Part I. FINANCIAL INFORMATION [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents EVERTEC's unaudited condensed consolidated financial statements for Q1 2021, showing a 14% revenue increase to $139.5 million and a 60% net income increase to $35.6 million [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2021, total assets were $1.04 billion, liabilities decreased to $684.6 million, and equity increased to $356.0 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $156,363 | $202,649 | | Goodwill | $396,298 | $397,670 | | Other intangible assets, net | $229,972 | $219,909 | | **Total Assets** | **$1,040,649** | **$1,072,579** | | **Liabilities & Equity** | | | | Total current liabilities | $136,580 | $152,992 | | Long-term debt | $458,738 | $481,041 | | **Total Liabilities** | **$684,642** | **$730,150** | | **Total Equity** | **$356,007** | **$342,429** | [Unaudited Condensed Consolidated Statements of Income and Comprehensive Income](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Q1 2021 revenues increased 14% to $139.5 million, income from operations grew 37% to $45.0 million, and diluted EPS rose to $0.49 Statement of Income Highlights (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $139,528 | $121,942 | 14.4% | | Income from operations | $44,999 | $32,763 | 37.3% | | Net income attributable to common stockholders | $35,503 | $22,211 | 59.8% | | Diluted EPS | $0.49 | $0.30 | 63.3% | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2021 saw $34.7 million in operating cash, $34.4 million used in investing (including a $14.8 million acquisition), and $48.7 million used in financing activities Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,746 | $33,925 | | Net cash used in investing activities | ($34,413) | ($9,412) | | Net cash used in financing activities | ($48,716) | ($31,358) | | Net decrease in cash | ($45,683) | ($6,017) | - Investing activities in Q1 2021 included a **$14.8 million acquisition** of a customer relationship and **$12.0 million in additions to software**[22](index=22&type=chunk)[42](index=42&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment revenue, debt, intangibles, and related-party transactions, including a $14.8 million customer relationship acquisition and 44% revenue from Popular, Inc - In Q1 2021, the Company acquired a customer relationship in Puerto Rico for **$14.8 million**, which will be amortized over ten years and is part of the Merchant Acquiring segment[42](index=42&type=chunk) - The Company has an interest rate swap agreement with a notional amount of **$250 million** to convert a portion of its variable-rate 2024 Term B Loan to a fixed rate of **2.89%**[51](index=51&type=chunk) - Revenues from related party Popular, Inc. represented **44% of total revenues** for the three months ended March 31, 2021[93](index=93&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 financial results, including a 14% revenue increase to $139.5 million, growth across all segments, and adjusted EBITDA rising to $68.9 million - The company is a leading transaction-processing business in Puerto Rico, the Caribbean, and Latin America, operating in **26 countries** and owning the ATH debit network[113](index=113&type=chunk) - The company benefits from the ongoing migration from cash to electronic payments and the trend of financial institutions outsourcing technology systems in Latin America[121](index=121&type=chunk) Non-GAAP Reconciliation Highlights (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Income | $35,604 | $22,275 | | EBITDA | $64,452 | $51,004 | | Adjusted EBITDA | $68,889 | $56,290 | | Adjusted Net Income | $45,032 | $33,533 | | Adjusted Diluted EPS | $0.62 | $0.46 | [Results of Operations](index=29&type=section&id=MD%26A%20Results%20of%20Operations) Q1 2021 revenues increased 14% to $139.5 million, driven by recovery and digital solutions, while income from operations grew 37% to $45.0 million Q1 2021 vs Q1 2020 Results of Operations (in thousands) | Line Item | Q1 2021 | Q1 2020 | Variance ($) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $139,528 | $121,942 | $17,586 | 14% | | Cost of revenues | $59,804 | $54,067 | $5,737 | 11% | | SG&A expenses | $16,102 | $17,317 | ($1,215) | (7)% | | Income from operations | $44,999 | $32,763 | $12,236 | 37% | [Segment Results of Operations](index=31&type=section&id=MD%26A%20Segment%20Results) All four business segments reported year-over-year revenue growth in Q1 2021, driven by digital payments, new contracts, and increased sales volume Segment Revenue and Adjusted EBITDA (in thousands) | Segment | Q1 2021 Revenue | Q1 2020 Revenue | Q1 2021 Adj. EBITDA | Q1 2020 Adj. EBITDA | | :--- | :--- | :--- | :--- | :--- | | Payment Services - PR & Caribbean | $36,264 | $29,887 | $20,803 | $16,074 | | Payment Services - Latin America | $25,014 | $21,640 | $10,019 | $8,242 | | Merchant Acquiring | $30,867 | $25,121 | $15,517 | $11,284 | | Business Solutions | $60,611 | $55,943 | $29,632 | $27,445 | [Liquidity and Capital Resources](index=33&type=section&id=MD%26A%20Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $156.4 million in cash and $117.0 million available on its revolving facility, making a $17.8 million debt repayment in Q1 2021 - As of March 31, 2021, the company had **$156.4 million in cash and cash equivalents** and **$117.0 million available** under its Revolving Facility[147](index=147&type=chunk)[149](index=149&type=chunk) - Primary uses of cash include operating expenses, capital expenditures (**$16.7 million in Q1 2021**), dividend payments (**$3.6 million in Q1 2021**), share repurchases, and debt service[150](index=150&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - On March 8, 2021, the company made a mandatory debt repayment of **$17.8 million** based on its 2020 excess cash flow calculation[48](index=48&type=chunk)[160](index=160&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces interest rate risk on variable debt and foreign exchange risk, mitigating the former with swaps; a 100 basis point rate increase would raise annual interest expense by $2.8 million - The company's primary market risks are interest rate risk on its floating-rate debt and foreign exchange risk from Latin American operations[178](index=178&type=chunk) - A **100 basis point increase** in interest rates on outstanding debt would increase annual interest expense by about **$2.8 million**[179](index=179&type=chunk) - The company utilizes an interest rate swap to hedge against interest rate volatility on its 2024 Term B Loan[180](index=180&type=chunk)[181](index=181&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - The CEO and CFO concluded that as of March 31, 2021, the Company's disclosure controls and procedures are **effective**[183](index=183&type=chunk) - No material changes to internal control over financial reporting occurred during the fiscal quarter ended March 31, 2021[184](index=184&type=chunk) Part II. OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings not expected to materially affect financial condition or results - The company is a defendant in various lawsuits arising in the ordinary course of business, which are **not expected to have a material adverse effect**[187](index=187&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section refers to risk factors from the 2020 Annual Report on Form 10-K, with no new material changes reported - The report refers to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, with **no material updates**[188](index=188&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20in%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 382,974 shares at an average price of $37.255 in Q1 2021, part of a $100 million program extended to 2023 Share Repurchases for Q1 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2021 | 8,700 | $35.777 | | Feb 2021 | 26,820 | $36.519 | | Mar 2021 | 347,454 | $37.349 | | **Total** | **382,974** | **$37.255** | - As of March 31, 2021, approximately **$85.7 million remained available** for future repurchases under the authorized program[189](index=189&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including RSU agreements, CEO/CFO certifications, and XBRL data files

Part I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) EVERTEC is a leading transaction processor in Latin America and the Caribbean, operating three service lines with significant revenue from Popular, Inc [Company Overview](index=7&type=section&id=Company%20Overview) EVERTEC is a leading transaction processor in Latin America and the Caribbean, operating the ATH network and deriving significant revenue from Popular, Inc - EVERTEC is a leading transaction processing company in Latin America and the Caribbean, owning and operating the **ATH network**, one of the region's leading PIN debit networks[15](index=15&type=chunk) - The company's business model is characterized by **recurring revenue**, with approximately **95% of total revenues in 2020** being recurring, supported by multi-year contracts[19](index=19&type=chunk)[28](index=28&type=chunk) - **Popular, Inc.** is EVERTEC's largest shareholder (**16.2% ownership**) and most significant client, generating **44% of the company's revenue in 2020** under a Master Services Agreement (MSA)[20](index=20&type=chunk) [Industry Trends](index=8&type=section&id=Industry%20Trends) The transaction processing industry benefits from a global shift to electronic payments and technology outsourcing, accelerated by the COVID-19 pandemic - The COVID-19 pandemic has accelerated the consumer shift from cash to electronic and contactless payment methods[22](index=22&type=chunk)[26](index=26&type=chunk) - Non-cash payment volumes in Latin America grew by **7.8% from 2018 to 2019**, reaching **52.6 billion transactions**, and are projected to continue growing at **6% through 2023** despite the pandemic's impact[23](index=23&type=chunk) - Financial institutions and government agencies are increasingly outsourcing technology systems and processes due to the high cost and inflexibility of legacy systems, creating opportunities for the Company[24](index=24&type=chunk) [Our Business Segments](index=10&type=section&id=Our%20Business) EVERTEC's operations are structured into Merchant Acquiring, Payment Services, and Business Solutions, processing billions of transactions annually - The Merchant Acquiring business processed over **384 million transactions in 2020**, enabling merchants to accept various electronic payment methods[38](index=38&type=chunk) - The Payment Services business, including the ATH network, processed approximately **two billion transactions in 2020**[41](index=41&type=chunk) - The Business Solutions segment provides mission-critical services such as core bank processing, network hosting, and is the only non-bank provider of cash processing services to the U.S. Federal Reserve in the Caribbean[44](index=44&type=chunk) [People and Culture](index=13&type=section&id=People%20and%20Culture) As of December 31, 2020, EVERTEC employed approximately 2,500 people, emphasizing diversity and maintaining employment during COVID-19 - The company employed approximately **2,500 people** as of December 31, 2020, with **55% located in Puerto Rico and the US**[53](index=53&type=chunk) - EVERTEC's workforce is **37% female** and over **99% Hispanic**, and the company has been included in the Bloomberg Gender Equality Index for three consecutive years[54](index=54&type=chunk)[55](index=55&type=chunk) - In response to COVID-19, the company transitioned most employees to remote work and implemented safety measures for on-site staff, with **no layoffs, furloughs, or pay reductions** related to the pandemic in 2020[61](index=61&type=chunk) [Government Regulation and Payment Network Rules](index=16&type=section&id=Government%20Regulation%20and%20Payment%20Network%20Rules) EVERTEC is subject to extensive regulation by the Federal Reserve and other bodies due to its Popular, Inc. ties and financial services operations - Due to its relationship with Popular, Inc., a bank holding company, EVERTEC is subject to regulation and oversight by the **Federal Reserve Board**, which restricts its permissible activities to those authorized for a bank or financial holding company[64](index=64&type=chunk)[67](index=67&type=chunk) - The company is subject to regulatory oversight and examination by the **Federal Financial Institutions Examination Council (FFIEC)** as a technology service provider to financial institutions[71](index=71&type=chunk) - Operations are governed by numerous laws including the **Dodd-Frank Act**, which imposed restrictions on debit card interchange fees (Durbin Amendment), and various privacy, anti-money laundering (AML), and anti-trust regulations[72](index=72&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - As a registered member or service provider for card associations like Visa and MasterCard, the company must adhere to their network rules, including mandates for EMV chip technology[85](index=85&type=chunk) [Geographic Concentration](index=20&type=section&id=Geographic%20Concentration) The company's business is highly concentrated in Puerto Rico, generating 82% of its 2020 revenues, with the remainder from Latin America and the Caribbean | Region | Revenue Contribution (FY 2020) | | :--- | :--- | | Puerto Rico | 82% | | Latin America & Caribbean | 18% | [Item 1A. Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from its reliance on Popular, Inc., operational vulnerabilities, Puerto Rico's economic instability, and extensive regulations [Risks Related to Our Business](index=22&type=section&id=Risks%20Related%20to%20Our%20Business) Key business risks include heavy dependence on Popular, Inc., system failures, cybersecurity threats, Puerto Rico's fiscal crisis, and evolving government regulations - A significant portion of revenue (**44% in 2020**) is derived from the relationship with Popular, Inc., and the Master Services Agreement (MSA) expires in 2025, creating renewal and pricing risk[95](index=95&type=chunk)[99](index=99&type=chunk) - The business is highly dependent on its technology infrastructure; system failures, security breaches, or data theft could lead to operational disruptions, financial liability, and reputational damage[109](index=109&type=chunk)[117](index=117&type=chunk) - High geographic concentration in Puerto Rico (**82% of 2020 revenue**) exposes the company to risks from the local economy's fiscal crisis, government instability, and natural disasters like hurricanes[149](index=149&type=chunk)[154](index=154&type=chunk) - The company is subject to extensive government regulation, including banking laws (due to its affiliation with Popular), data protection laws, and antitrust scrutiny, which could result in fines or operational restrictions[132](index=132&type=chunk)[139](index=139&type=chunk)[147](index=147&type=chunk) - Failure to comply with the terms of its preferential tax grant in Puerto Rico, which requires maintaining specific employment and investment levels, could result in the loss of its **4% preferential income tax rate**[162](index=162&type=chunk)[163](index=163&type=chunk) [Risks Related to Our Indebtedness](index=32&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) The company's high leverage of approximately $499.5 million exposes it to interest rate risk and restrictive debt covenants, with LIBOR phase-out adding uncertainty - As of December 31, 2020, the company had a total principal debt of approximately **$499.5 million**, creating high leverage that could impact its ability to raise capital and react to economic changes[174](index=174&type=chunk) - Debt agreements contain restrictive covenants that limit the company's ability to incur more debt, pay dividends, make investments, and sell assets[177](index=177&type=chunk) - The company's borrowings are predominantly at variable interest rates, exposing it to risks from interest rate increases, and the planned phase-out of LIBOR by the end of 2021 introduces uncertainty regarding future financing costs[174](index=174&type=chunk)[180](index=180&type=chunk) [Item 2. Properties](index=34&type=section&id=Item%202.%20Properties) The company's principal executive offices are leased in San Juan, Puerto Rico, with one owned property in Costa Rica and 14 leased facilities across the region - The company's main executive offices are leased in San Juan, Puerto Rico[185](index=185&type=chunk) - EVERTEC owns one property in Costa Rica and leases 14 other facilities across Latin America and the Caribbean[186](index=186&type=chunk) [Item 3. Legal Proceedings](index=34&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, which management does not expect to have a material adverse financial effect - The company is a defendant in various legal proceedings arising from the ordinary course of business, which are not expected to have a material adverse effect on its financial condition[187](index=187&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=35&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) EVERTEC's common stock trades on the NYSE, with the company having a history of dividends and an authorized $100 million stock repurchase program through 2023 - The company's common stock is traded on the New York Stock Exchange (NYSE) under the ticker symbol "**EVTC**"[191](index=191&type=chunk) | Period | Total Shares Purchased | Average Price per Share | | :--- | :--- | :--- | | Mar 2020 | 336,022 | $21.725 | - On December 17, 2020, the Board approved an increase and extension of the stock repurchase program, authorizing up to **$100 million in purchases through December 31, 2023**[193](index=193&type=chunk) [Item 6. Selected Financial Data](index=37&type=section&id=Item%206.%20Selected%20Financial%20Data) Over 2016-2020, EVERTEC showed consistent revenue growth, increased net income and total assets, while reducing total debt and significantly growing total equity | (In thousands, except per share data) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $510,588 | $487,374 | $453,869 | $407,144 | $389,507 | | **Net income attributable to common stockholders** | $104,436 | $103,469 | $86,270 | $55,054 | $75,036 | | **Net income per common share—diluted** | $1.43 | $1.41 | $1.16 | $0.76 | $1.01 | | **Total assets** | $1,072,579 | $1,011,676 | $927,292 | $902,788 | $885,662 | | **Total debt** | $496,779 | $527,603 | $538,606 | $616,740 | $650,759 | | **Total equity** | $342,429 | $271,623 | $215,606 | $147,976 | $108,175 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, EVERTEC's total revenues grew 5% to $510.6 million, driven by merchant acquiring and ATH Movil, while maintaining strong liquidity and reducing total debt [Results of Operations (2020 vs. 2019)](index=42&type=section&id=Results%20of%20Operations) In 2020, total revenues increased 5% to $510.6 million, but operating income decreased 2% due to higher costs, while non-operating expenses decreased significantly | (In thousands) | 2020 | 2019 | Variance | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $510,588 | $487,374 | $23,214 | 5% | | Cost of revenues | $226,870 | $213,379 | $13,491 | 6% | | SG&A expenses | $70,808 | $61,411 | $9,397 | 15% | | **Income from operations** | $141,392 | $144,502 | ($3,110) | (2)% | - The decrease in non-operating expenses was primarily due to a **$3.7 million reduction in interest expense** and a **$6.1 million increase in other income** from the remeasurement of assets and liabilities denominated in US dollars[240](index=240&type=chunk) - The effective tax rate increased from **11.1% in 2019 to 15.3% in 2020**, driven by discrete tax items, an uncertain tax position in a foreign jurisdiction, and a shift in business mix towards higher-taxed lines of business[242](index=242&type=chunk) [Segment Results of Operations](index=43&type=section&id=Segment%20Results%20of%20Operations) In 2020, Business Solutions led revenue and Adjusted EBITDA growth, while Merchant Acquiring also performed well, and Payment Services saw mixed results | Segment (in thousands) | Revenue 2020 | Revenue 2019 | Adj. EBITDA 2020 | Adj. EBITDA 2019 | | :--- | :--- | :--- | :--- | :--- | | Payment Services - PR & Caribbean | $124,771 | $125,544 | $66,947 | $78,609 | | Payment Services - Latin America | $84,641 | $84,453 | $32,778 | $30,679 | | Merchant Acquiring | $109,788 | $106,388 | $55,106 | $47,156 | | Business Solutions | $234,965 | $216,662 | $114,802 | $97,421 | - Business Solutions revenue growth was driven by a project with the Puerto Rico Department of Education and COVID-19 related services for Popular and the government[256](index=256&type=chunk) - Merchant Acquiring performance benefited from a **higher average ticket size**, which increased spreads despite lower transaction volumes[255](index=255&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, the company maintained strong liquidity with $202.6 million in cash and generated $199.1 million from operations, reducing debt and paying dividends | (In thousands) | 2020 | 2019 | | :--- | :--- | | Cash provided by operating activities | $199,089 | $179,949 | | Cash used in investing activities | ($48,634) | ($65,347) | | Cash used in financing activities | ($62,617) | ($70,227) | | **Increase in cash** | **$89,984** | **$44,375** | - As of December 31, 2020, cash and cash equivalents were **$202.6 million**, with **$117.0 million available** for borrowing under the Revolving Facility[257](index=257&type=chunk)[258](index=258&type=chunk) - In 2020, the company repurchased **336,022 shares of common stock for $7.3 million** and paid quarterly dividends of **$0.05 per share**[268](index=268&type=chunk)[270](index=270&type=chunk) [Financial Obligations](index=47&type=section&id=Financial%20Obligations) As of December 31, 2020, total principal debt was $499.5 million, subject to variable interest rates and restrictive covenants, with an interest rate swap in place | Facility | Unpaid Principal (Dec 31, 2020) | | :--- | :--- | | 2023 Term A Loan | $190.0 million | | 2024 Term B Loan | $309.5 million | | **Total** | **$499.5 million** | - The company must maintain a maximum total secured net leverage ratio, which was **4.00 to 1.00** for the quarter ended December 31, 2020, with the company's actual ratio at **1.86 to 1.00**[282](index=282&type=chunk)[292](index=292&type=chunk) - The company uses an interest rate swap to convert a portion of its variable-rate 2024 Term B Loan to a fixed rate of **2.89%** on a notional amount of **$250 million**, effective until November 2024[287](index=287&type=chunk)[295](index=295&type=chunk) [Non-GAAP Financial Measures](index=50&type=section&id=Non-GAAP%20Financial%20Measures) For FY2020, the company reported Adjusted EBITDA of $240.5 million and Adjusted Net Income of $151.4 million, providing alternative performance metrics Reconciliation of Net Income to Adjusted EBITDA and Adjusted Net Income (FY 2020, in thousands) | (In thousands) | Amount | | :--- | :--- | | **Net income (GAAP)** | **$104,851** | | Income tax expense | $19,002 | | Interest expense, net | $23,572 | | Depreciation and amortization | $71,518 | | **EBITDA** | **$218,943** | | Adjustments (Equity income, Compensation, Other fees) | $21,524 | | **Adjusted EBITDA** | **$240,467** | | Further Adjustments (Operating D&A, Cash interest, etc.) | ($89,107) | | **Adjusted net income** | **$151,360** | | Per Share Data (FY 2020) | Amount | | :--- | :--- | | Diluted EPS (GAAP) | $1.43 | | Adjusted Diluted EPS (Non-GAAP) | $2.07 | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk from floating-rate debt, partially mitigated by swaps, and foreign currency exchange risk from Latin American operations - The company's floating-rate debt creates interest rate risk; a **100 basis point (1%) increase** in interest rates would increase annual interest expense by approximately **$5.0 million**[307](index=307&type=chunk) - Foreign currency exchange risk from Latin American operations resulted in an unfavorable cumulative translation adjustment of **$24.8 million** in accumulated other comprehensive loss as of December 31, 2020[311](index=311&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=56&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for FY2020, including quarterly data showing revenue and net income fluctuations Selected Quarterly Financial Data 2020 (in thousands) | Quarter | Revenues | Income from operations | Net income | | :--- | :--- | :--- | :--- | | Q1 2020 | $121,942 | $32,763 | $22,275 | | Q2 2020 | $117,937 | $25,590 | $15,625 | | Q3 2020 | $136,507 | $43,844 | $34,581 | | Q4 2020 | $134,202 | $39,195 | $32,370 | Selected Quarterly Financial Data 2019 (in thousands) | Quarter | Revenues | Income from operations | Net income | | :--- | :--- | :--- | :--- | | Q1 2019 | $118,836 | $37,405 | $26,734 | | Q2 2019 | $122,548 | $37,688 | $27,137 | | Q3 2019 | $118,804 | $34,802 | $24,786 | | Q4 2019 | $127,186 | $34,607 | $25,043 | [Item 9A. Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, confirmed by external auditors - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[319](index=319&type=chunk) - Management assessed internal control over financial reporting based on the COSO criteria and found it to be effective as of December 31, 2020[324](index=324&type=chunk) Part III Part III incorporates information by reference from the 2021 proxy statement, covering directors, executive compensation, security ownership, and related party transactions [Item 10. Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2021 proxy statement - The required information for this item will be included in the company's proxy statement and is incorporated by reference[329](index=329&type=chunk) [Item 11. Executive Compensation](index=58&type=section&id=Item%2011.%20Executive%20Compensation) Details concerning executive compensation are incorporated by reference from the 2021 proxy statement - The required information for this item will be included in the company's proxy statement and is incorporated by reference[330](index=330&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=58&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and related stockholder matters is incorporated by reference from the 2021 proxy statement - The required information for this item will be included in the company's proxy statement and is incorporated by reference[331](index=331&type=chunk) [Item 13. Certain Relationships and Related Party Transactions and Director Independence](index=58&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Party%20Transactions%20and%20Director%20Independence) Disclosures regarding related party transactions and director independence are incorporated by reference from the 2021 proxy statement - The required information for this item will be included in the company's proxy statement and is incorporated by reference[332](index=332&type=chunk) [Item 14. Principal Accounting Fees and Services](index=58&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information about principal accounting fees and services is incorporated by reference from the 2021 proxy statement - The required information for this item will be included in the company's proxy statement and is incorporated by reference[333](index=333&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=58&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits filed with the Form 10-K, including key organizational and contractual agreements - This item includes the consolidated financial statements of EVERTEC, Inc. and the Report of Independent Registered Public Accounting Firm[335](index=335&type=chunk) - A list of exhibits filed with the report is provided, including key agreements such as the Amended and Restated Master Service Agreement with Popular, Inc. and the 2018 Credit Agreement[337](index=337&type=chunk)[338](index=338&type=chunk)

EVERTEC, Inc. (NYSE:EVTC) Q4 2020 Results Earnings Conference Call March 1, 2021 8:00 AM ET Company Participants Kay Sharpton - Vice President, Investor Relations Morgan Schuessler - President and Chief Executive Officer Joaquin Castrillo-Salgado - Chief Financial Officer Conference Call Participants Allison Jordan - Cowen and Company Robert Napoli - William Blair & Company, LLC Vasundhara Govil - Keefe, Bruyette & Woods James Friedman - Susquehanna Financial Group James Faucette - Morgan Stanley Matthew O' ...

Fourth Quarter and Full Year 2020 Earnings Conference Call March 1, 2021 Disclosures Forward-looking statements Certain statements in this presentation constitute "forward-looking statements" within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of EVERTEC to be materially different from any f ...

Investor Presentation October 2020 Disclosures Forward-looking Statements Certain statements in this presentation constitute "forward-looking statements" within the meaning of, and subject to the protection of, the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of EVERTEC to be materially different from any future results, performance or achievem ...

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 September 30, 2020 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 | --- | --- | --- | |----------------------------------------------------------------------------|--------------- ...

Financial Data and Key Metrics Changes - Total revenue for Q2 2020 was $118 million, a decrease of 4% compared to 2019 [5][17] - Adjusted EBITDA was $50 million, a 13% decrease year-over-year [5][19] - Adjusted earnings per share was $0.38, down 25% from the previous year [5][23] - Year-to-date operating cash flow was $87 million, an increase of $11 million compared to the prior year [6][39] - Liquidity as of June 30 was $234 million [6][43] Business Line Data and Key Metrics Changes - Merchant Acquiring revenue decreased 8% year-over-year to approximately $24.8 million, but improved from a low of negative 33% in April to over 20% growth in June [24][25] - Payment Services Puerto Rico and the Caribbean segment revenue was $27.5 million, down approximately 10% year-over-year [28] - Payment Services LatAm segment revenue was $19.8 million, down approximately 6% year-over-year, impacted by FX fluctuations [32][34] - Business Solutions revenue increased approximately 1% to $55.5 million, driven by new services [36] Market Data and Key Metrics Changes - Transaction volumes in Puerto Rico improved throughout the quarter, ending at negative 6% for June from a low of negative 43% in April [28] - ATH Movil P2P transactions increased over 50% year-over-year, and ATH Movil business revenue surged more than 400% [10][52] Company Strategy and Development Direction - The company is focusing on product innovations and growth initiatives in Latin America despite the pandemic [4][15] - Continued investment in digital payment solutions is expected to drive future growth [10][65] - The company is pursuing new contracts with government agencies, such as the Department of Education, to enhance revenue streams [9][44] Management's Comments on Operating Environment and Future Outlook - Management noted that while the pandemic impacted results, there was a sequential improvement in business performance throughout the quarter [16][45] - The company is cautious about future forecasts due to ongoing uncertainty related to COVID-19 [43][60] - Management expressed optimism about the long-term shift towards digital payments and the potential for sustained growth in this area [65][66] Other Important Information - The company returned approximately $14 million to shareholders through share repurchases and dividends [6][41] - Adjusted effective tax rate for the quarter was 20.2%, with expectations of a higher rate in the second half of 2020 [22][57] Q&A Session Summary Question: Commentary on segment performance in July - Management noted that transactions have continued to improve in July, although at a slower pace compared to June [48][49] Question: Details on ATH Movil performance - ATH Movil saw a 50% increase in transactions, with a 400% increase in business revenue, indicating a significant shift towards digital payments [52][53] Question: Capital allocation and stock buyback plans - Management indicated a cautious approach to capital allocation, with a focus on maintaining a strong balance sheet amid ongoing pandemic uncertainties [55][56] Question: Future tax rate expectations - The higher tax rate is expected to be a temporary situation, with a return to normalized levels anticipated as business conditions stabilize [57][58] Question: Launch timeline for Santander Chile and Citibanamex - Management confirmed that both projects are on track for launch by the end of 2020, which is expected to contribute meaningfully to revenue [67][69]

Financial Performance - Total revenues for Q2 2020 were $117.9 million, a decrease of 3.3% compared to $122.5 million in Q2 2019[17]. - Net income for Q2 2020 was $15.6 million, down 42.7% from $27.1 million in Q2 2019[17]. - Operating costs and expenses increased to $92.3 million in Q2 2020, compared to $84.9 million in Q2 2019, reflecting a rise of 8.7%[17]. - The company reported a net income attributable to common stockholders of $15.5 million for Q2 2020, resulting in a diluted earnings per share of $0.21[17]. - Net income for the six months ended June 30, 2020, was $37.9 million, compared to $53.9 million for the same period in 2019, representing a decrease of approximately 29.6%[24]. - Total revenues for the six months ended June 30, 2020, were $239,879,000, a decrease from $241,384,000 for the same period in 2019, representing a decline of approximately 0.6%[112]. - Adjusted EBITDA for the six months ended June 30, 2020, was $106,491,000, compared to $115,393,000 for the same period in 2019, reflecting a decrease of about 7.7%[113]. - EBITDA for the six months ended June 30, 2020, was $94,798,000, down from $108,045,000 in the same period of 2019, a decrease of about 12.1%[115]. - Adjusted net income for the six months ended June 30, 2020, was $61.3 million, a decrease of 17.5% from $74.3 million in the same period of 2019[211]. - The company reported diluted adjusted earnings per common share of $0.84 for the six months ended June 30, 2020, compared to $1.01 for the same period in 2019, reflecting a 16.8% decline[211]. Cash and Assets - Cash and cash equivalents increased to $146.9 million as of June 30, 2020, compared to $111.0 million at the end of 2019, an increase of 32.3%[13]. - Total cash, cash equivalents, and restricted cash at the end of the period was $169.1 million, up from $77.5 million at the end of the same period last year, indicating a significant increase of approximately 118.5%[25]. - The company had cash and cash equivalents of $146.9 million as of June 30, 2020, with $60.8 million held in subsidiaries outside of Puerto Rico[185]. - Total assets as of June 30, 2020, were $1,011.7 million, slightly up from $1,011.7 million at the end of 2019[13]. - Current liabilities increased to $151.5 million as of June 30, 2020, compared to $144.3 million at the end of 2019[13]. - Long-term debt decreased to $487.6 million from $510.9 million at the end of 2019, a reduction of 4.5%[13]. - As of June 30, 2020, total debt amounted to $518.3 million, a decrease from $527.6 million as of December 31, 2019, representing a reduction of approximately 2.5%[56]. Expenses and Costs - Operating costs and expenses for the six months ended June 30, 2020, totaled $181,526,000, up from $166,291,000 in the same period of 2019, indicating an increase of approximately 9.2%[112]. - Cost of revenues for the six months ended June 30, 2020 increased by $8.4 million or 8% to $111.0 million, driven by increased headcount and special incentives related to COVID-19[155]. - Selling, general and administrative expenses for the six months ended June 30, 2020 increased by $4.6 million or 15% compared to the same period in the prior year[156]. - Non-operating expenses for the six months ended June 30, 2020 decreased by $3.5 million to $11.4 million, primarily due to a $2.0 million decrease in interest expense[158]. - Depreciation and amortization expenses for the six months ended June 30, 2020, were $35,634,000, compared to $33,468,000 for the same period in 2019, reflecting an increase of approximately 6.5%[115]. Dividends and Shareholder Returns - The company declared cash dividends of $0.05 per share, totaling $3.6 million[20]. - Cash dividends declared on common stock were $7.2 million for the six months ended June 30, 2020, slightly down from $7.3 million in the same period of 2019[24]. - The company declared a quarterly cash dividend of $0.05 per share on July 24, 2020, to be paid on September 4, 2020[116]. - The Company declared quarterly cash dividends of $0.05 per share on February 20, 2020, and April 21, 2020, paid to stockholders on April 3, 2020, and June 5, 2020, respectively[95]. Impact of COVID-19 - The company has implemented precautionary measures in response to COVID-19, including transitioning most employees to a work-from-home environment to minimize risks[32]. - The Company drew down $30 million on its Revolving Facility in April 2020 to increase cash position and preserve financial flexibility, which has since been fully repaid[35]. - Management anticipates a $2.7 million deferral of payroll taxes under the CARES Act, with $0.8 million deferred through June 30, 2020[35]. - The company anticipates revenue attrition in Latin America of approximately $3 million to $4 million due to previously disclosed migrations[134]. - Consumer preference for digital payment solutions has increased during the pandemic, benefiting the company's transaction volumes[141]. - The ongoing shift from cash to electronic payments presents substantial growth opportunities in Latin America and the Caribbean[129]. Segment Performance - The company operates in four segments: Payment Services - Puerto Rico & Caribbean, Payment Services - Latin America, Merchant Acquiring, and Business Solutions[101]. - Revenues for the Payment Services - Puerto Rico & Caribbean segment decreased by $3.0 million to $27.5 million for the three months ended June 30, 2020, primarily due to a decline in transaction volumes from COVID-19[172]. - Payment Services - Latin America segment revenues decreased by $1.3 million to $19.8 million, impacted by foreign exchange losses and client attrition due to COVID-19[174]. - Merchant Acquiring segment revenues decreased by $2.0 million to $24.8 million, primarily due to decreased sales volumes from COVID-19, but adjusted EBITDA increased by $1.1 million to $13.4 million[175]. - Business Solutions segment revenues increased by $0.3 million to $55.5 million, while adjusted EBITDA decreased by $0.2 million to $24.0 million due to increased operating costs[176]. Accounting and Compliance - The Company has adopted new accounting guidance effective January 1, 2020, impacting the measurement of credit losses and implementation costs in cloud computing arrangements[37][39]. - The expected credit loss rate is likely to increase as receivables move to older aging buckets, with historical credit losses being low[45][46]. - The Company is currently evaluating the impact of recently issued accounting pronouncements on its consolidated financial statements[43][44]. - The secured leverage ratio as of June 30, 2020, was 2.12 to 1.00, indicating compliance with the 2018 Credit Agreement[205].

Financial Data and Key Metrics Changes - Total revenue for Q1 2020 was $122 million, a 3% increase compared to $118.8 million in Q1 2019 [13][25] - Adjusted EBITDA was $56 million, a 2% decrease from the prior year, with an adjusted EBITDA margin of 46.2%, down 230 basis points year-over-year [14][27] - Adjusted earnings per share (EPS) was $0.46, an 8% decrease compared to the previous year [14][29] - The company generated significant operating cash flow and returned approximately $7 million to shareholders through share repurchases [14] Business Line Data and Key Metrics Changes - Merchant Acquiring net revenue decreased 3% year-over-year to approximately $25.1 million, with a significant decline in March due to COVID-19 [30] - Payment Services in Puerto Rico and the Caribbean segment revenue was $29.9 million, down approximately 7% year-over-year [34] - Payment Services in Latin America segment revenue was $21.6 million, up approximately 4% year-over-year, driven by the acquisition of PlacetoPay [37] - Business Solutions revenue increased approximately 9% to $55.9 million, supported by new services for Popular [40] Market Data and Key Metrics Changes - The impact of COVID-19 on revenue was estimated at approximately $3 million for the quarter [26] - Puerto Rico is expected to receive $5 billion in Federal Aid through CARES, with an additional $800 million from the local government [19] - The government of Puerto Rico has begun reopening several industries, which is expected to provide some economic activity [20] Company Strategy and Development Direction - The company is focusing on digital payment solutions and has seen increased adoption of its ATH Movil service during the pandemic [58][80] - There is a commitment to continue investing in technology and digital platforms to enhance service offerings [59][93] - The company aims to differentiate itself from competitors through customer focus and service [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to adapt to challenges posed by COVID-19 [7][12] - The company is suspending annual guidance due to uncertainty but expects to maintain positive cash flow [49][52] - Preliminary trends for April indicate a decline in revenue, but there is optimism about gradual economic recovery [51][72] Other Important Information - The company has a strong balance sheet with over $220 million in liquidity, excluding restricted cash [48] - The net debt to trailing 12 months adjusted EBITDA was under two times, which may improve interest rates on a portion of the debt [47] Q&A Session Summary Question: Trends in April and early May - Management noted a decline in volume in March, stabilizing in early April, with slight improvements as businesses began reopening [55][56] Question: Digital payment trends - There is evidence of a shift towards digital payments, with increased usage of ATH Movil among small businesses [58] Question: Merchant base and online volume - The merchant base is heavily weighted towards essential businesses, which have remained open during the pandemic [61][63] Question: Cost control measures - The company is focused on managing discretionary expenses while ensuring future growth opportunities are not compromised [66][69] Question: ATM exposure - ATM volumes have seen a decline due to shelter-in-place orders, but improvements are expected as businesses reopen [100] Question: M&A appetite post-COVID - The company remains focused on M&A as a growth strategy, although the current environment has slowed down potential deals [84]

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 March 31, 2020 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 | --- | --- | --- | |----------------------------------------------------------------------------|------------------- ...