EVERTEC, Inc. (NYSE: EVTC) ("EVERTEC" or the "Company") today announced results for the second quarter ended June 30, 2016.

Second Quarter 2016 Highlights
  • Revenue grew 5% to $97.7 million
  • GAAP Net Income was $20.2 million, or $0.27 per diluted share
  • Adjusted EBITDA increased 4% to $48.8 million
  • Adjusted diluted earnings per share increased 7% to $0.43
  • $21 million returned to shareholders through share repurchases and dividends

Six-Month Year-to-Date 2016 Highlights
  • Revenue grew 4% to $193.2 million
  • GAAP Net Income was $39.4 million, or $0.53 per diluted share
  • Adjusted EBITDA increased 2% to $94.9 million
  • Adjusted diluted earnings per share increased 10% to $0.84
  • $31 million returned to shareholders through share repurchases and dividends

Mac Schuessler, President and Chief Executive Officer, stated, "We are pleased with our second quarter financial results that reflect the resiliency of our business model in challenging market conditions."

Second Quarter 2016 Results

Revenue. Total revenue for the quarter ended June 30, 2016 was $97.7 million, an increase of 5% compared with $93.4 million in the prior year.

Merchant Acquiring net revenue was $23.3 million, an increase of 10% compared with $21.2 million in the prior year. Revenue growth in the quarter was driven by the FirstBank merchant business, partially offset by the shift of a merchant acquiring customer contract to a payment processing contract as well as other revenue mix shifts.

Payment Processing revenue was $28.2 million, an increase of 5% compared with $26.8 million in the prior year. Revenue growth in the quarter primarily reflected increases in transactions processed over the ATH® debit network and card processing volume, revenue related to the Processa acquisition and the reference revenue shift from merchant acquiring to payment processing. These increases were partially offset by a reduction related to the classification of FirstBank revenues in merchant acquiring in 2016 as well as revenue reductions related to government programs.

Business Solutions revenue was $46.2 million, an increase of 2% compared to $45.5 million in the prior year. Business Solutions revenue growth in the quarter reflects additional volumes in core banking and increased revenue from hardware sales, partially offset by a decrease in IT consulting and cash and item processing revenue.

Adjusted EBITDA. For the quarter ended June 30, 2016, Adjusted EBITDA was $48.8 million, an increase of 4% compared with $47.0 million in the prior year. Adjusted EBITDA margin (Adjusted EBITDA as a percentage of total revenues) decreased 30 basis points to 50.0% compared with 50.3% in the prior year. The decrease in Adjusted EBITDA margin was primarily driven by a change in revenue mix, increased business to business operating taxes, increased investment expense related to Latin America growth initiatives and corporate development.

Net Income. For the quarter ended June 30, 2016, GAAP Net Income was $20.2 million, or $0.27 per diluted share, compared with $19.6 million or $0.25 per diluted share in the prior year.

For the quarter ended June 30, 2016, Adjusted Net Income was $32.0 million, an increase of 4% compared with $30.9 million in the prior year. Adjusted Net Income per diluted share of $0.43 increased 7% as compared to $0.40 per diluted share in the prior year.

Share Repurchase

During the three months ended June 30, 2016, the Company repurchased 0.8 million shares of common stock at an average price of $15.83 per share for a total of $13.2 million. As of June 30, 2016, a total of $104.4 million remained available for future use under the Company's share repurchase program.

2016 Outlook

The Company increased the current financial outlook for 2016 as follows:
  • Total consolidated revenue between $382 and $388 million representing growth of 2 to 4%
  • Adjusted diluted earnings per share guidance of $1.61 to $1.67 representing a growth range of 1 to 5% as compared to $1.59 in 2015

Capital expenditures continue to be expected in a range between $35 and $40 million.

Earnings Conference Call and Audio Webcast

The conference call can be accessed live over the phone by dialing (888) 338-7153 or for international callers by dialing (412) 317-5117. A replay will be available one hour after the end of the conference call and can be accessed by dialing (877) 344-7529 or (412) 317-0088 for international callers; the pin number is 10089345. The replay will be available through Thursday, August 4, 2016. The call will be webcast live from the Company's website at www.evertecinc.com under the Investor Relations section or directly at http://ir.evertecinc.com. A supplemental slide presentation that accompanies this call and webcast can be found on the investor relations website at ir.evertecinc.com and will remain available after the call.

About EVERTEC

EVERTEC, Inc. (NYSE: EVTC) is a leading full-service transaction processing business in Latin America, providing a broad range of merchant acquiring, payment processing and business solutions services. The Company manages a system of electronic payment networks that process more than two billion transactions annually, and offers a comprehensive suite of services for core bank processing, cash processing and technology outsourcing. In addition, EVERTEC owns and operates the ATH® network, one of the leading personal identification number ("PIN") debit networks in Latin America. Based in Puerto Rico, the Company operates in 18 Latin American countries and serves a diversified customer base of leading financial institutions, merchants, corporations and government agencies with "mission-critical" technology solutions. For more information, visit www.evertecinc.com.

About Non-GAAP Financial Measures

Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, the company has provided non-GAAP financial measures, which it believes are useful to help investors better understand its financial performance, competitive position and prospects for the future. For these reasons, management also uses these measures in part to assess its performance. In addition, the Company's presentation of Adjusted EBITDA is consistent with the equivalent measurements contained in the Credit Agreement in testing EVERTEC Group's compliance with covenants therein such as the senior secured leverage ratio. Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP measures. Further, EVERTEC's non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP measures to related GAAP measures, including footnotes describing the specific adjustments, are provided in the attached schedules and in the Investor Relations section of the EVERTEC web site, www.evertecinc.com.

Forward-Looking Statements

Certain statements in this press release constitute "forward-looking statements" within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact our business and could impact our business in the future are: the effect of the Restatement of our previously issued financial results for the years ended December 31, 2014 and 2013 as described in Note 2 to the quarterly unaudited financial statements, and any claims, investigations or proceedings arising as a result; the effectiveness of our efforts to remediate the material weakness in our internal controls over financial reporting described in Item 4 of this Quarterly Report and our ability to maintain effective internal controls and procedures in the future; our reliance on our relationship with Popular, Inc. ("Popular") for a significant portion of our revenues and with Banco Popular de Puerto Rico ("Banco Popular"), Popular's principal banking subsidiary, to grow our merchant acquiring business; for as long as we are deemed to be controlled by Popular, we will be subject to supervision and examination by U.S. federal banking regulators, and our activities will be limited to those permissible for Popular. Furthermore, as a technology service provider to regulated financial institutions, we are subject to additional regulatory oversight and examination. As a regulated institution, we most likely will be required to obtain regulatory approval before engaging in certain new activities or businesses, whether organically or by acquisition; our ability to renew our client contracts on terms favorable to us; our dependence on our processing systems, technology infrastructure, security systems and fraudulent payment detection systems, as well as on our personnel and certain third parties with whom we do business, and the risks to our business if our systems are hacked or otherwise compromised; our ability to develop, install and adopt new software, technology and computing systems; a decreased client base due to consolidations and failures in the financial services industry; the credit risk of our merchant clients, for which we may also be liable; the continuing market position of the ATH network; a reduction in consumer confidence, whether as a result of a global economic downturn or otherwise, which leads to a decrease in consumer spending; our dependence on credit card associations, including any adverse changes in credit card association or network rules or fees; changes in the regulatory environment and changes in international, legal, political, administrative or economic conditions; the geographical concentration of our business in Puerto Rico, including our business with the government of Puerto Rico and its instrumentalities, which are facing severe fiscal challenges and fiscal and regulatory oversight uncertainties; our exposure to climate risks in Puerto Rico; additional adverse changes in the general economic conditions in Puerto Rico, 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 multiple regions with potential political and economic instability, including Latin America; our ability to execute our geographic expansion and acquisition strategies; 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 recruit and retain the qualified personnel necessary to operate our business; 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 high level of indebtedness and restrictions contained in our debt agreements, including the senior secured credit facilities, as well as debt that could be incurred in the future; our ability to prevent a cybersecurity attack or breach in our information security; our ability to generate sufficient cash to service our indebtedness and to generate future profits; our ability to refinance our debt; and the risk that the counterparty to our interest rate swap agreement fails to satisfy its obligations under the agreement. 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. The Company does not undertake, and specifically disclaims any obligation, to update any of the "forward-looking statements" to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by the federal securities laws. Investors should refer to the Company's Form 10-K for the year ended December 31, 2015 (the "2015 Form 10-K") for a discussion of factors that could cause events to differ from those suggested by the forward-looking statements, including factors set forth in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations".
 
EVERTEC, Inc.Schedule 1: Unaudited Consolidated Condensed Statements of Income and Comprehensive Income
         
Quarter ended June 30, Six-month period ended June 30,
(Dollar amounts in thousands, except per share data)

2016

2015

2016

2015
(As restated) (As restated)
Revenues
Merchant Acquiring, net $ 23,277 $ 21,165 $ 46,167 $ 41,256
Payment Processing 28,157 26,759 55,132 53,136
Business Solutions   46,238     45,481     91,852     90,510  
Total revenues   97,672     93,405     193,151     184,902  
 
Operating costs and expenses
 
Cost of revenues, exclusive of depreciation and amortization shown below 41,966 41,004 85,374 80,954
Selling, general and administrative expenses 12,573 8,948 23,408 16,651
Depreciation and amortization   14,941     16,006     29,611     32,834  
Total operating costs and expenses   69,480     65,958     138,393     130,439  
 
Income from operations   28,192     27,447     54,758     54,463  
 
Non-operating income (expenses)
Interest income 92 127 179 231
Interest expense (6,138 ) (6,210 ) (12,016 ) (12,411 )
(Losses) earnings of equity method investment 29 84 (101 ) 199
Other income   860     764     1,258     1,049  
Total non-operating expenses   (5,157 )   (5,235 )   (10,680 )   (10,932 )
Income before income taxes 23,035 22,212 44,078 43,531
Income tax expense   2,801     2,645     4,677     5,420  
Net income 20,234 19,567 39,401 38,111
Less: Net (loss) income attributable to non-controlling interest   (1 )   -     18     -  
Net income attributable to EVERTEC, Inc.'s common stockholders' 20,235 19,567 39,383 38,111
Other comprehensive loss, net of tax
Foreign currency translation adjustments (2,047 ) (87 ) (1,579 ) 802
Loss on cash flow hedge   (1,475 )   -     (4,547 )   -  
Total comprehensive income $ 16,712   $ 19,480   $ 33,275   $ 38,913  
 
Net income per common share:
Basic $ 0.27 $ 0.25 $ 0.53 $ 0.49
Diluted $ 0.27 $ 0.25 $ 0.53 $ 0.49
 
Shares used in computing net income per common share:
Basic 74,706,042 77,457,322 74,826,946 77,631,339
Diluted 75,019,485 77,697,861 74,958,126 77,780,202
 
     
EVERTEC, Inc.Schedule 2: Unaudited Consolidated Condensed Balance Sheets
 
(Dollar amounts in thousands) June 30, 2016 December 31, 2015
Assets
Current Assets:
Cash $ 35,728 $ 28,747
Restricted cash 7,601 11,818
Accounts receivable, net 72,164 73,715
Deferred tax asset - 1,685
Prepaid expenses and other assets   21,976     18,758  
Total current assets 137,469 134,723
Investment in equity investee 12,193 12,264
Property and equipment, net 35,358 34,128
Goodwill 372,001 368,133
Other intangible assets, net 302,356 312,059
Long-term deferred tax asset 531 -
Other long-term assets   4,544     2,347  
Total assets $ 864,452   $ 863,654  
Liabilities and stockholders' equity
Current Liabilities:
Accrued liabilities 34,365 $ 37,308
Accounts payable 18,122 21,216
Unearned income 3,703 2,877
Income tax payable 2,903 1,350
Current portion of long-term debt 26,500 22,750
Short-term borrowings   20,000     17,000  
Total current liabilities 105,593 102,501
Long-term debt 604,676 619,297
Long-term deferred tax liability, net 17,415 20,614
Unearned income - Long-term 12,690 10,939
Other long-term liabilities   16,632     12,089  
Total liabilities   757,006     765,440  
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued - -

Common stock, par value $0.01; 206,000,000 shares authorized; 74,027,206 sharesissued and outstanding at June 30, 2016 (December 31, 2015 - 74,988,210)
741 750
Additional paid-in capital - 9,718
Accumulated earnings 116,986 95,328
Accumulated other comprehensive loss, net of tax   (13,708 )   (7,582 )
Total EVERTEC, Inc stockholders' equity 104,019 98,214
Non-controlling interest   3,427     -  
Total equity   107,446     98,214  
Total liabilities and equity $ 864,452   $ 863,654  
 
 
EVERTEC, Inc.Schedule 3: Unaudited Consolidated Condensed Statements of Cash Flows
     
 
Six-month period ended June 30,
(Dollar amounts in thousands)

2016

2015
(As restated)
Cash flows from operating activities
Net income $ 39,401 $ 38,111
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 29,611 32,834
Amortization of debt issue costs and accretion of discount 1,939 1,621
Provision for doubtful accounts and sundry losses 858 622
Deferred tax benefit (1,537 ) (1,740 )
Share-based compensation 3,403 2,191
Unrealized gain of indemnification assets - (12 )
Loss on disposition of property and equipment and other intangibles 122 1
Losses (earnings) of equity method investment 101 (199 )
Decrease (Increase) in assets:
Accounts receivable, net 2,776 1,998
Prepaid expenses and other assets (2,972 ) (1,691 )
Other long-term assets (1,826 ) (50 )
(Decrease) increase in liabilities:
Accounts payable and accrued liabilities (6,793 ) 1,263
Income tax payable 1,553 (1,875 )
Unearned income 2,578 1,580
Other long-term liabilities   210     2,027  
Total adjustments   30,023     38,570  
Net cash provided by operating activities   69,424     76,681  
 
Cash flows from investing activities
Net decrease (increase) in restricted cash 4,217 (543 )
Additions to software (13,154 ) (6,713 )
Property and equipment acquired (5,878 ) (8,649 )
Acquisitions, net of cash acquired (5,947 ) -
Proceeds from sales of property and equipment   40     11  
Net cash used in investing activities   (20,722 )   (15,894 )
 
Cash flows from financing activities
Net increase (decrease) in short-term borrowings 3,000 (19,000 )
Repayments of short-term borrowing for purchase of equipment (778 ) -
Dividends paid (14,964 ) (15,542 )
Statutory minimum withholding taxes paid on share-based compensation (290 ) (31 )
Credit amendment fees (3,587 ) -
Repurchase of common stock (15,602 ) (9,991 )
Repayment of long-term debt   (9,500 )   (9,500 )
Net cash used in financing activities   (41,721 )   (54,064 )
 
Net increase in cash 6,981 6,723
Cash at beginning of the period   28,747     32,114  
Cash at end of the period $ 35,728   $ 38,837  
 
 
EVERTEC, Inc.Schedule 4: Unaudited Income from Operations by Segment
         
Quarter ended June 30, Six-month period ended June 30,
(Dollar amounts in thousands)

2016

2015

2016

2015
Segment income from operations
 
Merchant Acquiring $ 8,786 $ 9,626 $ 17,212 $ 18,901
Payment Processing 14,276 14,515 26,690 28,058
Business Solutions   15,126     13,288     28,369     27,356  
Total segment income from operations 38,188 37,429 72,271 74,315

Merger related depreciation and amortizationand other unallocated expenses (1)
(9,996 ) (9,982 ) (17,513 ) (19,852 )
       
Income from operations $ 28,192   $ 27,447   $ 54,758   $ 54,463  
 
 

(1) Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.
         
EVERTEC, Inc.Schedule 5: Reconciliation of GAAP to Non-GAAP Operating Results
 
Quarter ended June 30, Six-month period ended June 30,

(Dollar amounts in thousands, except per share data)

2016

2015

2016

2015
 
Net income $ 20,234 $ 19,567 $ 39,401 $ 38,111
Income tax expense (benefit) 2,801 2,645 4,677 5,420
Interest expense, net 6,046 6,083 11,837 12,180
Depreciation and amortization   14,941     16,006     29,611     32,834  
EBITDA 44,022 44,301 85,526 88,545
 
Software maintenance reimbursement and other costs (1) 149 455 461 929
Equity (income) loss (2) (29 ) (9 ) 101 (199 )
Compensation and benefits (3) 2,349 1,831 6,030 2,664
Transaction, refinancing and other non-recurring fees (4) 611 411 970 732
Purchase accounting (5) - (9 ) - (12 )
Restatement related expenses (6)   1,737     -     1,796     -  
Adjusted EBITDA 48,839 46,980 94,884 92,659
 
Operating depreciation and amortization (7) (7,081 ) (6,638 ) (14,087 ) (14,099 )
Cash interest expense, net (8) (5,264 ) (5,309 ) (10,301 ) (10,642 )
Income tax expense (9) (4,438 ) (4,171 ) (7,470 ) (8,452 )
Non-controlling interest (10)   (69 )   -     (88 )   -  
Adjusted Net Income $ 31,987   $ 30,862   $ 62,938   $ 59,466  
 
Net income per common share (GAAP):
Basic $ 0.27 $ 0.25 $ 0.53 $ 0.49
Diluted $ 0.27 $ 0.25 $ 0.53 $ 0.49
 
Adjusted net income per common share (Non-GAAP):
Basic $ 0.43 $ 0.40 $ 0.84 $ 0.77
Diluted $ 0.43 $ 0.40 $ 0.84 $ 0.76
 
Shares used in computing adjusted net income per common share:
Basic 74,706,042 77,457,322 74,826,946 77,631,339
Diluted 75,019,485 77,697,861 74,958,126 77,780,202
                   

1)Predominantly represents reimbursements received for certain software maintenance expenses as part of the Merger.

2)Represents the elimination of non-cash equity earnings from our 19.99% equity investment in CONTADO, net of cash dividends received.

3)Primarily represents share-based compensation expense of $1.9 million and $1.5 million for the quarters ended June 30, 2016 and 2015 and severance payments of $0.4 million and $0.2 million for the quarters ended June 30, 2016 and 2015 and share-based compensation expense of $3.5 million and $2.3 million for the six-month period ended June 30, 2016 and 2015 and severance payments of $2.5 million and $0.2 million for the six month period ended June 30, 2016 and 2015.

4)Represents fees and expenses associated with corporate transactions as defined in the Credit Agreement.

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

6)Represents consulting, audit and legal expenses incurred as part of the restatement.

7)Represents operating depreciation and amortization expense, which excludes amounts generated as a result of the Merger.

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

9)Represents income tax expense calculated on adjusted pre-tax income using GAAP tax rate.

10)Represents the 35% non-controlling equity interest in Processa, net of amortization for intangibles created as part of the purchase.
 
EVERTEC, Inc.Schedule 6: Reconciliation of Adjusted Net Income to GAAP Net Income
             
Quarter ended June 30,
(Dollar amounts in thousands, except per share data) 2016 2015
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
 
Revenues $ 97,672   $ 97,672   $ 93,405   $ 93,405  
 
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization shown below 41,966 (990 )

(1),(3)
40,976 41,004 (1,178 )

(1),(3)
39,826
Selling, general and administrative expenses 12,573 (3,856 )

(3),(4),(5),(6)
8,717 8,948 (1,510 )

(3),(4),(5)
7,438
Depreciation and amortization   14,941   (7,860 )

(7)
  7,081     16,006   (9,368 )

(7)
  6,638  
Total operating costs and expenses   69,480     56,774     65,958     53,902  
Income from operations   28,192     40,898     27,447     39,503  
 
Non-operating income (expenses)
Interest income 92 (92 )

(8)
- 127 (127 )

(8)
-
Interest expense (6,138 ) 874

(8)
(5,264 ) (6,210 ) 901

(8)
(5,309 )
Earnings of equity method investment 29 (29 )

(2)
- 84 (9 )

(2)
75
Other income   860     860     764     764  
Total non-operating expenses   (5,157 )   (4,404 )   (5,235 )   (4,470 )
Income before income taxes 23,035 36,494 22,212 35,033
Income tax expense   2,801   1,637

(9)
  4,438     2,645   1,526

(9)
  4,171  
Net income 20,234 32,056 19,567 30,862
Less: Net income attributable to non-controlling interest   (1 ) 70

(10)
  69     -     -  
Net income attributable to EVERTEC, Inc.'s common stockholders'   20,235     31,987     19,567     30,862  
 
Net income per common share:
Basic $ 0.27 $ 0.43 $ 0.25 $ 0.40
Diluted $ 0.27 $ 0.43 $ 0.25 $ 0.40
 
Shares used in computing net income per common share:
Basic 74,706,042 77,457,322
Diluted 75,019,485 77,697,861
 
Six-month period ended June 30,
(Dollar amounts in thousands, except per share data) 2016 2015
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Revenues
Total revenues $ 193,151   $ 193,151   $ 184,902   $ 184,902  
 
Operating costs and expenses
Cost of revenues, exclusive of depreciation and amortization shown below 85,374 (3,366 )

(1),(3)
82,008 80,954 (2,002 )

(1),(3)
78,952
Selling, general and administrative expenses 23,408 (5,891 )

(3),(4),(5),(6)
17,517 16,651 (2,311 )

(3),(4),(5)
14,340
Depreciation and amortization   29,611   (15,524 )

(7)
  14,087     32,834   (18,735 )

(7)
  14,099  
Total operating costs and expenses   138,393     113,612     130,439     107,391  
Income from operations   54,758     79,539     54,463     77,511  
 
Non-operating income (expenses)
Interest income 179 (179 )

(8)
- 231 (231 )

(8)
-
Interest expense (12,016 ) 1,715

(8)
(10,301 ) (12,411 ) 1,769

(8)
(10,642 )
Earnings of equity method investment (101 ) 101

(2)
- 199 (199 )

(2)
-
Other income   1,258     1,258     1,049     1,049  
Total non-operating expenses   (10,680 )   (9,043 )   (10,932 )   (9,593 )
Income before income taxes 44,078 70,496 43,531 67,918
Income tax expense   4,677   2,793

(9)
  7,470     5,420   3,032

(9)
  8,452  
Net income 39,401 63,026 38,111 59,466
Less: Net income attributable to non-controlling interest   18   70

(10)
  88     -     -  
Net income attributable to EVERTEC, Inc.'s common stockholders'   39,383     62,938     38,111     59,466  
 
Net income per common share:
Basic $ 0.53 $ 0.84 $ 0.49 $ 0.77
Diluted $ 0.53 $ 0.84 $ 0.49 $ 0.76
 
Shares used in computing net income per common share:
Basic 74,826,946 77,631,339
Diluted 74,958,126 77,780,202
                     

1)Predominantly represents reimbursements received for certain software maintenance expenses as part of the Merger.

2)Represents the elimination of non-cash equity earnings from our 19.99% equity investment in CONTADO, net of cash dividends received.

3)Primarily represents non-cash equity based compensation expense of $1.9 million and $1.5 million for the quarters ended June 30, 2016 and 2015 and severance payments of $0.4 million and $0.2 million for the quarters ended June 30, 2016 and 2015 and non-cash equity based compensation expense of $3.5 million and $2.3 million for the six-month period ended June 30, 2016 and 2015 and severance payments of $2.5 million and $0.2 million for the six month period ended June 30, 2016 and 2015.

4)Represents fees and expenses associated with corporate transactions as defined in the Credit Agreement.

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

6)Represents consulting, audit and legal expenses incurred as part of the restatement.

7)Represents operating depreciation and amortization expense, which excludes amounts generated as a result of the Merger.

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

9)Represents income tax expense calculated on adjusted pre-tax income using GAAP tax rate.

10)Represents the 35% non-controlling equity interest in Processa, net of amortization for intangibles created as part of the purchase.
           
EVERTEC, Inc.Schedule 7: Reconciliation of new measure for Adjusted Net Income and Adjusted EPS
 
(in thousands, except per share data) Quarter ended Year ended
March 31, 2015 June 30, 2015 September 30, 2015 December 31, 2015 December 31, 2015
Net income, as restated $ 18,544 $ 19,567 $ 25,336 $ 21,930 $ 85,377
Income tax expense (benefit) 2,775 2,645 (9,347 ) 592 (3,335 )
Interest expense, net 6,097 6,083 5,863 5,728 23,771
Depreciation and amortization   16,828     16,006     16,934     15,206     64,974  
EBITDA 44,244 44,301 38,786 43,456 170,787
 
Software maintenance reimbursement and other costs (1) 474 455 479 494 1,902
Equity income (2) (190 ) (9 ) 3 49 (147 )
Compensation and benefits (3) 833 1,831 7,271 2,302 12,237
Transaction, refinancing and other non-recurring fees (4) 321 411 260 324 1,316
Purchase accounting (5)   (3 )   (9 )   94     -     82  
Adjusted EBITDA 45,679 46,980 46,893 46,625 186,177
 
Operating depreciation and amortization (6) (7,461 ) (6,638 ) (7,568 ) (7,634 ) (29,301 )
Cash interest expense, net (7) (5,333 ) (5,310 ) (5,081 ) (4,941 ) (20,665 )
Income Tax expense (8)   (4,281 )   (4,171 )   (3,867 )   (892 )   (13,211 )
Adjusted Net income $ 28,604   $ 30,861   $ 30,377   $ 33,158   $ 123,000  
 
Applicable GAAP Tax Rate 13.0 % 11.9 % 12.2 % 2.6 % 9.7 %
 
GAAP EPS - diluted $ 0.24 $ 0.25 $ 0.33 $ 0.29 $ 1.11
 
Adjusted Non-GAAP EPS - diluted $ 0.37 $ 0.40 $ 0.39 $ 0.43 $ 1.59
 
Quarter ended Year ended
March 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014 December 31, 2014
Net income, as restated $ 16,978 $ 17,473 $ 18,855 $ 12,851 $ 66,157
Income tax expense (benefit) 2,400 2,395 1,159 2,947 8,901
Interest expense, net 6,525 6,422 6,279 6,218 25,444
Depreciation and amortization   16,614     16,390     16,453     16,531     65,988  
EBITDA 42,517 42,680 42,746 38,547 166,490
 
Software maintenance reimbursement and other costs (1) 546 563 661 478 2,248
Equity income (2) (321 ) (15 ) (239 ) (240 ) (815 )
Compensation and benefits (3) 488 437 648 4,579 6,152
Transaction, refinancing and other non-recurring fees (4) 517 1,999 269 5,145 7,930
Purchase accounting (5)   179     (8 )   284     (9 )   446  
Adjusted EBITDA 43,926 45,656 44,369 48,500 182,451
 
Operating depreciation and amortization (6) (7,483 ) (7,281 ) (7,338 ) (7,416 ) (29,518 )
Cash interest expense, net (7) (5,755 ) (5,654 ) (5,501 ) (5,441 ) (22,351 )
Income Tax expense (8)   (3,423 )   (3,230 )   (1,703 )   (5,354 )   (13,183 )
Adjusted Net income $ 27,265   $ 29,491   $ 29,827   $ 30,289   $ 117,399  
 
Applicable GAAP Tax Rate 11.2 % 9.9 % 5.4 % 15.0 % 10.1 %
 
GAAP EPS - diluted $ 0.21 $ 0.22 $ 0.24 $ 0.16 $ 0.84
 
Adjusted Non-GAAP EPS - diluted $ 0.34 $ 0.37 $ 0.38 $ 0.38 $ 1.49
 

1)Predominantly represents reimbursements received for certain software maintenance expenses as part of the Merger.

2)Represents the elimination of non-cash equity earnings from our 19.99% equity investment in CONTADO, net of cash dividends received.

3)Represents share-based compensation expense of $5.3 million for the year ended December 31, 2015 and severance payments of $6.4 million for the year ended December 31, 2015. For 2014, primarily represents share-based compensation.

4)Represents fees and expenses associated with corporate transactions as defined in the Credit Agreement.

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

6)Represents operating depreciation and amortization expense, which excludes amounts generated as a result of the Merger.

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

8)Represents income tax expense calculated on adjusted pre-tax income using GAAP tax rate. Figures for the third quarter of 2015 and the year ended December 31, 2015 were adjusted to exclude the effect of tax benefit related to the reversal of the liability for uncertain tax position, as the underlying statue of limitations expired.

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