165
Repurchase of common stock	(357,114)	(4)		(3,466)		(10,566)		—		—		(14,036)
Restricted stock units delivered	25,149	—		(28)		—		—		—		(28)
Net income (loss)	—	—		—		33,589		—		(33)		33,556
Cash dividends declared on common stock, $0.05 per share	—	—		—		(3,579)		—		—		(3,579)
Other comprehensive income (loss)	—	—		—		—		(3,241)		(384)		(3,625)

Balance at June 30, 2022	71,367,333	713		1,671		545,814		(39,452)		3,855		512,601

Table of Contents


	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

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

Table of Contents

EVERTEC, Inc. Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

Table of Contents


	Six months ended June 30,
	2022		2021
Cash flows from operating activities
Net income	$	72,422	$	84,695
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	38,720		37,346
Amortization of debt issue costs and accretion of discount	805		991
Operating lease amortization	3,056		2,938
Provision for expected credit losses and sundry losses	1,795		85
Deferred tax benefit	(1,210)		(947)
Share-based compensation	9,444		7,235

Gain from sale of assets	—		(778)
Loss on disposition of property and equipment and impairment of software	4,370		1,106
Earnings of equity method investment	(1,432)		(896)
Dividend received from equity method investment	—		1,183
Loss on valuation of foreign currency	1,046		—
(Increase) decrease in assets:
Accounts receivable, net	2,759		(48)
Prepaid expenses and other assets	(1,972)		1,407
Other long-term assets	(3,965)		(14)
Increase (decrease) in liabilities:
Accrued liabilities and accounts payable	7,397		(10,899)
Income tax payable	(3,862)		(3,398)

Unearned income	1,025		(1,664)
Operating lease liabilities	(1,605)		(3,438)
Other long-term liabilities	1,109		(2,875)
Total adjustments	57,480		27,334
Net cash provided by operating activities	129,902		112,029
Cash flows from investing activities


Additions to software	(18,918)		(21,317)
Acquisition of customer relationships	(10,607)		(14,750)

Property and equipment acquired	(10,051)		(8,803)
Proceeds from sales of property and equipment	76		802
Purchase of certificates of deposit	(7,264)		—
Proceeds from maturities of available-for-sale debt securities	572		—
Acquisition of available-for-sale debt securities	—		(2,968)
Net cash used in investing activities	(46,192)		(47,036)
Cash flows from financing activities
Statutory withholding taxes paid on share-based compensation	(5,676)		(8,793)


Repayment of short-term borrowings for purchase of equipment and software	(853)		(1,556)
Dividends paid	(7,177)		(7,213)

Repurchase of common stock	(35,215)		(24,388)
Repayment of long-term debt	(9,875)		(24,919)
Net cash used in financing activities	(58,796)		(66,869)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash	(191)		73
Net increase (decrease) in cash, cash equivalents and restricted cash	24,723		(1,803)
Cash, cash equivalents and restricted cash at beginning of the period	285,917		221,105
Cash, cash equivalents and restricted cash at end of the period	$	310,640	$	219,302
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	288,064	$	199,891
Restricted cash	22,576		19,411
Cash, cash equivalents and restricted cash	$	310,640	$	219,302
Supplemental disclosure of cash flow information:
Cash paid for interest	$	6,034	$	10,940
Cash paid for income taxes	12,868		7,835




Supplemental disclosure of non-cash activities:

Payable due to vendor related to equipment and software acquired	$	—	$	721

Table of Contents

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

Table of Contents

Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

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 Latin America and the Caribbean. The Company is based in Puerto Rico and provides a broad range of merchant acquiring, payment processing 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 and automated teller machine ("ATM") networks in the Caribbean and Latin America. In addition, EVERTEC provides a comprehensive suite of services for core bank processing and cash processing in Puerto Rico and technology outsourcing in 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.

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, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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 – Held-for-Sale

On February 24, 2022, the Company entered into a definitive agreement with Banco Popular de Puerto Rico and its parent, Popular, to sell software and prepaid assets and transfer certain employees in connection with those assets (the "Disposal group"). As consideration for the sale of the Disposal Group, Popular will deliver 4.6 million shares of Evertec stock held by Popular (the "Popular Transaction"). The Popular Transaction closed on July 1, 2022, refer to Note 17, Subsequent Events of the unaudited condensed consolidated financial statements for further details.

Accounting Policy

An asset or a disposal group is classified as held for sale in the period in which the following criteria are met: (a) management commits to a plan to sell; (b) the asset or disposal group is available for sale in its present condition; (c) an active program to locate a buyer and other actions to complete the plan to sell have been initiated; (d) the sale of the asset or disposal group is probable within one year; (e) the asset or disposal group is being be actively marketed; and (f) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn.

A disposal group is a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. The group includes goodwill acquired in a business combination if the group is a cash-generating unit to which goodwill has been allocated, or if it is an operation within such a cash-generating unit.

Assets and disposal groups classified as held for sale are measured at the lower of carrying amount or fair value less costs to sell. Any excess of the carrying amount over the fair value less costs to sell is recognized as an impairment loss. Depreciation of assets that have been classified as held for sale is discontinued upon classification.

Given that the Disposal Group pertains to the Business Solutions segment and that the Company concluded that it constitutes a business, goodwill from this segment was allocated to the Popular Transaction and is reflected as part of the Held-for-Sale balance.

Table of Contents

The following table details the carrying amount of the major classes of assets classified as held-for-sale as of June 30, 2022:


	June 30, 2022
(In thousands)

Prepaid expenses and other assets	$	513
Other intangible assets, net	18,835
Goodwill	5,813
Assets held-for-sale	$	25,161

Note 3 – Debt Securities

The amortized cost, gross unrealized gains and losses recorded in OCI and estimated fair value of debt securities available-for-sale by contractual maturity as of June 30, 2022 and December 31, 2021 were as follows:


	June 30, 2022
(In thousands)			Gross unrealized
	Amortized cost		Gains	Losses	Fair Value
Costa Rica Government Obligations
After 1 to 5 years	$	2,426	—	(29)	$	2,397


	December 31, 2021
(In thousands)			Gross unrealized
	Amortized cost		Gains		Losses		Fair Value
Costa Rica Government Obligations
After 1 to 5 years	$	2,963	$	78	$	—	$	3,041

Debt securities 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.

No debt securities were sold during the six months ended June 30, 2022. Debt securities amounting to $0.6 million matured during the six months ended June 30, 2022. A provision for credit losses was not required for the periods 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, 2022		December 31, 2021
Buildings	30	$	1,269	$	1,359
Data processing equipment	3 - 5	146,811		141,359
Furniture and equipment	3 - 20	8,234		7,718
Leasehold improvements	5 -10	3,259		3,277
		159,573		153,713
Less - accumulated depreciation and amortization		(112,558)		(106,365)
Depreciable assets, net		47,015		47,348
Land		1,107		1,185
Property and equipment, net		$	48,122	$	48,533

Depreciation and amortization expense related to property and equipment for three and six months ended June 30, 2022 amounted to $4.6 million and $9.3 million, respectively, compared to $4.4 million and $8.8 million for the corresponding periods in 2021.

Table of Contents

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, 2021	$	160,972	$	48,402	$	138,121	$	45,823	$	393,318


Foreign currency translation adjustments	—		(1,969)		—		—		(1,969)
Goodwill reclassified to held-for-sale	—		—		—		(5,813)		(5,813)
Balance at June 30, 2022	$	160,972	$	46,433	$	138,121	$	40,010	$	385,536

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 a qualitative analysis, the Company assesses whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount. In the quantitative analysis, the Company compares the estimated fair value of the reporting units to their carrying values, including goodwill. No impairment losses were recognized for the periods ended June 30, 2022 or 2021.

As of June 30, 2022, Goodwill of $5.8 million is classified as held-for-sale as the Company entered into a commitment to sell certain assets and transfer certain employees under the Popular Transaction, this commitment constitutes the sale of a business under ASC 805, refer to Note 2 – Held-for-Sale for further details.

The carrying amount of other intangible assets at June 30, 2022 and December 31, 2021 was as follows:


		June 30, 2022
(In thousands)	Useful life in years	Gross amount		Accumulated amortization		Assets reclassified to Held-for-Sale		Net carrying amount
Customer relationships	5 - 14	$	368,223	$	(286,562)	$	—	$	81,661
Trademarks	2 - 15	41,834		(37,281)		—		$	4,553
Software packages	3 - 10	340,651		(230,677)		(18,835)		$	91,139
Non-compete agreement	15	56,539		(44,288)		—		$	12,251
Other intangible assets, net		$	807,247	$	(598,808)	$	(18,835)	$	189,604


		December 31, 2021
(Dollar amounts in thousands)	Useful life in years	Gross amount		Accumulated amortization		Net carrying amount
Customer relationships	5 - 14	$	357,991	$	(272,732)	$	85,259
Trademarks	2 - 15	41,901		(36,684)		5,217
Software packages	3 - 10	326,320		(217,643)		108,677
Non-compete agreement	15	56,539		(42,404)		14,135
Other intangible assets, net		$	782,751	$	(569,463)	$	213,288

During the quarter ended June 30, 2022, the Company acquired a customer relationship in Puerto Rico amounting to $10.6 million that will be amortized over five years. Revenues and expenses in connection with this customer relationship are included as part of the Payment Services - Puerto Rico & Caribbean segment.

Amortization expense related to other intangibles for the three and six months ended June 30, 2022 amounted to $14.8 million and $29.3 million, respectively, compared to $14.3 million and $28.5 million for the corresponding periods in 2021, respectively. During the six months ended June 30, 2022, the Company recorded an impairment loss through cost of revenues of $4.1 million for a multi-year software development for which cash flows used in the internal model will be impacted due to a

Table of Contents

decrease in the forecasted revenues to be generated by the software. During the six months 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. Both impairment charges affected the Company’s Payment Services – Puerto Rico & Caribbean segment.

At June 30, 2022, Software amounting to $18.8 million is classified as to held-for-sale as part of the Popular Transaction, refer to Note 2 – Held-for-Sale for further details.

The estimated amortization expense of the other intangible balances outstanding at June 30, 2022 for the next five years is as follows:


(Dollar amounts in thousands)
Remaining 2022	$	28,868
2023	53,340
2024	42,181
2025	15,494
2026	8,467

Note 6 – Debt and Short-Term Borrowings

Total debt at June 30, 2022 and December 31, 2021 follows:


(In thousands)	June 30, 2022		December 31, 2021
2023 Term A Loan bearing interest at a variable interest rate (LIBOR plus applicable margin(1)(2))	$	162,830	$	170,875
2024 Term B Loan bearing interest at a variable interest rate (LIBOR plus applicable margin(1)(3))	292,393		293,660

Note payable due January 1, 2022(1)	—		758
Total debt	$	455,223	$	465,293

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

(2)Applicable margin of 1.75% at June 30, 2022 and December 31, 2021.

(3)Subject to a minimum rate ("LIBOR floor") of 0% plus applicable margin of 3.50% at June 30, 2022 and December 31, 2021.

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 leverage ratio is below 1.75x or the resulting amount of the excess cash flow multiplied by the applicable percentage is less than $10 million. On March 8, 2021, in connection with this mandatory repayment clause, the Company repaid $17.8 million, as a result of excess cash flow calculation performed for the year ended December 31, 2020. No mandatory repayment was required in 2022 in connection with the excess cash flow calculation performed for the year ended December 31, 2021 as the leverage ratio was below 1.75x.

The unpaid principal balance at June 30, 2022 of the 2023 Term A Loan and the 2024 Term B Loan was $163.4 million and $294.2 million, respectively. The additional borrowing capacity under our Revolving Facility at June 30, 2022 was $119.1 million. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

Table of Contents

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, which were fully repaid in January 2022. As of December 31, 2021, the outstanding principal balance of the notes payable was $0.8 million. These notes were included in accounts payable in the Company's unaudited condensed consolidated balance sheets.

Interest Rate Swap

As of June 30, 2022, 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, 2022 and December 31, 2021, the carrying amount of the derivative included on the Company's unaudited condensed consolidated balance sheets was an asset of $0.8 million, recorded in other long term assets and $13.4 million in liabilities, 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, 2022, the Company reclassified losses of $1.4 million and $3.1 million, respectively, from accumulated other comprehensive loss into interest expense compared to $1.8 million and $3.5 million for the corresponding periods in 2021. Based on current LIBOR rates, the Company expects to reclassify gains of $0.8 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 classified as a Level 2 asset within the fair value hierarchy. The fair value of debt securities was $2.4 million and $3.0 million as of June 30, 2022 and December 31, 2021 respectively.

Derivative 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 an asset position with a balance of $0.8 million as of June 30, 2022 and in a liability position with a balance of $13.4 million as of December 31, 2021.

The following table presents the carrying value, as applicable, and estimated fair value for financial instruments at June 30, 2022 and December 31, 2021:

Table of Contents


	June 30, 2022		December 31, 2021
(In thousands)	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Financial assets:
Costa Rica government obligations	2,397	2,397	3,041	3,041
Interest rate swap	766	766	—	—
Certificates of deposits	7,264	7,264	—	—
Financial liabilities:
2023 Term A Loan	162,830	162,139	170,875	168,610
2024 Term B Loan	292,393	288,612	293,660	294,735
Interest rate swap	—	—	13,392	13,392

The fair values of the term loans at June 30, 2022 and December 31, 2021 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 accounted for at fair value in the balance sheets. The certificates of deposits were purchased on the last day of the quarter.

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, 2022:


(In thousands)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Unrealized Gains (losses) on Debt Securities AFS		Total
Balance - December 31, 2021, net of tax	$	(35,971)	$	(12,261)	109		(48,123)
Other comprehensive income (loss) before reclassifications	(4,335)		10,000		(56)		5,609
Effective portion reclassified to net income	—		3,062		—		3,062
Balance - June 30, 2022, net of tax	$	(40,306)	$	801	$	53	$	(39,452)

Note 9 – Share-based Compensation

Long-term Incentive Plan ("LTIP")

During the three months ended March 31, 2020, 2021 and 2022, 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 2020 LTIP, 2021 LTIP and 2022 LTIP, respectively, all under the terms of the Company's 2013 Equity Incentive Plan. On May 20, 2022, the Company's shareholders approved the 2022 Equity Incentive Plan which replaces the 2013 Equity Incentive Plan, all RSUs outstanding on this date and any unissued shares under the 2013 Equity Incentive Plan were transferred to the 2022 Equity Incentive Plan. Under the LTIPs, the Company granted RSUs to eligible participants as time-based awards and/or performance-based awards.

On May 20, 2022 (the “Effective Date”), the Company's shareholders approved the 2022 Equity Incentive Plan which replaced the 2013 Equity Incentive Plan. All shares remaining available for grant under the 2013 Plan as of the Effective Date plus any shares covered by outstanding awards under the 2013 Plan as of the Effective Date that again become available for grant pursuant to the terms of the 2022 Plan as of the Effective Date, to the extent the shares underlying such awards are not issued because they are forfeited or settled or terminate without distribution of shares of common stock of the Company became available for issuance under the 2022 Plan on the Effective Date pursuant to the terms of the 2022 Plan.

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

Table of Contents

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 27 of each year for the 2020 LTIP, March 2 of each year for the 2021 LTIP, and February 25 of each year for the 2022 LTIP. In 2022, the Company also granted time-based awards with a three year service vesting period which will vest on February 25, 2025.

For the performance-based awards under the 2020 LTIP, 2021 LTIP, and 2022 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 27, 2023 for the 2020 LTIP, March 2, 2024 for the 2021 LTIP, and February 25, 2025 for the 2022 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, 2022:


Nonvested RSUs	Shares	Weighted-average grant date fair value
Nonvested at December 31, 2021	1,086,329	$	34.73
Granted	686,927	42.06
Vested	(421,015)	33.02
Forfeited	(3,986)	36.31
Nonvested at June 30, 2022	1,348,255	$	38.99

For the three and six months ended June 30, 2022, the Company recognized $5.1 million and $9.4 million of share-based compensation expense, respectively, compared with $3.9 million and $7.2 million for the corresponding periods in 2021.

As of June 30, 2022, the maximum unrecognized cost for RSUs was $36.5 million. The cost is expected to be recognized over a weighted average period of 2.2 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, 2022
(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	$	101	$	418	$	—	$	2,281	$	2,800
Products and services transferred over time	30,159		26,664		38,540		62,408		157,771
	$	30,260	$	27,082	$	38,540	$	64,689	$	160,571

Table of Contents


	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



	Six months ended June 30, 2022
(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	$	155	$	432	$	—	$	4,166	$	4,753
Products and services transferred over time	56,589		52,161		74,168		123,148		306,066
	$	56,744	$	52,593	$	74,168	$	127,314	$	310,819



	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

Contract Balances

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


(In thousands)	June 30, 2022		December 31, 2021
Balance at beginning of period	$	1,715	$	2,796
Services transferred to customers	5,077		5,374
Transfers to accounts receivable	(2,161)		(6,455)
Balance at end of period	$	4,631	$	1,715

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 as of June 30, 2022 amounted to $107.7 million. Contract liability and contract liability - long term at June 30, 2022 amounted to $21.4 million and $32.7 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

Table of Contents

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, 2022, the Company recognized revenue of $5.0 million and $12.1 million respectively that was included in the contract liability at December 31, 2021. During the three and six months ended June 30, 2021, the Company recognized revenue of $7.1 million and $15.4 million that was included in the contract liability at December 31, 2020.

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, 2022 is $233.1 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, 2022		December 31, 2021
Balance at beginning of period	$	2,523	$	2,401
Current period provision for expected credit losses	316		819
Write-offs	(135)		(698)
Recoveries of amounts previously written-off	1		1
Balance at end of period	$	2,705	$	2,523

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.

Table of Contents

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, 2022 and 2021, respectively, consisted of the following:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2022		2021		2022		2021

Current tax provision	$	8,196	$	2,689	$	15,073	$	8,287
Deferred tax benefit	(508)		(57)		(1,210)		(947)
Income tax expense	$	7,688	$	2,632	$	13,863	$	7,340

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, 2022 and 2021, and its segregation based on location of operations:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2022		2021		2022		2021

Current tax provision (benefit)
Puerto Rico	$	3,176	$	(569)	$	5,491	$	1,035
United States	33		45		63		75
Foreign countries	4,987		3,213		9,519		7,177
Total current tax provision	$	8,196	$	2,689	$	15,073	$	8,287
Deferred tax (benefit) provision
Puerto Rico	$	(647)	$	(226)	$	(1,040)	$	(520)
United States	26		242		(45)		(187)
Foreign countries	113		(73)		(125)		(240)
Total deferred tax benefit	$	(508)	$	(57)	$	(1,210)	$	(947)

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, 2022, the Company has $113.5 million of unremitted earnings from foreign subsidiaries, compared to $99.1 million as of December 31, 2021. 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, 2022, the gross deferred tax asset amounted to $19.8 million and the gross deferred tax liability amounted to $13.5 million, compared to $22.3 million and $16.3 million, respectively, as of December 31, 2021. As of June 30, 2022, and December 31, 2021, there is a valuation allowance against the gross deferred tax asset of approximately $1.3 million and $1.4 million, respectively.

The Company estimates that it is reasonably possible that the Puerto Rico liability for uncertain tax positions relating to the net operating loss created by transaction costs from mergers and acquisitions will decrease by approximately $3.6 million during 2022 as a result of the statute of limitations.

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:

Table of Contents


	Six months ended June 30,
(In thousands)	2022		2021
Computed income tax at statutory rates	$	32,357	$	34,513
Differences in tax rates due to multiple jurisdictions	1,155		960
Effect of income subject to tax-exemption grant	(20,440)		(23,863)
Unrecognized tax (benefit) expense	122		(3,580)
Excess tax benefits on share-based compensation	(21)		(976)
Other, net	690		286
Income tax expense	$	13,863	$	7,340

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)	2022		2021		2022		2021
Net income available to EVERTEC, Inc.’s common shareholders	$	33,589	$	49,197	$	72,487	$	84,700
Weighted average common shares outstanding	71,476,850		72,127,847		71,714,876		72,139,125
Weighted average potential dilutive common shares (1)	673,099		703,519		843,689		577,825
Weighted average common shares outstanding - assuming dilution	72,149,949		72,831,366		72,558,565		72,716,950
Net income per common share - basic	$	0.47	$	0.68	$	1.01	$	1.17
Net income per common share - diluted	$	0.47	$	0.68	$	1.00	$	1.16

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

On February 15, 2022 and April 21, 2022, the Company's Board declared quarterly cash dividends of $0.05 per share of common stock, which was paid on March 25, 2022 and June 3, 2022, to stockholders' of record on February 25, 2022 and May 2, 2022.

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, 2022 and 2021:

Table of Contents


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2022		2021		2022		2021
Total revenues (1)(2)	$	65,825	$	61,884	$	130,553	$	122,253
Cost of revenues	$	418	$	569	$	1,733	$	1,618
Operating lease cost and other fees	$	1,765	$	1,609	$	3,626	$	3,524
Interest earned from affiliate
Interest income	$	440	$	130	$	780	$	238

(1)Popular revenues as a percentage of total revenues were 41%, 42%, 42% and 42%, 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, $0.2 million, and $0.1 million, respectively, for each of the periods presented above.

As of June 30, 2022 and December 31, 2021, EVERTEC had the following balances arising from transactions with related parties:


(In thousands)	June 30, 2022		December 31, 2021
Cash and restricted cash deposits in affiliated bank	$	107,977	$	187,602
Other due to/from affiliate
Accounts receivable	$	35,985	$	38,120
Prepaid expenses and other assets	$	1,790	$	1,763
Operating lease right-of-use assets	$	11,856	$	13,533
Other long-term assets	$	3,054	$	2,853
Accounts payable	$	2,664	$	5,601
Contract liabilities	$	41,709	$	40,982
Operating lease liabilities	$	12,359	$	14,019

Note 16 – Segment Information

The Company operates in four business segments: Payment Services - Puerto Rico & Caribbean, Payment Services - Latin America, 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 and digital payment services to the government of Puerto Rico), ATH Movil (person-to-person) and ATH Business (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.

Table of Contents

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.), server capacity usage 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:

Table of Contents


	Three months ended June 30, 2022
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	46,078	$	30,784	$	38,539	$	64,690	$	(19,520)	$	160,571
Operating costs and expenses	$	28,680	$	25,032	$	22,823	$	40,297	$	(2,908)	$	113,924
Depreciation and amortization	$	5,466	$	2,712	$	1,040	$	4,279	$	6,063	$	19,560
Non-operating income (expenses)	$	309	$	123	$	332	$	624	$	(1,664)	$	(276)
EBITDA	23,173		8,587		17,088		29,296		(12,213)		65,931
Compensation and benefits (2)	675		973		446		555		2,756		$	5,405
Transaction, refinancing and other fees (3)	—		—		—		(16)		2,055		$	2,039
Adjusted EBITDA	$	23,848	$	9,560	$	17,534	$	29,835	$	(7,402)	$	73,375

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $13.3 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring, intercompany software developments and transaction processing of $3.7 million from Payment Services- Latin America to both Payment Services- Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $2.5 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, and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A.


	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 and 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 and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A, net dividends received, a software impairment charge and a gain from sale of assets.

Table of Contents


	Six months ended June 30, 2022
(In thousands)	Payment Services - Puerto Rico & Caribbean		Payment Services - Latin America		Merchant Acquiring, net		Business Solutions		Corporate and Other (1)		Total

Revenues	$	86,086	$	59,567	$	74,168	$	127,314	$	(36,316)	$	310,819
Operating costs and expenses	49,960		48,619		43,027		79,225		(2,704)		218,127
Depreciation and amortization	9,946		5,524		2,059		9,042		12,149		38,720
Non-operating income (expenses)	544		3,729		632		1,324		(2,629)		3,600
EBITDA	46,616		20,201		33,832		58,455		(24,092)		135,012
Compensation and benefits (2)	1,012		1,786		786		1,000		5,100		9,684
Transaction, refinancing and other fees (3)	—		—		—		(16)		4,080		4,064
Adjusted EBITDA	$	47,628	$	21,987	$	34,618	$	59,439	$	(14,912)	$	148,760

(1)Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment revenue eliminations predominantly reflect the $24.2 million processing fee from Payments Services - Puerto Rico & Caribbean to Merchant Acquiring and intercompany software developments and transaction processing of $7.0 million from Payment Services - Latin America to both Payment Services - Puerto Rico & Caribbean and Business Solutions, and transaction processing and monitoring fees of $5.1 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.


	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 and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A. net dividends received, a software impairment charge and a gain from the sale of the asset.

Table of Contents

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


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2022		2021		2022		2021
Total EBITDA	$	65,931	$	75,654	$	135,012	$	140,106
Less:
Income tax expense	7,688		2,632		13,863		7,340
Interest expense, net	5,127		5,208		10,007		10,725
Depreciation and amortization	19,560		18,723		38,720		37,346
Net income	$	33,556	$	49,091	$	72,422	$	84,695

Note 17 – Subsequent Events

On July 1, 2022, the Company closed the previously announced Popular Transaction. On this date, the Company received approximately 4.6 million shares of its own common stock as consideration for the transaction. Additionally, on the same date, the previously agreed upon modification and extension of the main commercial agreements with Popular, including a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement, a 5-year extension of the ATH Network Participation Agreement and a 3-year extension of the MSA, went into effect.

On July 1, 2022, EVERTEC Group also completed the acquisition of 100% of the outstanding shares of BBR, SpA for an aggregate purchase price of CLP 48,600 million, approximately USD$53 million. Based in Santiago, Chile, BBR SpA is a payment solutions and business technology company with operations in Chile and Peru. The completion of this acquisition expands the Company's geographic footprint in Chile and opens a new market for the Company in Peru.

On July 28, 2022, 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 2, 2022 to stockholders of record as of the close of business on August 8, 2022. 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.

Table of Contents

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) covers: (i) the results of operations for the three and six months ended months ended June 30, 2022 and 2021 and (ii) the financial condition as of June 30, 2022. 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, 2021, included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 25, 2022 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 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, Evertec Placetopay, SAS (formerly known as EGM Ingeniería sin Fronteras, S.A.S. ("PlacetoPay")) 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. We believe that we are one of the largest merchant acquirers in Latin America based on total number of transactions and the largest merchant acquirer in the Caribbean. 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 and automated teller machine ("ATM") networks in the Caribbean and 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 over 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 leverage proprietary IP that enables us to be nimble and flexible when it comes to client requirements;

•Our ability to put forth Spanish speaking developers in front of our Spanish speaking customers making communication much more effective and integrations more efficient;

•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).

Table of Contents

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 for 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 MSA. On February 24, 2022, we entered into an agreement to modify and extend the main commercial agreements with Popular, including a 10-year extension of the Merchant Acquiring Independent Sales Organization Agreement (the “ISO Agreement”), a 5-year extension of the ATH Network Participation Agreement and a 3-year extension of the MSA. The ISO Agreement, which sets our merchant acquiring relationship with Popular, will now include revenue sharing provisions with Popular. The MSA modifications include the elimination of the exclusivity requirement, the inclusion of annual MSA minimums through 2028, a 10% discount on certain MSA services in October 2025 and adjustments to the existing CPI pricing escalator clause. We also entered into an agreement to sell Popular certain assets in exchange for Popular owned Evertec stock ("Popular Transaction"). As part of this transaction, Popular has agreed to take certain actions after closing to ensure that Evertec is no longer deemed a “subsidiary” of Popular for purposes of the Bank Holding Company Act, including reducing Popular's voting interest in Evertec to 4.5% over a period of three months after the close of the transaction through either the sale of shares or conversion to non-voting preferred shares. The Popular Transaction closed on July 1, 2022, on which date the Company received approximately 4.6 million shares of its own common stock as consideration and the contract extensions and modifications became effective.

Results of Operations

Comparison of the three months ended June 30, 2022 and 2021


	Three months ended June 30,
In thousands	2022		2021		Variance

Revenues	$	160,571	$	149,148	$	11,423	8	%
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	74,313		59,381		14,932		25	%
Selling, general and administrative expenses	20,051		16,752		3,299		20	%
Depreciation and amortization	19,560		18,723		837		4	%
Total operating costs and expenses	113,924		94,856		19,068		20	%
Income from operations	$	46,647	$	54,292	$	(7,645)	(14)	%

Table of Contents

Revenues

Total revenues for the quarter ended June 30, 2022 were $160.6 million, an increase of 8% compared with $149.1 million in the prior year. Revenue in Puerto Rico benefited from increased payment transaction volumes in addition to continued growth in the Company's digital solutions, ATH Movil and ATH Business, as well as revenue generated from an acquisition completed at the beginning of the quarter. Revenue in the quarter also benefited from the printing contract entered into in June 2021, one-time software sales and the year over year CPI escalator on the MSA with Popular. Latin America revenue reflected organic growth.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2022 amounted to $74.3 million, an increase of $14.9 million or 25% when compared to the same period in the prior year. The increase in cost of revenues includes a $4.1 million impairment loss related to a multi-year software development recorded during the quarter, as well as an increase in personnel costs, mainly due to increased headcount in Latin America, an increase in professional fees, higher equipment expenses for cloud services as utilization continues to grow and an increase in provisions for expected losses.

Selling, General and Administrative

Selling, general and administrative expenses for the three months ended June 30, 2022 amounted to $20.1 million, an increase of $3.3 million or 20% when compared to the same period in the prior year driven by an increase in professional fees related to corporate transactions and increased personnel costs.

Depreciation and Amortization

Depreciation and amortization expense for the three months ended June 30, 2022 amounted to $19.6 million, an increase of $0.8 million or 4% when compared to the same period in the prior year. Increased expense during the three months is driven by the amortization of customer relationships mainly resulting from the acquisition completed in the quarter.

Non-Operating Expenses


	Three months ended June 30,
In thousands	2022		2021		Variance

Interest income	$	805	$	450	$	355	79	%
Interest expense	(5,932)		(5,658)		(274)		(5)	%
Earnings of equity method investment	862		394		468		119	%
Other (expenses) income	(1,138)		2,245		(3,383)		(151)	%
Total non-operating expenses	$	(5,403)	$	(2,569)	$	(2,834)	(110)	%

Non-operating expenses for the three months ended June 30, 2022 amounted to $5.4 million, an increase of $2.8 million when compared to the same period in the prior year. Other (expenses) income amounted to an expense of $1.1 million compared with income of $2.2 million in the prior year comparable quarter as the current year includes a loss from the remeasurement of assets and liabilities denominated in US dollars while the prior year includes a gain. This negative impact was partially offset by a $0.5 million increase in earnings from equity method investments.

Income Tax Expense


	Three months ended June 30,
In thousands	2022		2021		Variance
Income tax expense	$	7,688	$	2,632	$	5,056	192	%

Income tax expense for the three months ended June 30, 2022 amounted to $7.7 million, an increase of $5.1 million when compared to the same period in the prior year. The effective tax rate for the period was 18.6%, compared with 5.1% in the 2021 period. The increase in the effective tax rate primarily reflects the impact of higher revenues in higher taxed jurisdictions, shift in the mix of business in Puerto Rico and higher withholding taxes, while the prior year reflected the impact from the reversal of a potential liability for uncertain tax positions as a result of the expiration of the statute of limitation.

Table of Contents

Comparison of the six months ended June 30, 2022 and 2021


	Six months ended June 30,
In thousands	2022		2021		Variance

Revenues	$	310,819	$	288,676	$	22,143	8	%
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization	138,972		119,185		19,787		17	%
Selling, general and administrative expenses	40,435		32,854		7,581		23	%
Depreciation and amortization	38,720		37,346		1,374		4	%
Total operating costs and expenses	218,127		189,385		28,742		15	%
Income from operations	$	92,692	$	99,291	$	(6,599)	(7)	%

Revenues

Total revenues for the six months ended June 30, 2022 were $310.8 million, an increase of 8% compared with $288.7 million in the prior year reflecting increases across all of the Company's segments. The increase is primarily driven by the same factors explained above for the quarter.

Cost of Revenues

Cost of revenues for the six months ended June 30, 2022 amounted to $139.0 million, an increase of $19.8 million or 17% when compared to the same period in the prior year. The increase is primarily driven by the same factors explained above for the quarter.

Selling, General and Administrative

Selling, general and administrative expenses for the six months ended June 30, 2022 amounted to $40.4 million, an increase by $7.6 million or 23% when compared to the same period in the prior year. The increase is driven by the same factors explained above for the quarter.

Depreciation and Amortization

Depreciation and amortization expense for the six months ended June 30, 2022 amounted to $38.7 million, an increase of $1.4 million or 4% when compared to the same period in the prior year. Increased expense during the period is driven by an increase in the amortization of customer relationships, primarily due to the aforementioned acquisition in the second quarter of 2022 and the expansion of the FirstBank relationship in the prior year, as well as increased software amortization as a result of key projects that went into production in the prior years.

Table of Contents

Non-Operating Expenses


	Six months ended June 30,
In thousands	2022		2021		Variance

Interest income	$	1,472	$	839	$	633	75	%
Interest expense	(11,479)		(11,564)		85		1	%
Earnings of equity method investment	1,432		896		536		60	%
Other income (expenses)	2,168		2,573		(405)		(16)	%
Total non-operating expenses	$	(6,407)	$	(7,256)	$	849	12	%

Non-operating expenses for the six months ended June 30, 2022 decreased by $0.8 million to $6.4 million when compared to the same period in the prior year. The decrease is mainly related to a $0.6 million increase in interest income coupled with a $0.5 million increase in earnings from the Company's equity method investment.

Income Tax Expense


	Six months ended June 30,
In thousands	2022		2021		Variance
Income tax expense	$	13,863	$	7,340	$	6,523	89	%

Income tax expense for the six months ended June 30, 2022 amounted to $13.9 million, an increase of $6.5 million when compared to the same period in the prior year. The effective tax rate for the period was 16.1%, compared with 8.0% in the 2021 period. The increase in the effective tax rate is driven by the same factors explained above for the quarter.

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, which, together with the ongoing shift from cash and paper methods of payment to electronic payments will continue to generate growth opportunities for our business. For example, currently the adoption of banking products, including electronic payments, in the Latin America and Caribbean region 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 America regions. We also benefit from the outsourcing of technology systems and processes trend for financial institutions and government. 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.

As a result of the COVID-19 pandemic, consumer preference has accelerated its shift away from cash and paper payment methods, noting increased demand for omni-channel payment services that facilitate cashless and contactless transactions. The markets in which we operate, particularly Latin America and the Caribbean continue to grow and consumer preference is driving an increase for electronic payments usage. Latin America is one of the fastest-growing mobile markets globally, with a growing base of tech-savvy customers that demonstrate a preference for credit cards, digital wallets, contactless payments, and other value-added offerings. The region's FinTech sector is driving change via new contactless payment technology that are becoming popular alternatives to cash payments. We continue to believe that the attractive characteristics of our markets and our position across multiple services and sectors will continue to drive growth and profitability in our businesses.

On July 1, 2022, we closed the previously announced Popular Transaction, which includes extensions and amendments to the main commercial agreements with Banco Popular. The extension of the ISO Agreement includes a revenue sharing provision which will be treated as an expense and will result in a decline to the Merchant Acquiring Segment results. The extension of the MSA includes a reduction in the CPI cap from 5% to 1.5%, as well as a retroactive credit for the 5% CPI price increase applied to certain services since October 1, 2021 through closing, both of which will negatively impact the revenue and consequently margin of our Business Solutions Segment and, to a lesser extent, the Payment Services – Puerto Rico Segment. Additionally, as part of the amendments to the MSA, there will be contractual revenue minimums through 2028. As part of the Popular

Table of Contents

Transaction, we also sold certain assets from our Business Solutions Segment to Banco Popular, which will result in a reduction in revenue and margin for this segment.

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. Rising interest rates, inflationary pressure and economic uncertainty in the markets in which we operate may affect consumer confidence which could result in a decrease in consumer spending and impact our financial results.

Segment Results of Operations

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

Table of Contents

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 below.

Comparison of the three months ended June 30, 2022 and 2021

Payment Services - Puerto Rico & Caribbean


	Three months ended June 30,
In thousands	2022			2021
Revenues	$	46,078		$	38,589
Adjusted EBITDA	$	23,848		$	23,620
Adjusted EBITDA Margin	51.8		%	61.2		%

Payment Services - Puerto Rico & Caribbean segment revenues for the three months ended June 30, 2022 increased by $7.5 million to $46.1 million when compared to the same period in the prior year. The increase in revenues was primarily driven by an increase in transaction volumes for POS processing, the ongoing growth from ATH Movil and ATH Business and an increase in issuing services. The revenue increase also includes the impact of the acquisition completed in the quarter. The segment also continues to benefit from increases in transaction processing and monitoring revenue recognized for services provided to the Payment Services - Latin America Segment. Adjusted EBITDA increased by $0.2 million to $23.8 million driven by the increase in revenues partially offset by the impairment charge recognized in the quarter and higher operating expenses, including higher equipment expenses and personnel costs.

Payment Services - Latin America


	Three months ended June 30,
In thousands	2022			2021
Revenues	$	30,784		$	25,835
Adjusted EBITDA	$	9,560		$	10,975
Adjusted EBITDA Margin	31.1		%	42.5		%

Table of Contents

Payment Services - Latin America segment revenues for the three months ended June 30, 2022 increased by $4.9 million to $30.8 million driven mainly by organic growth including revenue generated by new client contracts signed in prior years as well as an increase in intercompany software developments and transaction processing revenue recognized for services provided to the Payment Services - Puerto Rico & Caribbean segment. Adjusted EBITDA decreased by $1.4 million as prior year comparable quarter included a $1.4 million favorable impact from the remeasurement of assets and liabilities denominated in US dollars, while the current year quarter is reflecting a $0.1 million unfavorable impact. Additionally, operating expenses in the segment increased primarily due to an increase in personnel costs driven by merit increases and increased headcount, an increase in provisions for expected losses as well as increases in fees for transaction processing and monitoring services from the Payment Services - Puerto Rico & Caribbean segment.

Merchant Acquiring


	Three months ended June 30,
In thousands	2022			2021
Revenues	$	38,539		$	38,335
Adjusted EBITDA	$	17,534		$	20,546
Adjusted EBITDA Margin	45.5		%	53.6		%

Merchant Acquiring segment revenues for the three months ended June 30, 2022 increased slightly by $0.2 million mainly as a result of lower sales volumes and a lower transaction spread offset by pricing initiatives implemented during the quarter. Volumes were impacted on a year over year basis as prior year period was positively impacted by incremental COVID related federal stimulus. Adjusted EBITDA decreased by $3.0 million driven by higher operating expenses, mainly transaction processing costs and supplies.

Business Solutions


	Three months ended June 30
In thousands	2022			2021
Revenues	$	64,690		$	60,693
Adjusted EBITDA	$	29,835		$	30,621
Adjusted EBITDA Margin	46.1		%	50.5		%

Business Solutions segment revenues for the three months ended June 30, 2022 increased by $4.0 million to $64.7 million as a result of higher transactions and account volumes, the benefit from the CPI escalator on the MSA with Popular, another strong quarter of contribution from the printing contract that began generating revenue in June of the prior year, and one-time software sales in the Dominican Republic. Adjusted EBITDA decreased by $0.8 million to $29.8 million as the increase in revenue was offset by an increase in provisions for expected losses, increased printing related expenses and an increase in cost of sales directly related to the software sale.

Comparison of the six months ended June 30, 2022 and 2021

Payment Services - Puerto Rico & Caribbean


	Six months ended June 30,
In thousands	2022			2021
Revenues	$	86,086		$	74,853
Adjusted EBITDA	$	47,628		$	44,423
Adjusted EBITDA Margin	55.3		%	59.3		%

Payment Services - Puerto Rico & Caribbean segment revenues for the six months ended June 30, 2022 increased by $11.2 million to $86.1 million when compared to the same period in the prior year. The increase in revenues was primarily driven by an increase in transaction volumes, mainly POS processing, the continued strong digital payments growth from ATH Movil and ATH Business, higher issuing services, and revenue contribution from the acquisition completed in the current year quarter, as

Table of Contents

well as an increase in transaction processing and monitoring revenue recognized for services provided to the Payment Services - Latin America Segment. Adjusted EBITDA increased by $3.2 million to $47.6 million driven by the increase in revenues partially offset by the impairment loss discussed above, higher personnel costs and an increase in equipment expenses, including POS equipment maintenance costs.

Payment Services - Latin America


	Six months ended June 30,
In thousands	2022			2021
Revenues	$	59,567		$	50,849
Adjusted EBITDA	$	21,987		$	20,994
Adjusted EBITDA Margin	36.9		%	41.3		%

Payment Services - Latin America segment revenues for the six months ended June 30, 2022 increased by $8.7 million to $59.6 million driven mainly by organic growth including revenue generated by new client contracts signed in prior years, and higher revenues recognized for services provided to the Payment Services - Puerto Rico & Caribbean and Business Solutions segments. Adjusted EBITDA increased by $1.0 million when compared to the same period in the prior year reflecting the increase in revenues as well as the year over year favorable impact from the remeasurement of assets and liabilities denominated in US dollars, partially offset by higher operating expenses, including an increase in personnel costs, and in provisions for expected losses as well as increases in fees for transaction processing and monitoring services from the Payment Services - Puerto Rico & Caribbean segment.

Merchant Acquiring


	Six months ended June 30,
In thousands	2022			2021
Revenues	$	74,168		$	69,202
Adjusted EBITDA	$	34,618		$	36,063
Adjusted EBITDA Margin	46.7		%	52.1		%

Merchant Acquiring segment revenues for the six months ended June 30, 2022 increased by $5.0 million to $74.2 million mainly as a result of an increase in sales volume with a higher average ticket and a slightly higher spread per transaction as well as the benefit of pricing initiatives implemented. The higher volume was driven mainly by six months of contribution from the FirstBank expanded relationship, compared with four months in the prior year. Adjusted EBITDA decreased by $1.4 million as the increase in revenues was entirely offset by higher transaction processing costs.

Business Solutions


	Six months ended June 30,
In thousands	2022			2021
Revenues	$	127,314		$	121,304
Adjusted EBITDA	$	59,439		$	60,253
Adjusted EBITDA Margin	46.7		%	49.7		%

Business Solutions segment revenues for the six months ended June 30, 2022 increased by $6.0 million to $127.3 million as a result of higher transactions and account volumes and the benefit of the CPI escalator on the Popular MSA. In addition, the segment benefited from incremental printing volume resulting from the contract entered into in June of the prior year. These increases were partially offset by services provided to the Puerto Rico Department of Education in the prior year quarter that did not recur. Adjusted EBITDA decreased by $0.8 million to $59.4 million as the increase in revenue was offset by increased expenses, mainly software and hardware maintenance costs and printing related expenses.

Liquidity and Capital Resources

Table of Contents

Our principal source of liquidity is cash generated from operations, and our primary liquidity requirements are the funding of working capital needs, capital expenditures, acquisitions, debt service, dividend payments and share repurchases. We also have a $125.0 million Revolving Facility, of which $119.1 million was available for borrowing as of June 30, 2022. The Company issues letters of credit against our Revolving Facility which reduce our availability of funds to be drawn.

As of June 30, 2022, we had cash and cash equivalents of $288.1 million, of which $103.3 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.

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)	2022		2021

Cash provided by operating activities	$	129,902	$	112,029
Cash used in investing activities	(46,192)		(47,036)
Cash used in financing activities	(58,796)		(66,869)
Effect of foreign exchange rate on cash, cash equivalents and restricted cash	(191)		73
Increase (decrease) in cash, cash equivalents and restricted cash	$	24,723	$	(1,803)

Net cash provided by operating activities for the six months ended June 30, 2022 was $129.9 million compared to $112.0 million for the same period in the prior year. The $17.9 million increase in cash provided by operating activities is primarily driven by less cash used to pay down accounts payable and accrued liabilities as the Company continues to effectively manage working capital.

Net cash used in investing activities for the six months ended June 30, 2022 was $46.2 million compared to $47.0 million for the same period in the prior year. The $0.8 million decrease is driven by lower capital expenditures of $1.2 million as well as a decrease in acquisitions of customer relationships given that the prior year acquisition amounted to $14.8 million while the acquisition in the current year amounted to $10.6 million. Partially offsetting these decreases was a $7.3 million purchase of certificates of deposit while the prior year included a $3.0 million purchase of available-for-sale debt securities.

Net cash used in financing activities for the six months ended June 30, 2022 was $58.8 million compared to $66.9 million for the same period in the prior year. The $8.1 million decrease was mainly attributed to a decrease of $15.0 million in cash used to pay down long-term debt as in the prior year, in connection with the mandatory repayment clause, the Company repaid $17.8 million, as a result of excess cash flow calculation performed, while no mandatory repayment was required in the current year, and a $3.1 million decrease in withholding taxes paid on share-based compensation partially offset by an increase in cash used to repurchase common stock of $10.8 million.

Capital Resources

Our principal capital expenditures are for hardware and computer software (purchased and internally developed) and additions to property and equipment. During the six months ended June 30, 2022 and 2021, the Company invested approximately $29.0 million and $30.1 million, respectively, the Company acquired customer relationships amounting to $10.6 million and $14.8 million during the six months ended June 30, 2022 and 2021, respectively, as well as $7.3 million in certificates of deposit in 2022 and $3.0 million in available-for-sale debt securities in 2021. Generally, we fund capital expenditures with cash flow generated from operations and, if necessary, borrowings under our Revolving Facility.

Table of Contents

Dividend Payments

On February 15, 2022 and April 21, 2022, the Board declared quarterly cash dividends of $0.05 per share of common stock, which were paid on March 25, 2022 and June 3, 2022, respectively, to stockholders of record as of the close of business on February 25, 2022 and May 2, 2022, respectively.

On July 28, 2022, 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 2, 2022 to stockholders of record as of the close of business on August 8, 2022. 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 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 or if the leverage ratio is below 1.75x. On March 8, 2021, in connection with this mandatory repayment clause, the Company repaid $17.8 million, as a result of excess cash flow calculation performed for the year ended December 31, 2020. No mandatory repayment was required in the first quarter of 2022 in connection with the excess cash flow calculation performed for the year ended December 31, 2021 as the leverage ratio was below 1.75x.

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.

As of June 30, 2022 and December 31, 2021, the carrying amount of the derivative included on the Company's unaudited condensed consolidated balance sheets was an asset of $0.8 million, recorded in other long term assets and $13.4 million liabilities, 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 7 of the unaudited condensed consolidated financial statements for disclosure of losses recorded on cash flow hedging activities.

Table of Contents

During the three and six months ended months ended June 30, 2022 and 2021, the Company reclassified losses of $1.4 million and $3.1 million respectively, from accumulated other comprehensive loss into interest expense compared to $3.5 million and $5.3 million for the corresponding periods in 2021. Based on current LIBOR rates, the Company expects to reclassify gains of $0.8 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, 2022, our secured leverage ratio was 1.37 to 1.00, as determined in accordance with the 2018 Credit Agreement. As of the date of filing of this Report, 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 merger and acquisition activity. 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.

Table of Contents

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)	2022		2021				2022		2021		June 30, 2022
Net income	$	33,556	$	49,091			$	72,422	$	84,695	$	148,870
Income tax expense	7,688		2,632				13,863		7,340		27,085
Interest expense, net	5,127		5,208				10,007		10,725		20,203
Depreciation and amortization	19,560		18,723				38,720		37,346		76,444
EBITDA	65,931		75,654		—		135,012		140,106		272,602

Equity income (1)	(862)		923				(1,432)		421		(2,248)
Compensation and benefits (2)	5,405		4,283				9,684		7,787		17,041
Transaction, refinancing and other fees (3)	2,901		(599)				5,496		836		7,033


Adjusted EBITDA	73,375		80,261		—		148,760		149,150		294,428
Operating depreciation and amortization (4)	(11,156)		(10,724)				(22,408)		(21,606)		(44,240)
Cash interest expense, net (5)	(4,858)		(4,944)				(9,487)		(10,020)		(19,271)
Income tax expense (6)	(10,325)		(7,535)				(19,002)		(15,291)		(35,395)
Non-controlling interest (7)	1		71				11		(72)		(78)
Adjusted net income	$	47,037	$	57,129			$	97,874	$	102,161	$	195,444
Net income per common share (GAAP):
Diluted	$	0.47	$	0.68			$	1.00	$	1.16
Adjusted Earnings per common share (Non-GAAP):
Diluted	$	0.65	$	0.78			$	1.35	$	1.40
Shares used in computing adjusted earnings per common share:
Diluted	72,149,949		72,831,366				72,558,565		72,716,950

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

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, 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 the condensed 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.

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 inflation has had minimal net effect on our operating results during the last three years given that overall inflation has been offset by sales and cost reduction actions, the rate of inflation can impact certain input costs, such as occupancy, labor and benefits, and general administrative costs, which may not be readily recoverable from our customers and could affect our results

Table of Contents

of operations and financial condition. In addition, if inflation were to result in rising interest rates, it could result in an adverse effect on our cost of funding due to increased interest expense on our outstanding debt.

Table of Contents

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, 2022, under the secured credit facilities, would increase our annual interest expense by approximately $2.1 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, 2022, the Company has an interest rate swap agreement, entered into in 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 US dollar, are reported in accumulated other comprehensive loss in the unaudited condensed consolidated balance sheets. As of June 30, 2022, the Company had $40.3 million in an unfavorable foreign currency translation adjustment as part of accumulated other comprehensive loss compared with an unfavorable foreign currency translation adjustment of $36.0 million as of December 31, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management, under the direction of the Chief Executive Officer and the Chief Financial Officer, has evaluated, as of the end of the period covered by this Report on Form 10-Q, disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-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, 2022, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no 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, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

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

Other than the risk factor set forth below, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 25, 2022. For a discussion of the potential risks and uncertainties related to us, see "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.

The risks described in our Annual Report on Form 10-K for the year ended December 31, 2021 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.

Banco Popular, our largest customer, is controlled by Popular, which owned 16.2% of our outstanding common stock as of June 30, 2022. The anticipated reduction in or elimination of Popular’s ownership of our common stock could adversely affect us.

For the year ended December 31, 2021, approximately 42% of our revenue was attributable to Banco Popular, a wholly owned subsidiary of Popular, Inc. which was our largest stockholder as of June 30, 2022. As a result, Popular has historically had substantial influence over our policies and management. In connection with the sale of certain of our assets to, and renegotiation of certain agreements with, Popular and Banco Popular on July 1, 2022, Popular is contractually required to reduce its holding in our voting equity to 4.5% or less of our common stock, either through the sale of shares or by converting shares of common stock into non-voting stock. The anticipated reduction or elimination of Popular’s holdings of our common stock may change or negatively impact our business relationship with Banco Popular and could have a material adverse effect on our business, financial condition, results of operations and cash flows, and could materially adversely affect the trading price of our common stock.

Effective as of July 1, 2022, the stockholders agreement dated April 17, 2012 with Popular was terminated and, thus, Popular

no longer has a right to, among other things, designate nominees for election to the Board or representation to each committee

of the Board.

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

The following table summarizes repurchases of shares of the Company’s common stock in the three month period ended June 30, 2022:


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

4/1/2022-4/30/2022	153,596	41.07	153,596
5/1/2022-5/31/2022	203,518	37.97	203,518
	357,114	39.30	357,114	114,785,749

(1) On February 24, 2022, the Company announced that its Board approved an increase to the current stock

repurchase program, authorizing the purchase of up to an aggregate of $150 million shares of the Company’s common stock under the program which expires on December 31, 2023.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Table of Contents

Not applicable.

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits















10.1*+			Form of Restricted Stock Unit Award Agreement for grant of restricted stock units to directors under the EVERTEC, Inc. 2022 Equity Incentive Plan, dated June 1, 2022, 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+			EVERTEC, Inc. 2022 Incentive Award Plan.
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*			Inline 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.

Table of Contents

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 5, 2022	By:	/s/ Morgan Schuessler
		Morgan Schuessler Chief Executive Officer

Date: August 5, 2022	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			9
Note 2 - Held-for-Sale			9
Note 3 - Debt Securities			10
Note 4 - Property and Equipment, net			10
Note 5 - Goodwill and Other Intangible Assets			11
Note 6 - Debt and Short-Term Borrowings			12
Note 7 - Financial Instruments and Fair Value Measurements			13
Note 8 - Equity			14
Note 9 - Share-based Compensation			14
Note 10 - Revenues			15
Note 11 - Current Expected Credit Losses			17
Note 12 - Income Tax			18
Note 13 - Net Income per Common Share			19
Note 14 - Commitments and Contingencies			19
Note 15 - Related Party Transactions			19
Note 16 - Segment Information			20
Note 17 - Subsequent Events			24

Evertec - 10-Q quarterly report FY2022 Q2

What is the market capitalization of a company?

DISCLAIMER

Contact

Links